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Summer training Project

Report

On

ANALYSIS OF SHARE MARKET OF

NSE/BSE

For Submitted for Partial Fulfillment Of

Masters of Business Administration

(MBA -2009-2010)

Under The Guidance of:- Under The

Supervision of:-

Dr. K.G.CHOBEY B.K.Nathani

( Executive Director, UPSE)

Submitted By:-

Neelesh Pachauri

Roll No. 0944070029

Naraina Vidya Peeth Management Institute

Panki, Kanpur-208020


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STUDENT DECLARATION

I, Neelesh Pachauri student of M.B.A at Naraina Vidya Peeth Management

Institute, Kanpur of hereby declare that the Project work entitled Analysis of

Share Market of NSE/BSE is compiled and submitted under the guidance of

Swati Singh This is my original work.

Whatever information furnished in this project report is true to the

best of my knowledge.

Neelesh Pachauri

MBA IInd Year

Roll No: - 0944070029


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Naraina Vidya Peeth Management Institute

Gangaganj,Panki, Kanpur-208020

DATE. . . . . . .

To Whom It may Concern

This is to certify that Mr./Ms. Neelesh Pachauri student of

M.B.A Course (2008-10) at Naraina Vidya Peeth Management Institute with dual

Specialization in Marketing & Finance has satisfactorily completed the

summer research project on ANALYSIS OF SHARE MARKET OF

NSE/BSE .

study is done under the guidance of the undersigned by partil fulfillment for theaward of M.B.A .I wish him /her all the best for bright future ahead.

Suervisor Head of Department Director


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ACKNOWLEDGEMENT

I would like to express my Acknowledgement to those people, without whose

contribution, Support and guidance this Report would not have seen the light of the

day. Notable among them are Mr. B.K.Nathani who was my Project Guide and

who helped me in a lot.

I am also thankful to all other employees of Religare who guide me during myProject.

I am also thankful and would like to express my Gratitude to the Honorable Head

of Department Dr. K.G. Chobey and the entire Institute for giving me a Platform

to have this wonderful opportunity and being able to get a glimpse of the Corporate

World


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PREFACE

In this study behaviour of the share market has been analysed, and changing trends

which comes in last ten years. For which I surveyed the market and interviewed

registered brokers, sub- brokers and investors through which I analyze the

customer behaviour, how the share market affect. The study is all about capital

market .The capital market is the market for securities, where companies and

governments can raise long term funds. It is a market in which money is lent for

periods longer than a year. The capital market includes the stock market and the

bond market. Financial regulators, such as the U.S. Securities and Exchange

Commission (SEC), oversee the capital markets in their designated countries to

ensure that investors are protected against fraud.

The capital markets consist of the primary market and the secondary market. The

primary markets are where new stock and bonds issues are sold (underwriting) to

investors. The secondary markets are where existing securities are sold and bought

from one investor or speculator to another, usually on an exchange (e.g. the New

York Stock Exchange).

Share market is the part of secondary market. Here are a lot of changes in todays

share market in comparison to last ten years. With the perception in mind that

initially, before ten years back investors were only from big cities but now thescenario has been changed with the retailing in this industry. Today small investors

concept is in trend that show now cities like, Bhopal, where financial market is not

enough smart but a good number of customers and investors have started

investing this study is all about this changing scenario.


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CONTENTS

Certificate____________________________________6

Declaration___________________________________7

Acknowledgement______________________________8

The Indian Capital Market_______________________9-31

An Overview

Other leading cities in stock market operation

Growth of Indian Stock Exchanges

Sensex and Nifty

History

Key Milestones

Myths of Stock Market

How Stock Market Works

Initial Public Offering__________________________32-35

Introduction

How to apply Public issue

How to make Payment for IPOs Role of SEBI in process of IPO

DEMAT account______________________________36-38

Introduction

How to open Demat account


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Document required

SEBI (Securities and Exchange Board of India)_____39-45

Introduction

The Board Comprises

Functions and Responsibilities

BSE (Bombay Stock Exchange) Introduction_______46-49

NSE (National Stock Exchange)_________________50-52

Introduction

NSE group

SENSEX____________________________________53-58

Introduction

SENSEX calculation Methodology

Concept of Free Float

Definition of Free Float

Function and Purpose of Stock Market

Depository__________________________________59-64

CDSL NSDL

CSD

FII(Foreign Institutional Investor)________________65-72

Introduction


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FII mean

Regulations

Participatory Notes___________________________73-77

Scams of Share Market________________________78-94

Harshad Mehta Scam

Ketan Parekhs Scam

Satyam Scam

Karvy IPO scam

List of registered Share Brokers and Sub- Brokers__95-109

Research Methodology_______________________

Result analysis &Interpretation________________

Suggestions_______________________________

Conclusion_________________________________

Questions for interview_______________________

Biblography________________________________


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ACKNOWLEDGEMENT

I would like to thank my project guide Dr. K.G.Chaubey for guiding me through

my summer internship and research project. His encouragement, time and effort

are greatly appreciated.

I would like to thank Ms. B.K.Nathani, for supporting me during this project and providing me an opportunity to learn outside the class room. It was a truly

wonderful learning experience.

I would like to dedicate this project to my parents. Without their help and constant

support this project would not have been possible.

Lastly I would like to thank all the respondents who offered their opinions and

suggestions through the survey that was conducted by me in Bhopal.

Once again my gratitude to the Brokers, Sub-Brokers and Investors of share

market. For their kind co-operation.


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THE INDIAN CAPITAL MARKET

AN OVERVIEW

The Indian capital market is more than a century old. Its history goes back to 1875,

when 22 brokers formed the Bombay Stock Exchange (BSE). Over the period, the

Indian securities market has evolved continuously to become one of the most

dynamic, modern, and efficient securities markets in Asia. Today,

Indian market confirms to best international practices and standards both in termsof structure and in terms of operating efficiency .Indian securities markets are

mainly governed by a) The Companys Act1956, b) the Securities Contracts

(Regulation) Act 1956 (SCRA Act), and c) the Securities and Exchange Board of

India (SEBI) Act, 1992. A brief background of these above regulations are given

below

a) The Companies Act 1956 deals with issue, allotment and transfer of securities

and various aspects relating to company management. It provides norms for

disclosures in the public issues, regulations for underwriting, and the issues

pertaining to use of premium and discount on various issues.

b) SCRA provides regulations for direct and indirect control of stock exchanges

with an aim to prevent undesirable transactions in securities. It provides regulatory

jurisdiction to Central Government over stock exchanges, contracts in securities

and listing of securities on stock exchanges.


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c) The SEBI Act empowers SEBI to protect the interest of investors in the

securities market, to promote the development of securities market and to regulate

the security market.

The Indian securities market consists of primary (new issues) as well as secondary

(stock) market in both equity and debt. The primary market provides the channel

for sale of new securities, while the secondary market deals in trading of securities

previously issued. The issuers of securities issue (create and sell) new securities in

the primary market to raise funds for investment. They do so either through public

issues or private placement. There are two major types of issuers who issue

securities. The corporate entities issue mainly debt and equity instruments (shares,

debentures, etc.), while the governments (central and state governments) issue debt

securities (dated securities, treasury bills). The secondary market enables

participants who hold securities to adjust their holdings in response to changes in

their assessment of risk and return. A variant of secondary market is the forward

market, where securities are traded for future delivery and payment in the form of

futures and options. The futures and options can be on individual stocks or basketof stocks like index. Two exchanges, namely National Stock Exchange (NSE) and

the Stock Exchange, Mumbai (BSE) provide trading of derivatives in single stock

futures, index futures, single stock options and index options. Derivatives trading

commenced in India in June 2000

Other leading cities in stock market operations

Ahmedabad gained importance next to Bombay with respect to cotton textile

industry. After 1880, many mills originated from Ahmedabad and rapidly forged

ahead. As new mills were floated, the need for a Stock Exchange at Ahmedabad


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was realized and in 1894 the brokers formed "The Ahmedabad Share and Stock

Brokers' Association".

