indian stock market final report

8/6/2019 Indian Stock Market Final Report

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Project Guide:

Amity School of Business

Amity University, Noida


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Acknowledgement

There are certain quarters without whose guidance and support this project would

not seen the light of the day. My sincere thanks are to due to all of them.

First of all, I am immensely grateful to , Amity School of Business , who has been a

constant source of inspiration and motivation for me. She has always been the

guiding force in holistic development of her students in all walks of life. While

undergoing this project work, I have drawn immensely from her able guidance and

leadership. She has always provided considerable flexibility and freedom to her

students in successful and timely completion of their dissertation / research projects.

I am also thankful to my project nt for his unstinting guidance and support

throughout the project.

My sincere thanks are also due to the Library staff of Amity School of Business for

their constant support during my occasional visits to the departmental library for

consulting related literature on the subject.

My special thanks are also to all other members of faculty, and staff of Amity School

of Business, my friends and batchmates for extending their helping hand whenever I

needed it the most.


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` KRANTI CHANDRA

IMBA -22


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Guide Certificate


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Abstract

RESEARCH METHODOLOGY


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A research is done whenever we try to analyse a particular trend, or to study the

impact of a new policy on various socio-economic variables in the society. At times it

is also undertaken to analyse the effects of some happenings in the past. The way in

which such a research is done is called Research Methodology. A research work

consists of an objective which tells us what we want to establish or co-relate with

the help of our research.

Research objectives of this project

RESEARCH METHODOLOGY ADOPTED

The research methodology being adopted in this project is to extract and analyse

information and secondary data available in the public domain from credible sources

such as, etc. Information has also been sought from the related literaure

(books, business newspapers, and magazines) available in the departmental library.

The information thus obtained has been edited and condensed accodingly keeping in

mind the scope of the project. Time-series data has been analysed by plotting charts

using MS-Excel software. Keeping in mind the nature of topic choosen, primary

data / research has not been conducted or included in this research project.

CONCLUSIVE RESEARCH

A conclusive research is meant to provide information that is useful in researching

conclusion of decision making. It tends to be quantitative in nature which is to say in

the form of numbers that can be quantified and summarized. It relies on both


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secondary data, particularly existing database that are analyzed to shed light on

different problems than the original one for which they were constituted and primary

research or data specifically gathered for the current study

Data Collected : Secondary Data

For analysis of data graphs have been used.

Secondary Data Methodology: Secondary data was collected from the web, various r published on the internet, books, newspapers (Economic Times, Business Standard,Financial Express) and business magazines.

Various websites those were visited and data / information collected from: -

www.wikipedia.com

www.google.com
http://www.wikipedia.com/http://www.google.com/http://www.wikipedia.com/http://www.google.com/


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LIST OF CONTENTS

S.No. Topic Page

No.

1. Introduction

2.

9. Conclusion

10. Limitations

11. Bibliography


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CHAPTER 1

INTRODUCTION

1.1 Evolution

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 yeaThe earliest records of security dealings in India are meager and obscure. The East Company was the dominant institution in those days and business in its loan securities usedtransacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took plBombay. Though the trading list was broader in 1839, there were only half a dozen brrecognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage buattracted many men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of Ewas stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs

At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, fo place in a street (now appropriately called as Dalal Street) where they would convenassemble and transact business. In 1887, they formally established in Bombay, the "Nativeand Stock Brokers' Association" (which is alternatively known as " The Stock Exchange1895, the Stock Exchange acquired a premise in the same street and it was inaugurated inThus, the Stock Exchange at Bombay was consolidated.

1.2 Other Leading Cities in Stock Market Operations


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Ahmedabad gained importance next to Bombay with respect to cotton textile industry.1880, many mills originated from Ahmedabad and rapidly forged ahead. As new mills

floated, the need for a Stock Exchange at Ahmedabad was realised and in 1894 the bformed "The Ahmedabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmedabad, the jute industry wCalcutta. Also tea and coal industries were the other major industrial groups in Calcutta. AfShare Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was fo by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 190June 1908, some leading brokers formed "The Calcutta Stock Exchange Association".

