special is at ion project, ashwani

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A SPECIALISATION PROJECT REPORT ON

UNDERSTANDING THE STOCK MARKETMOVEMENT

SUBMITTED BYASHWANI KUMAR SINGH

ROLL NO:B3-05

UNDER THE ESTEEMED GUIDANCE OFDR. V.G.CHARI

SSIM

SIVA SIVANI INSTITUTE OF MANAGEMENT


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AUTHORISATION

This specialisation project UNDERSTANDING THE STOCK MARKETMOVEMENT is submitted as a partial fulfillment of the requirement ofPGDM program of Siva Sivani Institute of Management, Secunderabad.

APHIDALIN SYIEMLIEHDATE: 10.01.2011PLACE: SECUNDERABAD


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ACKNOWLEDGEMENT

I would like to thank my faculty guide, DR. V.G.CHARI, for all hisvaluable inputs and constant support towards me throughout myspecialisation project and providing me an opportunity to learn outside theclass room. It was a truly wonderful learning experience.

Finally I would like to dedicate this project to my family members for their blessings, and my friends/classmates for their help and wishes for the

successful completion of this project.

APHIDALIN SYIEMLIEH

Contents

EXECUTIVE SUMMARY.........................................................................................................6

INTRODUCTION....................................................................................................................7

OBJECTIVE OF STUDY...........................................................................................................8

SCOPE OF STUDY..................................................................................................................9

RESEARCH METHODOLOGY................................................................................................10


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AN OVERVIEW OF STOCK MARKET......................................................................................11

HISTORY OF STOCK MARKET.............................................................................................13

PRESENT SCENARIO OF STOCK MARKET.............................................................................14

CAPITAL MARKET..............................................................................................................17

1. PRIMARY MARKET....................................................................................................17

2. SECONDARY MARKET..............................................................................................19

NATIONAL STOCK EXCHANGE (NSE) OF INDIA.....................................................................21

BOMBAY STOCK EXCHANGE (BSE) OF INDIA.......................................................................24

REGIONAL STOCK EXCHANGE (RSE) OF INDIA.....................................................................25

OVER THE COUNTER EXCHANGE (OTCEI) OF INDIA..............................................................27

FACTORS INFLUENCING STOCK MARKET............................................................................31

Demand and Supply......................................................................................................31

Market Capital...............................................................................................................31

Earning Per Share..........................................................................................................31

IMPACT OF NEWS...............................................................................................................32

Secular Market Trends...................................................................................................32

Primary Market Trends...................................................................................................33

Secondary Market Trends..............................................................................................34

MARKET TRENDS IN YEAR 2009...........................................................................................35

RELATIONSHIP BETWEEN DOLLAR AND RUPEE MOVEMENT................................................37

INTERPRETING RECENT MOVEMENTS OF THE RUPEE-DOLLAR RATE....................................39

RECENT DEVELOPMENT IN STOCK MARKET........................................................................40

Key Features Of The Depository System In India...........................................................40Benefits..........................................................................................................................42

Advantages of the Depository System...........................................................................42

Disadvantage of the Depository System........................................................................43

Depositiory Participant..................................................................................................45

NATIONAL SECURITIES DEPOSITORY LIMITED (NSDL)..........................................................46

CENTRAL DEPOSITORY SERVICES LIMITED (CDSL)..............................................................48

FOREIGN STOCK EXCHANGE...............................................................................................52

NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED QUOTATIONS (NASDAQ)....54

NEW YORK STOCK EXCHANGE (NYSE)................................................................................55

LONDON STOCK EXCHANGE (LSE).......................................................................................56

MOVEMENT OF STOCK MARKET (NSE) WITH $ & RS..............................................................57

DATA FINDINGS..............................................................................................................57

DATA ANALYSIS..............................................................................................................58

MOVEMENT OF STOCK MARKET (BSE) WITH $ & RS..............................................................60

DATA FINDINGS..............................................................................................................60

DATA ANALYSIS..............................................................................................................61


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LIMITATIONS.....................................................................................................................63

ANALYSIS OF TWO STOCKS OF A COMPANY........................................................................64

INFOSYS TECHNOLOGY LIMITED....................................................................................64

WIPRO LIMITED..............................................................................................................65

CONCLUSION.....................................................................................................................66

RECOMMENDATIONS..........................................................................................................67

BIBLIOGRAPHY..................................................................................................................68

BIBLIOGRAPHY

EXECUTIVE SUMMARY

The project on Stock market movement is an attempt to study the relationship between dollar

and rupee movement versus stock market indices with an overall primary market and

secondary market of India. It helped to know and study the parameters opted by the Stock

market and the companies who are operating themselves under the rules and regulation of

SEBI.

The market for long-term securities like bonds, equity stocks and preferred stocks is divided

into primary market and secondary market. The primary market deals with the new issues of


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securities. Outstanding securities are traded in the secondary market, which is commonly

known as stock market or stock exchange. In the secondary market, the investors can sell and

buy securities. Stock markets predominantly deal in the equity shares. Debt instruments like

bonds and debentures are also traded in the stock market. Well-regulated and active stock

market promotes capital formation. Growth of the primary market depends on the secondary

market. The health of the economy is reflected by the growth of the stock market.

Companies raise funds to finance their projects through various methods. The promoters can

bring their own money or borrow from the financial institutions or mobilize capital by issuing

securities. The funds may be raised through issue of fresh shares at par or premium, preference

shares, debentures or global depository receipts. The main objectives of a capital issue are

given below:

To promote a new company

To expand an existing company

To diversify the production

To meet the regular working capital requirements

To capitalize the reverses

Once a company's public offering is complete, it gets listed in a stock exchange. After

listing it would be available for trading to all investors in the stock exchanges.

INTRODUCTION

The Stock Exchange provides companies with the facility to raise capital for expansion through

selling shares to the investing public. The "stock market" is just that- a huge "market" where

stocks are traded by many different vendors. This project emphasis on the movement of stock

market in order to study the relationship between dollar and rupee, how and what makes the

price of a stock change?, when to invest in stock market?, what is the right time for FDI? And

many others factors related to stock movement will be included in this project.

Companies are expected to earn profit. If profits increase, the stock price will likely increase.

Even if investors think the earnings will increase, the stock price may go up. If good news

comes out on a company, the price, and demand for the stock may go up. With bad news, the


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price and demand may go down. The price of a stock is even more dramatically affected when

supply is very high or very low. It is not so uncommon for certain unscrupulous individuals to

"create" news or other financial information, for the purpose of duping unsaved investors into

creating a demand situation, into which, the unscrupulous-one "sells into" and makes an unfair

profit. The project will also focus on investors protection.

The problem one seem to study market trends and therefore find difficulty in interpreting it

can be solve after studying the NSE an d BSE which will help to gather information regarding

all listed company till date, to build information about the share market, to identify the good

stocks to invest trade understanding the market strategy.

The NSE and BSE index with movement of Dollar ($) and Rupee(Rs.) indices helps investors

to analysis the relation of currencies, will make easy to study the seasonal variation of stockmarket as this project has graphing data, trend analysis which will be easy to interpret market

trends.

