growth and evaluation of stock exchange
TRANSCRIPT
GROWTH AND EVALUATION OF STOCK EXCHANGE
The history of stock exchanges can be traced to 12th century France, when the
first brokers are believed to have developed, trading in debt and government
securities. Unofficial share markets existed across Europe through the 1600s,
where brokers would meet outside or in coffee houses to make trades. The
Amsterdam Stock Exchange, created in 1602, became the first official stock
exchange when it began trading shares of the Dutch East India Company. These
were the first company shares ever issued.
By the early 1700s there were fully operational stock exchanges in France and
England, and America followed in the later part of the century. Share exchanges
became an important way for companies to raise capital for investment, while also
offering investors the opportunity to share in company profits. The early days of the
stock exchange experienced many scandals and share crashes, as there was little
to no regulation and almost anyone was allowed to participate in the exchange.
Today, stock exchanges operate around the world, and they have become highly
regulated institutions. Investors wanting to buy and sell shares must do so through
a share broker, who pays to own a seat on the exchange. Companies with shares
traded on an exchange are said to be 'listed' and they must meet specific criteria,
which varies across exchanges. Most stock exchanges began as floor exchanges,
where traders made deals face-to-face. The largest stock exchange in the world,
the New York Stock Exchange, continues to operate this way, but most of the
world's exchanges have now become fully electronic.
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1.1 Global, National, State Stock Exchanges
List Of Major Stock Exchanges in the world
1. American Stock Exchanges
American Stock Exchange (AMEX)
The American Stock Exchange is the third largest stock exchange in the U.S.
after the NYSE and the NASDAQ, handling approximately 10% of American trades.
The American Stock Exchange lists companies from all different industries and of all
different sizes. However, the exchange is known as having the least strict listing
requirements among the three top American exchanges, which results in many
small companies joining the exchange. Once a major competitor of the NYSE, the
American Stock Exchange is now mostly known for trading in small cap stocks,
options, and exchange traded funds. The exchange is owned by NASD (National
Association of Securities Dealers), but operated as a separate exchange from the
NASDAQ.
New York Stock Exchange (NYSE)
Trading approximately 1.46 billion shares each day, the New York Stock
Exchange (NYSE) is the leading stock exchange in the world. The exchange
trades stocks for some 2,800 companies, ranging from blue chips to new high
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growth companies. Each listed company has to meet strict requirements, as the
NYSE works to maintain its reputation of trading strong, high quality securities.
Operating as a continuous auction floor trading stock exchange, the major
players on the floor of the New York Stock Exchange are specialists and brokers.
Brokers are employed by investment firms and trade either on behalf of their
firm's clients or the firm itself. The broker moves around the floor, bringing buy
and sell orders to the specialists. Each specialist stands in one location on the
floor and deals in one or several specific stocks, depending on their trading
volume. The specialist's job is to accept buy and sell orders from brokers and
manage the actual auction. It is also the specialist's job to ensure that there is a
market for their specified stocks at all times, meaning they will invest their own
firm's capital at times to keep the market active and maintain the shares' liquidity.
Specialists and brokers interact to create an effective system that provides
investors with competitive prices based on supply and demand.
NASDAQ Stock Exchange
The NASDAQ, an acronym for National Association of Securities Dealers
Automated Quotations, is an electronic stock exchange with 3,300 company
listings. It currently has a greater trading volume than any other U.S. exchange,
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making approximately 1.8 billion trades per day. The NYSE is still considered the
biggest exchange because its market capitalisation far exceeds that of the
NASDAQ. The NASDAQ trades shares in a variety of companies, but is well known
for being a high-tech exchange, trading many new, high growth, and volatile stocks.
This is partially due to the fact that the listing fees on the NASDAQ are significantly
lower than those for the NYSE, with the maximum price only $150,000. The
NASDAQ is a publicly owned company, trading its shares on its own exchange
under the ticker symbol NDAQ.
2. European Stock Exchanges
London Stock Exchange (LSE)
The London Stock Exchange is the most important exchange in Europe and one
of the largest in the world. It lists over 3,000 companies and with 350 of the
companies coming from 50 different countries, the LSE is the most international
of all exchanges.
The London Stock Exchange is comprised of two different stock markets: the
Main Market and the Alternative Investment Market (AIM). The Main Market is
solely for established companies with high performance, and the listing
requirements are strict. Approximately 1,800 of the LSE's company listings trade
on the Main Market, and the total market capitalization is over 3,500 billion. The
Alternative Investment Market on the other hand trades small-caps, or new
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enterprises with high growth potential. Over 1,060 companies list on this market,
with a total capitalization of 37 billion.
Moscow Stock Exchange (MICEX)
The Moscow Interbank Currency Exchange Group (MICEX) is an independent
close joint-stock company established and owned by major Russian commercial
banks and the Central Bank of the Russian Federation from 1992. It is the group of
organizations providing trading, settlement, clearing and depository services for
Russian and foreign investors. The MICEX Group is comprised of the MICEX, the
MICEX Stock Exchange, the National Mercantile Exchange, the MICEX Settlement
House, the National Depositary Center, the National Clearing Center, and regional
exchanges.
The MICEX Stock Exchange (SE) lists securities of approximately 170 Russian
issuers such as blue chips Gazprom, LUkoil, or Novatek. About 550 organizations
with over 130 thousand registered investors trade on the MICEX SE. Corporate
bonds have recently become the main source for attracting investors in the MICEX.
The MICEX SE trades corporate bonds of over 210 Russian companies. Since
2003 the MICEX Corporate Bonds Index reflects the dynamics of the bonds market.
3. Middle Eastern Exchanges
Dubai Stock Exchange (DIFX)
The Dubai International Financial Exchange (DIFX) owned by the sole
shareholder Dubai International Financial Centre Authority (DIFC), launched
Dubai securities trading market in September 2005. As the DIFX is situated in the
newly established financial free zone DIFC, all the operations of the Exchange
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together with all other financial activities in the DIFC are regulated by the Dubai
Financial Services Authority (DFSA).
The DIFX is a fast-growing company seeking high goals. Although it started
operating with four members on the board, the Exchange already has 13
member banks. It is expecting to have up to 40 members by the 2006 year-end.
Also the governance of the DIFX is seeking to list 10 to 15 IPOs and to gain the
market capitalization of minimum US$ 50 million by the end of 2010.
4. African Stock Exchanges
Johannesburg Stock Exchange (JSE)
The Johannesburg Stock Exchange lists more than 400 companies and has
market capitalization of over $182 billion, making it the largest exchange in Africa
and among the top ten largest in the world. The exchange trades shares for a
wide variety of industries, with the largest portion of market capitalization coming
from the mining industry. The JSE just recently became a publicly held company
in July or 2005.
The JSE lists shares on two separate markets, the Mainboard and AltX. The
requirements for listing on the Mainboard are strict, while the AltX lists smaller
companies who fail to meet the Mainboard criteria. As a new branch of the JSE,
AltX companies currently make up a very small portion of JSE listings.
The exchange is fully electronic, using the JET System (Johannesburg Equities
Trading). This is an order-based system, whereby trades are automatically
executed when matching buy and sell prices are found.
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5. Asian and Pacific Stock Exchanges
Hong Kong Stock Exchange (HKSE)
lthough the trade of securities began in the middle of the 19th c., Hong Kong
Stock Exchange was established at the end of the century. Today with its total
securities market capitalization of a record sum of HK$ 8,260.3 billion (US$
1,063.9 trillion), the HKSE ranks 8th place by market capitalization in the world.