In the beginning of the twentieth century, the industrial revolution was on the way in Indithe Swadeshi Movement; and with the inauguration of the Tata Iron and Steel Company L

in 1907, an important stage in industrial advancement under Indian enterprise was reached.Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies genenjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange functionits midst, under the name and style of "The Madras Stock Exchange" with 100 memHowever, when boom faded, the number of members stood reduced from 100 to 3, by 192so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was aincrease in the number of textile mills and many plantation companies were floated. In 1

stock exchange was once again organized in Madras - Madras Stock Exchange AssociatioLimited. (In 1957 the name was changed to Madras Stock Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Stock Exchange Limited, which was incorporated in 1936.

1.3 Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed by a sBut, in 1943, the situation changed radically, when India was fully mobilized as a supply ba

On account of the restrictive controls on cotton, bullion, seeds and other commodities, thosdealing in them found in the stock market as the only outlet for their activities. They wereanxious to join the trade and their number was swelled by numerous others. Many newassociations were constituted for the purpose and Stock Exchanges in all parts of the countrwere floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited (1940Hyderabad Stock Exchange Limited (1944) were incorporated.


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In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and theDelhi Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgaminto the Delhi Stock Exchnage Association Limited.

1.4 Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited companiThey are broadly divided into two categories, namely, specified securities (forward list) andspecified securities (cash list). Equity shares of dividend paying, growth-oriented companiea paid-up capital of atleast Rs.50 million and a market capitalization of atleast Rs.100 milliohaving more than 20,000 shareholders are, normally, put in the specified group and the balanon-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot delivertransactions "for delivery and payment within the time or on the date stipulated when enteriinto the contract which shall not be more than 14 days following the date of the contract" : (b) forward transactions "delivery and payment can be extended by further period of 14 dayso that the overall period does not exceed 90 days from the date of the contract". The latter permitted only in the case of specified shares. The brokers who carry over the outstandingscarry over charges (cantango or backwardation) which are usually determined by the rates ointerest prevailing.

A member broker in an Indian stock exchange can act as an agent, buy and sell securities fo

clients on a commission basis and also can act as a trader or dealer as a principal, buy and ssecurities on his own account and risk, in contrast with the practice prevailing on New YorkLondon Stock Exchanges, where a member can act as a jobber or a broker only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style of fface trading with bids and offers being made by open outcry. However, there is a great amoeffort to modernize the Indian stock exchanges in the very recent times.


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CHAPTER 2

2.1 National Stock Exchange (NSE)

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stocmarket trading system on par with the international standards. On the basis of therecommendations of high powered Pherwani Committee, the National Stock Exchange wasincorporated in 1992 by Industrial Development Bank of India, Industrial Credit and InvestCorporation of India, Industrial Finance Corporation of India, all Insurance Corporations,selected commercial banks and others.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Capital market.

Wholesale debt market operations are similar to money market operations - institutions andcorporate bodies enter into high value transactions in financial instruments such as governmsecurities, treasury bills, public sector unit bonds, commercial paper, certificate of deposit, There are two kinds of players in NSE:

(a) trading members and

(b) participants.

Recognized members of NSE are called trading members who trade on behalf of themselvetheir clients. Participants include trading members and large players like banks who take disettlement responsibility.

Trading at NSE takes place through a fully automated screen-based trading mechanism whiadopts the principle of an order-driven market. Trading members can stay at their offices anexecute the trading, since they are linked through a communication network. The prices at the buyer and seller are willing to transact will appear on the screen. When the prices matchtransaction will be completed and a confirmation slip will be printed at the office of the tradmember.

NSE has several advantages over the traditional trading exchanges. They are as follows:


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NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-marke

operations are streamlined coupled with the countrywide access to the securities. Delays in communication, late payments and the malpractices prevailing in the

traditional trading mechanism can be done away with greater operational efficiency informational transparency in the stock market operations, with the support of totalcomputerized network.

Unless stock markets provide professionalised service, small investors and foreign investornot be interested in capital market operations. And capital market being one of the major soof long-term finance for industrial projects, India cannot afford to damage the capital marke path. In this regard NSE gains vital importance in the Indian capital market system.


