guideline about indian stock market
TRANSCRIPT
Stock Market In Stock Market In IndiaIndia
Covering in LessonCovering in Lesson
Various Markets & Its FeaturesDevelopment of securities market in IndiaRegulation of securities MarketPrimary marketSecondary marketTrading and settlementClearing and settlement procedures
Essential Features of a MarketEssential Features of a Market
Existence of buyers and sellers Existence of price for every asset Allocation of resources Existence of regulatory mechanism
Properties of efficient marketProperties of efficient market
Breadth Depth Information arbitrage efficiency Fundamental valuation efficiency Full insurance efficiency Operational efficiencyAllocational efficiency
Classification of marketsClassification of markets
Securities market◦Equity Market ◦Debt Market
Government securities Market (gilt securities) Corporate Securities Money Market
◦Derivative Market Options Market Futures Market
Foreign exchange market
Functions of the marketFunctions of the market
Primary Market: it deals in the issuance of new securities and bring the savers and users of capital together.
Secondary Market: it is the financial market where previously issued securities and financial instruments such as stock, bonds, options, and futures are bought and sold.
It provide liquidity to the investors. It helps the players to keep transaction cost
very low.
Milestones in development of Milestones in development of Indian Stock MarketIndian Stock Market
1875 BSE established as 'the native Share and Stock Brokers Association‘
1956 BSE became the first stock exchange to be recognized under the Securities Contract Act.
1993 NSE recognized as a stock exchange.2000 Commencement of Internet trading at NSE.2000 NSE commences derivatives trading (Index
futures)2001 BSE commences derivatives trading29 August 2008 NSE started trading in currency
derivatives
Securities and exchange board Securities and exchange board of India of India
Objectives:◦To protect the interest of the investors in
securities ◦To promote the development of securities
market in India◦To regulate the securities market
Important Functions of SEBI1. Regulating the business in stock exchanges and any other securities
markets2. Recognition and regulation of the stock exchanges3. Registering and regulating the working of the depositories [participants],
custodians of securities, foreign institutional investors, credit rating agencies
4. Registration of FII5. Registering and regulating the working of venture capital funds and
collective investment schemes, including mutual funds6. Promotion and regulation of Self regulatory organization. 7. Prohibiting fraudulent and unfair trade practices relating to securities
markets 8. Conducting research relating to securities market.
Departments of SEBI
1)MARKET INTERMEDIARIES REGULATION AND SUPERVISION DEPARTMENT (MIRSD)
2) MARKET REGULATION DEPARTMENT (MRD)3) DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD)
4) CORPORATION FINANCE DEPARTMENT (CFD)5) INVESTMENT MANAGEMENT DEPARTMENT (IMD)
6) INTEGRATED SURVEILLANCE DEPARTMENT (ISD) 7) INVESTIGATIONS DEPARTMENT (IVD)8) ENFORCEMENT DEPARTMENT (EFD) 9) LEGAL AFFAIRS DEPARTMENT (LAD)
10 ) ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD)11) OFFICE OF INVESTOR ASSISTANCE AND EDUCATION (OIAE).
12 ) GENERAL SERVICES DEPARTMENT (GSD) 13)RESEARCH AND TRAINING DEPARTMENT (RTD).
14) OFFICE OF THE CHAIRMAN (OCH)15) THE REGIONAL OFFICES (RO’s)
PRIMARY EQUITY MARKET
• PUBLIC ISSUE
• RIGHTS ISSUE
• PRIVATE PLACEMENT
• PREFERENTIAL ALLOTMENT
ISSUE TYPE OFFER PRICE DEMAND PAYMENT
Fixed Price Issues
Price at which the securities are offered and would be allotted is made known in advance to the investors
Demand for the securities offered is known only after the closure of the issue
100 % advance payment is required to be made by the investors at the time of application.
Book Building Issues
A 20 % price band is offered by the issuer within which investors are allowed to bid and the final price is determined by the issuer only after closure of the bidding.
Demand for the securities offered , and at various prices, is available on a real time basis..
10 % advance payment is required to be made by the QIBs along with the application, while other categories of investors have to pay 100 % advance along with the application.
Reverse Book BuildingThe reverse book building is an efficient price discovery mechanism of de-listing of securities, which is provided for capturing the sell orders on online basis from the shareholders through respective BRLM.
Secondary MarketSecondary Market
Secondary Market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange.