The HKSE has 4338 stocks listed on the exchange with the market turnover of
HK$4,520.4 billion (US$ 0,582.2 trillion) in 2010. The turnover increased by 14%
from the previous year. Local institutional and retail investors are the main
contributors of market turnover (56%). The exchange also has a leading
derivatives market in the Asia-Pacific region with the daily turnover of 103.332
contracts per day that has increased by even 30% from 2010.
Singapore Exchange (SGX)
With Singapore now a leading financial center in the Asia-Pacific, the Singapore
Exchange has become one of the premier exchanges in its region. The SGX has
approximately 659 companies listed on its exchange, and has a market
capitalization of $398.4 billion. It is a highly international exchange, with 40
percent of its market capitalization coming from foreign companies.
The SGX divides its company listings into the SGX Mainboard and the SGX
SESDAQ. The Mainboard lists companies that meet certain requirements
including market capitalization, pre-tax profits, and operating track record. The
SESDAQ, on the other hand, is for newer companies and there are no
quantitative requirements for listing. Companies listed on the SESDAQ may
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apply to be moved to the Mainboard if they have been listed for at least two years
and meet the minimum quantitative requirements.
Shanghai Stock Exchange (SSE)
The Shanghai Stock Exchange can stake a claim to fame to being both the first
and largest stock exchange on mainland China. The exchange has a total of
eight hundred and seventy-eight listed companies. The main indices used on the
exchange are:
• SSE 50 index
• SSE 180 Index
• SSE Composite Inde
• SHSE- SZSE 300 Index.
The Shanghai Stock Exchange works as a non profit institution administered by
the China Securities Regulatory Commission. The exchange lists two different
kinds of stocks: A and B shares. The difference between the two stocks is the
currency that they are traded in. The A shares is traded in the local Renminbi
yuan currency, whereas the B shares are traded in U.S. dollars. Traditionally A
shares were only traded within the country, but now both A and B shares may be
traded world wide. The majority of the stocks listed on the exchange are A
shares. There are eight hundred twenty-four A shares and fifty-four B shares
listed on the market.
Tokyo Stock Exchange (TSE)
The Tokyo Stock exchange is one of the more important world exchanges,
trading an average of 1,540 million shares per day. It is one of five exchanges in
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Japan, but with 2,276 companies listed, the Tokyo Stock Exchange is by far the
largest. Most of the TSE's listings are domestic, although it also trades shares for
30 international companies.
The Tokyo Stock Exchange uses an electronic, continuous auction system of
trading. This means that brokers place orders online and when a buy and sell
price match, the trade is automatically executed. Deals are made directly
between buyer and seller, rather than through a market maker. The TSE uses
price controls so that the price of a stock cannot rise or fall below a certain point
throughout the day. These controls are used to prevent dramatic swings in prices
that may lead to market uncertainty or stock crashes. If a major swing in price
occurs, the exchange can stop trading on that stock for a specified period of time.
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List Of Major Stock Exchanges in the india
1.Bombay Stock Exchange (BSE)
The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces
its history to the 1850s, when stockbrokers 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-cry 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.
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As the first stock exchange in India, the Bombay Stock Exchange is considered
to have played a very important role in the development of the country's capital
markets. The Bombay Stock Exchange is the largest of 22 exchanges in India,
with over 6,000 listed companies. It is also the fifth largest exchange in the world,
with market capitalization of $466 billion.
The Bombay Stock Exchange uses the BSE Sensex, an index of 30 large,
developed BSE stocks. This index gives a measure of the overall performance of
the Bombay Stock Exchange, and is closely followed around the world. Based on
the Sensex, the BSE equity market has grown significantly since 1990.
In addition to individual stocks, the BSE also has a market in derivatives, which
was the first to be established in India. Listed derivatives on the exchange
include stock futures and options, index futures and options, and weekly options.
2. National Stock Exchange(NSE)
Capital market reforms in India and the launch of the Securities and Exchange
Board of India (SEBI) accelerated the incorporation of the second Indian stock
exchange called the National Stock Exchange (NSE) in 1992. After a few years
of operations, the NSE has become the largest stock exchange in India.
Three segments of the NSE trading platform were established one after another.
The Wholesale Debt Market (WDM) commenced operations in June 1994 and
the Capital Market (CM) segment was opened at the end of 1994. Finally, the
Futures and Options segment began operating in 2000. Today the NSE takes the
14th position in the top 40 futures exchanges in the world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX
Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a
diversified index of 50 stocks from 25 different economy sectors. The Indices are
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owned and managed by India Index Services and Products Ltd (IISL) that has a
consulting and licensing agreement with Standard & Poor's.
In the fast growing Indian financial market, there are 23 stock exchanges trading
securities. The National Stock Exchange of India (NSE) situated in Mumbai - is
the largest and most advanced exchange with 1016 companies listed and 726
trading members.
The NSE is owned by the group of leading financial institutions such as Indian
Bank or Life Insurance Corporation of India. However, in the totally de-
mutualised Exchange, the ownership as well as the management does not have
a right to trade on the Exchange. Only qualified traders can be involved in the
securities trading.
The NSE is one of the few exchanges in the world trading all types of securities
on a single platform, which is divided into three segments: Wholesale Debt
Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market. Each
segment has experienced a significant growth throughout a few years of their
launch. While the WDM segment has accumulated the annual growth of over
36% since its opening in 1994, the CM segment has increased by even 61%
during the same period.
List of Regional Stock Exchanges in India
Ahmedabad
Bangalore
Bhubaneshwar
Calcutta
Cochin
Coimbatore
Delhi
Guwahati
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Hyderabad
Jaipur
Ludhiana
Madhya Pradesh
Madras
Magadh
Mangalore
Meerut
OTC Exchange Of India
Pune
Saurashtra Kutch
UttarPradesh
Vadodara
1.2 Analysis of Stock Market
1. Political and Legal Enviornment Analysis
The strict legal rules and regulations are made to avoids scams and other illegal
activities in the stock market.
STOCK MARKET AND SCAM
Harshad Mehta scam (4000 crores) : 1992
Ketan Parekh scam (2000 crores) : 2001
How to become a Stock Broker?
SEBI (STOCK BROKERS AND SUB-BROKERS)
RULES AND REGULATION,1992)
Registration of stock brokers
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Registration of sub-brokers
Code of conduct for stock brokers
Code of conduct for Sub-brokers
Regulation of transaction between clients and brokers
Risk disclosure document
Unique client code
Model tripartite agreement
Dealing by foreign brokers
Bitter & Curative experience in legal frame work
Badla in share market (Badla to Derivatives)
Harshad Mehta Scam and Others.
Settlement Period & Settlement Cycle
Know your customers (KYC Norms)
2. Economical Enviornment Analysis
Structure
• 191 companies listed under NSE and BSE
• Divided into four regions
North – 40%
South – 24%
East – 5%
West -- 31%
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Others60%
Kotak Securi-ties Ltd.
12%
India Info-line Ltd.
9%
IndiaBulls Securities
Ltd.6%
ICICI Securi-ties Ltd
8%
Geojit Financial Services Ltd.
3%HDFC Securities Ltd.