What the cotton textile industry was to Bombay and Ahmedabad, the jute industry

was to Calcutta. Also tea and coal industries were the other major industrial groups

in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp

boom in jute shares, which was followed by a boom in tea shares in the 1880's and

1890's; and a coal boom between 1904 and 1908. On June 1908, some leading

brokers formed "The Calcutta Stock Exchange Association".

In the beginning of the twentieth century, the industrial revolution was on the wayin India with the Swadeshi Movement; and with the inauguration of the Tata Iron

and Steel Company Limited 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

generally enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange

functioning in its midst, under the name and style of "The Madras Stock

Exchange" with 100 members. However, when boom faded, the number of

members stood reduced from 100 to 3, by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there

was a rapid increase in the number of textile mills and many plantation companieswere floated. In 1937, a stock exchange was once again organized in Madras -

Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was

changed to Madras Stock Exchange Limited).


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Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged

with the Punjab Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was

followed by a slump. But, in 1943, the situation changed radically, when India was

fully mobilized as a supply base.

On account of the restrictive controls on cotton, bullion, seeds and othercommodities, those dealing in them found in the stock market as the only outlet for

their activities. They were anxious to join the trade and their number was swelled

by numerous others. Many new associations were constituted for the purpose and

Stock Exchanges in all parts of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange

Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association

Limited and the Delhi Stocks and Shares Exchange Limited - were floated and

later in June 1947, amalgamated into the Delhi Stock Exchange Association

Limited.

There are two major indicators of Indian capital market- SENSEX & NIFTY:

What are the Sensex & the Nifty?

The Sensex is an "index". What is an index? An index is basically an indicator. It

gives you a general idea about whether most of the stocks have gone up or most of


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the stocks have gone down. The Sensex is an indicator of all the major companies

of the BSE. The Nifty is an indicator of all the major companies of the NSE. If the

Sensex goes up, it means that the prices of the stocks of most of the major

companies on the BSE have gone up. If the Sensex goes down, this tells you thatthe stock price of most of the major stocks on the BSE have gone down. Just like

the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks

of the NSE. Just in case you are confused, the BSE, is the Bombay Stock Exchange

and the NSE is the National Stock Exchange. The BSE is situated at Bombay and

the NSE is situated at Delhi. These are the major stock exchanges in the country.

There are other stock exchanges like the Calcutta Stock Exchange etc. but they are

not as popular as the BSE and the NSE. Most of the stock trading in the country is

done though the BSE & the NSE . Besides Sensex and the Nifty there are many

other indexes. There is an index that gives you an idea about whether the mid-cap

stocks go up and down. This is called the BSE Mid-cap Index. There are many

other types of index. Unless stock markets provide professionalized service, small

investors and foreign investors will not be interested in capital market operations.

And capital market being one of the major source of long-term finance for

industrial projects, India cannot afford to damage the capital market path. In this

regard NSE gains vital importance in the Indian capital market but if we see the

sensex & nifty graph there is a great variation.


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The Big Picture of share market

As investors, most of us tend to forget about all of the good years and only focus

on the bad. The broad markets have been heading up for about four years, so the

thoughts of what happened in 1999-2002 are well behind us. But now that the

markets are volatile, there is a lot of talk about the subprime mortgage industry, a

weak dollar, and everyone begins to completely forget about how well the pastfour years have been and only focus on the last few months or weeks complaining

how bad it is. Things can certainly continue to get worse, but you have to look at

things in context.

Remember, what goes up, must come down. Not only does the stock market cycle,

but there is a business cycle as well. We will always have various times that are

great, and those that arent as great, but you cant lose sight of the big picture.

Take a look at the following 12 years in a colorized format. Green identifies

periods of strong growth. Yellow indicates a period of volatility or no real

direction, and red shows a period of a downward trend. Based on this, is it any

surprise that markets are becoming volatile and possibly trending downward?


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For even more similarities, scroll back up and look at the first chart from 1996-

1999. Now, scroll down and look at the 2005-Present image. Notice how similar

they are? The markets went up for completely different reasons, yet are behaving

almost the same. All you have to do is look at the following few years to see what

might be in store for us over the coming year or two. Will history repeat itself?

There is no way to tell, and anything could happen to make all of this information

worthless, but you do have to at least consider the past trends and understand that

there is a chance the market will behave similarly and well enter a period of

significant decline.

Keep Doing What Youre Doing

Sure, the market may be a bit unstable right now, and we may certainly be headed

for a time where the market falls further, but that shouldnt be of much concern to

you if youre investing for the next 10, 20, 30 or more years. If you want to try and

time the market or predict what the next hot sector is, thats fine, but the best thing

most people can do is to just continuously invest in a diversified portfolio. If you


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keep buying even as the market falls, youre just adding more shares at a lower

price.

Could you make more money if you only invested at the low points and sold at the

high points compared to dollar cost averaging? Sure, but the likelihood ofsucceeding on a regular basis is low. For most people, the best thing to do is to just

continue investing bi-weekly, monthly, or quarterly into the same diversified

portfolio regardless of market conditions. When markets are choppy or headed

down, youre just buying stocks or funds on sale. All you have to do is look back a

few years to see that even though the market might go down, it will eventually

come back up again.

KEY MILESTONES

Following is the timeline on the rise and rise of the Sensex through Indian stock

market history.

1830's Business on corporate stocks and shares in Bank and Cotton presses started

in Bombay.

1860-1865 Cotton price bubble as a result of the American Civil War

1870 - 90's Sharp increase in share prices of jute industries followed by a boom in

tea stocks and coal

1900s

1978-79 Base year of Sensex, defined to be 100.


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1986 Sensex first compiled. Using a market Capitalization Weighted methodology

for 30 component stocks representing well-established companies across key

sectors.

Since 1990

1000, July 25, 1990 On July 25, 1990, the Sensex touched the magical four-digit

figure for the first time and closed at 1,001 in the wake of a good monsoon season

and excellent corporate results.

July 1991 Rupee devalued by 18-19 %

2000, January 15, 1992 On January 15, 1992, the Sensex crossed the 2,000-mark

and closed at 2,020 followed by the liberal economic policy initiatives undertaken

by the then prime minister P.V.Narasimha rao.

3000, February 29, 1992 On February 29, 1992, the Sensex surged past the 3000

mark in the wake of the market-friendly Budget announced by the then Finance

Minister, Dr Manmohan Singh.

4000, March 30, 1992 On March 30, 1992, the Sensex crossed the 4,000-mark and

closed at 4,091 on the expectations of a liberal export-import policy. It was then

that the Harshad Mehta scam hit the markets and Sensex witnessed unabated

selling.

5000, October 8, 1999 On October 8, 1999, the Sensex crossed the 5,000-mark asthe BJP-led coalition won the majority in the 13th Lok Sabha election.

6000, February 11, 2000 On February 11, 2000, the infotech boom helped the

Sensex to cross the 6,000-mark and hit and all time high of 6,006.


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6151, Feb 14, 2000 Tops. Index declines until Sept 2001 and loses half the value.

Coincides with dot-com bubble burst.

2595, Sept 21, 2001 Bottoms.

7000, June 20, 2005 On June 20, 2005, the news of the settlement between the

Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance

Energy, Reliance Capital, and IPCL made huge gains. This helped the Sensex

crossed 7,000 points for the first time.

8000, September 8, 2005 On September 8, 2005, the Bombay Stock Exchange's

benchmark 30-share index -- the Sensex -- crossed the 8000 level following brisk

buying by foreign and domestic funds in early trading.

9000, November 28, 2005 The Sensex on November 28, 2005 crossed the magical

figure of 9000 to touch 9000.32 points during mid-session at the Bombay Stock

Exchange on the back of frantic buying spree by foreign institutional investors and

well supported by local operators as well as retail investors.

10,000, February 6, 2006 The Sensex on February 6, 2006 touched 10,003 points

during mid-session. The Sensex finally closed above the 10K-mark on February 7,

2006.

11,000, March 21, 2006 The Sensex on March 21, 2006 crossed the magical figure

of 11,000 and touched a life-time peak of 11,001 points during mid-session at the

Bombay Stock Exchange for the first time. However, it was on March 27, 2006

that the Sensex first closed at over 11,000 points.