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CHAPTER 3

3.1 BOMBAY STOCK EXCHANGE

Bombay Stock Exchange

Mumba hear Bjr

Type Stock Exchange

Location Mumbai, India

Coordinates 18.929681N72.833589E
http://en.wikipedia.org/wiki/Stock_Exchangehttp://en.wikipedia.org/wiki/Mumbaihttp://toolserver.org/~geohack/geohack.php?pagename=Bombay_Stock_Exchange&params=18.929681_N_72.833589_E_region:IN-MH_type:landmarkhttp://toolserver.org/~geohack/geohack.php?pagename=Bombay_Stock_Exchange&params=18.929681_N_72.833589_E_region:IN-MH_type:landmarkhttp://en.wikipedia.org/wiki/File:Bombay_Stock_Exchange_3.jpghttp://en.wikipedia.org/wiki/File:Bombay_Stock_Exchange_logo.svghttp://en.wikipedia.org/wiki/Stock_Exchangehttp://en.wikipedia.org/wiki/Mumbaihttp://toolserver.org/~geohack/geohack.php?pagename=Bombay_Stock_Exchange&params=18.929681_N_72.833589_E_region:IN-MH_type:landmarkhttp://toolserver.org/~geohack/geohack.php?pagename=Bombay_Stock_Exchange&params=18.929681_N_72.833589_E_region:IN-MH_type:landmark


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Founded 1875

Owner Bombay Stock Exchange Limited

Key people MadhuKannan (CEO& MD)

Currency INR

No. of listings 4,900

MarketCap US$1.28 trillion (Feb,2010)

Volume US$980 billion (2006)

Indexes BSE Sensex

Website www.bseindia.com

TheBombay Stock Exchange (BSE ) Mumba hear Bjr (formerly, The Stock Exchange,Mumbai; popularly called Bombay Stock Exchange, or BSE) is the oldeststock exchangein Asiaand has the third largest number of listed companies in the world, with 4900 listed as of Feb2010. It is located at Dalal Street, Mumbai, India. On Feb, 2010, the equitymarketcapitalizationof the companies listed on the BSE was US$1.28trillion, making it the largeststock exchange inSouth Asiaand the12th largest in the world.[2]

With over 4900 Indian companies listed & over 7700 scrips on the stock exchange,] it has asignificant trading volume. TheBSE SENSEX(SENS itive indEX ), also called the "BSE 30", is awidely used market index in India andAsia. Though many other exchanges exist, BSE andthe National Stock Exchange of India account for most of the trading in shares in India.
http://en.wikipedia.org/wiki/Chief_Executive_Officerhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/BSE_Sensexhttp://en.wikipedia.org/wiki/Websitehttp://www.bseindia.com/http://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Dalal_Streethttp://en.wikipedia.org/wiki/Dalal_Streethttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/1000000000000_(number)http://en.wikipedia.org/wiki/South_Asiahttp://en.wikipedia.org/wiki/List_of_stock_exchangeshttp://en.wikipedia.org/wiki/List_of_stock_exchangeshttp://en.wikipedia.org/wiki/Bombay_Stock_Exchange#cite_note-1http://en.wikipedia.org/wiki/BSE_Sensexhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_Indiahttp://en.wikipedia.org/wiki/Chief_Executive_Officerhttp://en.wikipedia.org/wiki/Managing_Directorhttp://en.wikipedia.org/wiki/Indian_rupeehttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/United_States_dollarhttp://en.wikipedia.org/wiki/BSE_Sensexhttp://en.wikipedia.org/wiki/Websitehttp://www.bseindia.com/http://en.wikipedia.org/wiki/Stock_exchangehttp://en.wikipedia.org/wiki/Dalal_Streethttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/1000000000000_(number)http://en.wikipedia.org/wiki/South_Asiahttp://en.wikipedia.org/wiki/List_of_stock_exchangeshttp://en.wikipedia.org/wiki/Bombay_Stock_Exchange#cite_note-1http://en.wikipedia.org/wiki/BSE_Sensexhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/National_Stock_Exchange_of_India


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3.2 Hours of operation

Session Timing

Beginning of the Day Session 8:00 9:00

Trading Session 9:00 - 15:30

Position Transfer Session 15:30 - 15:50

Closing Session 15:50 - 16:05

Option Exercise Session 16:05 - 16:35

Margin Session 16:35 - 16:50

Query Session 16:50 - 17:35

End of Day Session 17:30

The hours of operation for the BSE quoted above are stated in terms of the local time (i.e. GMT +5:30) in

Mumbai (Bombay), India. BSE's normal trading sessions are on all days of the week except Saturdays,Sundays and holidays declared by the Exchange in advance.

