suresh rathi

AN

PROJECT REPORT

ON

SECURITIES MARKET AND MUTUAL FUND

Submitted in the partial fulfillment of PGDSAPM

Session 2009-2010

JAI NARAIN VYAS UNIVERSITY

Project Submitted To: Submitted By: Abhishek Agarwal

CONTENTS

Executive Summary

Company- Profile

Money Market

Capital Market

Financial Market

Stock Market

Stock Exchange

General Information- BSE

Equity market declines increase risk to insurers capital reserve

NSE (National Stock Exchange)

Securities Exchange Board of India

References & Bibliography

EXECUTIVE SUMMARY:-

Suresh Rathi is a Company includes the fields like Mutual Funds, Derivatives, Equities, IPO, Depository, Insurance etc. the stock market also takes place to carry out the functions of BSE and the functions of NSE i.e. Bombay Stock Exchange and National Stock Exchange for trading of shares by investors in the company.

The Main Branch of Suresh Rathi is at 9th Pal Road, Behind HDFC Bank in Jodhpur. Although it has many branches in Jodhpur. Suresh Rathi opens demat accounts through CDS (Central Depository Services) and also by NDS (National Depository Services) of various potential customers.

Suresh Rathi has various objectives by which it can attract various investors in the city and formats the Daily Sales Report. It is also covered through various competitors like Reliance Power, Indiabulls etc. Suresh Rathi is basically a part of Stock Market where all its transactions are being carried out with proper efforts which is performed by the persons working in the company.

SECURITIES MARKET AND MUTUAL FUNDS

Introduction:-

M/s Suresh Rathi Pvt. Ltd. is a Member of Stock Exchange Mumbai and was incorporated on June 19, 1997 and it commenced business on December 29, 1997. Earlier Stock Broking Business was done in the name of our erstwhile firm M/s Suresh R & Co. since 1989.

The company is in business of Stock Broking and allied activities and is providing services like Equity Broking, Investor Guidance & Education, and Mutual Fund & IPO distribution.

The company is a Depository Participant of Central Depository Services Ltd, since June 1999 with a DP branch at Jodhpur & 6 other cities. CDSL’s ‘easiest’ facility has been recently provided to facilitate the instructions through internet.

The company is also a Member of National Stock Exchange of India. It is also a trading member in the Futures & Options Segment of NSE and Derivatives Segment of BSE. Internet trading facility has also been made available for investors on BSE. Needless to mention, our entire back- office operations are fully computerized, giving us that technological edge to service the clients effectively.

The company has Network of around 50 Business Associates all over Rajasthan and Mumbai. The company has experienced and professional personnel managing effective risk control and operations.

How to choose a broker?

The easiest way to go broke on the stock market is to sign on a bad broker. We need to have a good equation not just with money but with a reliable stockbroker as well. Reliable brokers are thin on the ground, and regulatory authorities aren’t much help either. What can an investor do? Check out the following to start with:

Registered brokers: Investors should try and transact business only with member brokers for sub-brokers registered with Sebi, or directly with stock exchange members. However there are very few of them. Even when dealing with a registered broker, insist on a control note.

Retail focus: Most good brokers would rather have corporate clients than retail investors, as retail traders are smaller and the broker has to trade more often to generate the same turnover. Despite this, there are several brokers who specialize in the retail business.

References: Check the broker’s reputation. Is he a known speculator? Can he back his advice with substantial market information? Does he provide quick trades and settlement? Can he help us with share transfers, usually at 0.5 per cent of the transaction value? Check his staff’s experience in the business. Ask for specific investment advice and cross-check it with other brokers.

Deposits: Inform our broker at the outset whether you’re interested in trading shares or in long-term investments. Depending on how risky our investments in trading shares or in long-term investments. Depending on how risky our investments are, the broker could ask us to prescribe by Sebi, the amount varies among brokers. For high-risk speculative clients, this factor could affect liquidity.

Brokerage charges: Brokers charge a commission for every transaction. Shop around for the best deal on brokerage rates. Stock brokers charge up to 2.5 per cent brokerage but rates can vary depending on the broker, the client and the deal. Brokers charge more for small trades.