OBJECTIVE OF STUDY

The working of stock exchanges in India started in1875. BSE is the oldest stock market

in India. Indian stock trading starts with 318 persons taking membership in Native Share

and Stock Brokers Association, which we now know by the name Bombay Stock

Exchange or BSE. BSE and NSE represent themselves as synonyms of Indian stock

market. It helps in raising capital for businesses, mobilizing savings for investment,

facilitating company growth, profit sharing corporate governance.

In many areas, the housing market has also suffered, resulting in numerous evictions,

foreclosures and prolonged vacancies. Issues regarding bank solvency, declines in credit

availability and damaged investor confidence had an impact on global stock markets,

where securities suffered large losses during late 2008 and early 2009. Economies

worldwide slowed during this period as credit tightened and international trade declined.


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Critics argued that credit rating agencies and investors failed to accurately price the risk

involved with mortgage-related financial products, and that governments did not adjust

their regulatory practices to address 21st century financial markets

In 2009 there has been a lot of focus on the appreciation of the rupee against the dollar.The US dollar has fluctuated considerably in the period after September 2008, and

interpret the recent events on the Indian currency market. However this project will

bring out the circumstances at how and when these fluctuation has contributed to Indian

rupee as well as US dollar. The other areas which will be highlighted are:-

To know reasons for investing in Indian share market.

To know the relation between dollar and rupee investment

To know recent developments in stock market

To know the factors affecting stock market

Therefore, these are the objectives that have been focus to clearly understand the stock

market scenario and for the welfare of investors.

SCOPE OF STUDY

A stock market or equity market is a public market for the trading of company stock and

derivatives at an agreed price, these are securities listed on a stock exchange. Indian Shares

listed in National Stock Exchange and Bombay Stock Exchange is closely monitored by the

prospective investors and business analysts after the end of every trading session for the

assessment of best performing stocks.

The movements of the prices in a market or section of a market are captured in price indices

called stock market indices, for e.g., the S&P, the FTSE. Organizations that facilitate the tradein financial securities, e.g., a stock exchange or commodity exchange. This may be a physical

location (like the NYSE) or an electronic system (like NASDAQ). Much trading of stocks

takes place on an exchange; still, corporate actions (merger, spinoff) are outside an exchange,

while any two companies or people, for whatever reason, may agree to sell stock from the one

to the other without using an exchange. Without financial markets, borrowers would have

difficulty finding lenders themselves. Intermediaries such as banks help in this process. Banks


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take deposits from those who have money to save. They can then lend money from this pool of

deposited money to those who seek to borrow.

Stock Indices helps to represents the performance of stock market and by proxy, reflects

investors sentiment on the state of the economy. This also helps one to analysis the updated

stock movement fluctuation with the BSE and NSE indices along with index from NYSE

Composite, NASDAQ Composite and other leading stock markets of the world. The study of

stock movement helps to know about:-

The market news for companies about joint ventures or mergers is important, as they

help in predicting the movement of stocks.

Trading indicators are available, for investors who do not understand performance

charts, having one of these indicators could be beneficial. Investors must be willing to learn from any mistakes that they make, as experience is

the foremost guide to an investor in the stock market.

Thus, the study will help investors to invest their money after briefly understanding the

market scenario, investment strategy, factors affecting stock market with NSE and BSE

indices.

RESEARCH METHODOLOGY

This report is based on secondary data which can be process through paper based

sources as journals, company reports, research reports, periodicals, newspapers,

magazines and statistics.

Technical observation had been done.

Analysis of stock market on monthly basis

A deductive approach had been examined through :-

Hypothesis based upon prior theoretical knowledge.


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Collection of data and carrying out analysis

AN OVERVIEW OF STOCK MARKET

A stock market or equity market is a public market for the trading of company stock and

derivatives at an agreed price, these are securities listed on a stock exchange. Indian Shares

listed in National Stock Exchange and Bombay Stock Exchange is closely monitored by the

prospective investors and business analysts after the end of every trading session for the

assessment of best performing stocks. The movements of the prices in a market or section of a

market are captured in price indices called stock market indices, for e.g., the S&P, the FTSE

index.

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 easily sell securities. This is an attractive

feature of investing in stocks, compared to other less liquid investments such as real estate. 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.


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Statistics show that in recent decades shares have made up an increasingly large proportion of

households' financial assets in many countries. In the 1970s, in Sweden, deposit accounts and

other very liquid assets with little risk made up almost 60 percent of households' financial

wealth, compared to less than 20 percent in the 2000s. The major part of this adjustment in

financial portfolios has gone directly to shares but a good deal now takes the form of various

kinds of institutional investment for groups of individuals, e.g., pension funds, mutual funds,

hedge funds, insurance investment of premiums, etc. The trend towards forms of saving with a

higher risk has been accentuated by new rules for most funds and insurance, permitting a

higher proportion of shares to bonds. Similar tendencies are to be found in other industrialized

countries.

In all developed economic systems, such as the European Union, the United States, Japan and

other developed nations, the trend has been the same: saving has moved away from traditional

(government insured) bank deposits to more risky securities of one sort or another. In comprise

of all this areas stock market plays major role as:

Raising capital for businesses

The Stock Exchange provide companies with the facility to raise capital for expansion

through selling shares to the investing public

Mobilizing savings for investment

When people draw their savings and invest in shares, it leads to a more rational

allocation of resources because funds, which could have been consumed, or kept in

idle deposits withbanks, are mobilized and redirected to promotebusiness activity with

benefits for several economic sectors such as agriculture, commerce and industry,

resulting in strongereconomic growth and higherproductivity levels of firm.

Facilitating company growth

Companies view acquisitions as an opportunity to expand product lines, increase

distribution channels, hedge against volatility, increase its market share, or acquire other

necessary business assets. A takeover bid or a merger agreement through the stock

market is one of the simplest and most common ways for a company to grow by

acquisition or fusion.
http://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Productivity_(economics)http://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Takeoverhttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Capital_(economics)http://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Businesshttp://en.wikipedia.org/wiki/Agriculturehttp://en.wikipedia.org/wiki/Commercehttp://en.wikipedia.org/wiki/Industryhttp://en.wikipedia.org/wiki/Economic_growthhttp://en.wikipedia.org/wiki/Productivity_(economics)http://en.wikipedia.org/wiki/Product_linehttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Assethttp://en.wikipedia.org/wiki/Takeoverhttp://en.wikipedia.org/wiki/Mergers_and_acquisitionshttp://en.wikipedia.org/wiki/Stock_markethttp://en.wikipedia.org/wiki/Stock_market


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Corporate governance

By having a wide and varied scope of owners, companies generally tend to improve on

their management standards and efficiency in order to satisfy the demands of these

shareholders and the more stringent rules for public corporations imposed by public

stock exchanges and the government. Consequently, it is alleged that public companies

(companies that are owned by shareholders who are members of the general public and

trade shares on public exchanges) tend to have better management records than

privately held companies (those companies where shares are not publicly traded).