12,000, April 20, 2006 The Sensex on April 20, 2006 crossed the 12,000-mark and

closed at a peak of 12,040 points for the first time.


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index zoomed to a new all-time intra-day high of 18,327. It finally gained 789

points to close at an all-time high of 18,280. The market set several new records

including the biggest single day gain of 789 points at close, as well as the largest

intra-day gains of 993 points in absolute term backed by frenzied buying after thenews of the UPA and Left meeting on October 22 put an end to the worries of an

impending election.

19,000, October 15, 2007 The Sensex crossed the 19,000-mark backed by revival

of funds-based buying in blue chip stocks in metal, capital goods and refinery

sectors. The index gained the last 1,000 points in just four trading days. The index

touched a fresh all-time intra-day high of 19,096, and finally ended with a smart

gain of 640 points at 19,059.The Nifty gained 242 points to close at 5,670.

20,000, October 29, 2007 The Sensex crossed the 20,000 mark on the back of

aggressive buying by funds ahead of the US Federal Reserve meeting. The index

took only 10 trading days to gain 1,000 points after the index crossed the 19,000-

mark on October 15. The major drivers of today's rally were index heavyweights

Larsen and Toubro, Reliance Industries, ICICI Bank, HDFC Bank and SBI among

others. The 30-share index spurted in the last five minutes of trade to fly-past the

crucial level and scaled a new intra-day peak at 20,024.87 points before ending at

its fresh closing high of 19,977.67, a gain of 734.50 points. The NSE Nifty rose to

a record high 5,922.50 points before ending at 5,905.90, showing a hefty gain of

203.60 points.

21,000, January 8, 2008 The sensex peaks. It crossed the 21,000 mark in intra-day

trading after 49 trading sessions. This was backed by high market confidence of

increased FII investment and strong corporate results for the third quarter.

However, it later fell back due to profit booking.


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15,200, June 13, 2008 The sensex closed below 15,200 mark, Indian market suffer

with major downfall from January 21,2008

14,220, June 25, 2008 The sensex touched an intra day low of 13,731 during the

early trades, then pulled back and ended up at 14,220 amidst a negative sentiment

generated on the Reserve Bank of India hiking CRR by 50 bps. FII outflow

continued in this week.

12,822, July 2, 2008 The sensex hit an intra day low of 12,822.70 on July 2nd,

2008. This is the lowest that it has ever been in the past year. Six months ago, on

January 10th, 2008, the market had hit an all time high of 21206.70. This is a badtime for the Indian markets, although Reliance and Infosys continue to lead the

way with mostly positive results. Bloomberg lists them as the top two gainers for

the Sensex, closely followed by ICICI Bank and ITC Ltd.

11801.70, Oct 6, 2008 The sensex closed at 11801.70 hitting the lowest in the past

2 years.

10527, Oct 10, 2008 The Sensex today closed at 10527,800.51 points down from

the previous day having seen an intraday fall of as large as 1063 points. Thus,this

week turned out to be the week with largest percentage fall in the Sensex.

14284.21, May 18, 2009 After the result of 15th indian general election Sensex

gained 2110.79 points form the previous close of 12173.42 these creates a new

histroy in Indian Market. In the Opening Trade itself sensex gain 15% from theprevious day close this leads to the suspension of 2 hours trade. After 2 hours

sensex again surged this leads to the suspension of full day trading. 14200


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Myths of stock market

1. You can tell if a Stock is cheap or expensive by the Price to Earnings Ratio.

False: PE ratios are easy to calculate, that is why they are listed in newspapers etc.

But you cannot compare PEs on companies from different industries, as the

variables those companies and industries have are different. Even comparing

within an industry, PEs dont tell you about many financial fundamentals and

nothing about a stocks value.

2. To make Money in the Stock Market, you must assume High Risks.

False: Tips to Lower your Risk:

Do not put more than 10% of your money into any one stock

Do not own more than 2-3 stocks in any industry

Buy your stocks over time, not all at once

Buy stocks with consistent and predictable earnings growth

Buy stocks with growth rates greater than the total of inflation and

interest rates

Use stop-loss orders to limit your risk


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3. Buy Stocks on the Way Down and Sell on the Way Up.

False: People believe that a falling stock is cheap and a rising stock is too

expensive. But on the way down, you have no idea how much further it may fall. If

a stock is rising, especially if it has broken previous highs, there are no unhappy

owners who want to dump it. If the stock is fairly valued, it should continue to rise.

4. You can Hedge Inflation with Stocks.

False: When interest rates rise, people start to pull money out of the market andinto bonds, so that pushes prices down. Plus the cost of business goes up, so

corporate earnings go down, along with the stock prices.

5. Young People can afford to take High Risk.

False: The only thing true about this is that young people have time on their side if

they lose all their money. But young people have little disposable income to risklosing. If they follow the tips above, they can make money over many years.

Young people have the time to be patient.

How stock market works

In order to understand what stocks are and how stock markets work, we need to

dive into history--specifically, the history of what has come to be known as the

corporation, or sometimes the limited liability company (LLC). Corporations in

one form or another have been around ever since one guy convinced a few others

to pool their resources for mutual benefit.


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The first corporate charters were created in Britain as early as the sixteenth

century, but these were generally what we might think of today as a public

corporation owned by the government, like the postal service.

Privately owned corporations came into being gradually during the early 19th

century in the United States , United Kingdom and western Europe as the

governments of those countries started allowing anyone to create corporations.

In order for a corporation to do business, it needs to get money from somewhere.

Typically, one or more people contribute an initial investment to get the company

off the ground. These entrepreneurs may commit some of their own money, but if

they don't have enough, they will need to persuade other people, such as venture

capital investors or banks, to invest in their business.

They can do this in two ways: by issuing bonds, which are basically a way of

selling debt (or taking out a loan, depending on your perspective), or by issuing

stock, that is, shares in the ownership of the company.

Long ago stock owners realized that it would be convenient if there were a central

place they could go to trade stock with one another, and the public stock exchange

was born. Eventually, today's stock markets grew out of these public places.

IPO Initial Public Offering

Public issues can be classified into Initial Public offerings and further public

offerings. In a public offering, the issuer makes an offer for new investors to enter

its shareholding family. The issuer company makes detailed disclosures as per the


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DIP guidelines in its offer document and offers it for subscription. Initial Public

Offering (IPO ) is when an unlisted company makes either a fresh issue of

securities or an offer for sale of its existing securities or both for the first time to

the public. This paves way for listing and trading of the issuers securities.

IPO is New shares Offered to the public in the Primary Market .The first time the

company is traded on the stock exchange. A prospectus is issued to read about its

risk before investing. IPO is a company's first sale of stock to the public. Securities

offered in an IPO are often, but not always, those of young, small companies

seeking outside equity capital and a public market for their stock. Investors

purchasing stock in IPOs generally must be prepared to accept very large risks for

the possibility of large gains. Sometimes, Just before the IPO is launched, Existing

share Holders get a very liberal bonus issues as a reward for their faith in risking

money when the project was new

How to apply to a public issue ?

When a company floats a public issue orIPO, it prints forms for application to befilled by the investors. Public issues are open for a few days only. As per law, any

public issue should be kept open for a minimum of 3days and a maximum of 21

days. For issues, which are underwritten by financial institutions, the offer should

be kept open for a minimum of 3 days and a maximum of 21 days. For issues,

which are underwritten by all India financial institutions, the offer should be kept

open for a maximum of 10 days. Generally, issues are kept open for only 3 to 4days. The duly complete application from, accompanied by cash, cheque, DD or

stock invest should be deposited before the closing date as per the instruction on

the from. IPO's by investment companies (closed end funds) usually contain

underwriting fees which represent a load to buyers.
http://www.sharemarketbasics.com/IPO-Initial-Public-Offering.htmhttp://www.sharemarketbasics.com/IPO-Initial-Public-Offering.htmhttp://www.sharemarketbasics.com/IPO-Initial-Public-Offering.htmhttp://www.sharemarketbasics.com/IPO-Initial-Public-Offering.htm


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Before applying for any IPO , analyse the following factors:

1. Who are the Promoters ? What is their credibility and track record ?

2. What is the company manufacturing or providing services - Product, its potential

3. Does the Company have any Technology tie-up ? if yes , What is the reputation

of the collaborators

4. What has been the past performance of the Company offering the IPO?

5. What is the Project cost, What are the means of financing and profitability

projections?