2%
%age market share (2011)
3. Sociocultural Enviornment Analysis
Social Responsibility
Provide the facility of free demonstrations
Limited number of clients under the relationship manager
Promotional activities for the awareness of the customer
Co-operation with other department and other branches
Should not give fake news to their customers
Complete information about products and services offered
Educate about the rules and regulations of SEBI to its customers
Health of Brokers
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Neck inclined to one side causes pain
Headache
Loss in Vision
Stress
Diabetes due to stress
4. Technological Enviornment Analysis
Development in information, communication and network technologies
Created a paradigm shift in securities market operations
Bringing about innovations in product and services
Provide new business opportunities
Insure timeliness and satisfaction in customer service
Technology of NSE
• IT set is largest by any company in India
• Use satellite communication technology
• Energize participation from around 200 cities spread all over the country
• With up gradation of trading hardware, NSE today can handle up to 15
million trades per day
Mobile Trading
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Broking houses are now betting on mobile trading to boost revenues
Provides a Java application for your cell phone
BSE launched its Mobitrack service
1.3 Current Trends, Major Players, Products/Services
1. Current Trends in Stock Market
Retrospection
Before we look at the recent trends in the Indian capital market, a retrospective
glance at the market will be relevant. Fortunately, India has been spared of any
major corporate debacles of the kind and magnitude the world witnessed in the
recent years. But, certain developments like
widespread industrial sickness - not attributable entirely to external factors
-capacity overhang constricting growth, unsustainably high IPO pricing by
companies who chose not to mix business with scruples, vanishing acts of
vampire companies, robbed the market of its buoyancy. Two scams of serious
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ramifications skimmed the investors’ confidence Bitten badly - not once, but twice
– investors became noticeably shy and even perceptibly paranoid. As a
consequence, secondary market slipped into slumber; primary market passed
into passivity. The damaging developments, however, had one redeeming
feature; one favourable fall out: Least resistance to the reform at the market. The
reform was needed to address the inadequacies and enhance the efficacy of the
market.
Reformation
The recent years witnessed significant reforms in the capital market. It is well
known that trading platform has become automatic, electronic, anonymous,
order-driven, nation-wide and screen-based. Shouting and gesticulations have
yielded place to punching and clicking. Speed and efficiency are the hallmark of
the current system. Across the system, multitude of market participants trade
with one another anonymously and simultaneously. On any trading day, more
than 10,000 terminals come alive, in 400 towns and cities; information is flashed
on real time basis. Equal opportunity is provided for all concerned to access the
information. Transparency is ensured in respect of dissemination of information,
price and quantum of the order; but, member’s identity is sought to be hidden to
prevent any bias in response. Today, a trading member need not wend his way
to the Jeejeebhoy Tower in Dalal Street, Mumbai or to any stock exchange
building elsewhere; he can comfortably sit at his computer terminal and execute
the order. Laptops, palmtops and hand mobiles, in fact, challenge the relevance
of the brick and mortar.
An investor, today, need not wait, with his fingers crossed, for a fortnight or more,
for getting crossed cheques or crisp notes for the sale proceeds of his securities.
The trading cycle has been shortened to T+2. This shortening of the cycle has
been done in a phased manner but in a rapid succession – from T+5 to T+3 to
T+2, all in a matter of two years.
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Another material development, which proved to be of immense relief to the
investors, was dematerialisation of the scrips. Now 99% of the scrips in the
market are dematerialised. Almost 100% of the trades are in D-mat form.
Inconvenience of physical custody and transfer, tedium of intimating change of
address and problems of bad delivery, late delivery, non delivery and the risks of
forgery and frauds have virtually disappeared – or shall I say - have been
dematerialised! The benefit is relished but not the cost. We should bear in mind
the maxim – no cost, no benefit. There is no free lunch in this world. Still, there is
no denying the fact that there could be a possibility for reduction in the cost; such
possibilities are explored.
At the stock exchanges, robust risk management system has been put in place,
Value-at-risk margining and exposure limits, on-line monitoring of margins and
positions, Clearing Corporation and Settlement Guarantee Fund mechanism for
trade settlement – all these have made Indian capital market now arguably world
class, in terms of transparency, efficiency and safety.
Antiquated and abused badla system or ALBM stands abolished. In its place, for
hedging and trading purposes, a number of derivatives – in the form of futures
and options, both index-based and stocks-specific have been introduced. The
sophistication of these products have not scared away our brokers and investors.
Instead, with their native intelligence, they are as comfortable in the F&O Quarter
as a fish in the water. The vibrancy of F&O segment has surpassed the cash
segment in terms of daily turnover within a short period.
Corporate bonds and Government Securities used to be traded via telephone
exchange. A beginning has been made for their trading on the stock exchange
now. As is natural, the weaning takes time!
Our accounting standards are already principle-based; they have been aligned
with international standards almost in all aspects, barring one or two. Our
disclosure requirements, both initial and continuing, are on par with global
practices.
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The corporate governance and corporate performance do reflect and get
reflected in the conditions of capital market. As a market regulator and protector,
SEBI is concerned with corporate governance practice on an ongoing basis.
According to the Economic Intelligence Unit Survey of 2003 regarding corporate
governance across the countries, “Top of the country class, as might be
expected, was Singapore followed by Hongkong and, somewhat surprisingly,
India.” It is significant to note that Singapore and Hongkong claiming the top
positions, was not a matter of surprise, but India coming as third, surprised the
world! It shall be our collective endeavour to eliminate the“surprise element”. As
part of its endeavour towards continual improvement, SEBI has got corporate
governance code and practice reviewed, by Narayana Murthy Committee. The
Committee’s recommendations for refinement were evolved through consultative
process, transparent deliberations and democratic approach. These were posted
on SEBI’s website for 21 long days. Thereafter, they were got incorporated in
Clause 49 of Listing Agreement. No sooner was this done, the corporate
quietitude was disturbed and a spate of representations followed. The three
major aspects, which disturbed the corporates, related to definition of
independent directors, their nine-year term and whistle blowing policy.
Resurgence
During the last one year, Indian capital market has been regaining its buoyancy.
Globally recognised economic fundamentals of the country and widely perceived
robustness of the Indian Capital Market system have gradually restored the
confidence of the investors, global and local, in the Indian market, to a
substantial degree. During the last one year, the sensex has risen by over 75%.
The Indian capital market has out performed many in the world. More
importantly, the primary market too has perked up. The depth and liquidity of the
market and its absorbing capacity has been indisputably proven. The fear of
failure of PSU disinvestments turned out to be unfounded. Some mistakes have
occurred. To err is human and occasional systemic fault / fatigue is not
uncommon. Mistakes may happen and do happen; but they should not lead to
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paralysis, panic and cynicism; nor should they be allowed to be exploited.
Mistakes if any should be rectified and rectified quickly and their recurrence
prevented. If by ignorance, one mistakes, by mistake one should learn.
Vigilance
However sophisticated, efficacious, fail-proof a system or technology may be,
human intervention is inevitable, for, the system is manned, managed or used by
human beings. Human nature being what it is, and as the human ingenuity
knows no bounds, constant regulatory surveillance and prompt action is
necessary. That is what SEBI is trying to do. Armed with statutory authority and
consumed by missionary zeal, SEBI keeps vigil, clamps down appropriate
surveillance actions. Any market misconduct or manipulation are sought to be
dealt with severely in the interest of the market and the investors. Investigations
into allegations of manipulations etc. are getting speeded up and necessary
regulatory action is taken, without bias or prejudice, with no fear or favour. At
times, the action may turn out to be deterrent in nature, as circumstances
warrant.
Furtherance
A few more things are on the anvil. Margin trading and securities lending have
been introduced with adequate checks and balances. The Central Listing
Authority has become operational to provide an independent entry-point scrutiny
of the corporates to be listed. Straight Through Processing will get broadened
market wide in another 3 month’s time. The Central Registry of market
intermediaries and professionals with unique identification number is under
construction. And, when RTGS is being ushered in, T+1 settlement cannot be far
behind! Structural consolidation, infrastructural improvements, product-
innovation, refinement of regulations, and integrated surveillance should be some
of the thrust areas for planned action in the days ahead.