HISTORY OF STOCK MARKET

In 12th century France the courtiers de change were concerned with managing and regulatingthe debts of agricultural communities on behalf of the banks. Because these men also traded

with debts, they could be called the first brokers. A common misbelieve is that in late 13th

century Bruges commodity traders gathered inside the house of a man called Van der Beurze,

and in 1309 they became the "Brugse Beurse", institutionalizing what had been, until then, an

informal meeting, but actually, the family Van der Beurze had a building in Antwerp where

those gatherings occurred;[6] the Van der Beurze had Antwerp, as most of the merchants of that

period, as their primary place for trading. The idea quickly spread around Flanders andneighboring counties and "Beurzen" soon opened in Ghent and Amsterdam.

In the middle of the 13th century, Venetian bankers began to trade in government securities. In

1351 the Venetian government outlawed spreading rumors intended to lower the price of

government funds. Bankers in Pisa, Verona, Genoa and Florence also began trading in

government securities during the 14th century. This was only possible because these were

independent city states not ruled by a duke but a council of influential citizens. The Dutch later

started joint stock companies, which let shareholders invest in business ventures and get ashare of their profits - or losses. In 1602, the Dutch East India Company issued the first share

on the Amsterdam Stock Exchange. It was the first company to issue stocks andbonds.

The Amsterdam Stock Exchange (or Amsterdam Beurs) is also said to have been the first stock

exchange to introduce continuous trade in the early 17th century. The Dutch "pioneered short

selling, option trading, debt-equity swaps, merchant banking, unit trusts and otherspeculative

instruments, much as we know them". There are now stock markets in virtually every
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developed and most developing economies, with the world's biggest markets being in the

United States, United Kingdom, Japan, India, China, Canada,Germany, France, South Korea

and theNetherlands.

PRESENT SCENARIO OF STOCK MARKET

Thecurrent conditions of Indian current market have drastically improved. There is absolute

transparency and instant transactions. All Indian Stock markets are now computerized and

Internet Trading has become a common phenomenon. Indian stock markets have also

developed a dynamic nature and can change from a bullish temperament to a bearish slide. Any

small bit of information or even rumors from any part of the country can affect the market andis a fairly accurate indicator of the prevalent atmosphere in the region or country. People from

across the country and globe get in touch with minute wise readings on the stock market and

gain a lot of trading aptitude after daily seeing BSE Stock GainersorBSE top losers list which

does a world of good to their investment portfolio.

Share markets in India comprise primarily of NSE share and BSE share with share brokers

managing the transactions. The SEBI is the governing body in India, controlling the activities

of the stock exchanges, and stock brokers too function under SEBI guidelines. To open tradingaccounts to be able to buy and sell shares like NSE share or BSE share, you will have to seek

the services of stock brokers. Many a broker functions online through the medium of brokerage

platforms. Once you get registered at such an online trading platform, you can get tips and

suggestions from expert brokers, helping you take your investing goals to the next level.

It is moving in the right direction that matters in share markets trading. Market analysts and

experts advice investors not to invest in individual NSE share or individual BSE share given

the market volatility and the high risks involved. And as aforementioned those who manage

their own portfolios including experts are at least able to decipher, take risks, and buy

individual stocks without paying heed to the brokers' advice. Their deep knowledge about the

market and their ability to select the right stocks help them experience a win-win situation.

The Indian Stock Markets can be a very rewarding avenue of investment but the constant

changes and the inherent dynamic nature of the markets can wipe out your funds or savings

within a minute. Thus, the key words for every retail investor is to be constantly alert and very
http://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Netherlandshttp://www.paisawaisa.com/stocks/top-gainers.aspxhttp://www.paisawaisa.com/stocks/top-loosers.aspxhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Netherlandshttp://www.paisawaisa.com/stocks/top-gainers.aspxhttp://www.paisawaisa.com/stocks/top-loosers.aspx


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observant. Don't always rely on the daily list of BSE top gainers or BSE top losers as it only

takes a minute to get the things changed here. Keeping ones eyes and ears open can the insure

the investor against any major losses.

Share markets across the world are recuperating with traces of recession still visible in few

nations. The Indian stock market is fast recovering and the emerging opportunities have led to

the steady inflows of foreign investments. Investing in India has thus become a trend which is

likely to gain more impetus in the near future. It is the promotion oriented user friendly policies

of the Indian government that have led to this sudden surge. And owing to the increased

quantum of foreign investment inflows, India is emerging as one of the best performing

markets.

The stock market is characterized by its volatility. What exactly causes its rises and falls has

several explanations. Some of them are obvious whereas others are not so easily determined.

Most of the market movers are of economic, political and societal character. Some of the

factors that cause movement in the stock market have long-term effects while the influences of

others are felt only in the short-term. Some of the easily determined market movers include:

Inflation

Earnings

Interest Rates

Domestic Political Turmoil

Terrorism and Times of War

Oil and Energy Prices

Crime and Fraud

Uncertainty

The last mentioned factor - uncertainty - plays an extreme role in the movement of the market.

The stock market is characterized by its unpredictability. Thus, only a little surprise maychange the direction toward which the market has headed. Generally, it is claimed that every

investor has equal access to the available information. However, this is not always the case. On

the other hand, most investors expect that the stock market is efficient enough to be able to

predict events and news in a timely manner so that it can quickly and effectively respond to

conditions that has aroused.


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If the Fed (the Federal Reserve Board's Open Market Committee) is about to decide on the

increase of interest rates by one-quarter, it is expected that even the decision is taken the

market will adjust the prices of the stocks to reflect the future change. As a result, after the

decision is taken by the Fed, the change in the interest will be unfelt since the market has

already done its job. Different unexpected events, such as economic news or war may take the

market out of balance, which may lead to serious financial depression.

On the other hand, events with positive light will have a reverse effect by increasing the

prices. Unfortunately, today what moves most of the time the stock prices are bad news. These

movements of the market should be of no worry to you since they are of a temporary character.

They will soon be alleviated. The knowledge of market movers is important in order to be able

to both seize the opportunities offered and avoid the problems that occur as a result of stock

market movements.

To be a successful investor you need two main things - the knowledge and the right trading

platform.

CAPITAL MARKET

Capital market is a market which provides an opportunity for the companies to raise the funds

directly from the investors, as well as, outstanding securities are bought and sold in this

market. This market functions under the supervision of Securities and Exchange Board of

India, the regulatory provisions regulating this market are derived from various laws like


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Securities and Contracts Regulation Act, Companies Act, SEBI Act, FEMA, etc. this market is

divided into two segments:

1. Primary market

2. Secondary market

1. PRIMARY MARKET

It is the market which provides a platform for new as well as old companies to raise funds by

issuing securities directly to the ultimate investors. Thus, the market provides a bridge between

savings and investments. Different securities like equity shares, preference shares debentures,

bonds, etc. are issued to the investors. These can be issued through any of the following

mechanisms:

Public issue

Rights issue

Private placement

Public issue through book building

Buyout deals

Public issue

It is the system of issuing securities by a public limited company. In this the general public is

invited to subscribe towards the capital of the company. General public includes individual

investors, institutional investors, mutual funds, NRIs, etc. The securities issued through a

public issue must get listed on a stock exchange within 10 weeks from the closing of the issue.