6. What are the Risk factors involved ?

7. Who has appraised the Project ? In India Projects apprised by IDBI and ICICI

have more credibility than small Merchant Bankers

How to make payments for IPOs:

The payment terms of any IPO or Public issue is fixed by the company keeping in

view its fund requirements and the statutory regulations. In general, companies

stipulate that either the entire money should be paid along with the application or

50 percent of the entire amount be paid along with the application and rest onallotment. However, if the funds requirements is staggered, the company may ask

for the money in calls, that is, the company demands for the money after allotment

as and when the cash flow demands. As per the statutory requirements, for public

issue large than Rs. 250 crore, the money is to be collected as under:


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25 per cent on application

25 per cent on allotment

50 per cent in two or more calls

The role of SEBI in the process of IPO

SEBI regulates the IPO process and issued detailed Guidelines under section 11 of

the SEBI Act, 1992 in the name of SEBI (Disclosure and Investors Protection)

Guidelines, 2002 generally known as DIP Guidelines. It is also noted that under the

provisions sections 55 of the Companies Act, 1956. the matters pertaining to issue

and transfer of securities and non payment of dividend in case of listed companies,

the companies intend to get listed are being administered by SEBI.

DEMAT ACCOUNT

Demat refers to a dematerialised account.

Though the company is under obligation to offer the securities in both physical and

demat mode, you have the choice to receive the securities in either mode.

If you wish to have securities in demat mode, you need to indicate the depository

and also of the depository participant with whom you have depository account in

your application.


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It is, however desirable that you hold securities in demat form as physical

securities carry the risk of being fake, forged or stolen.

Just as you have to open an account with a bank if you want to save your money,

make cheque payments etc, Nowadays, 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. You

have to approach the DPs (remember, they are like bank branches), to open your

demat account. Let's say your portfolio of shares looks like this: 150 of Infosys,

50 of Wipro, 200 of HLL and 100 of ACC. All these will show in your demataccount. So you don't have to possess any physical certificates showing that you

own these shares. They are all held electronically in your account. As you buy

and sell the shares, they are adjusted in your account. Just like a bank passbook

or statement, the DP will provide you with periodic statements of holdings and

transactions.

The most important thing required to trade in share market is Demat account.Demat or Dematerialized account is to store stocks in electronics form. It is just

like opening a bank account to store your money. Now nobody is interested to keep

shares in physical forms and going for electronic based filing of shares. This has

changed the style of operation in main Indian stock markets like BSE Sensex

( Bombay Stock Exchange Sensitive Index) and Nifty (National Stock Exchange of

India) and its brokers.

How to Open a Demat Account

It is like opening a bank account. You have to approach a depository participants to

open an online trading or demat account. Most of the banks are DPs too.


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Documents Required

You will have to submit few documents with the application form to open a demat

account. As per latest Govt of India rule PAN (Personal Account Number) card is

must for opening a demat account. These are the documents required to open a

demat account

1. Photo Copy of PAN Card (Mandatory)

2. Two Passport size photos

3. Address Proof Ration Card/Passport/Driving License/Voters IDCard/BSNL Telephone/LIC Policy

4. Latest Bank Statement and photocopy of Bank Passbook.

SEBI Introduction

In 1988 the Securities and Exchange Board of India (SEBI) was established by the

Government of India through an executive resolution, and was subsequently

upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the

passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th

January 1992. In place of Government Control, a statutory and autonomous

regulatory board with defined responsibilities, to cover both development &

regulation of the market, and independent powers have been set up. Paradoxically

this is a positive outcome of the Securities Scam of 1990-91.

The basic objectives of the Board were identified as:


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to protect the interests of investors in securities;

to promote the development of Securities Market;

to regulate the securities market and

for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securities and is attending

to the fulfillment of its objectives with commendable zeal and dexterity. The

improvements in the securities markets like capitalization requirements, margining,

establishment of clearing corporations etc. reduced the risk of credit and also

reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed

registration norms, the eligibility criteria, the code of obligations and the code of

conduct for different intermediaries like, bankers to issue, merchant bankers,

brokers and sub-brokers, registrars, portfolio managers, credit rating agencies,

underwriters and others. It has framed bye-laws, risk identification and risk

management systems for Clearing houses of stock exchanges, surveillance system

etc. which has made dealing in securities both safe and transparent to the end

investor.

Another significant event is the approval of trading in stock indices (like S&P

CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective

product because of the following reasons:

It acts as a barometer for market behavior;

It is used to benchmark portfolio performance;


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It is used in derivative instruments like index futures and index options;

It can be used for passive fund management as in case of Index Funds.

Two broad approaches of SEBI is to integrate the securities market at the national

level, and also to diversify the trading products, so that there is an increase in

number of traders including banks, financial institutions,insurance companies,

mutual funds, primary dealers etc. to transact through the Exchanges. In this

context the introduction of derivatives trading through Indian Stock Exchanges

permitted by SEBI in 2000 AD is a real landmark.

SEBI appointed the L. C. Gupta Committee in 1998 to recommend the regulatory

framework for derivatives trading and suggest bye-laws for Regulation and Control

of Trading and Settlement of Derivatives Contracts. The Board of SEBI in its

meeting held on May 11, 1998 accepted the recommendations of the committee

and approved the phased introduction of derivatives trading in India beginning

with Stock Index Futures. The Board also approved the "Suggestive Bye-laws" as

recommended by the Dr LC Gupta Committee for Regulation and Control of

Trading and Settlement of Derivatives Contracts.

SEBI then appointed the J. R. Verma Committee to recommend Risk

Containment Measures (RCM) in the Indian Stock Index Futures Market. The

report was submitted in November 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) required

amendment to include "derivatives" in the definition of securities to enable SEBI to

introduce trading in derivatives. The necessary amendment was then carried out by

the Government in 1999. The Securities Laws (Amendment) Bill, 1999 was

introduced. In December 1999 the new framework was approved.


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Derivatives have been accorded the status of `Securities'. The ban imposed on

trading in derivatives in 1969 under a notification issued by the Central

Government was revoked. Thereafter SEBI formulated the necessaryregulations/bye-laws and intimated the Stock Exchanges in the year 2000. The

derivative trading started in India at NSE in 2000 and BSE started trading in the

year 2001.

SEBI is the Regulator for the Securities Market in India. Originally set up by

the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act

1992 being passed by the Indian Parliament.Chaired by C B Bhave, SEBI is

headquartered in the popular business district of Bandra-Kurla

complex in Mumbai, and has Northern, Eastern, Southern and Western regional

offices in New Delhi, Kolkata, Chennai and Ahmedabad.

Organisation Structure

Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market

Regulator. Prior to taking charge as Chairman SEBI, he had been the chairman of

NSDL (National Securities Depository Limited) ushering in paperless securities.

Prior to his stint at NSDL, he had served SEBI as a Senior Executive Director. He

is a former Indian Administrative Service officer of the 1975 batch.

The Board comprises

Name Designation As per

Mr CB Bhave Chairman SEBI CHAIRMAN (S.4(1)(a)


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of the SEBI Act, 1992)

Mr KP Krishnan

Joint Secretary,

Ministry of Finance

Member (S.4(1)(b) of the

SEBI Act, 1992)

Mr Anurag GoelSecretary, Ministry ofCorporate Affairs

Member (S.4(1)(b) of theSEBI Act, 1992)

Dr G Mohan GopalDirector, NationalJudicial Academy,

Bhopal

Member (S.4(1)(d) of theSEBI Act, 1992)

Mr MS SahooWhole Time Member,SEBI


Dr KM AbrahamWhole Time Member,SEBI


Mr Mohandas Pai Director, InfosysMember (S.4(1)(d) of theSEBI Act, 1992)

Functions 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.