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2. Major Players
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3. Products / Services
1.4 Foreign Institutional Investors in India
India opened her doors to foreign institutional investors in September, 1992. This
event represents a landmark event since it resulted in effectively globalizing its
financial services industry. Beginning 1996-97, the group was expanded to
include registered university funds, endowment, foundations, charitable trusts
and charitable. Since then, FII flows which form a part of foreign portfolio
investments have been steadily growing in importance in India. Other than in the
year 1998, the net flows have been positive. The nuclear tests and East Asian
crisis did slow down the flows but as stated by Gordan and Gupta (2003), their
effects were short lived. That the percentage of total net turnover of BSE, the
share of average of FII sales and purchases increased from 2.6 percent in 1998
to 5.5 percent in 2002. The cumulative net FII investment in India as on August
2003 is approximately $17400 million. As of August 2003 net FII investment was
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EQUITY TRADING DERIVATIVESCOMMODITIES
TRADING OTHERS
9 percent of the BSE market capitalization which is small compared to the size of
the market. However, in the words of Banaji (2002), it is not the market
capitalization that matters but what is important is the level of the free float, that
is, the shares that are actually publicly available for trading. With floating stock in
the Indian market being less than 25 percent, about 35 percent of the free float
available has been bagged by FIIs - despite the fact that they invest in just a few
highly liquid stocks.
Though India receives hardly 1 percent of the FII investments in emerging
markets, the portfolio flows to India have been less volatile when compared with
that of many other emerging markets. FIIs by adopting a bottom-up approach
seem to invest in top-quality, high growth, large cap stocks.
India is one of the fastest growing economies in South Asia, promising a growth
of over 9 percent, second only to China; it would not be a surprise to see
increased FII flows to India in the future. FIIs are now looking at the economy as
a whole, with the macro-economic factors also playing their role in attracting
foreign investors. Factors like a strong currency, key reforms in the banking,
power and telecommunications sector, increased consumer spending and stable
policies are expected to play a major role in attracting FIIs to India. The
Securities Exchange Board of India (SEBI) along with the Institute of Chartered
Accountants of India (ICAI) jointly monitor the markets and announces the
regulatory measures thus making the Indian companies more transparent and
more disciplined.
According to the April 2005 report on corporate governance by CLSA Emerging
Markets, India ranks fourth with a score of 55.6 percent. Banaji (2000)
emphasizes that the capital market reforms like improved market transparency,
automation, dematerialization and regulations on reporting and disclosure
standards were initiated because of the presence of the FIIs. But FII flows can be
considered both as the cause and the effect of capital market reforms. The
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market reforms were initiated because of the presence of FIIs and this in turn has
lead to increased flows.
The Government of India gave preferential treatment to FIIs till 1999-2000 by
subjecting their long term capital gains to lower tax rate of 10 percent while the
domestic investors had to pay higher long-term capital gains tax. The Indo-Mauritius
Double Taxation Avoidance Convention 2000 (DTAC), exempts Mauritius-based
entities from paying capital gains tax in India - including tax on income arising from
the sale of shares. This gives an incentive for foreign investors to invest in Indian
markets taking the Mauritius route. Consequently, we now see investments coming
from Mauritius while there were none before 2000.
The country wise distribution of the FIIs registered in India, with majority of them
coming from USA and UK. Chakrabarti (2002) and Rao et al. (1999) point out the
fact that due to existing inter-linkages, the source of the FII investment might not be
the country from where the institution operates. Nevertheless, the figure gives us an
idea of the country wise distribution of the FIIs in India. So as to encourage long
term investments in the Indian market, Budget 2003 proposed that investors who
buy stocks of listed companies from March 1, 2003 be exempt from paying tax on
the gains they make on their investments, provided they hold them for more than
one year. With so much to benefit from, the FII investment in India is likely to
increase in the future.
Foreign Institutional Investor- Overview
One who propose to invest their proprietary funds or on behalf of "broad based"
funds or of foreign corporate and individuals and belong to any of the under given
categories can be registered for FII.
Pension Funds
Mutual Funds
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Investment Trust
Insurance or reinsurance companies
Endowment Funds
University Funds
Foundations or Charitable Trusts or Charitable Societies who propose to
invest on their own behalf, and
Asset Management Companies
Nominee Companies
Institutional Portfolio Managers
Trustees
Power of Attorney Holders
Bank
An application for registration has to be made in Form A, the format of which is
provided in the SEBI (FII) Regulations, 1995 and submitted with under mentioned
documents in duplicate addressed to SEBI as well as to Reserve Bank of India
(RBI) and sent to the following address within 10 to 12 days of receipt of application.
Regulations
Investments by FIIs are regulated under SEBI (FII) regulations, 1995 and
regulations 5(2) of FEMA Notification No. 20 dated May 3, 2000.
SEBI acts as the nodal point in the entire process of FII registration. FIIs are
required to apply to SEBI in a common application form in duplicate. A copy of
application form is sent by SEBI to RBI along with their ‘No Objection’ so as to
enable RBI to grant necessary permission under FEMA. RBI approval under FEMA
26
enables an FII to buy/sell securities on stock exchanges and open foreign currency
and Indian rupee accounts with a designated bank branch.
FIIs are required to allocate their investment between equity and debt instruments
in the ratio of 70:30. However, it is also possible for an FII to declare it a 100% debt
FII in which case it can make its entire investment in debt instruments.
FIIs can invest in listed and unlisted securities including shares, debt instruments,
dated government securities and treasury bills. No individual FII/sub-accounts taken
together acquires more than 24% of the paid up capital of an Indian company.
Indian companies can raise the above mentioned 24% ceiling to the sectoral cap /
statutory ceiling as applicable by passing a resolution by its board of directors
followed by passing a resolution to that effect by its general body in terms of press
release dated September 20, 2001 and FEMA Notification No. 45 dated September,
20, 2001.
Foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of
Indian Origin (PIOs) are allowed to invest in the primary and secondary capital
markets in India through the portfolio investment scheme (PIS). Under this scheme,
FIIs/NRIs can acquire shares/debentures of Indian companies through the stock
exchanges in India.
The ceiling for overall investment for FIIs is 24 per cent of the paid up capital of the
Indian company and 10 per cent for NRIs/PIOs. The limit is 20 per cent of the paid
up capital in the case of public sector banks, including the State Bank of India.
The ceiling of 24 per cent for FII investment can be raised up to sectoral
cap/statutory ceiling, subject to the approval of the board and the general body of
the company passing a special resolution to that effect. And the ceiling of 10 per
cent for NRIs/PIOs can be raised to 24 per cent subject to the approval of the
general body of the company passing a resolution to that effect.
The ceiling for FIIs is independent of the ceiling of 10/24 per cent for NRIs/PIOs.
27
The equity shares and convertible debentures of the companies within the
prescribed ceilings are available for purchase under PIS subject to:
The total purchase of all NRIs/PIOs both, on repatriation and non-
repatriation basis, being within an overall ceiling limit of (a) 24 per cent of
the company's total paid up equity capital and (b) 24 per cent of the total
paid up value of each series of convertible debenture; and
The investment made on repatriation basis by any single NRI/PIO in the
equity shares and convertible debentures not exceeding five per cent of
the paid up equity capital of the company or five per cent of the total paid
up value of each series of convertible debentures issued by the company
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2.1 INTRODUCTION
In middle of 1999, when e-commerce was just about starting in India, Sameer
Gehlaut and his close IIT Delhi friend Rajiv Rattan got together and bought a
defunct securities company with a NSE membership and started offering
brokerage services . A Few months later, their friend Saurabh Mittal also joined
them. By December 1999, the company embarked on its journey to build one of
the first online platforms in India for offering internet brokerage services. In
January 2000, the 3 founders incorporated Indiabulls Financial Services and
made it as the flagship company.