3.3 History

The Bombay Stock Exchange is known as the oldest exchange in Asia. It traces its history t1850s, when 4 Gujarati and 1 Parsi stockbroker would gather under banyan trees in front of


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Mumbai's Town Hall. The location of these meetings changed many times, as the number o brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 18

became an official organization known as 'The Native Share & Stock Brokers Association'.1956, the BSE became the first stock exchange to be recognized by the Indian Governmentthe Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 BSE used this index to open its derivatives market, trading Sensex futures contracts. Thedevelopment of Sensex options along with equity derivatives followed in 2001 and 2002,expanding the BSE's trading platform. Historically an open outcry floor trading exchange, tBombay Stock Exchange switched to an electronic trading system in 1995. It took the exchonly fifty days to make this transition. This automated, screen-based trading platform called

On-line trading (BOLT) currently has a capacity of 80 lakh orders per day. The BSE has alsintroduced the world's first centralized exchange-based internet trading system, BSEWEBxto enable investors anywhere in the world to trade on the BSE platform.

CHAPTER 4


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4.1 SEBI

Securities and Exchange Board of India

Securities and Exchange Board of India

SEBI Bhavan, Mumbai headquarters

Agency overview

Formed 1992

Jurisdiction India

Headquarters Mumbai, Maharashtra, India

Employees 525 [1]

Agency executive C B Bhave, Chairman

Website

http://www.sebi.gov.in
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India#cite_note-sebi.gov.in-0http://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India#cite_note-sebi.gov.in-0http://www.sebi.gov.in/http://en.wikipedia.org/wiki/File:SEBI_Bhavan.jpghttp://en.wikipedia.org/wiki/File:SEBI_logo.svghttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Maharashtrahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Securities_and_Exchange_Board_of_India#cite_note-sebi.gov.in-0http://www.sebi.gov.in/


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SEBI is theregulator for the securities market in India. It was formed officially bythe Government of India in 1992 withSEBI Act 1992 being passed by the Indian Parliament.

Chaired byC B Bhave, SEBI is headquartered in the popular business district of Bandra-Kurlacomplex inMumbai, and has Northern, Eastern, Southern and Western regional offices in NewDelhi, Kolkata, ChennaiandAhmedabad.

Chandrasekhar Bhaskar Bhaveis the sixth chairman of the Securities Market Regulator. Prior ttaking charge as Chairman SEBI, he had been the chairman of NSDL ( National SecuritiesDepository Limited) ushering in paperless securities. Prior to his stint at NSDL, he had servedSEBI as a Senior Executive Director. He is a former Indian Administrative Service officer of the

1975 batch.The Board comprises.

Name Designation As per

CB Bhave ChairmanSEBI CHAIRMAN (S.4(1)(a) of the SEB1992)

KP Krishnan Joint Secretary, Ministry of Finance Member (S.4(1)(b) of the SEB

Anurag Goel Secretary, Ministry of Corporate Affairs Member (S.4(1)(b) of the SEB

Dr G MohanGopal

Director, National Judicial Academy,Bhopal Member (S.4(1)(d) of the SEBI Act

MS Sahoo Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI Act

Dr KM Abraham Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI Act

Mohandas Pai Director, Infosys Member (S.4(1)(d) of the SEBI A
http://en.wikipedia.org/wiki/Regulatorhttp://en.wikipedia.org/wiki/Regulatorhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/SEBI_Act_1992http://en.wikipedia.org/wiki/SEBI_Act_1992http://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/National_Securities_Depository_Limitedhttp://en.wikipedia.org/wiki/National_Securities_Depository_Limitedhttp://en.wikipedia.org/wiki/Indian_Administrative_Servicehttp://en.wikipedia.org/wiki/Indian_Administrative_Servicehttp://en.wikipedia.org/wiki/Indian_Administrative_Servicehttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Regulatorhttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/SEBI_Act_1992http://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Bandra-Kurla_complexhttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/New_Delhihttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Ahmedabadhttp://en.wikipedia.org/wiki/Chandrasekhar_Bhaskar_Bhavehttp://en.wikipedia.org/wiki/National_Securities_Depository_Limitedhttp://en.wikipedia.org/wiki/National_Securities_Depository_Limitedhttp://en.wikipedia.org/wiki/Indian_Administrative_Servicehttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBI


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Prashant Saran Whole Time Member, SEBI Member (S.4(1)(d) of the SEBI Act

4.2Functions and responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the market:

the issuers of securities

the investors the market intermediaries.