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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 and enforcement action in its executive function and it passes rulings

and orders in its judicial capacity. Though this makes it very powerful, there is anappeals process to create accountability. There is a Securities Appellate Tribunal

which is a three member tribunal and is presently headed by a former Chief Justice

of a High court - Mr. Justice NK Sodhi. A second appeal lies directly to

the Supreme Court.

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively

and successively (e.g. the quick movement towards making the markets electronicand paperless rolling settlement on T+2 basis). SEBI has been active in setting up

the regulations as required under law. It is regulating body.


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more than 4,700 listed companies, which for easy reference, are classified into A,

B, S, T and Z groups.

The BSE Index, SENSEX, is India's first stock market index that enjoys an iconic

stature , and is tracked worldwide. It is an index of 30 stocks representing 12 major

sectors. The SENSEX is constructed on a 'free-float' methodology, and is sensitive

to market sentiments and market realities. Apart from the SENSEX, BSE offers 21

indices, including 12 sectoral indices. BSE has entered into an index cooperation

agreement with Deutsche Brse. This agreement has made SENSEX and other

BSE indices available to investors in Europe and America. Moreover, Barclays

Global Investors (BGI), the global leader in ETFs through its iShares brand,

has created the 'iShares BSE SENSEX India Tracker' which tracks the

SENSEX. The ETF enables investors in Hong Kong to take an exposure to the

Indian equity market.

The first Exchange Traded Fund (ETF) on SENSEX, called "SPIcE" is listed on

BSE. It brings to the investors a trading tool that can be easily used for the

purposes of investment, trading, hedging and arbitrage. SPIcE allows small

investors to take a long-term view of the market.

BSE provides an efficient and transparent market for trading in equity, debt

instruments and derivatives. It has a nation-wide reach with a presence in more

than 359 cities and towns of India. BSE has always been at par with the

international standards. The systems and processes are designed to safeguardmarket integrity and enhance transparency in operations. BSE is the first exchange

in India and the second in the world to obtain an ISO 9001:2000 certification. It is

also the first exchange in the country and second in the world to receive


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Information Security Management System Standard BS 7799-2-2002 certification

for its BSE On-line Trading System (BOLT).

BSE continues to innovate. In recent times, it has become the first national level

stock exchange to launch its website in Gujarati and Hindi to reach out to a larger

number of investors. It has successfully launched a reporting platform for

corporate bonds in India christened the ICDM or Indian Corporate Debt Market

and a unique ticker-cum-screen aptly named 'BSE Broadcast' which enables

information dissemination to the common man on the street.

In 2006, BSE launched the Directors Database and ICERS (Indian Corporate

Electronic Reporting System) to facilitate information flow and increase

transparency in the Indian capital market. While the Directors Database provides a

single-point access to information on the boards of directors of listed companies,

the ICERS facilitates the corporate in sharing with BSE their corporate

announcements.


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Our Group

NSCCL

NCCL NSETECH

IISL

NSE NSE.IT

DotExIntl. Ltd.

NSDL

Listing
http://www.nseindia.com/content/us/us_nsdl.htmhttp://www.nseindia.com/content/us/us_dotex.htmhttp://www.nseindia.com/content/us/us_nseit.htmhttp://www.nseindia.com/content/us/us_organisation.htmhttp://www.nseindia.com/content/us/us_iisl.htmhttp://www.nseindia.com/content/us/us_nsetech.htmhttp://www.nseindia.com/content/us/us_nccl.htmhttp://www.nseindia.com/content/us/us_nsccl.htm


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NSE plays an important role in helping an Indian companies access equity capital,

by providing a liquid and well-regulated market. NSE has about 1319 companies

listed representing the length, breadth and diversity of the Indian economy which

includes from hi-tech to heavy industry, software, refinery, public sector units,infrastructure, and financial services. Listing on NSE raises a companys profile

among investors in India and abroad. Trade data is distributed worldwide through

various news-vending agencies. More importantly, each and every NSE listed

company is required to satisfy stringent financial, public distribution and

management requirements. High listing standards foster investor confidence and

also bring credibility into the markets.

NSE lists securities in its Capital Market (Equities) segment and its Wholesale

Debt Market segment

Introduction of SENSEX

SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-

Weighted" methodology of 30 component stocks representing large, well-

established and financially sound companies across key sectors. The base year of

SENSEX was taken as 1978-79. SENSEX today is widely reported in both

domestic and international markets through print as well as electronic media. It is

scientifically designed and is based on globally accepted construction and review

methodology. Since September 1, 2003, SENSEX is being calculated on a free-

float market capitalization methodology. The "free-float market capitalization-

weighted"methodology is a widely followed index construction methodology on

which majority of global equity indices are based; all major index providers like

MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology.


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The growth of the equity market in India has been phenomenal in the present

decade. Right from early nineties, the stock market witnessed heightened activity

in terms of various bull and bear runs. In the late nineties, the Indian market

witnessed a huge frenzy in the 'TMT' sectors. More recently, real estate caught thefancy of the investors. SENSEX has captured all these happenings in the most

judicious manner. One can identify the booms and busts of the Indian equity

market through SENSEX. As the oldest index in the country, it provides the time

series data over a fairly long period of time (from 1979 onwards). Small wonder,

the SENSEX has become one of the most prominent brands in the country.

SENSEX Calculation Methodology

SENSEX is calculated using the "Free-float Market Capitalization" methodology,

wherein, the level of index at any point of time reflects the free-float market value

of 30 component stocks relative to a base period. The market capitalization of a

company is determined by multiplying the price of its stock by the number of

shares issued by the company. This market capitalization is further multiplied by

the free-float factor to determine the free-float market capitalization.

The base period of SENSEX is 1978-79 and the base value is 100 index points.

This is often indicated by the notation 1978-79=100. The calculation of SENSEX

involves dividing the free-float market capitalization of 30 companies in the Index

by a number called the Index Divisor. The Divisor is the only link to the original

base period value of the SENSEX. It keeps the Index comparable over time and is

the adjustment point for all Index adjustments arising out of corporate actions,

replacement of scrips etc. During market hours, prices of the index scrips, at which

latest trades are executed, are used by the trading system to calculate SENSEX

every 15 seconds. The value of SENSEX is disseminated in real time.


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Concept of FREE FLOAT

Free-float methodology refers to an index construction methodology that takes intoconsideration only the free-float market capitalization of a company for the

purpose of index calculation and assigning weight to stocks in the index. Free-float

market capitalization takes into consideration only those shares issued by the

company that are readily available for trading in the market. It generally excludes

promoters' holding, government holding, strategic holding and other locked-in

shares that will not come to the market for trading in the normal course. In otherwords, the market capitalization of each company in a free-float index is reduced

to the extent of its readily available shares in the market.

Definition of Free-float

Shareholding of investors that would not, in the normal course come into the open

market for trading are treated as 'Controlling/ Strategic Holdings' and hence not

included in free-float. Specifically, the following categories of holding are

generally excluded from the definition of Free-float:

Shares held by founders/directors/ acquirers which has control element

Shares held by persons/ bodies with "Controlling Interest"

Shares held by Government as promoter/acquirer

Holdings through the FDI Route Strategic stakes by private corporate bodies/ individuals

Equity held by associate/group companies (cross-holdings)

Equity held by Employee Welfare Trusts


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Locked-in shares and shares which would not be sold in the open market in

normal course.

Maintenance of SENSEX

One of the important aspects of maintaining continuity with the past is to update

the base year average. The base year value adjustment ensures that replacement of

stocks in Index, additional issue of capital and other corporate announcements like

'rights issue' etc. do not destroy the historical value of the index. The beauty of

maintenance lies in the fact that adjustments for corporate actions in the Index

should not per se affect the index values.

