stock+exchange1 in india

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ndian Stock Exchangesnd how their indicesre calculated

:y ( )ITU GOSWAMI 08FN083( )OVIN GUPTA 08FN086( )ANDESH PAHUJA O8FN087


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What is a Stock Exchange?

Stock exchange is that placewhere trading of shares is done

.in terms of sale and purchase
http://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpghttp://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpg


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NDIAN STOCK EXCHANGESND THEIR INDICES


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here are 23 stockxchanges in the.ndia Mumbai's( arlier known as),ombay Bombay Stockxchange is the,argest with over, .000 stocks listedhe BSE accounts forver two thirds ofhe total trading.olume in the country

,stablished in 1875he exchange is also.he oldest in Asia-mong the twenty twotock Exchangesecognized by theovernment of Indiander the Securities

:BSE The Bombay StockExchange
http://en.wikipedia.org/wiki/Image:Bombay-Stock-Exchange.jpg


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Scrip s at BSE

ACC AIRTEL BHEL DLF GRASIM UJRAT AMBUJA HDFC DFC BANK HINDALCO HUL CICI BANK INFOSYS .UN Pharma IND LTD ITC &T

MARUTI &AHINDRA MAHIND NTPC ONGC RANBAXY ELIANCECOMMUNICATION ELIANCEINFRASTRUCTURE RIL TERLITE INDUSTIELTD SBI TCS ATA MOTERS ATA STEEL ATA POWER COMPAN

LTD WIPRO


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:SE National StockExchange he National Stock( ),xchange NSE located,n Bombay is India's.irst debt market Itas set up in 1993 toncourage stockxchange reform throughystem modernization.nd competition Itpened for trading in

- .id 1994 It wasecently accordedecognition as a stockxchange by theepartment of Company.ffairs The,nstruments traded are


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: &ndices SENSEX NIFTY Stock Market performance is

quantified by calculating an index

using the benchmark scrip s and as

(known to all SENSEX Sensitive)Index is associated with Bombay

&Stock Exchange and S P CNX NIFTY is

associated with National Stock

Exchange


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OW ARE INDICES OF SENSEXND NIFTY CALCULATED???


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ow are the SENSEX 30tocks are selected? Listing History

Trading Frequency (Rank based on the Market Cap Should be

)Among top 100 Market Capitalization weight /Industry sector they belong

Historical Record


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SENSEX SENSEX has been calculated since 1986

and initially it was calculatedbased on the Total Market

Capitalization methodology and themethodology was changed in 2003 to.Free Float Market Capitalization

, ,Hence these days the SENSEX is based

on the Free Floating Market cap of

30 SENSEX Stocks traded on the BSErelative to the base value which is

( - )100 1978 79 and it is calculatedfor every 15 seconds.


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ree Float MarketCapitalization??

The value of all the sharesavailable for public trading

,excluding the promoter equity,holdings through FDI Route,Holdings by private corporate

and holdings by Employee Welfare

.Funds


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hy Free Flow Market Cap?.1 It depicts the market more rationally.2 It removes undue influence of government

,or promoter share holding there by

giving the equal opportunity forcompanies to be in the SENSEX.3 Almost all the Indices world over are

calculated by this methodology

.4 It gives Fund managers more authentic.information for benchmark comparisons


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ENSEX CALCULATIONMETHODOLOGY


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" -ENSEX is calculated using the Free"loat Market Capitalization, ,ethodology wherein the level ofndex at any point of time reflects-he free float market

t reflects value of 30 component .tocks relative to a base period

he market capitalization of aompany is determined byultiplying the price of its stocky the number of shares issued by.he company

his market capitalization is further


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-he base period of SENSEX is 1978 79 and.he base value is 100 index points( - = ).otation 1978 79 100

he calculation of SENSEX involves dividing-he free float market capitalization of0 companies in the Index by a number.alled the Index Divisor

he Divisor is the only link to the.riginal base period value of the SENSEXt keeps the Index comparable over timend is the adjustment point for all Indexdjustments arising out of corporate, .ctions replacement of scrip s etc

,uring market hours prices of the index,crip's at which latest trades are


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ow SENSEX iscalculated? he formula for calculating the= (ENSEX Sum of free flow market)*ap of 30 benchmark stocks IndexFactor ,here