The stock exchange should be the one whose name has been specified by the company in its

prospectus for the public issue. Under this, shares can be issued by the company at par, at

premium or at a discount. The issued price is decided by the company itself.

A company is required to complete all the regulatory formalities for bringing out its public

issue as specified by SEBI.

Rights issue

The raising of new capital by giving existing equity shareholders the right to subscribe to new

shares or debentures in proportion to their current holdings. These stocks are normally issued at

a discount to market price. A stockholder not wishing to take up a rights issue may sell the

rights. These can be issued to the general public, only when existing shareholders decline to


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accept such offer. The subsequent issue of shares can be made to the general public after a

resolution to this effect has been passed under Section 81 of the Companies Act.

Private placement

The sale of securities directly to an institutional investor, such as a bank, mutual fund,

insurance company,pension fund, orfoundation. Does not require SEC registration, provided

the securities are bought for investment purposes rather than resale, as specified in the

investment letter. The sale of securities to a relatively small number of select investors as a

way of raising capital. Investors involved in private placements are usually large banks, mutual

funds, insurance companies and pension funds. Private placement is the opposite of a public

issue, in which securities are made available for sale on the open market.

Since a private placement is offered to a few, select individuals, the placement does not have to

be registered with the Securities and Exchange Commission. In many cases, detailed financial

information is not disclosed and the need for a prospectus is waived. Finally, since the

placements are private rather than public, the average investor is only made aware of the

placement after it has occurred.

Public issue through book building

The system of book building is a mechanism of issuing shares to the general public in which

the company does not decide the final issue price of the securities, instead pricing is done byinviting Bids from the public. Decision of final issue price, acceptance of bids and book

running is done as per SEBI rules. In case of book building, different investors/bidders are

classified as follows:

Qualified Institutional Buyers QIBS)

Non-individual buyers

Individual investors

The shares are issued to the investors at the cut- off point, decided by taking weighted averageof all the bids received. The bidders who have given the bids at or above the cut-off point

qualify for allotment, rest are disqualified and their application money is refunded as per rules.

Securities issued through this mechanism should be listed on a recognized stock exchange.

Buyout deals
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A company can issue the shares on OTCEI through the mechanism of buyout deals, which is as

follows:

Company negotiates with at least one dealer of the exchange to buy the complete issue

at the specified price.

Buyout deal is with the intention that the dealer will sell these shares in the general

market in the future.

Dealer will have no managerial control over the company.

Dealer has the freedom to sell through the stock exchange or directly to the public.

1. SECONDARY MARKET

A market in which outstanding securities of corporate houses and government are traded in

through the intervention of members of the stock exchange. All the transaction entered throughthe members of the stock exchange become valid and legal only when these are reported to the

stock exchange. For exchange traded transactions default risk is negligible, as exchange

becomes the counter party and takes the responsibility for the settlement of transaction. Every

stock exchange is the secondary market itself. Stock exchange provides necessary facilities for

the trading of securities on the floor of the stock exchange.

A stock exchange is two-way quotation market through an open outcry system for buying and

selling the securities listed on the stock exchange, as per the bye laws of the exchange andregulation of regulatory body. Transactions are entered through the members of the stock

exchange only in the listed securities.

Secondary marketing is vital to an efficient and modern capital market. In the secondary

market, securities are sold by and transferred from one investororspeculatorto another. It is

therefore important that the secondary market be highly liquid (originally, the only way to

create this liquidity was for investors and speculators to meet at a fixed place regularly).As a

general rule, the greater the number of investors that participate in a given marketplace, and the

greater the centralization of that marketplace, the more liquid the market.

Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the investor's

desire not to tie up his or her money for a long period of time, in case the investor needs it to deal with

unforeseen circumstances) with the capital user's preference to be able to use the capital for an

extended period of time.

Accurate share price allocates scarce capital more efficiently when new projects are financed through a

new primary market offering, but accuracy may also matter in the secondary market because:
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1) Price accuracy can reduce the agency costs of management, and make hostile takeover a less risky

proposition and thus move capital into the hands of better managers, and

2) Accurate share price aids the efficient allocation of debt finance whether debt offerings or

institutional borrowing.

NETWORK OF STOCK EXCHANGES IN INDIA

Stock Exchanges are structured marketplace where affiliates of the union gather to sell

firm's shares and other securities. India Stock Exchanges can either be a conglomerate/

firm or mutual group. The affiliates act as intermediaries to their patrons or as key

players for their own accounts. Stock Exchanges in India also assist the issue andrelease of securities and other monetary tools incorporating the fortification of revenues

and dividends. The book keeping of the trade is centralized but the buying and selling is

associated to a particular place as advanced marketplaces are mechanized. The buying

and selling on an exchange is only open to its affiliates and brokers.

NATIONAL STOCK EXCHANGE (NSE) OF INDIA

Integrated in November 1992, the National Stock Exchange of India (NSE) was initially a tariff

forfeiting association. In 1993, the exchange was certified under Securities Contracts

(Regulation) Act, 1956 and in June 1994 it started its business functioning in the Wholesale

Debt Market (WDM). The Equities division of NSE began its operations in 1994 while in 2000

the corporation incorporated its Derivatives division.

Innovations

NSE has remained in the forefront of modernization of India's capital and financial markets,

and its pioneering efforts include:


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Being the first national, anonymous, electronic limit order book (LOB) exchange to

trade securities in India. Since the success of the NSE, existent market and new market

structures have followed the "NSE" model.

Setting up the first clearing corporation "National Securities Clearing Corporation Ltd."

in India. NSCCL was a landmark in providing innovation on all spot equity market (and

later, derivatives market) trades in India.

Co-promoting and setting up of National Securities Depository Limited, first depository

in India.

Setting up ofS&P CNX Nifty.

NSE pioneered commencement of Internet Trading in February 2000, which led to the

wide popularization of the NSE in the broker community.

Being the first exchange that, in 1996, proposed exchange traded derivatives,

particularly on an equity index, in India. After four years of policy and regulatory

debate and formulation, the NSE was permitted to start trading equity derivatives

Being the first and the only exchange to trade GOLD ETFs (exchange traded funds) in

India.

NSE has also launched the NSE-CNBC-TV18 media centre in association with CNBC-

TV18.

NSE.IT Limited, setup in 1999, is a 100% subsidiary of the National Stock Exchange of

India. A Vertical Specialist Enterprise, NSE.IT offers end-to-end Information

Technology (IT) products, solutions and services.