In mid 2000, Indiabulls Financial Services received venture capital funding from
Mr L.N. Mittal & Mr Harish Fabiani. In late 2000, Indiabulls Securities, a
subsidiary of Indiabulls Financial Services started offering online brokerage
services and simultaneously opened physical offices across India. By 2003,
Indiabulls securities had established a strong pan India presence and client base
through its offices and on the internet.
In September 2004, Indiabulls Financial Services went public with an IPO at Rs
19 a share. In late 2004, Indiabulls Financial Services started its financing
business with consumer loans. In March 2005, Indiabulls Properties Private Ltd,
a subsidiary of Indiabulls Financial Services, participated in government auction
of Jupiter Mills, a defunct 11 acre textile mill owned by NTC in Lower Parel,
Mumbai. Indiabulls Properties private Ltd won the mill in auction and that
purchase started Indiabulls real estate business. A few months later, Indiabulls
Real Estate company pvt ltd bought Elphinstone mill in Lower Parel, another
textile mill auctioned by NTC.
With real estate business gaining size, Indiabulls Financial Services demerged
the real estate business under Indiabulls Real Estate and each shareholder of
Indiabulls Financial Services received additional share of Indiabulls Real Estate
through the demerger. Subsequently, Indiabulls Financial Services also
29
demerged Indiabulls Securities and each shareholder of Indiabulls Financial
Services also received a share of Indiabulls Securities.
In year 2007, Indiabulls Real Estate incorporated a 100% subsidiary, Indiabulls
Power, to build power plants and started work on building Nashik & Amrawati
thermal power plants. Indiabulls Power went public in September 2009.
Today, Indiabulls Group has a networth of Rs 16,796 Crore & has a strong
presence in important sectors like financial services, power & real estate through
independently listed companies and Indiabulls Group continues its journey of
building businesses with strong cash flows.
Diversified Business Group of Indiabulls
2.1Diversified Business Groups of Indiabulls
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2.2 INDIABULLS SUBSIDAIRIES
Indiabulls securities limited: business comprises of Securities & Derivatives
broking.
Indiabulls Credit services limited: business comprises of personal loans,
secured and unsecured loans, and housing and auto loans.
Financial products distribution: distribution of mutual funds and insurance
products.
Indiabulls commodities Pvt ltd: deals with commodity brokerage business
Indiabulls Realities limited: is into development of Real estate and mining.
Indiabulls housing loans: is into mortgage of properties and housing loan
business.
2.3 ORGANIZATIONAL STRUCTURE OF INDIABULLS
The organizational structure of Indiabulls is Functional, which consist of several
departments.
Functioning Online: serving clients primarily through an Internet based
relationship targeted towards clients who value anytime, anywhere access and
can be serviced at low incremental costs.
Functioning Offline: serving clients primarily through an office based
relationship targeted towards clients who value physical interaction.
Online & offline business consist of following departments
• Administration
• Operations & Service quality
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• Technology
• Finance
• Corporate affairs
• Human resources
• Marketing
Department based Organizational Structure
2.3.1 Department based organizational Structure of Indiabulls
32
Regional Hierarchy of Indiabulls
Key Positions
2.3.2 Regional hierarchies of Indiabulls
2.4 Products and Services of Indiabulls
Indiabulls offer the following products and services in the financial markets:
Products:
• Stocks
• Options and Futures
• Depository Services
• Commodities
• Insurance Products
• Mutual Funds
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• Bonds and Debt Products
Services:
Commercial Vehicle Loans:
In April 2006 Indiabulls started Commercial Vehicle Finance under the flagship of
Indiabulls Credit Services Ltd. in order to provide refinance to its
commercial vehicle clients. Their fundamentals, competent management and
expertise in financing the transporters are pretty sound. The company’s
unique market position enables it to excel in client contentment, quick service
and growth–led profitability.
Mortgage Loans:
Indiabulls Housing Finance Ltd. which is a flagship of Indiabulls has
started lending of Mortgage Loans to prospective customers. This company
enables the home-seekers to access finance to buy their homes. They provide
different types of loans like plot loans, Loan against Residential,
Commercial and Rental Property, thereby enabling the borrower to leverage
the property owned to fund any genuine needs be it Business Expansion, Child's
Education, Child's Marriage or for Holiday Abroad.
Consumer Finance:
Indiabulls is a retail focused organization that fulfills the credit needs of a large
percentage of population in India. The key aspect of Indiabulls business model is
to provide an extremely unique customer experience.
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CHAIRMAN’S desk
Sameer Gehlaut has been the chairman of Indiabulls Group since
inception. He is also the chairman of major Indiabulls companies: Indiabulls
Power, Indiabulls Financial Services & Indiabulls RealEstate. Under his
leadership, Indiabulls Group has grown in scale and size to a business house
with strong businesses in various sectors.
Mr Gehlaut started Indiabulls Group after working briefly with Halliburton
before returning to India. Mr Gehlaut received a B.Tech degree in Mechanical
Engineering from Indian Institute of Technology, Delhi.
MANAGEMENT TEAM
Indiabulls Group
Mr Rajiv Rattan - Vice Chairman
Mr Saurabh Mittal - Vice Chairman
Mr Gagan Banga - Group Spokesperson
Mr Ashok Kacker - Group President
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Mr Saket Bahuguna - Group CLO
Mr Ashok Sharma - Group CFO
Mr Ajit Mittal - Group Director
Mr Gurbans Singh - Group Director
Mr Tejinderpal Singh Miglani - Group CIO
Indiabulls Financial Services Limited
Mr Gagan Banga - CEO
Mr Ashwini Kumar Hooda - DMD
Indiabulls Real Estate Limited
Mr Vipul Bansal - CEO
Mr Narendra Gehlaut - Joint MD
Mr O P Agrawal- COO
Indiabulls Power Limited
Mr Ranjit Gupta - CEO
Mr Mehul Johnson - President
Indiabulls Securities Limited
Mr Divyesh Shah - CEO
Mr Vijay Babbar - DMD
36
In focus
Indiabulls supports Moneylife Foundation in Empowering Investors
“Moneylife Foundation” in collaboration with Indiabulls, recently organized an
‘Investor, Empower Yourself’ seminar, which was held at the lush Town &
Country Club at New Gurgaon, in the National Capital Region (NCR), on
Saturday, 7th May 2011. This was the first occasion for Moneylife Foundation to
venture into other territories outside Maharashtra. Indiabulls played a major role
in helping this event happen successfully.
The event witnessed over 300 attendees not only from Gurgaon but also from
other parts of National Capital Region (NCR), Delhi, Allahabad, Ludhiana,
Chandigarh & other cities from northern region of India. The venue was fully
packed with eager & curious investors. “Moneylife Foundation” expressed its
gratitude towards helpful team of Indiabulls led by Mr. Gagan Banga, CEO -
Indiabulls Financial Services Ltd, for making this event such a huge success.