SEBI’s role in Secondary Markets NSCCLListing of Securities
Objectives of the listing Objectives of the listing
Provide liquidity to securities; Mobilize savings for economic
development; Protect interest of investors by
ensuring full disclosures
Types of the ListingTypes of the Listing
Initial listing—First time listing Listing of public issue - Listing of
additional shares or debentures of already listed entity.
Listing of rights issue of shares and debentures
Listing of Bonus issue of shares Listing of shares issued on
amalgamation, mergers etc.
Trading and settlement Trading and settlement
Screen based system started by NSE which is followed by BSE and other regional stock exchanges
NSE has an order driven systemOTCEI is a quote BOLT (BSE Online trading) is a mix of
order driven and quote driven system
Trading and settlementTrading and settlement
Market timingsTrading Process
◦Locating a broker◦Placement of an order ◦Order sent to stock exchange◦Order is executed.
Depository system Depository system BANK DEPOSITORYHolds funds in an account Holds securities in an
accountTransfers funds between accounts on the instruction of the accountholder
Transfers securities between accounts on the instruction of the BO account holder
Facilitates transfer without having to handle money
Facilitates transfer of ownership without having to handle securities
Facilitates safekeeping of money
Facilitates safekeeping of securities
Functions of Depository Functions of Depository
Dematerialization Account transfer and recognition Corporate actionsPledge and hypothecation Linkages with clearing system
Depository participants (DP)Depository participants (DP)
A depository participants is an agent of the depository and intermediaries between the depository and the investors.
A DP has to register with SEBI to offer depository related services.
Process of dematerializationProcess of dematerialization
Investor approach DP to open an account. Then he has to submit the shares in physical
form to DP for dematerialization. DP will intimate the NSDL about the investor’s
intention and then submit the share certificates to the registrar and transfer agent.
On confirming the genuineness of certificates the registrar destroys them and sends the confirmation of dematerialization of shares to NSDL.
Advantage of the depository Advantage of the depository system system
Filling up transfer deeds and lodging the same with the company for transfer is not necessary.
There would not be any bad deliveries. Exemptions from paying stamp duty on
transfer of shares. Shares purchased in electronic form will
be transferred to the investor’s name within a day of completion of settlement.
Faster payment on sale of sharesNo scope for forgery of share certificates
Category of shares at BSECategory of shares at BSE
A groupB1 Group (medium Sized, Inconsistent
profit, less liquidity)B2 Group (Small companies, very low
trading, poor in profit generation)Z Group (non compliance, poor
companies)F Group (debt Market)
LIMIT ORDER BOOK
Buyside Sellside
Limit Price
Shares
500 501 502 503 504 505 506 507 508 509 510 511 512
TYPES OF ORDERS
Limit Order Those who place limit order supply liquidity
Market Order Those who place market order demand liquidity
SETTLEMENT
• Security transactions are settled through electronic
delivery facilitated by depositories
• Presently, the settlement of all trades is a rolling
settlement on a T+2 basis
In case of sale:- BO will give delivery instruction through Delivery Instruction Slip (DIS) to DP to debit his account and credit the broker’s account. Such instruction should reach the DP’s office at least 24 hours before the pay-in, failing which, DP will accept the instruction only at the BO’s risk.
ETF
An ETF is a basket of securities that is traded on the stock exchange, akin to a stock. So, unlike conventional mutual funds, ETFs are listed on a recognised stock exchange. Their units can be bought and sold directly on the exchange, through a stockbroker during the trading hours.
Circuit Breakers
In case of a 10% movement of either of these indices, there would be a 1-hour market halt if the movement takes place before 1 p.m. In case the movement takes place at or after 1 p.m. but before 2.30 p.m. there will be a trading halt for ½ hour. In case the movement takes place at or after 2.30 p.m. there will be no trading halt at the 10% level and the market will continue trading.
In case of a 15% movement of either index, there will be a 2-hour market halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1 p.m. but before 2 p.m., there will be a 1 hour halt. If the 15% trigger is reached on or after 2 p.m. the trading will halt for the remainder of the day.
In case of a 20% movement of the index, the trading will be halted for the remainder of the day.
Circuit filters On individual stocks
When applied to individual stocks, circuit filters are known as price bands or price filters.
There are no circuits on the 30 stocks included in the Sensex or the 50 included in the Nifty.
The filter bands are in the range of 2%, 5%, 10% and 20%.
Buy back of shares
Buyback is the reverse of issue of shares by a company. In buy back, company offers to take back its shares owned by the investors at a specified price; this offer can be binding or optional to the investors.