Markets

Currently, NSE has the following major segments of the capital market:

Equity

Futures and Options

Retail Debt Market

Wholesale Debt Market

Currency futures
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Mutual Fund

Stocks Lending & Browing

August 2008 Currency derivatives were introduced in India with the launch of Currency

Futures in USD INR by NSE. Currently it has also launched currency futures in EURO,

POUND & YEN. Interest Rate Futures was introduced for the first time in India by NSE on 31

August 2009, exactly after one year of the launch of Currency Futures.

NSE became the first stock exchange to get approval for Interest rate futures as recommended

by SEBI-RBI committee, on 31 August 2009, a futures contract based on 7% 10 Year GOI

bond (NOTIONAL) was launched with quarterly maturities.

Hours

NSE's normal trading sessions are conducted from 9:00 am India Time to 3:30 pm India Time

on all days of the week except Saturdays, Sundays and Official Holidays declared by the

Exchange (or by the Government of India) in advance The exchange, in association with BSE

(Bombay Stock Exchange Ltd.), is thinking of revising its timings from 9.00 am India Time to

5.00 pm India Time. There were System Testing going on and opinions, suggestions or

feedback on the New Proposed Timings are being invited from the brokers across India. And

finally on 18 November 2009 regulator decided to drop their ambitious goal of longest Asia

Trading Hours due to strong opposition from its members.

On 16 December 2009, NSE announced that it would pre-pone the market opening at 9am

from 18 December 2009. So NSE trading hours will be from 9:00 am till 3:30 pm India Time.

However, on 17 December 2009, after strong protests from brokers, the Exchange decided to

postpone the change in trading hours till 4 Jan 2010.

NSE new market timing from 4 Jan 2010 is 9:00 am till 3:30 pm India Time.

Some NSE Figures and Facts 2009

The equities division of NSE covers around 300 Indian cities, while its derivates section

covers 305 cities.

The number of securities accessible for buying and selling in NSE exchange in its

equities and derivates section are 1,383 and 3,143 respectively.


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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 - 17:35End 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.

Some BSE Figures and Facts

BSE exchange was the first in India to launch Equity Derivatives, Free Float Index,

USD adaptation of BSE Sensex and Exchange facilitated Internet buying and selling

policy

BSE exchange was the first in India to acquire the ISO authorization for supervision,

clearance & Settlement

BSE exchange was the first in India to have launched private service for economic

training

Its On-Line Trading System has been felicitated by the internationally renowned

standard of Information Security Management System.

REGIONAL STOCK EXCHANGE (RSE) OF INDIA

The Regional Stock Exchanges in India started spreading its business operation from 1894.

The first RSE to start its functioning in India was Ahmedabad Stock Exchange (ASE)

followed by Calcutta Stock Exchange (CSE) in 1908.

The stock exchange in India witnessed a flourishing phase in 1980s with the incorporation of

many exchanges under it. In early 60s, it has only few certifies RSEs under it namely

Hyderabad Stock Exchange, Indore Stock Exchange, Madras Stock Exchange, Calcutta Stock

Exchange and Delhi Stock Exchange. The recent to join the list was Meerut Stock Exchange

and Coimbatore Stock Exchange.


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Catalog of Regional Stock Exchanges in India

Ahmedabad Stock Exchange

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange

Calcutta Stock Exchange

Cochin Stock Exchange

Coimbatore Stock Exchange

Delhi Stock Exchange

Guwahati Stock Exchange

Hyderabad Stock Exchange

Jaipur Stock Exchange

Ludhiana Stock Exchange

Madhya Pradesh Stock Exchange

Madras Stock Exchange

Magadh Stock Exchange

Mangalore Stock Exchange

Meerut Stock Exchange

OTC Exchange Of India

Pune Stock Exchange

Saurashtra Kutch Stock Exchange

Uttar Pradesh Stock Exchange

Vadodara Stock Exchange


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OVER THE COUNTER EXCHANGE (OTCEI) OF INDIA

OTC Exchange Of India also known as Over-the-Country Exchange of India or OTCEI was

set up to access high-technology enterprising promoters in raising finance for new product

development in a cost effective manner and to provide transparent and efficient trading system

to the investors.

OTC Exchange Of India was founded in1990 under the Companies Act 1956 and got

recognized by the Securities Contracts Regulation Act, 1956 as a stock exchange. It has a

pattern along the lines of the NASDAQ market and has introduced several innovations to the

Indian capital markets like:

1. screen-based nationwide trading

2. sponsorship of companies

3. market making

4. scrip less trading

Among important listed companies under the OTC Exchange Of India are VIP, Advanta,

Sonora Tiles & Brilliant mineral water, etc.

OTC EXCHANGE OF INDIA

There are three types of intermediaries-

1. Members

2. Dealers

3. Sponsors

Services of OTC Exchange of India

OTC Exchange Of India introduced certain new concepts in the Indian trading system:

1. screen based nationwide trading known as OTCEI Automated Securities Integrated

System or OASIS


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2. Market Making

3. Sponsorship of companies

4. Trading done in share certificates

5. Weekly Settlement Cycle

6. Short Selling

7. Demat trading through National Securities Depository Limited for convenient paperless

trading

8. Tie-up with National Securities Clearing Corporation Ltd for Clearing.

Promoters of the OTC Exchange of India

Some of the leading financial institutions of India that co-promote the Over-the-counter

exchange of India are like:

Unit trust of India

ICICI

Industrial Development Bank of India

SBI Capital Market limited

Industrial Finance Corporation of India

Life Insurance Corporation of India General Insurance Corporation of India & its subsidiaries.

OTC Exchange Of India introduced the opening of the Investor Grievance Cells at the four

Metro cities in India for readdressing the complaints from the investors against the brokers and

their listed companies. OTC Exchange Of India designed trading in debt instruments

commonly known as PSU bonds and also in the equity shares of unlisted companies.

Trading Documents on OTCEI

The trading documents on OTCEI are Counter Receipts (CRs) permanent and temporary

CRs, sale confirmation slip, application acknowledge slip, and transfer deed. Initially, counter

receipts were issued instead of share certificates as share certificate was not a mercantile

document. The share certificate was kept with the registrar-cum custodian and a counter receipt

was issued against this as a tradable document to the allottee along with the allotment advice.

The counter receipt contained names of the investor and the company, number of shares, name


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and address of the registrar, price, commission, date and time of the transaction, investors

signature, name of his bank, and signature of the issuing counter. Four copies of CR were

prepared and sent to the investors counter, OTCEI, registrar and investor. The counter receipt

could be exchanged for share certificate at any of the counters of OTCEI. If the investor

wanted to sell these shares on OTCEI, he had just to surrender the permanent counter receipt

and transfer deed at the exchange and get a sale confirmation slip. Later, as the trading

volumes dipped, counter receipts were replaced be share certificates from March 1999.

Advantages:

OTCEI was the first exchange in India to have on-line trading cum depository. It became quote

driven and a transparent system of trading. It provides a liquid cash market for retail investors

with a T + 3 rolling settlement system and no problem of bad or short deliveries. Despite the

unique advantages of the system, OTCEI got off to a poor start. Trading volumes were thin,

liquidity was poor, and most of the investors were not aware of its existence. This was the

result of the absence of a nationwide network, lack of an on line communication network of its

own, and the fact that in initial stages it restricted its business to Mumbai.