The event started with introductory remarks & guidance by Mr. Gagan Banga,
CEO - Indiabulls Financial Services Ltd. Mr. Veeresh Malik, Consulting Editor,
Moneylife, Delhi gave a brief introduction about Moneylife Foundation.Then
audience was guided by Sucheta Dalal, Trustee - Moneylife Foundation and
Managing Editor- Moneylife, on How to be Safe with your money & Debashis
Basu, Trustee - Moneylife Foundation and Editor- Moneylife about How to be
smart with your investments. Mr. Sachin Choudhary, Director & Business Head -
Indiabulls Housing Finance Ltd, talked about Do's and Don’ts of Housing
Mortgages. Ms. Sucheta Dalal also explained the importance & procedure of
Wills & Nominations.
This event helped people in understanding how to become an aware and
empowered investor. The attendees included both finically literate & new
investors. They posted number of intelligent questions which were adequately
37
answered by all the speakers. Empowering today’s investors by creating
awareness and guiding them in taking wise decisions when it comes to money or
investments was the main objective of ‘Investor, Empower Yourself’ seminar.
During the Panel Discussion with the panel members Sucheta Dalal, Debashis
Basu & Sachin Choudhary, quite a few interesting & informative issues regarding
Investments were discussed. Mr. Monu Ratra, National Sales Manager -
Indiabulls housing Finance Ltd gave Vote of Thanks.
This event received many request and suggestions from audience about
continuing with such events all over India so that citizens of India will be more
empowered investors & ultimately nation will benefit from it. There were some
requests from audience to telecast further events live on television & internet so
that those who are unable to attend the event will also get the guidance. The
knowledge shared about the investments during the event was well appreciated
by all.
Moneylife Foundation has been instrumental in promoting financial literacy & pro-
customer advocacy in India. Moneylife Foundation has been organizing such
events at the Moneylife Knowledge Centre in Mumbai, and also in various cities
across Maharashtra. The Foundation has completed 15 months of spreading
financial literacy & has hosted around 49 speakers and 61 events. Currently,
more than 5,000 people are members of the Foundation.
After the seminar, Indiabulls received feedbacks from some attendees
congratulating Indiabulls’ team about the success of seminar. Many of the
attendees mentioned that they are looking forward to such seminars in future.
Indiabulls has been participating in such Corporate Social Activities with many
other socially aware groups and trusts & Indiabulls is committed to continue in
doing so in future.
38
2.5 OVERVIEW OF INDIABULLS SECURITIES LTD
Indiabulls Securities Ltd is engaged in the business of Internet based trading and
is registered with SEBI as a stockbroker, trading and clearing member of NSE,
member of BSE and as a depositary participant with National Securities
Depository Limited (“NSDL”) and Central Depository Services (India) Limited
(“CDSL”). ISL is also a member of the National Securities Clearing Corporation
Limited.
HistoryIndiabulls Securities Limited (ISL) was incorporated as GPF Securities
Private Limited on June 9, 1995. The name of the company was changed to
Orbis Securities Private Limited on December 15, 1995 to change the profile of
the company and subsequently due to the conversion of the company into a
public limited company; the name was further changed to Orbis Securities
Limited on January 5, 2004. The name of the company was again changed to
Indiabulls Securities Limited on February 16, 2004 so as to capitalize on the
brand image of the term “Indiabulls” in the company name. ISL is a corporate
member of capital market & derivative segment of The National Stock Exchange
of India Ltd.
Products
Indiabulls Securities Limited (ISL) is the pioneer in Retail Broking Industry
having a pan India presence and providing services to a customer base
exceeding half a million. ISL is in the business of providing securities broking and
advisory services and is a corporate member of capital market, wholesale debt
market and derivative segment of NSE and of the capital market and derivative
segment of BSE. ISL is the first and only brokerage house to be assigned the
highest rating BQ-1 by CRISIL. The company through various types of brokerage
accounts provides product and services related to purchase and sale of
securities listed in NSE and BSE. It also provides depository services, equity
39
research services, mutual fund, IPO distribution to its clients. The company
provides these services through on-line and off-line distribution channel.
Different products that offer by the Indiabulls Securities Ltd are as follows:
Power Indiabulls
Power Indiabulls (PIB) is the advanced online trading platform from
Indiabulls Securities Limited. PIB provides the best in the class internet trading
features and delivers a seamless and rich online trading experience for its users.
PIB comes with a whole host of online features for the internet trading users
ranging from real-time stock prices, to live trading reports, charting, News Room.
PIB provides an integrated online trading platform for the internet trading
community to invest in equity, F&O, Online IPOs and base their decision on
sound fundamental research and technical analysis. It also provides various
kinds of trading reports, each developed to cater to internet trading users’ distinct
needs.
With whole host of advanced online trading features, PIB aims to fulfill the
needs of every genre of investors & help them gain profits in every possible way.
Why PIB?
PIB is the internet based stock trading application, which provides you an
unparalleled edge to trade in Indian stock markets. Here are some of the
compelling reasons, why you should subscribe for Power Indiabulls (PIB)
Integrated market watch for Equities and Derivatives
Live Streaming Quotes
Fast Order Entry
Tic by Tic Live Intraday Charts
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Technical Analysis
Live Market News
Customizable Alerts
Extensive Reports
Real Time Market Statistics
World Market Summary
Introducing Intraday Futures
Indiabulls Signature Account
With Indiabulls Signature account you will always remain on top of your
investments. It provides you the platform to trade in Equity and Derivatives. With
an unmatched service and nationwide presence, the Indiabulls Signature account
comes bundled with a variety of exclusive features.
Ease of trading – With Indiabulls Signature account you have the
flexibility to place your orders either by logging on the website, calling at
the branch or walking in the branch.
Dedicated Service Branch and Relationship Manager: You can get in
touch with your Relationship Manager and Service Branch for all your
trading related requirements.
Power Indiabulls (PIB): You can trade smarter and faster using the
Power Indiabulls application. Access the broad spectrum of sophisticated
trading tools and get an edge in the stock markets.
Online Payment Gateways: Use our online payment gateways facility
and get instant credit in your Trading Account. We currently provide online
41
gateway payment facility with five major banks – HDFC, ICICI, AXIS,
CITI and IDBI.
IPOs – Indiabulls provides you the flexibility to apply in ongoing IPOs
through either online or offline channels. For applying online, you do not
need to fill tedious forms and write cheques. You can apply conveniently
in IPOs from the comfort of your home / office through our Website/PIB.
For applying offline, you can contact your Relationship Manager/ Service
Branch.
Portfolio Tracker: You can track your investments online through our
portfolio tracker functionality. You can conveniently track the daily
movement, notional / booked profits and losses in your portfolio.
Equity Analysis Report – A qualified and dedicated team of equity
analysts at Indiabulls publishes various research reports. You can view
these reports to gain insight into the companies of your interest.
News Room: The News Room provides real-time news from stock-
markets, corporate sector, economy and other segments that have a
bearing on the market sentiment.
Market Statistics: This functionality facilitates tracking the market trend
by providing you real time data on top gainers, top losers, volume toppers
and most volatile stocks.
Mobile Power Indiabulls (MPIB): MPIB is a mobile-phone based
application, developed exclusively for Indiabulls customers. Using MPIB,
you can view the live market rates of your favorite stocks and futures
contracts on your mobile device. Thus with MPIB, you can always remain
connected with the market, even on the move.
42
Electronic Contract Notes on Email: This facility enables you to get
digitally signed Electronic Contract Notes on email within 24 hours of
executing trades in your Trading Account.
Introducing Intraday Futures: Intraday Futures Product enables you to
take intraday positions in various future contracts at lower margins. These
positions have to be necessarily squared-off at the day end.
Security Token: Security Token, the new age security tool to make your
trading experience totally secure by using two factor authentication
mechanism.
Comprehensive Reports: Track your financials and portfolio efficiently
through various reports like Ledger Statements, Account Summary, Net
Portfolio Report, Daily Transaction Report, Daily Transaction report etc.