TheBSE Index Celldoes the day-to-day maintenance of the index within the broad

index policy framework set by the BSE Index Committee. The BSE Index

Cellensures that SENSEX and all the other BSE indices maintain their benchmark

properties by striking a delicate balance between frequent replacements in index

and maintaining its historical continuity. The BSE Index Committee comprises of

capital market expert, fund managers, market participants and members of the BSE

Governing Board.

Function and purpose of stock market

The stock market is one of the most important sources for companies to raise

money. This allows businesses to be publicly traded, or raise additional capital for

expansion by selling shares of ownership of the company in a public market. The

liquidity that an exchange provides affords investors the ability to quickly and


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easily sell securities. This is an attractive feature of investing in stocks, compared

to other less liquid investments such as real estate.

History has shown that the price of shares and other assets is an important part of

the dynamics of economic activity, and can influence or be an indicator of social

mood. An economy where the stock market is on the rise is considered to be an up

and coming economy. In fact, the stock market is often considered the primary

indicator of a country's economic strength and development. Rising share prices,

for instance, tend to be associated with increased business investment and vice

versa. Share prices also affect the wealth of households and their consumption.

Therefore, central banks tend to keep an eye on the control and behavior of the

stock market and, in general, on the smooth operation of financial system

functions. Financial stability is the raison d'tre of central banks.

Exchanges also act as the clearinghouse for each transaction, meaning that they

collect and deliver the shares, and guarantee payment to the seller of a security.

This eliminates the risk to an individual buyer or seller that the counterparty could

default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that

lower costs and enterprise risks promote the production of goods and services as

well as employment. In this way the financial system contributes to increased

prosperity.


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CDSL was set up with the objective of providing convenient, dependable and

secure depository services at affordable cost to all market participants. Some of the

important milestones of CDSL system are:

CDSL received the certificate of commencement of business from SEBI in

February, 1999.

Honourable Union Finance Minister, Shri Yashwant Sinha flagged off the

operations of CDSL on July 15, 1999.

Settlement of trades in the demat mode through BOI Shareholding Limited, the

clearing house of BSE, started in July 1999.

All leading stock exchanges like the National Stock Exchange, Calcutta Stock

Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have

established connectivity with CDSL.

As at the end of Dec 2007, over 5000 issuers have admitted their securities

(equities, bonds, debentures, commercial papers), units of mutual funds, certificate

of deposits etc. into the CDSL system.

About NSDL

Although India had a vibrant capital market which is more than a century old, the

paper-based settlement of trades caused substantial problems like bad delivery and

delayed transfer of title till recently. The enactment of Depositories Act in August

1996 paved the way for establishment ofNational Securities Depository Limited

(NSDL), the first depository in India. This depository promoted by institutions of


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national stature responsible for economic development of the country has since

established a national infrastructure of international standards that handles most of

the securities held and settled in dematerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to support the

investors and brokers in the capital market of the country. NSDL aims at ensuring

the safety and soundness of Indian marketplaces by developing settlement

solutions that increase efficiency, minimise risk and reduce costs. At NSDL, we

play a quiet but central role in developing products and services that will continue

to nurture the growing needs of the financial services industry.

In the depository system, securities are held in depository accounts, which is more

or less similar to holding funds in bank accounts. Transfer of ownership of

securities is done through simple account transfers. This method does away with

all the risks and hassles normally associated with paperwork. Consequently, the

cost of transacting in a depository environment is considerably lower as compared

to transacting in certificates Promoters / Shareholders

NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the

largest development bank of India, Unit Trust of India (UTI) - the largest mutual

fund in India and National Stock Exchange of India Limited (NSE) - the largest

stock exchange in India. Some of the prominent banks in the country have taken a

stake in NSDL.

NSDL Facts & Figures

As on December 31, 2008

Number of certificates eliminated (Approx.) : 550 Crore

Number of companies in which more than 75% shares are dematted : 2282


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Average number of accounts opened per day since November 1996 : 3636

Presence of demat account holders in the country : 78% of all pincodes in

the country.

Central Securities Depository (CSD)

A Central Securities Depository (CSD) is an organization holding securities

either in certificated or uncertificated (dematerialized) form, to enable book entry

transfer of securities. In some cases these organizations also carry out centralized

comparison, and transaction processing such as clearing and settlement of

securities. The physical securities may be immobilised by the depository, orsecurities may be dematerialised (so that they exist only as electronic records).

International Central Securities Depository (ICSD) is a central securities

depository that settles trades in international securities and in various domestic

securities, usually through direct or indirect (through local agents) links to local

CSDs. ClearStream International (earlier Cedel), Euro clear and SIX SIS are

considered ICSDs. While some view The Depository Trust Company (DTC) as anational CSD rather than an ICSD, in fact DTC -- the largest depository in the

world -- holds over $2 trillion in non-US securities and in American Depository

Receipts from over 100 nations.

Functions

Safekeeping Securities may be in dematerialized form, book-entry onlyform (with one or more "global" certificates), or in physical form

immobilized within the CSD.

Deposit and Withdrawal Supporting deposits and withdrawals involves the

relationship between the transfer agent and/or issuers and the CSD. It also


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covers the CSD's role within the underwriting process or listing of new

issues in a market.

Dividend, interest, and principal processing, as well as corporate actions

including proxy voting Paying and transfer agents, as well as issuers areinvolved in these processes, depending on the level of services provided by

the CSD and its relationship with these entities.

Other services CSDs offer additional services aside from those considered

core services. These services include Securities Lending and Borrowing,

Matching, and Repo Settlement

Pledge - Central depositories provide pledging of share and securities. Every

country require to provide legal framework to protect the interest of the

pledgor and pledgee.

However, there are risks and responsibilities regarding these services that must be

taken into consideration in analyzing and evaluating each market on a case-by-case

basis.

FII (Foreign Institutional Investors) in Indian Stock Market

Foreign Institutional Investor (FII) is used to denote an investor - mostly of the

form of an institution or entity, which invests money in the financial markets of acountry different from the one where in the institution or entity was originally

incorporated.

FII investment is frequently referred to as hot money for the reason that it can leave

the country at the same speed at which it comes in.


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In countries like India, statutory agencies like SEBI have prescribed norms to

register FIIs and also to regulate such investments flowing in through FIIs. In

2008, FIIs represented the largest institution investment category, with an

estimated US$ 751.14 billion.

Since 1990-91, the Government of India embarked on liberalisation and economic

reforms with a view of bringing about rapid and substantial economic growth and

move towards globalisation of the economy. As a part of the reforms process, the

Government under its New Industrial Policy, revamped its foreign investment

policy recognising the growing importance of foreign direct investment as an

instrument of technology transfer, augmentation of foreign exchange reserves and

globalisation of the Indian economy. Simultaneously, the Government, for the first

time, permitted portfolio investments from abroad by foreign institutional investors

in the Indian capital market. The entry of FIIs seems to be a follow up of the

recommendation of the Narsimhan Committee Report on Financial System. While

recommending their entry, the Committee, however did not elaborate on the

objectives of the suggested policy. The committee only suggested that the capital

market should be gradually opened up to foreign portfolio investments.

From September 14, 1992 with suitable restrictions, FIIs were permitted to invest

in all the securities traded on the primary and secondary markets, including shares,

debentures and warrants issued by companies which were listed or were to be

listed on the Stock Exchanges in India.

While presenting the Budget for 1992-93, the then Finance Minister Dr.

Manmohan Singh had announced a proposal to allow reputed foreign investors,

such as Pension Funds etc., to invest in Indian capital market. To operationalise

this policy announcement, it had become necessary to evolve guidelines for such


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investments by Foreign Institutional Investors (FIIs). The policy framework for

permitting FII investment was provided under the Government of India guidelines

vide Press Note date September 14, 1992. The guidelines formulated in this regard

were as follows:

1. Foreign Institutional Investors (FIIs) including institutions such as Pension

Funds, Mutual Funds, Investment Trusts, Asset Management Companies,

Nominee Companies and Incorporated/Institutional Portfolio Managers or

their power of attorney holders (providing discretionary and non-

discretionary portfolio management services) would be welcome to make

investments under these guidelines.