= /ndex Factor 100 Market Cap- .alue in 1978 79 -00 is the Index value during 1978.9


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:xample ssume SENSEX has only 2 stocks.amely SBI and RELIANCE Total sharesn SBI are 500 out of which 200 areeld by Government and only 300 are.vailable for public tradingELIANCE has 1000 shares out ofhich 500 are held by promoters and.00 are available for trading Assume

.rice of SBI Stock is Rs 100 and. . " -eliance is Rs 200 Then free"loating Market Cap of these 2=ompanies


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( * + * ) = +00 100 500 200 30000 100000= .s 130000ssume Market Cap during the year- .978 79 was Rs 25000 = * / = .hen SENSEX 130000 100 25000 520he methodology in the example isxactly followed to calculate the,ENSEX only difference being the.nclusion of 30 stocks


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ndex Closure Algorithm he closing SENSEX on any trading day isomputed taking the weighted average ofll the trades on SENSEX constituents in.he last 30 minutes of trading session

f a SENSEX constituent has not traded in,he last 30 minutes the last traded prices taken for computation of the Index.losure

f a SENSEX constituent has not traded at,ll in a day then its last day's closingrice is taken for computation of Index.losure


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NIFTY ( )he National Stock Exchange NSEs associated with NIFTY and it is

lso calculated by the sameethodology but with two key.ifferences . Base year is 1995 and base

.alue is 1000 . NIFTY is calculated based on 50.tocks verything else remains the same in.IFTY Index calculation as well


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enefits of Stockxchanges to Community . It assist the economiesevelopment by providing a body of.nterested investors . It uploads the position of superiornterprises and assist them in.aising further funds . It encourages capital formation . Government can undertake projectsf national importance and social

alue raising funds through the salef its securities on the stock.xchange . It is the stock exchanges thatentral bank of a country can control

redit by undertaking open marketerations urchase and sale of


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enefits to Investor . Liquidity of the investment isincreased . The securities dealt on a stockxchange are good collateral.ecurity for loans . The stock exchange safeguardsnterests of investors throughtrict enforcement of rules and

.egulations . The present net worth ofnvestments can be easily known by.he daily quotations . The risk is considerably less


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enefits to the company. company whose shares quoted ontock exchange they enjoy better.eputation and credit. he market for the shares of such a

.ompany is naturally widened . The market price of securities isikely to be higher in relation to,ts earnings dividends and property

.alues This raises the bargainingower of the company in the event of, .takeover merger or amalgamation


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,DJUSTMENTS FOR BONUSIGHTS AND NEWLY ISSUEDCAPITAL


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,djustment for Bonusights and Newly IssuedCapital ENSEX calculation needs to be adjusted,or issue of Bonus or Rights shares,f no adjustments are made a

iscontinuity would arise between theurrent value of the index and its-revious value despite the nonccurrence of any economic activityf substance

,t the BSE Index Cell the base value,s adjusted which is used to alterarket capitalization of theomponent stocks to arrive at the


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djustments for Rights Issues

,hen a company included in the,ompilation of the index issues right, -hares the free float marketapitalization of that company isncreased by the number of additionalhares issued based on the theoretical

.rice n offsetting or proportionatedjustment is then made to the Base(arket capitalization see 'Basearket capitalization Adjustment'


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djustments for Bonus Issue ,hen a company included in the,ompilation of the index issues,onus shares the marketapitalization of that company does

. ,ot undergo any change Thereforehere is no change in the Base,arket capitalization only thenumber of shares' in the formula is.pdated

ther Issues ase Market capitalization adjustments required when new shares aressued by way of conversion of


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ase Market capitalizationdjustment he formula for adjusting the Base Market:apitalization is as follows

,o illustrate suppose a company issuesight shares which increases the marketapitalization of the shares of that, . .ompany by say Rs 100 crores Thexisting Base Market capitalization( ), ,ld Base Market capitalization say is.s 2450 crores and the aggregate marketapitalization of all the shares

. .w Base Mkt cap= . .ld Base Mkt cap x ew Market capitalization-------------------------------ld Market capitalization


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( + )450 x 4781 100 --------------------------= . .s 2501 24crores 4781

. .his figure of Rs 2501 24 crore will besed as the Base Market capitalizationor calculating the index number fromhen onwards till the next base change.ecomes necessary


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HANK YOU

stock+exchange1 in india

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