Currency Derivatives: Trade in Currency Derivatives which are similar in
nature to Stock or Index Futures contracts. Currency Future Contracts,
with INR: USD exchange rate as the underlying, are available with a
monthly expiry.
Depository Services
Indiabulls is a depository participant with the National Securities
Depository Limited and Central Depository Services (India) Limited for trading
and settlement of dematerialised shares. Indiabulls performs clearing services for
all securities transactions through its accounts. We offer depository services to
create a seamless transaction platform – execute trades through Indiabulls
Securities and settle these transactions through the Indiabulls Depository
Services. Indiabulls Depository Services is part of our value added services for
our clients that create multiple interfaces with the client and provide for a solution
that takes care of all your needs.
43
IPO Online
For various reasons, we often miss the opportunity of subscribing to
anIPO. It can either be because we could not procure the application form or we
did not have the time to fill up the form and submit it. The most important benefit
of the 'ONLINE IPO facility offered by Indiabulls Securities Ltd. is the
convenience in submission of applications from anywhere breaking the
limitations of time and geography. You don’t need to submit the application in
paper form, or write a cheque or go to submit it anywhere.
Now you have the convenience at your fingertip. You can quickly and seamlessly
apply to the latest public offerings with just a few clicks. Indiabulls Securities Ltd.
offers ONLINE IPO facility to its registered trading customers at absolutely no
cost.
To use theONLINE IPO feature, you need to fulfill the following criteria :
You must be registered for internet Trading with Indiabulls Securities Ltd.
You must have a demat account with Indiabulls Securities Ltd.
You must have signed the POA agreement for OnlineIPOs.
You must have access to Net Banking facility with those banks with which
Indiabulls is providing Payment Gateways. Currently, we are providing
payment gateways for ICICI, IDBI and HDFC Banks.
Indiabulls Equity Analysis
Indiabulls Equity Analysis complements its equity broking and advisory
services with high quality comprehensive report which can be accessed online.
Research report assess the potential strength and investment risk by doing in-
depth and exhaustive analysis of operational and financial performance of
44
company, Peer group analysis, present Industry scenario using advanced and
sophisticated forecasting tools and models. These research reports identify,
examine and distill attractive investment opportunities to help you in building and
maintaining your ideal portfolio.
Salient features of Indiabulls Equity Analysis:
Covers report of more than 540 company
Updated on a daily basis
Scorecard on Fundamentals, Valuations and risk
Peer Analysis
Valuation of potential growth
Industry Scenario
Expansion plan
Details of Mergers and Acquisitions
Currency Derivatives
Indiabulls offers trading in the Currency Derivatives Segment in National
Stock Exchange (NSE) Currency Derivatives are similar in nature to Stock
Futures & Option contracts. Currency Derivatives Contracts (USD-INR, EUR-
INR, GBP-INR and JPY-INR) at exchange rate as the underlying are available for
trading with a monthly expiry. At any given time, Currency Derivatives Contracts
are available for trading for the next 12 months expiry for futures whereas 3
months expiry and 1 quarterly expiry for Options.
45
The Mark-to-Market for Currency Derivatives is settled on a daily basis in a
manner similar to Equity Futures & Options.
Product Reference Guide
The Product Reference Guide is a comprehensive manual detailing
the Products and Services available with the Indiabulls Trading Account.
This manual has been designed to assist you with placing orders online or
through the branch, transferring funds and stocks, applying in IPOs, activating
Power Indiabulls, activating Mobile Power Indiabulls, getting services from your
Relationship Manager / Service Branch, utilizing customer care helpdesk
services etc. We recommend you to go through this manual as it would
familiarize you very well with your Indiabulls Trading Account.
Document Required
• 3 photographs ( signed across)
• Photo Identification Proof - any of the following - Voter ID/Driving
License/Passport.
• Address Proof any of the following - Voter ID/Driving License/ Passport/ Bank
statement or pass book sealed and attestation by bank official/ BSNL landline
bill.
• A crossed Cheque favoring “India bulls Securities Ltd”. of the required amount.
The amount for Demat as well as trading will be Rs. 900/-(free Demat +900
Trading Account) the minimum amount being Rs. 900 a cheque can be given for
a larger amount.
• Copy of PAN Card is mandatory.
• Registration Kit
46
• CDSL Demat Kit
• Bank and address proof declaration. (Master undertaking)
• PAN name discrepancy formThese documents may not be consumer friendly
but it is to avoid illegal transaction and to prevent black money this ensures that
money invested is accounted.
2.6 Business Model & Operations of Indiabulls Securities Ltd
The three distinct internal business segments are:
• Online business
• Offline business
• Other Sales
Online business: serving clients primarily through an Internet based relationship
targeted towards clients who value anytime, anywhere access and can be
serviced at low incremental costs. The Online sales force sells all products and
services and follows the relationship manager model.
Offline business: serving clients primarily through an office based relationship
targeted towards clients who value physical interaction and are typically larger
accounts. The Offline Sales force sells all products and services and follows the
relationship manager model. The Institutional business serving clients such as
mutual funds and pension funds is considered part of the offline business due to
largely similar client servicing and channel needs as required for high net worth
clients. Indiabulls Securities Limited has established relationships with some
large institutional players in India and is qualified broker for Equities, F&O and
Debt markets for 145 such institutional clients.Other Sales: includes insurance,
research services and other offerings
47
Basic Requirement for doing Trading
Trading requires Opening a Demat account. Demat refers to a dematerialized
account.
You need to open a Demat account if you want to buy or sell stocks. So it is just
like a bank account where actual money is replaced by shares. We need
to approach the Depository Participants (DP, they are like bank branches), to
open Demat account.
A depository is a place where the stocks of investors are held in electronic form.
The depository has agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details
of all accounts held is like the depository. And the DPs are the branches that
cater to individuals.
There are only two depositories in India –
• The National Securities Depository Ltd (NSDL) and the
• Central Depository Services Ltd (CDSL).
Trading Products of Indiabulls Securities
2.6 Trading Products of Indiabulls securities
48
Indiabulls Securities provide three products for trading. They are
• Cash account
• Intraday account
• Margin trading (Mantra)
Cash account provides the client to buy 4 times of cash balance in his trading
account.
Intraday product provides the client to buy 8 times of his cash balance in the
trading account.Mantra account – called as margin trading, is a special account
to buy on leverage for a longer duration
49
Gayathri Devi .R in 2003, she conducted study on “Causal Relationship between
FIIs and Stock Market: A critical study”. It revealed that there was long run
relationship between net FII investment and Sensex, FII investment did not
respond the short-run changes or technical-position of the market and they were
more driven by fundamentals, and FII investments did granger cause India stock
market.
Julia Priya, D. Lazar and Joseph Jeyapual in 2005, they conducted study on
“Role of Foreign Institutional Investors on stock market development in India”,
Results revealed that Sensex, market capitalization of NSE, Turnover of BSE
and NIFTY without market capitalizations were influenced by Foreign Institutional
Investors.
“Suchismita Bose and Dipankor coondoo” in 2004, they conducted study on “The
Impact of FII Regulation in India”, These results strongly suggested The
liberalization policies had the desired expansionary effect and had either
increased the mean level of FII inflows and/or the sensitivity of these flows to a
change in BSE returns.
Parthapratim pal in 2004 conducted study entitled as “Recent volatility in stock
markets in India and foreign institutional investors. Findings of this study
indicated that foreign institutional investors had emerged as the most dominant
investor group in the domestic stock market in India. Particularly, in the
companies that constitute the Bombay stock market sensitivity index, their level
of control was very high inertia of these flows.