2. FIIs would be welcome to invest in all the securities traded on the Primary

and Secondary markets, including the equity and other

securities/instruments of companies which are listed/to be listed on the

Stock Exchanges in India including the OTC Exchange of India. These

would include shares, debentures, warrants, and the schemes floated by

domestic Mutual Funds. Government would even like to add further

categories of securities later from time to time.

3. FIIs would be required to obtain an initial registration with Securities and

Exchange Board of India (SEBI), the nodal regulatory agency for securities

markets, before any investment is made by them in the Securities of

companies listed on the Stock Exchanges in India, in accordance with these

guidelines. Nominee companies, affiliates and subsidiary companies of a

FII would be treated as separate FIIs for registration, and may seek separate

registration with SEBI.


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4. Since there were foreign exchange controls in force, for various

permissions under exchange control, along with their application for initial

registration, FIIs were also supposed to file with SEBI another application

addressed to RBI for seeking various permissions under FERA, in a format

that would be specified by RBI for the purpose. RBI's general permission

would be obtained by SEBI before granting initial registration and RBI's

FERA permission together by SEBI, under a single window approach.

5. For granting registration to the FII, SEBI should take into account the track

record of the FII, its professional competence, financial soundness,

experience and such other criteria that may be considered by SEBI to be

relevant. Besides, FII seeking initial registration with SEBI were be

required to hold a registration from the Securities Commission, or the

regulatory organisation for the stock market in the country of

domicile/incorporation of the FII.

6. SEBI's initial registration would be valid for five years. RBI's general

permission under FERA to the FII would also hold good for five years.

Both would be renewable for similar five year periods later on.

7. RBI's general permission under FERA would enable the registered FII to

buy, sell and realize capital gains on investments made through initial

corpus remitted to India, subscribe/renounce rights offerings of shares,


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What Does Foreign Institutional Investor - FIIMean?

An investor or investment fund that is from or registered in a country outside of the

one in which it is currently investing. Institutional investors include hedge funds,

insurance companies, pension funds and mutual funds.

Regulation imposed by SEBI on FII

(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of

1992);

(b) "certificate" means a certificate of registration granted by the Board under

these regulations;

(c) "designated bank" means any bank in India, which has been authorised by

the Reserve Bank of India to act as a banker to Foreign Institutional Investors;

(d) "domestic custodian" includes any person carrying on the activity of

providing custodial services in respect of securities;

(e) "Enquiry officer" means any officer of the Board, or any other person

appointed by the Board under Chapter V of these regulations;

(f) "Foreign Institutional Investor" means an institution established or

incorporated outside India which proposes to make investment in India in

securities;


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(g) "Form" means a form specified in the First Schedule to these regulations;

(h) "Government of India Guidelines" means the guidelines dated September

14, 1992 issued by the Government of India for Foreign Institutional Investors,

as amended from time to time;

(i) "institution" includes every artificial juridical person;

(j) "schedule" means a schedule to these regulations;

(k) "sub-account" includes those institutions, established or incorporated

outside India and those funds, or portfolios, established outside India, whether

incorporated or not, on whose behalf investments are proposed to be made in

India by a Foreign Institutional Investor.


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Participatory notes (P- Notes)

Participatory notes (PNs / P-Notes) are instruments used by investors or hedgefunds that are not registered with the SEBI (Securities & Exchange Board of India)

to invest in Indian securities. Participatory notes are instruments that derive their

value from an underlying financial instrument such as an equity share and, hence,

the word, 'derivative instruments'. SEBI permitted FIIs to register and participate in

the indian stock market in 1992.

Indian based brokerages buy Indian-based securities and then issue PNs to foreigninvestors.

Any dividends or capital gains collected from the underlying securities go back to

the investors.

Participatory notes are instruments used for making investments in the stock

markets. However, they are not used within the country. They are used outside

India for making investments in shares listed in that country. That is why they arealso called offshore derivative instruments.

In the Indian context, foreign institutional investors (FIIs) and their sub-accounts

mostly use these instruments for facilitating the participation of their overseas

clients, who are not interested in participating directly in the Indian stock market.

For example, Indian-based brokerages buy India-based securities and then issue

participatory notes to foreign investors. Any dividends or capital gains collectedfrom the underlying securities go back to the investors. According to an expert

group constituted by the finance ministry in India, in August 2004, participatory

notes constituted about 46 per cent of the cumulative net investments in equities by

FIIs.


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Any entity investing in participatory notes is not required to register with SEBI

(Securities and Exchange Board of India), whereas all FIIs have to compulsorily

get registered. Trading through participatory notes is easy because participatory

notes are like contract notes transferable by endorsement and delivery. Secondly,some of the entities route their investment through participatory notes to take

advantage of the tax laws of certain preferred countries. Thirdly, participatory

notes are popular because they provide a high degree of anonymity, which enables

large hedge funds to carry out their operations without disclosing their identity.

Participatory notes in brief is as follows :

What are participatory notes or PNs? Participatory notes are instruments used by

foreign funds which are not registered to trade in domestic Indian Capital Markets.

PNs are derivative instruments issued against an underlying security permitting

holders to get a share in the income from the security.

How does it work? Investors who buy PNs deposit their funds in US or European

operations of Foreign Institutional Investors (FII) operating in India . The FII uses

its proprietary account to buy stocks.

Why do investors use PNs? Reason for using PNs is to keep investor name

anonymous, some investors have used them to save transaction and overhead costs.

Tax officials fear that PNs are becoming a favourite with a host of Indian money

launderers who use them to first take funds out of country through hawala and then

get it back using PNs.

Participatory Notes Crisis of 2007

On the 16th of October, 2007, SEBI (Securities & Exchange Board of India)

proposed curbs on participatory notes which accounted for roughly 50% of FII


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investment in 2007. SEBI was not happy with P-Notes because it is not possible to

know who owns the underlying securities and hedge funds acting through PNs

might therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash

when the markets opened on the following day (October 17, 2007). Within a

minute of opening trade, the Sensex crashed by 1744 points or about 9% of its

value - the biggest intra-day fall in Indian stock-markets in absolute terms. This led

to automatic suspension of trade for 1 hour. Finance Minister P.Chidambaram

issued clarifications, in the meantime, that the government was not against FIIs and

was not immediately banning PNs. After the markets opened at 10:55 am, theystaged a remarkable comeback and ended the day at 18715.82, down just 336.04

from Tuesdays close after tumbling to a days low of 17307.90.

This was, however not the end of the volatility. The next day (October 18, 2007),

the Sensex tumbled by 717.43 points 3.83 per cent to 17998.39, its second

biggest fall. The slide continued the next day when the Sensex fell 438.41 points to

settle at 17559.98 at the end of the week, after touching the lowest level of thatweek at 17226.18 during the day.

The SEBI chief, M.Damodaran held an hour long conference on the 22nd of

October to clear the air on the proposals to curb PNs where he announced that

funds investing through PNs were most welcome to register as FIIs, whose

registration process would be made faster and more steamlined. The markets

welcomed the clarifications with an 879-point gain its biggest single-day surge on October23, thus signalling the end of the PN crisis. SEBI issued the fresh

rules regarding PNs on the 25th of October, 2007 which said that FIIs cannot issue

fresh P-Notes and existing exposures were to be wound up within 18 months.


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UPSE

U.P. Stock Exchange Association Ltd.

The UP Stock Exchange association limited, Kanpur is situated at avery important place. It holds a very important position among otherexisting stock exchanges in India. The exchange was inaugurated on 27th

august 1982 by the then finance minister Shri Pranab Mukherjee. Fromthe very first day it has been playing role in the development of thecapital market of north India.

Incorporation in 15th NOV 1979 and Commencement of business on5th May 1982 has made a long way through the time.

The UP Stock Exchange association limited, Kanpur occupies a very prominent place among the existing Stock Exchanges in India. Theexchange was inaugurated on 27th august 1982 by the then finance

minister Shri Pranab Mukherjee. Right from its inception it has beenplaying a very prominent role in the development of capital market ofnorthern India. UPSE is the only. Initially it had 350 members whichhave now increased to 540 members belonging to almost all importantcities of the country. Members living outside Kanpur have contributed alot by creating the equity cult in whole of the Uttar Pradesh. Not onlythese members are highly qualified and professional and devoted to thecause of capital formulation in the country.