Steps to Improve Turnover on OTCEI:

During 1993-94, OTCEI entered a Memorandum of Understanding (MOU) with the NASDAQ

for enhanced cooperation between the two exchanges in the area of market technology,

regulations, and business development.

As part of its expansion program, OTCEI invited applications in January 1995 for dealership in

54 cities, in 19 States across the country to achieve nationwide coverage. As a result, OTCEI

could expand its dealer network from just 5 cities in 1995-96 to 23 cities during 1996-97. It has

60 national members and 145 dealers.

In order to increase the popularity of OTCEI, SEBI relaxed norms for listing on OTCEI during

March 1995. The minimum post issue capital to be offered to the public to enable listing was

lowered from 40 to 25 per cent. SEBI also permitted finance and leasing companies to get

listed on OTCEI. With the exposure of price rigging scams of finance companies, OTCEI

modified its guidelines in April 1995, making the listing of finance companies more stringent.

Companies covered under the FERA/ MRTP Act were permitted to be listed on OTCEI.

Hence, medium sized companies belonging to big industrial groups could join the OTCEI.


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In 1996-97, OTCEI introduced trading of PSU bonds and launched a new segment called the

listed mutual fund segment. Despite relaxing the norms for the listing of securities, the

turnover at the exchange steadily declined from 1994-95. Hence, SEBI appointed two

committees Malegam and Dave Committees to review OTCEIs working and suggest

measures to improve its functioning. The recommendations of these committees suggested

relaxing the strict norms with which OTCEI had begun operating. During 1997-98, OTCEI re-

launched trading in the permitted segment by moving over a weekly settlement cycle in line

with the recommendations of the Dave Committee. The re-launched permitted segment

witnessed increased activity with a coverage of 15 cities.

OTCEI revamped its trading activity by switching from the system of Counter Receipts to

share certificates and dematerialization, with effect from March 1, 1999. Under the CR system,

it was difficult to match the buyer and seller receipts which resulted in delays. All CRs in

circulation were converted to share certificates or dematerialized.

FACTORS INFLUENCING STOCK MARKET

Stock market is something where you can never foretell what is going to happen in the market.

One can might get huge gain or incur losses when the stock market crashes. There are many

factors affecting share prices. It is very hard to say just one or two factors affect the share

prices. So, let us have a look at the factors that affect share prices.

Demand and SupplyThis is the first factor that affects share prices. When you get to see that more people are

buying stocks, then there is an increase in the price of that particular stock. On the other hand

price of stock falls when more people are selling their stocks. So it is very difficult to predict

the Indian stock market. This is the main reason why one need to get in touch with a good

stock market consultant. There is consultancy for which help a lot on choosing the right stocks.
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Market Capital

It is a very big mistake when you try to guess a companys worth from the price of a stock.

You should know that the more important is the market capitalization of the particular

company. This helps to determine the worth of a company. So market cap serves as an

important use to determine share prices.

Earning Per Share

Now when it comes to the term, earning per share, it means the profit that a particular

company has made per share and that too on the last quarter. If you need to know the health of

the company then this is the most important factor. Whats more earning per share also

influences the buying tendency in the market that results in the increase of the particular stock

price. This is the reason why it is very important for every public company to bring out the

quarterly report. So when you wish to make a profitable investment, then the best thing for you

would be to keep a good watch on the quarterly reports of different companies. This is very

important before you wish to invest your hard earned money in the share market.

IMPACT OF NEWS

News is another factor that affects the share price. When there is positive news about a

particular stock or company, people try to invest all their money in that particular stock or

market. This leads to increase in the interest of buying the stock. But there are many

circumstances where news could also bring a negative effect where it could ruin the prospect of

the particular stock. So it is very important to know the overall news of a stock or company

where you can invest your money so that it grows within a very short period of time.

There are many things that you need to consider when you go for investing your hard earned

money in the stock market. You should never be in a haste to invest your money in the stock

market. You should always get in touch with a good stock market consultancy where it can

give you some share tips. They are the one who can give you advice where to invest your

money and where not to. They know to distinguish the good stock from the bad ones.

The major factors are:-

Market Trends that includes Bullish and Bearish trends effecting stock market where the terms

bull market andbear market describe upward and downward market trends, respectively, and
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can be used to describe either the market as a whole or specific sectors and securities. These

trends are classified as

Secular trends for long time frames,

Primary trends for medium time frames, and

Secondary trends lasting short times.

Secular Market Trends

A secular market trend is a long-term trend that lasts 5 to 25 years and consists of a series of

sequential primary trends. A secular bear market consists of smaller bull markets and larger

bear markets; a secular bull market consists of larger bull markets and smaller bear markets.In

a secular bull market the prevailing trend is "bullish" or upward moving. The United States

was described as being in a secular bull market from about 1983 to 2000 (or 2007), with briefupsets including the crash of 1987 and the dot-com bust of 20002002.

In a secular bear market, the prevailing trend is "bearish" or downward moving. An example of

a secular bear market was seen in gold during the period between January 1980 to June 1999,

culminating with the Brown Bottom. During this period the nominal gold price fell from a high

of $850/oz ($30/g) to a low of $253/oz ($9/g), and became part of the Great Commodities

Depression.

Primary Market Trends

A primary trend has broad support throughout the entire market (most sectors) and lasts for a

year or more.

Bull market :- A bull market is associated with increasing investor confidence, and increased

investing in anticipation of future price increases (capital gains). A bullish trend in the stock

market often begins before the general economy shows clear signs of recovery. It is a win-win

situation for the investors. India's Bombay Stock Exchange Index, SENSEX, was in a bull

market trend for about five years from April 2003 to January 2008 as it increased from 2,900

points to 21,000 points, notable bull market was in the 1990s and most of the 1980s when the

U.S. and many other stock markets rose; the end of this time period sees the dot-com bubble.

Bear market-A bear market is a general decline in the stock market over a period of time. It is

a transition from high investor optimism to widespread investor fear and pessimism. According

to The Vanguard Group, "While theres no agreed-upon definition of a bear market, one
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generally accepted measure is a price decline of 20% or more over at least a two-month

period.

A bear market followed the Wall Street Crash of 1929 and erased 89% (from 386 to 40) of the

Dow Jones Industrial Average's market capitalization by July 1932, marking the start of the

Great Depression. After regaining nearly 50% of its losses, a longer bear market from 1937 to

1942 occurred in which the market was again cut in half. Another long-term bear market

occurred from about 1973 to 1982, encompassing the 1970s energy crisis and the high

unemployment of the early 1980s. Yet another bear market occurred between March 2000 and

October 2002. The most recent example occurred between October 2007 and March 2009.

Secondary Market Trends

Secondary trends are short-term changes in price direction within a primary trend. The duration

is a few weeks or a few months. One type of secondary market trend is called a market

correction. A correction is a short term price decline of 5% to 20% or so. A correction is a

downward movement that is not large enough to be a bear market (ex post).