Broker-client pact: A broker- client agreement has to be signed as per Sebi regulations. This is a legal understanding between both parties to take all transactions to completion. If our broker does not insist on this agreement, we should.

The seven deadly sins

Recommendations based on ‘inside information’, ‘prospective merges or acquisitions’, or ‘a dynamic new product’.

Promises of spectacular profit (“our money will double in six months”).

‘Guarantees’ that we will not lose money in a particular transaction.

Excessive transactions. The broker gets several commissions, but our investment opportunities may not improve.

Inducements to dramatically change our investment strategy, such as moving from low-risk investments to speculative securities.

Pressure to trade in a manner inconsistent with our goals and the risks we can afford to take.

Significant differences between the market price and the price we pay.

INVESTING IN IPO

What is an IPO?

IPO is an acronym for Initial Public Offering. This is the first sale of stock by a company to the public. A company can raise money by issuing either debt (bonds) or equity. If the company has never issued equity to the public, it’s known as an IPO.

What is book building?

Securities and Exchange Board of India (SEBI) guidelines define book building as “a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built-up and the price for such securities is assessed for the determination of the quantum of such securities to be issued by means of a notice, circular, advertisement, document or information memoranda or offer document.”

Book building is basically a process used in Public Issue for efficient price discovery. It is a mechanism where, during the period for which the Public Issues is open, bids are collected from investors at various prices within a Price Band. The offer price is determined after the bid closing date.

Do all the IPOs have to be through book building process?

No, depending upon the issuer company, certain IPOs are offered at Fixed Price also.

What is the number of days for which bid remains open in book building?

Book remains open for a minimum five days in the book building process.

What are floor and ceiling prices in book building?

When a company offers shares to the public through the book building process, it fixes a price band, which sets the minimum and maximum price limits at which the bids can be made by the investors for acquiring the shares of the company. While the floor price symbolizes the minimum price at which the investor can make bids.

What is ‘Cut-Off’ price?

The Cut-Off option is an option given only to the Retail Individual Bidders indicating their agreement to bid and purchase at the final Issue Price as determined at the end of the Book Building Process.

Is it possible to enter bids less or more than the floor rice and ceiling price respectively?

No, because the system tends to automatically reject the bids, which are lower than the floor price and more then the ceiling price.

Futures and options:-

Futures contracts are purchased when the investor expects the price of the underlying security to rise. This is known as going long. Because he has purchased the obligation to buy goods at the current price, the holder will profit if the price goes up, allowing him to sell his futures contract for a profit or take delivery of the goods on the future date at the lower price.

The opposite of going long is going short. In this case, the holder acquires the obligation to sell the underlying commodity at the current price. He will profit if the price declines before the future date.

Hedgers trade futures for the purpose of keeping price risk in check. Because the price for a future transaction can be set in the present, the fluctuations in the interim can be avoided. If the price goes up, the holder will be buying at a discount. If the price goes down, he will miss out on the new lower price. Hedging with futures can even be used to protect against unfavorable interest rate adjustments.

While hedgers attempt to avoid risk, speculators seek it out in the hope of turning a profit when prices fluctuate. Speculators trade purely for the purpose of making a profit and never intend to take delivery on goods. Like options, futures contracts can also be used to create spread that profit from price fluctuations.

Accounts used to trade futures must be settled with respect to the margin on a daily basis. Gains and losses are tallied on the day that they occur. Margin accounts that fall below a certain level must be credited with additional funds.

A Call option is an option to buy a stock at a specific price on or before a certain date. In this way, Call options are like security deposits.

If, for example, we wanted to rent a certain property, and left a security deposit for it, the money would be used to insure that we could, in fact, rent property at the price agreed upon when we returned.

If we never turned, we would give up our security deposit, but we would have no other liability. Call options usually increase in value as the value of the underlying instrument increases.

When we buy a Call option, the price we pay for it, called the option premium, secures our right to buy that certain stock at a specified price, called the strike price. If we decide not to use the option to buy the stock, and we are not obligated to, our only cost is the option premium.

Put options are options to sell a stock at a specific price on or before a certain date. In this way, Put options are like insurance policies.

