A Peek in to the Indian Securities Market

8/6/2019 A Peek in to the Indian Securities Market

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A Peek in to the Indian Securities Market



Facts

� Capital Market : Primary

� The market wherein resources are mobilised by companies through issue

of new securities

� Capital market: secondary

� Secondary market popularly known as the Stock Exchange is referred to

as theBarometer of the economy. The stock exchanges are the

exclusive centres for trading in equities. 22 stock exchanges

� Major trading between the two national level exchanges -> BSE and NSE.

� C apital market is firmly regulated by the Securities and Exchange Board

of India ( SEBI) to offer better protection to the investors. SEBI formultaes

guidelines for issue of new shares and regulations for intermediaries like

brokers, merchant bankers and mutual funds.



BSE

� Oldest in Asia . Started in 1875.

� Governed by a board of 20 directors who decide the policiesand regulate the affairs of theexchange

� The equity market capitalization of the companies listed on the BSEwas US$1.63 trillion as of December 2010, making it the 4thlargest stock exchange in Asia andthe 8th largest in the world.

� The BSE has the largest number of listed companies in the world. Ithas also been cited as one of theworld's best performing stockmarket.



BSE

� As of December 2010, there are over 5,034 listed Indian companies and over7700 scrips on the stock exchange.

� BSE Sensex = BSE 30

�

Historically an open outcry floor trading exchange. Brokers used to assemblein the trading ring for buying and selling securities.

� Switched to an electronic trading system in 1995. This automated, screen-based trading platform called BSE On-line trading (BOLT) currently has acapacity of 8 million orders per day. Traders enter orders for purchase or saleof securities from TWS instead of assembling in the trading ring.

�

The BSE has also introduced the world's first centralized exchange-basedinternet trading system, BSEWEBx.co.in to enable investors anywhere in theworld to trade on the BSE platform.

� The BSE is currently housed in Phiroze Jeejeebhoy Towers at Dalal Street, Fortarea.



BSE 30

� The base value of the sensex is 100 on April 1, 1979, and the base year of BSE-SENSEX is 1978-79.

� The BSE SENSEX consists of the following companies:

� Bajaj Auto Limited, Bharti Airtel Ltd., Bharat Heavy Electricals Ltd., Cipla Ltd.,

DLF Ltd., HDFC, HDFC Bank Ltd., Hero Honda Motors Ltd., Hindalco IndustriesLtd., Hindustan Unilever Ltd., ICICI Bank Ltd., Infosys Technologies Ltd., ITC Ltd., Jaiprakash Associates Ltd., Jindal Steel & Power Ltd., Larsen & Toubro Ltd., Mahindra & Mahindra Ltd., Maruti Suzuki India Ltd., NTPC Ltd., ONGC Ltd., Reliance Industries Ltd., Reliance Communications Ltd., Reliance InfrastructureLtd., State Bank of India, Sterlite Industries (India) Ltd., Tata Motors Ltd., TataPower Company Ltd., Tata Steel Ltd., Tata Consultancy Services Ltd., Wipro Ltd.

� The index is calculated based on a f ree f loat capitalization method (thoseissued shares that are readily available for trading.). The free-float method, therefore, does not include restricted stocks, such as those held by promoters, government and strategic investors



BSE

� How can investors participate in the BSE?

� Through members of the exchange or sub-brokers registered with the SEBI

� Who can be a member?

� An individual or a company formed in compliance with the provisions of

Section 12 or Section 322 of the Companies Act, 1956 .

� For individual: Minimum 2 years' experience as a partner or authorized

clerk or apprentice with a member of the Exchange or in other connected

areas in capital market.

� For Companies: have a minimum paid-up capital of Rs. 30 lakhs. Minimum

of its two directors should be appointed as designated directors, fulfilling

the criteria for individual members.



Trading and settlement procedures BSE

� Timing

� Trading on the BOLT System is conducted from Monday to Friday between 9:00

a.m. and 3:30 p.m. normally.

� Groups

�

Scrips in the Equity Segment are classified into A, B, S, T, TS, & Z to provide aguidance to the investors. .

� The classification is on the basis of several factors like market capitalization,

trading volumes and numbers, track records, profits, dividends, shareholding

patterns, and some qualitative aspects.

� Group A: Specif ied Shares:

� It is the most tracked class of scripts consisting of about 200 scripts. 216 lar capcompanies whose shares are frequently traded and command high price-earning s

multiples form group A. T

� All the 30 stocks in Sensex are A grade stocks.



Grouping of equity scrips

� Group C shares:

� Only odd lots from A and B groups

� T group: Trade-to-trade (T2T)

� Comprises of shares which have to be settled in delivery for all buys and

sells .� Squaring off of bought and sold positions during the day is not permitted.

� S group: Small & Medium

� S grade companies are small and typically ones with turnover of Rs 5Crore and tangible assets of Rs 3 Crore. Some also have low free-floatcapital with the promoter holding as high as 75 per cent.

� frenzied price movements.

� The F Group represents the Fixed Income Securities.

� Trading in Government Securities by the retail investors is done under theG group.



Grouping of equity shares

�TS group: A mix of T and S groups

� Stocks under this category are but the S grade stocks that are settled on a trade-

to-trade basis owing to surveillance requirements.

� Z group: Caution

� companies that have not complied with the exchanges listing requirements or

ones that have failed to redress investor complaints.

� Also includes stocks of companies that have dematerialisation arrangement with

only one of the two depositories, CDSL and NSDL.

� Risky stocks. Not much information would be available in the public domain on

these companies, making it tough to track them. Low media coverage that keeps

them relatively hidden from public scrutiny also makes them more vulnerable toinsider trading.

� B group: Lef t behind

� These counters see normal volumes and are settled under the rolling system.

Typically, stocks of mid- and small market capitalisation come under this grade.



Types of orders at BSE

� Limit order : buy or sell limit price is specified by the client while entering

the order into the system . Order is executed only at that price.

� Market order : buy or sell at the current market price at that particular

time.

� Stop loss order: is a type of advanced trade order that can be placed by

most brokerage houses. It specifies that an investor wants to execute a

trade or a given stock, but only if a specified price level is reached during

trading.

A Peek in to the Indian Securities Market

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