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial and quasi-executive. It drafts regulations in its legislative capacity, it conducts investigation andenforcement action in its executive function and it passes rulings and orders in its judicialcapacity. Though this makes it very powerful, there is an appeals process to create accountaThere is a Securities Appellate Tribunal which is a three-member tribunal and is presently h by a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal lies dire

the Supreme Court.SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively andsuccessively (e.g. the quick movement towards making the markets electronic and paperles

rolling settlement on T+2 basis). SEBI has been active in setting up the regulations as requiunder law.

CHAPTER 5

5.1 Depository participant
http://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Quasi-legislativehttp://en.wikipedia.org/wiki/Quasi-legislativehttp://en.wikipedia.org/wiki/Quasi-legislativehttp://en.wikipedia.org/wiki/Supreme_Court_of_Indiahttp://en.wikipedia.org/wiki/Supreme_Court_of_Indiahttp://en.wikipedia.org/wiki/SEBIhttp://en.wikipedia.org/wiki/Quasi-legislativehttp://en.wikipedia.org/wiki/Supreme_Court_of_India


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In India, a Depository Participant (DP) is described as an agentof the depository. They are theintermediaries between the depository and the investors. The relationship between the DPs

the depository is governed by an agreement made between the two under the Depositories Aa strictly legal sense, a DP is an entity who is registered as such with SEBI under the provisof the SEBI Act. As per the provisions of this Act, a DP can offer depository-related serviceafter obtaining a certificate of registration from SEBI.

SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of Rs. 50 lakh for stockbroR&T agents and non-banking finance companies (NBFC), for granting them a certificate ofregistration to act as DPs. If a stockbroker seeks to act as a DP in more than one depositoryshould comply with the specified net worth criterion separately for each such depository. Nminimum net worth criterion has been prescribed for other categories of DPs; however,depositories can fix a higher net worth criterion for their DPs.

5.2 Basics of Depository

Depository is an institution or a kind of organization which holds securities with it, in whictrading is done among shares, debentures, mutual funds, derivatives, F&O and commoditieintermediatories perform its actions in various kinds of securities at Depository on the behaits clients. These intermediatories are called Dipositories Participants. There are basically twkinds of depositories in India. One is the National Securities Depository Limited(NSDL) another is the Central Depository Service Limited(CDSL). Every Depository Participant(DP) to be registered under this Depository before starting operation or trade in the market.

5.3 Benefits of Depository

Bad delivery eliminated Immediate transfer of shares No stamp duty on such transfers Elimination of risks that are normally associated in dealing with Physical certificatesloss / theft / mutilation due to careless handling / forgery / etc. Reduced transaction cost.

5.4 How do Depository operate
http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Agenhttp://en.wikipedia.org/wiki/Agenhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Agen


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Depository interacts with its clients / investors through its agents, called Depository Participnormally known as DPs.

For any investor / client, to avail the services provided by the Depository, has to open Depoaccount, known as Demat A/c, with any of the DPs.

5.5 Demat Account Opening

A demat account is opened on the same lines as that of a Bank Account. Prescribed Accounopening forms are available with the DP, needs to be filled in. Standard Agreements are to bsigned by the Client and the DP, which details the rights and obligations of both parties. Alwith the form the client requires to attach Photographs of Account holder, Attested copies o proof of residence and proof of identity needs to be submitted along with the account openiform.

In case of Corporate clients, additional attachments required are - true copy of the resolutioDemat a/c opening along with signatories to operate the account and true copy of theMemorandum and Articles of Association is to be attached.

5.6 Services provided by Depositor

Dematerialisation (usually known as demat) is converting physical certificates toelectronic form Rematerialisation, known as remat, is reverse of demat, i.e. getting physical certificafrom the electronic securities Transfer of securities, change of beneficial ownership Settlement of trades done on exchange connected to the Depository

5.7 No. of Depository in the country

Currently there are two depositories operational in the country.

1. National Securities Depository Ltd. - NSDL - Having 95 Cr. Demat A/c as on03-2010 - 300 DPs in India2. Central Depository Services Ltd. - CDSL - Having 65 laks Demat A/c as

on 31-03-2010 - 500 DPs in India.