Another type of secondary trend is called a bearmarket rally (or "sucker's rally") which consist

of an market price increase of 10% to 20%. A bear market rally is an upward movement that is

not large enough to be a bull market (ex post). Bear market rallies occurred in the Dow Jones

index after the 1929 stock market crash leading down to the market bottom in 1932, and

throughout the late 1960s and early 1970s. The JapaneseNikkei 225 has been typified by a

number of bear market rallies since the late 1980s while experiencing an overall long-term

downward trend.
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MARKET TRENDS IN YEAR 2009

Looking at weakening world economy, the downtrend is expected to continue in first half of

2009. Then onwards economies are expected to start reviving. So, the Financial results of last

quarter i.e. Q-4 2008-2009, and for Q1 of FY 2009-2010, they are going to reflect the weak

economical financial conditions. And so the stock markets would reflect the same. Probability

is on higher side that SENSEX effects October 2008 lows. Buying stocks once the economic

cues are in clear trends and it could be only after near end of first half of 2009.

Meanwhile new investors can learn How to buy stocks and try finding out value stocks to

accumulated. In the beginning of year 2009, the bear trend up and rise, metal, cement, auto,

coal, heavy machinery, steel, iron, infrastructure will rise while bank, telecommunication,

information Technology, aviation will decline. The overall Bear period up in mid of march,

those who want to get good return in short term investment during March and sell in April will

get good return. During the month of April market remained in the hands of bull . Investors of

previous month got minimum 10 to 20% return during the month.

During this month Electric, Electronics, Information Technology, Auto, Engineering, Cement,

fertilizer, cement, banking, infrastructure, housing, sugar, power, television and oil rose. In

May 2009, the bull market condition appeared, and this month Arvind mill, Bajaj Hindustan,

Essar Oil, Glaxo, HCL Techno, Hul, IFCI, Infosys, MRF, Orbit Corporation, Power grid, RIL,

Suraj Diamond and voltamp had given good return.

Overall August was a flat month. No heavy up-down was remarkable. Market improved in

first 15 days and decline after 17th. In net nifty will + / - only 2%. It is better that not to trade

during the month or trade only in small quantity. Dual trend in all sectors. The major trend

dates are 5th, 11th, 16th, 17th, and 21st to 23rd. New line will start for 18days from 23rd. Oil,

Housing, Infrastructure, PSU, Bank, and Information Technology had normal improved. In

September 2009 market again bear for first 10 days. Normal improvement from 11th to 15th

and from 21st to 25th, while bear from 1st to 10th. The market remained overall in bull trend

during the first two weeks of October and remain in the hands of bear from 17th onwards. The

prices of Oil, gas, metal, chemical, electric, electronic, infrastructure, aviation, housing has

increased. Now the month of November it was a Bull Month. Market shown good rise from 3rd

to 7th, from 12th to 20th and from 25th onwards. Ansal property, Atlanta, Automotive, Bajaj


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Electric, Oswal Chemical, Dabur, GMR., Gulf oil, Indus Bank, Jet airways, Mundra port,

Religare, Siemens, Strelite, Sun TV and Union Bank has grown.

RELATIONSHIP BETWEEN DOLLAR AND RUPEEMOVEMENT

The positive impact of Dollar is very effective in India, it emphasis as many day to day

business in ones life as people traveling abroad will be able to buy more goods from the same

amount of money, students studying abroad will have to pay fewer Indian rupees for their fees


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and oil importers and gold importers will have to pay less for their imports. An appreciating

Rupee makes foreign direct investment (FDI) into India attractive. Indian companies that buy

equipments from the U.S. Companies that buy components from the U.S. benefit. E.g. Indian

PC manufacturers can buy an Intel chip at lower rates.

On the other hand, some negative impacts lies as NRIs who send their money in India to their

families would not be very happy, as their dollars would convert to lesser rupees. Software

companies (already working on thin margins), textiles, leather product and apparel

manufacturers would be major losers. The Indian export industry would be the major hit if

rupee appreciates against the dollar. Also a stronger dollar would mean lower income for India

bloggers and websites which get their pay check in dollars.

Measurement Of Currency Rate

Forex (foreign exchange) rates are dependent on demand and supply - just like stocks.

It is the net direction of money flow that decides the rate of a particular currency.

Currency appreciation is not always a result of economic progress.

Every economy has a capital account and a current account.

Capital account is the net effect of investments flowing in and out of the country.

These investments could be in the form of:

NRIs investing in the country,

Investments by foreign agencies in Indian stock market, etc.

Current account is the net effect of trade of a country.

As of now, India has a capital account surplus and a current account deficit.

This means that more investments are coming in India than going out.

Current account deficit means India is importing more than it is exporting.

An example would explain this in a better way:

All commodities such as gold / oil and etc are purchased with dollar in all countries.

So if I transfer 10,000 dollars to India. The rupee would go up.

But on the other hand, if a business in India wishes to buy 1000 gallons of oil in India, will buy

from distributor using rupees, but the country has bought that oil or that commodity using the

DOLLAR (converting rupees to dollars), this makes the value of rupee go down.


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While focusing on the past trends of Dollar Rupee movement as for example in year 2008,

The starting months of 2008 proved to be very critical.

SENSEX slipped down from 20k level to 14k.

Gold appreciated more than 20% in just few months.

Crude Oil prices touching levels of $110 per barrel.

Inflation rose to double figures.

Indian Rupee has fallen in recent years and is continuing so because of reasons as:-

1. Higher global crude oil prices, which widen the current account deficit

2. Slowdown in capital inflows, which decreases the supply of dollars

3. Inflation is raging at close to 12%.

4. There will be national elections in the next twelve months.

If certain things are been taken into consideration than these problems can be easily

summarized, which can mitigate Rupee weakness,

1. Globally the US$ is weakening (compare it with any of the majors like euro, yen,

Canadian$, Australian$, etc.)

2. Continuing optimism about Indias GDP growth from domestic and international

investors.

3. As the global credit crunch will recede, capital inflows into India in the form of FDI and

FII will increase

INTERPRETING RECENT MOVEMENTS OF THE RUPEE-DOLLAR RATE

In year 2009, there has been a lot of focus on the appreciation of the rupee against the

dollar. The US dollar has fluctuated considerably in the period after September 2008,

and interpret the recent events on the Indian currency market. At first, in the `flight to

safety' into US government bonds that came about after the Lehman shock, the US

dollar gained ground. As the global financial system has gained confidence, the reversal

of this `flight to safety' has meant a concomitant decline in the US dollar. These ups and
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downs of the US dollar have important implications for our intuition in India about the

rupee-dollar rate. If we think the US dollar is roughly fixed, then the pursuit of an

inflexible rupee-dollar rate can be interpreted as some kind of `stability'. But if the US

dollar itself is a fluctuating yardstick, it is hard to justify efforts at RBI to obtain

inflexibility of the rupee-dollar rate. When the dollar declines in value, an attempt at

holding on to a rigid rupee-dollar rate is tantamount to forcing a rupee depreciation, and

vice versa Greater flexibility in the rupee dollar rate will free up monetary policy to

pursue the more important goal of stabilizing the domestic business cycle. But along the

way, for firms to learn to live with greater flexibility of the rupee dollar rate, well

functioning currency derivatives markets are required. RBI needs to first step away from

the present strategy of banning most of these markets, so as to be able to move forwardto greater flexibility of the rupee.