The Exchange was initially started in the rented building but with theefforts of our members, a new complex was constructed and wasinaugurated by his Excellency Shri R Venkatraman the then President ofIndia on 8th February, 1989.


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At present we have 843 companies listed with the total capitalizationof Rs. 81184 Crores. The annual turnovers of this Exchange for the lastthree years are : 1998-99: 18429 Crores, 1999-2000: 23876 Crores and2000-01: 25112 Crores. Thus every year we have increased our turnover

creating more and more awareness among the people of Northern India.

This stock Exchange is wedded to the investors protection andinvestors education as we have firm conviction that any investor

protection cannot be achieved without proper awareness and education ofinvestors. Thus the Exchange has a very active investor service Cell andalso a very equipped Research and Development Wing is functioning.

We have also a very effective system of readdressing the investorscomplaints.

The Exchange has one of the best developed Exchanges of the countryso far its infrastructure is concerned. The Ex-Finance Minister Dr.Manmohan Singh, Ex-Commerce Minister Shri Pranab Mukherjee, othercentral Ministers and Chief Ministers Uttar Pradesh have visited thisExchange and appreciated its efforts in maintaining the transparency andthe integrity of the market. To keep pace of changing technology the

Exchange has embarked upon the Project of Screen Based Trading. TheOn-Line Trading based on VECTOR Software supplied by CMC hascommenced on UPSE from 11th November 1997.

To increase the further business and to facilitate the On-Line tradingfacility to about 22 members at Lucknow an additional trading Floor has

been established at Lucknow. At present at the additional trading at

Lucknow 22 Lucknow based members have been allotted ComputerTerminals which have been connected with UPSE main server viaVSAT.


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As per recent decision of SEBI for the revival of the smaller StockExchanges in the country, they can obtain the membership of big StockExchanges like, BSE, NSE, CSE etc. through forming a subsidiarycompany of the Exchange and in turn the members of the Exchange can

trade through the said subsidiary as sub-broker(s).

Accordingly we have incorporated a wholly owned subsidiary namelyUPSE Securities Ltd. and obtained the membership of BSE to enable themembers of UPSE on BOLT.

Main objective of UPSE

1. To organize and carry on the stock exchange andregulate the business of exchange and stock and share, debenturesand debenture stocks. Government securities, bonds and equities ofany description and with a view to establish and conduct stockexchange in Kanpur.2. To acquire the membership of any other recognized

exchange in India and abroad including membership of OCTEL,broad base the operations of the stock exchange for the benefit ofthe general public and investor.3. To promote one or more subsidiary whether wholly or

partly owned, with object to promote the trade in share and stocks,debenture bond and other securities of any description issued bycompanies statutory corporation, government of state or uniongovernment, financial institution.4. Provides quotation for shares/stock for fascinating and

marketability.5. Extends liquidity (conversion in to cash) to such stockas they are easily marketable and traded.6. Provides an orderly regulated market for securitieswhose prices are determined by the free market forces of supplyand demand.7. Promotes savings and investments in the economy byattracting funds for investment in corporate share and securities.


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Location and other communication details:

THE UTTAR PRADESH STOCK EXCHANGE ASSOCIATION LTD.

Padam Towers, 14/113, Civil Lines, Kanpur-208001

Telephone No: 2338115, 2338074

Fax No: 0512-2338175/2338220

Email Address: [email protected],

Website: upse-india.com

LIST OF DIRECTORS IN THE BOARD (UPSE) FOR THE YEAR

2009-2010

(Constituted on 29-03-10)

SL. No. Name of Director Particulars Telephone/ Fax Nos.

1. Shri K. D. Gupta Public Interest Director

Telephone No: 0512-2556585/2535356

Address: Flat No. 104, Ratan Bhawan 9336453452

7/108A, Swaroop Nagar, [email protected]

[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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2. Shri A. K. Shah Public Interest Director

Telephone No: 0512-2550688/2540383

Address: Registrar of U.P. & Uttarakhand 0512-2540423 (Fax)

10/499-B, Allenganj, 9935606399Kanpur-208002

[email protected]

3. Shri T. K. Das Public Interest Director Telephone No: 011-22756035

Address: Flat No. A-201, 9910518074

Anand Lok Society (purvasha),Mayur Vihar, Phase-1 Delhi-110091

[email protected]

4. Shri B. K. NadhaniExecutive Director

Telephone No: 0512-2338288, 2338153, 9793035588

Address: The U.P. Stock Exchange Assn. Ltd.

Padam Towers, 14/113, Civil Lines, Kanpur

Kanpur-208002

[email protected]

[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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5. Shri S. K. KanodiaTrading Member Director

Telephone No: 0512-2305958, 0512-2305883 (Fax), 9839035346

Address: Director

Kanodia Shares & Securities (P) Ltd.

407, Padam Towers, 14/113 Civil Lines,Kanpur

6. Shri Rajesh Agrawal Trading Member Director Telephone No: 9336332505

Address: C/o. Haryana Securities

407, Padam Towers, 14/113 Civil Lines,

Kanpur

7. Shri G. S. Diwedi Trading Member Director

Telephone No: 0512-2338192, 193, 0512-264381 (R), 9415074767

Address: 49/62, Nayaganj,

Kanpur

8. Shri Ashok Sharma Shareholder Director

Telephone No: 0512-2366629, 0512-2363726, 0512-3042039 (R)

Address: Chartered Accountant

58/4, Birhana Road, 9839068023


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Post Box No. 389, Kanpur-01

9. Shri Mukul Tandon Shareholder Director

Telephone No: 0512-2373680, 2393970, 9336114347, 9935568890

Address: 413, Plaza Kalpana

24/14-A, Birhana Road

Kanpur-01

10. Shri R. K. Agrawal Sahreholder Director

Telephone No: 9336117324, 9336222842

Address: 3/109, VishnupuriKanpur-208001

11. Shri S. K. Jain FCA Sahreholder Director

Telephone No: 0512-2531195/2532110, 9871055255,9839032305

Address: 113/233, Swaroop NagarKanpur-208001

12. Shri S. K. Gupta Sahreholder Director

Telephone No: 0512-2302737, 9839084094, 9336103555

Address: 51/40, Goldiee House, NayaGanjKanpur-208001


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13. Shri Vinod Kumar Sahreholder Director

Telephone No: 0522-2208030, 9415012598

Address: FF-2, Rajnigandha-2

Gulmohar Avenue3-C, Gokhla Marg, Lucknow-226001


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DEPARTMENTS

1. R & D department

2. Membership Inspection / Grievances / Complain / Audit

3. Listing

4. Market operation department (Margin)

5. Secretarial Department

6. Surveillance Department

7. EDP (Computer)

8. Accounts

9. Legal

10. UPSE securities (Subsidiary Company)

11. Clearing House (Trade and Operation)


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1. R & D, Library and Investor service department

Research and development wing of the Uttar Pradesh Stock ExchangeAssociation Limited has been functioning eve since 1992 under SEBIdirection and providing valuable services to the investors. The wing

presently names investor service center has a well maintained, librarycomprising of books, journals, periodicals, and newspapers on financialmarket, annual reports of companies, prime directory etc.

They maintain the records of day to day quotations of major

exchanges, the annual reports of companies, PRIME directory, completeset of volumes of the Stock Exchange, Mumbai Directories. Along withthis it also maintains the news letters, daily bulletin, books on CapitalMarkets, Investor awareness, Budget Taxation with other relevant books.

The UPSE has been organizing summer camps to give trainings toCompany Securities and MBAs different institutes giving those completedata and helping the student to know the practical day-to-day working ofthe exchanges. Along with this it also organizes Investor AwarenessShows.

The changing technology has helped the exchange to install acorporate database of over 7000 companies. The rates of UPSE, BSE,and NSE are displayed live for the benefit of investors.

There are three main function of this department

To render investor services To maintain library To conduct research a