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CHAPTER 6

6.1 DEMAT ACCOUNT

The termDemat , in India, refers to a dematerialised account. For individual Indian citizens ttrade in listed stocks or debentures. The Securities Exchange Board of India (SEBI) requireinvestor to maintain a Demat account. In a demat account shares and securities are held in


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electronic form instead of taking actual possession of certificates. A Demat Account is openthe investor while registering with an investment broker (or sub broker). The Demat accoun

number which is quoted for all transactions to enable electronic settlements of trades to take place.

Access to the demat account requires an internet password and a transaction password as winitiating and confirming transfers or purchases of securities. Purchases and sales of securitthe Demat account are automatically made once transactions are executed and completed.

6.2 Advantages of Demat

The demat account reduces brokerage charges, makes pledging/hypothecation of shares easenables quick ownership of securities on settlement resulting in increased liquidity, avoidsconfusion in the ownership title of securities, and provides easy receipt of public issue allot

It also helps you avoid bad deliveries caused by signature mismatch, postal delays and loss certificates in transit. Further, it eliminates risks associated with forgery, counterfeiting and due to fire, theft or mutilation. Demat account holders can also avoid stamp duty (as agains per cent payable on physical shares), avoid filling up of transfer deeds, and obtain quick recof such benefits as stock splits and bonuses.

6.3 Indian Market Scenario

Indian capital market has seen unprecedented boom in its activity in the last 15 years in termnumber of stock exchanges, listed companies, trade volumes, market intermediaries, invest population, etc. However, this surge in activity has brought with it numerous problems thatthreaten the very survival of the capital markets in the long run, most of which are due to thlarge volume of paper work involved and paper based trading, clearing and settlement.

Until the late eighties, the common man kept away from capital market and thus the quantufunds Benefit to the Investor The depository system reduces risks involved in holding physcertificated, e.g., loss, theft, mutilation, forgery, etc.It ensures transfer settlements and reducdelay in registration of shares. It ensures faster communication to investors. It helps avoid bdelivery problem due to signature differences, etc.It ensures faster payment on sale of sharestamp duty is paid on transfer of shares. It provides more acceptability and liquidity of secu


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Benefit to Brokers The depository system reduces risk of delayed settlement. It ensures gre profit due to increase in volume of trading. It eliminates chances of forgery bad delivery.

increases overall of trading and profitability.It increases confidence in investors.

6.4 Demat conversion

Converting physical holding into electronic holding (dematerialising securities) In order todematerialise physical securities one has to fill in a DRF (Demat Request Form) which isavailable with the DP and submit the same along with physical certificates one wishes todematerialise. Separate DRF has to be filled for each ISIN Number. The complete process odematerialisation is outlined below: Surrender certificates for dematerialisation to your

depository participant. Depository participant intimates Depository of the request through system. Depository participant submits the certificates to the registrar of the Issuer CompaRegistrar confirms the dematerialisation request from depository. After dematerialising thcertificates, Registrar updates accounts and informs depository of the completion of dematerialisation. Depository updates its accounts and informs the depository participant.Depository participant updates the demat account of the investor.

6.5 Demat Options

Banks score over others Around 200 depository participants (DPs) offer the demat accoufacility. A comparison of the fees charged by different DPs is detailed below. But there are distinct advantages of having a demat account with a bank quick processing, accessibilitonline transaction. Generally, banks credit your demat account with shares in case of purchcredit your savings accounts with the proceeds of a sale on the third day. Banks are alsoadvantageous because of the number of branches they have. Some banks give the option ofopening a demat account in any branch, while others restrict themselves to a select set of branches. Some private banks also provide online access to the demat account. So, you canon your holdings, transactions and status of requests through the net banking facility. A bro

who acts as a DP may not be able to provide these services.6.6 Fees Involved

There are four major charges usually levied on a demat account: Account opening fee, annumaintenance fee, custodian fee and transaction fee. All the charges vary from DP to DP.

6.7 Account-opening fee


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Depending on the DP, there may or may not be an opening account fee. Private banks, suchICICI Bank, HDFC Bank and UTI Bank, do not have one. However, players such as Globe

Capital, Karvy Consultants and the State Bank of India do so. But most players levy this whyou re-open a demat account, though the Stock Holding Corporation offers a lifetime accouopening fee, which allows you to hold on to your demat account over a long period. This ferefundable.

6.8 Annual maintenance fee

This is also known as folio maintenance charges, and is generally levied in advance.