RECENT DEVELOPMENT IN STOCK MARKET

The term depository is defined as a central location for keeping securities on deposit. It is

also defined as a facility for holding securities, either in certificated or uncertificated form to

enable book entry transfer of securities. It is understood from the above two definitions that

the depository is a place where securities are stored, recorded in the books on behalf of the

investors.

It also helps companies by:-

The companies will be able to know the particular of beneficial owners and their

holding periodically.

At the time of declaration of dividends, bonus etc. there will not be any rush for transfer

related activities for the companies.


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India has adopted the Depository System for securities trading in which book entry is done

electronically and no paper is involved. The physical form of securities is extinguished and

shares or securities are held in an electronic form. Before the introduction of the depository

system through the Depository Act, 1996, the process of sale, purchase and transfer of

securities was a huge problem, and there was no safety at all.

Key Features Of The Depository System In India

1. Multi-Depository System: The depository model adopted in India provides for a

competitive multi-depository system. There can be various entities providing depository

services. A depository should be a company formed under the Company Act, 1956 and should

have been granted a certificate of registration under the Securities and Exchange Board of

India Act, 1992. Presently, there are two depositories registered with SEBI, namely:

National Securities Depository Limited (NSDL), and

Central Depository Service Limited (CDSL)

2. Depository services through depository participants: The depositories can provide their

services to investors through their agents called depository participants. These agents are

appointed subject to the conditions prescribed under Securities and Exchange Board of India

(Depositories and Participants) Regulations, 1996 and other applicable conditions.

3. Dematerialisation: The model adopted in India provides for dematerialisation of securities.

This is a significant step in the direction of achieving a completely paper-free securities

market. Dematerialization is a process by which physical certificates of an investor are

converted into electronic form and credited to the account of the depository participant.

4. Fungibility: The securities held in dematerialized form do not bear any notable feature like

distinctive number, folio number or certificate number. Once shares get dematerialized, they

lose their identity in terms of share certificate distinctive numbers and folio numbers. Thus all

securities in the same class are identical and interchangeable. For example, all equity shares in

the class of fully paid up shares are interchangeable.

5. Registered Owner/ Beneficial Owner: In the depository system, the ownership of

securities dematerialized is bifurcated between Registered Owner and Beneficial Owner.

According to the Depositories Act, Registered Owner means a depository whose name is
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entered as such in the register of the issuer. A Beneficial Owner means a person whose name

is recorded as such with the depository. Though the securities are registered in the name of the

depository actually holding them, the rights, benefits and liabilities in respect of the securities

held by the depository remain with the beneficial owner. For the securities dematerialized,

NSDL/CDSL is the Registered Owner in the books of the issuer; but ownership rights and

liabilities rest with Beneficial Owner. All the rights, duties and liabilities underlying the

security are on the beneficial owner of the security.

6. Free Transferability of shares: Transfer of shares held in dematerialized form takes place

freely through electronic book-entry system.

Benefits:-

This system will eliminate paper work as the book entry system does not need physicalmovement of certificates for transfer process.

The risk of bad deliveries, fraud and misplaced and lost share certificates will not exist.

The electronic media will shorten settlement time and hence the investor can save timeand increase the velocity of security movement.

Investor will be able to change portfolio more frequently.

The distribution of dividend, interest and other benefits will be speedier as theownership can be easily identifiable.

The cost of transfer is less as the share transfers are exempt from stamp duty.

Faster payment in case of sale of shares.

Advantages of the Depository System are:-

Share certificates, on dematerialization, are cancelled and the same will not be sent back

to the investor. The shares, represented by dematerialized share certificates are fungible

and, therefore, certificate numbers and distinctive numbers are cancelled and become

non-operative.

It enables processing of share trading and transfers electronically without involving

share certificates and transfer deeds, thus eliminating the paper work involved in scrip-

based trading and share transfer system.


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Transfer of dematerialized securities is immediate and unlike in the case of physical

transfer where the change of ownership has to be informed to the company in order to

be registered as such, in case of transfer in dematerialized form, beneficial ownership

will be transferred as soon as the shares are transferred from one account to another.

The investor is also relieved of problems like bad delivery, fake certificates, shares

under litigation, signature difference of transferor and the like.

There is no need to fill a transfer form for transfer of shares and affix share transfer

stamps.

There is saving in time and cost on account of elimination of posting of certificates.

The threat of loss of certificates or fraudulent interception of certificates in transit that

causes anxiety to the investors, are eliminated.

Disadvantage of the Depository System are:-

Lack of control: Trading in securities may become uncontrolled in case of

dematerialized securities.

Need for greater supervision: It is incumbent upon the capital market regulator to keep

a close watch on the trading in dematerialized 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, needs to be supervised as they have the

capability of manipulating the market.

Complexity of the system: Multiple regulatory frameworks have to be confirmed to,

including the Depositories Act, Regulations and the various Bye Laws of various

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

dematerialization. These may cause anxiety to the investor desirous of simplicity in

terms of transactions in dematerialized securities.

Besides the above mentioned disadvantages, some other problems with the system have

been discovered subsequently. With new regulations people are finding more and more

loopholes in the system. Some examples of the malpractices and fraudulent activities that

take place are:

Current regulations prohibit multiple bids or applications by a single person. But

investors open multiple demat accounts and make multiple applications to subscribe to

IPOs in the hope of getting allotment of shares.
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Some listed companies had obtained duplicate shares after the originals were pledged

with banks and then sold the duplicates in the secondary market to make a profit.

Promoters of some companies dematerialised shares in excess of the companys issued

capital.

Certain investors pledged shares with banks and got the same shares reissued as

duplicates.

There is an undue delay in the settlement of complaints by investors against depository

participants. This is because there is no single body that is in charge of ensuring full

compliance by these companies.

At present there are two depositories in India, National Securities Depository Limited

(NSDL) and Central Depository Services (CDS). NSDL is the first Indian depository, it wasinaugurated in November 1996. NSDL was set up with an initial capital of US$28mn,

promoted by Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) and

National Stock Exchange of India Ltd. (NSE). Later, State Bank of India (SBI) also became a

shareholder.

The other depository is Central Depository Services (CDS). It is still in the process of linking

with the stock exchanges. It has registered around 20 DPs and has signed up with 40

companies. It had received a certificate of commencement of business from SEBI on February

8, 1999. These depositories have appointed different Depository Participants (DP) for them. An

investor can open an account with any of the depositories DP. But transfers arising out of

trades on the stock exchanges can take place only amongst account-holders with NSDLs DPs.

This is because only NSDL is linked to the stock exchanges (nine of them including the main

ones-National Stock