“Sandhya Ananthanaryanan, Chandrasekhar krishnamurthi and Nilajan Sen in
2003 conducted study as “Foreign institutional Investors and Security Returns:
Evidence from Indian Stock Exchanges”, It found strong evidence consistent with
the base-broadening hypothesis. It did not find compelling confirmation regarding
momentum or contrarian strategies being employed by FIIs. It supported price
pressure hypothesis. It did not find any substantiation to the claim that foreigner’
destabilize the market.
50
J.S. Pasricha and Umesh.C.Singh in 2001, tried to analyze the impact of FIIs
investment on Indian capital market. Their study revealed that FII are here to stay
and have become the integral part of Indian capital market. Their entry has led to
greater institutionalization of the market. They have brought transparency in the
market operations.
Kumar in 2001 attempted his study to find the effect of FIIs on the Indian stock
market. The inference analysis of the paper suggests that FII investments are
more driven by market fundamentals rather than by short term changers or
technical position of the market.
As per K. Seethapathi and V. Subbulakshmi study entitled “Foreign investment:
Need for focus”, they concluded that, the flows have to pick up. The political will
is to be demonstrated by the government. In addition, the regulators have to
identify the reasons for failure in converting approvals into actual investments
and those issues are to be addressed immediately.
Han Kim and Vijay Singal in 1997, they conducted study entitled “Are open
market Good for Foreign Investors and Emerging Nations?” Conclusion revealed
as. Integrating the emerging stock markets into world markets has had benefits,
and will continue to have benefits for both global investor and host countries. The
end result of integrated markets a better allocation of resources, improved
productivity of capital, and a higher standard of living.
Bruce A. Blonigen:This paper surveys the recent burgeoning literature that
empirically examines the foreign direct investment (FDI) decisions of
multinational enterprises (MNEs) and the resulting aggregate location of FDI
across the world. The contribution of the paper is to evaluate what we can say
with relative confidence about FDI as a profession, given the evidence, and what
we cannot have much confidence in at this point. Suggestions are made for
future research directions.
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Hugo Rojas-Romagosa studied and concluded that Foreign Direct Investment
(FDI) flows have increased substantially in the past two decades. These
developments have motivated the appearance of a large number of empirical
papers that test the expected benefits that FDI inflows are assumed to bring to
the host countries. We survey the recent theoretical and empirical literature, but
restrict our attention to the productivity changes that are induced by increased
FDI inflows. We review both the aggregate productivity effects, as well as the
spillover effects of FDI on local firms.
Giorgio De Saints studied and concluded that the dynamics of expected stock
return and volatility in emerging financial market. We find clustering predict ability
and persistence in conditional volatility and others have documented for mature
market. However, emerging market exhibit higher volatility and conditional
probability of large price changes then mature market exposure to high country
specific risk does not appear to be rewarded with higher expected return. We
deduct a risk reward relation in Latin America but not in Asia.
Karimullah examines the impact of foreign institutional investor s FII equity
investment behavior in the Indian stock market. It attempts to find out the two-
way causality between foreign institutional investors (FIIs) behavior and
performance of Indian stock market for the period of January 1997 to June
2007.this article seeks to examine the idea that financial liberalization induces
increased efficiency in the financial market as permission of FIIs equity
investment is an important example of financial liberalization. Return in the stock
market is used as proxy for the efficiency of the stock market in India .granger
causality test has been applied to test the bidirectional causality. Apart from net
investment of FIIs, the purchase and sales behavior of FIIs are analyzed
separately. The results indicate that stock market performance is a major
determinant of both the FIIs purchase and sales behavior. But we did not find
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strong evidence that the variations in the stock market indices are determined by
FIIs investment behavior.
Blockholder, Market efficiency and managerial myopia studied and concluded
that holders can add value even if they cannot interview in a firm’s operations.
Blockholders have strong incentive to monitor the firm’s fundamental value, since
they can sell their stakes upon bad news. By trading on their private information
(following the “Wall Street rule”) they cause prices to reflect fundamental value
rather than current earnings. This in turn encourages managers to invest for long
term growth rather than short term profits. Contrary to the view that the U.S.’s
liquid markets and transient shareholders exacerbate myopia, this paper shows
that they can encourage investment.
Robert Lensink and Oliver Morrissey’s contributes to the literature on FDI and
economic growth. We deviate from previous studies by introducing measures of
the volatility of FDI Inflows. As introduced into the model, these are predicted to
have a negative effect on growth. We estimate the standard model using cross-
section, panel data and instrumental variable techniques. Whilst all results are
not entirely robust, there is a consistent finding that FDI has a positive effect on
growth whereas volatility of FDI has a negative impact. The evidence for a
positive effect of FDI is not sensitive to which other explanatory variables are
included. In particular, it is not conditional on the level of human capital (as found
in some previous studies). There is a suggestion that it is not the volatility of FDI
per se that retards growth but that such volatility captures the growth-retarding
effects of unobserved variables.
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Research Methodology is a systematic way of solving a problem it includes the
research methods for solving a problem.
4.1 Objective
To know about the role of FII investment and impact of FII on Indian stock
market.
The relationship between FII net investment with Sensex
To know FII channel of global disturbance in stock market.
4.2 Type of Research
The objective of the research is to find out the effect of Foreign Institutional
Investors on Indian Stock Market. Hence it is Descriptive type research.
Descriptive research is the description of the condition as it exists at present for
example, FIIs and FDIs interest in stock market.
Data source - Secondary data
Data collection method - There will be no data collection method since data
source is secondary data.
Data collection tools – Internet, Books, and Research Papers.
Sampling universe – BSE
Sample size – 10 year data
4.3 Sampling
Design: The target population of the study consist of Indian Stock market more
specifically Bombay Stock Exchange. This survey was done by collecting data
from different sites like BSE, SEBI, and Equitymaster.
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Universe: The sample universe of the research is Bombay Stock Exchange
(BSE).
Size: After due consultation with the college guide, also keeping in mind the
requirements of the research, the sample size that was found to be appropriate
for the study was 12 year which started from 1999 to 2011.
Technique: The sampling technique that was adapted to conduct the survey was
‘Random Sampling’ and the area of the research was concentrated on the
Bombay Stock Exchange only.
4.4 Data Collection
The task of data collection begins after a research problem has been defined. In
this study data was collected through secondary data source.
Secondary Data: Secondary data consist of information that already exits
somewhere, having been collected for some other purpose. In this study
secondary data which is value of SENSEX and net investment of FII was
collected from the BSE and different websites, SEBI Manual, magazines, and
news papers.
4.5 Analysis Techniques
The statistical tools and techniques which were used mainly were –
Graphs
Correlation
4.6 Limitation of study
As the time available is limited and the subject is very vast.
It is mainly based on the data available in various websites &other
secondary sources.
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The inferences made is purely from the past year’s performance.
There is no particular format for the study
Sufficient time is not available to conduct an in-depth study.
WEB REFRENCE
http://madaan.com/fii.html#newrule.September,22,2011
http://in.advfn.com/StockExchanges.html.September,22,2011
http://en.wikipedia.org/wiki/Stock_market.October,02,2011
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http://www.surfindia.com/finance/regional-stock-
exchanges.html.October,12,2011
http://www.indiabulls.com/securities/home/
aboutindiabulls.htm.November,08,2011
http://www.indiabulls.com/ibgroup/Genesis.htm.November,09,2011
http://www.sebi.gov.in/chairmanspeech/trends.html.December,25,2011
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