6.9 Custodian fee

This fee is charged monthly and depends on the number of securities (international securitie

identification numbers ISIN) held in the account. It generally ranges between Rs 0.5 to R per ISIN per month. DPs will not charge custody fee for ISIN on which the companies haveone-time custody charges to the depository.6.10 Transaction fee

The transaction fee is charged for crediting/debiting securities to and from the account on amonthly basis. While some DPs, such as SBI, charge a flat fee per transaction, HDFC BankICICI Bank peg the fee to the transaction value, subject to a minimum amount. The fee alsodiffers based on the kind of transaction (buying or selling). Some DPs charge only for debit

the securities while others charge for both. The DPs also charge if your instruction to buy/sfails or is rejected. In addition, service tax is also charged by the DPs.

In addition to the other fees, the DP also charges a fee for converting the shares from the phto the electronic form or vice-versa. This fee varies for both demat and remat requests. For some DPs charge a flat fee per request in addition to the variable fee per certificate, while ocharge only the variable fee.

For instance, Stock Holding Corporation charges Rs 25 as the request fee and Rs 3 per certas the variable fee. However, SBI charges only the variable fee, which is Rs 3 per certificatRemat requests also have charges akin to that of demat. However, variable charges for remagenerally higher than demat. Some of the additional features (usually offered by banks) arefollows.Some DPs offer a frequent trader account, where they charge frequent traders at lowrates than the standard charges.Demat account holders are generally required to pay the DPadvance fee for each account which will be adjusted against the various service charges. Thaccount holder needs to raise the balance when it falls below a certain amount prescribed bDP. However, if you also hold a savings account with the DP you can provide a debit


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authorisation to the DP for paying this charge.Finally, once you choose your DP, it will be prudent to keep all your accounts with that DP, so that tracking your capital gains liability i

easier. This is because, for calculating capital gains tax, the period of holding will be determ by the DP and different DPs follow different methods. For instance, ICICI Bank uses the fifirst out (FIFO) method to compute the period of holding. The proof of the cost of acquisitiwill be the contract note. The computation of capital gains is done account-wise.

6.11 Opening an account

Steps involved in opening a demat account First an investor has to approach a DP and fill uaccount opening form. The account opening form must be supported by copies of any one oapproved documents to serve as proof of identity (POI) and proof of address (POA) as spec by SEBI. Besides, production of PAN card in original at the time of opening of account hasmade mandatory effective from April 1, 2006.

All applicants should carry original documents for verification by an authorized official of depository participant, under his signature. Further, the investor has to sign an agreement w

in a depository prescribed standard format, which details rights and duties of investor and Dshould provide the investor with a copy of the agreement and schedule of charges for their freference. The DP will open the account in the system and give an account number, which called BO ID (Beneficiary Owner Identification number). The DP may revise the charges bgiving 30 days notice in advance. SEBI has rationalised the cost structure for dematerialisatremoving account opening charges, transaction charges for credit of securities, and custodycharges vide circular dated January 28, 2005. Further, SEBI has vide circular dated Novem2005 advised that with effect from January 9, 2006, no charges shall be levied by a depositoDP and consequently, by a DP on a Beneficiary Owner (BO) when a BO transfers all thesecurities lying in his account to another branch of the same DP or to another DP of the samdepository or another depository, provided the BO Account/s at transferee DP and at transfeDP are one and the same, i.e. identical in all respects. In case the BO Account at transferor a joint account, the BO Account at transferee DP should also be a joint account in the samesequence of ownership.

Disadvantages of Demat


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The disadvantages of dematerialization of securities can be summarised as follows:

Trading in securities may become uncontrolled in case of dematerialized securities.

It is incumbent upon the capital market regulator to keep a close watch on the trading indematerialized securities and see to it that trading does not act as a detriment to investors.

The role of key market players in case of dematerialized securities, such as stock-brokers, nto be supervised as they have the capability of manipulating the market.

Multiple regulatory frameworks have to be confirmed to, including the Depositories Act,Regulations and the various By-Laws of various depositories.

Additionally, agreements are entered at various levels in the process of dematerialization. T

may cause anxiety to the investor desirous of simplicity in terms of transactions in dematerisecurities.

However, the advantages of dematerialization outweigh its disadvantages and the changesushered in by SEBI and the Central Government in terms of compulsory dematerialization securities is important for developing the securities market to a degree of advancement. Fretraded securities are an essential component of such an advanced market and dematerializaaddresses such issues and is a step towards the advancement of the market.

indian stock market final report

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