If we buy a new car, and then buy auto insurance on the car, we pay a premium and are, hence, protected if the asset is damaged is an accident. If this happens, we can use our policy to regain the insured value of the car. In this way, the put option gains in value as the value of the underlying instrument decreases.

If all goes well and the insurance is not needed, the insurance company keeps our premium in return for taking on the risk.

With a Put option, we can “insure” a stock by fixing a selling price. If something happens which causes the stock price to fall, and thus, “damages” our asset, we can exercise our option and sell it as its “insured” price level.

If the price of our stock goes up, and there is no “damage”, then we do not need to use the insurance, and, once again, our only cost is the premium.

ASSET ALLOCATION:-

With literally thousands of stocks, bonds and mutual funds to choose from, picking the right investments solution could confuse even the most seasoned investor. However, starting to build a portfolio with stock picking may be the wrong approach. Instead, one may concentrate on deciding the mix of stocks, bonds and mutual funds we may want to hold this is referred to as our “asset allocation”.

Asset allocation is an investment portfolio technique that aims to balance risk and create diversification by dividing assets among major categories such as cash, bonds, stocks, mutual funds, real estate and insurance. Each asset class has different levels of return and risk, so each will behave differently over time. Our selection of stocks or bonds is secondary to the way we allocate our asset to high and low-risk stocks, to short and long-term bonds, mutual funds and to cash on the sidelines.

We must emphasize that there is no simple formula that can find the right asset allocation for every individual. We can, however, outline some points for a 30 year old executive that we feel are important when thinking about asset allocation.

The risk-return tradeoff is at the core of what asset allocation is all about. Simply choosing the assets with the highest “potential” (stocks & derivatives) isn’t the answer as the risks that come with it can erode all our gains within no time if the markets crash. For a 30 year old executive, the risk appetite can be substantially higher when compared to a 60 year old retiree.

Hence more money can be allocated to high risk- high return assets. All our long-term & short-term goals should be considered in our asset allocation plan. For example, if you are planning to own a home at 35, we can invest in stocks & give 5 years to our investments and need not worry about short-term fluctuations in the stock market.

To begin with, one must have enough insurance cover. Typically, around 10-12 times the annual expenses should suffice. These can be “pure risk” or term insurance plans. At 30, our risk taking ability & investment horizon is fairly long; hence, we can invest a substantial portion of our money in stocks and keep a small portion in bonds or cash. Investing in stocks or bonds directly needs high levels of understanding & a lot of time to manage the investments.

There is no one standardized solution for allocating our assets. Individual investors require individual solutions. Furthermore, if a long- term horizon is something we don’t have, don’t worry. It’s never too late to get started. It’s also never too late to give our existing portfolio a facelift: asset allocation is not a one-time event; it’s a life-long process of progression and fine-tuning.

COMPANY PROFILE: -

Suresh R Group has a track record of more than 26 years in Service to the investors. During these years it has acquired membership of BSE, NSE, MCX, NCDEX, NSE F&O and NSE Currency Derivatives. It is a Depository Participant of CDSL. It is also active in Insurance, Mutual Fund and IPO distribution. The main functions which are performed by the company are as follows:-

EQUITIES:-

The Indian stock market has finally come of age. Riding each successive wave and trough is Suresh R Securities, one of the fastest growing domestic brokerage houses

in the country today. SRSPL (Suresh Rathi Private limited company) has already managed to carve a niche for itself, and it’s easy to see why.

With over 125 Locations in more than 45 cities, It offers us ease and convenience in opening Equities account with us. State-of-the-art dealing infrastructure geared to rigorous compliance and audit checks, integrity aligned with professionalism, a complete understanding of each client’s psyche to ensure the most suitable advice, insightful and in-depth research. These are only some of the key drivers that have fuelled our fast-paced growth.

We have provided facility of Online Back Office for your access. You can view your ledgers, contract notes and other financial information through our website. Known for its Ethical Business Practices, We at Suresh R keep an edge with the technology. To enhance investor knowledge, we keep sending Daily Notes and Weekly Notes to our clientele. We also offer online internet trading facility.

DERIVA TIVES:-

Derivatives instrument provide good leverage opportunity, it is a great tool for speculation. Leverage is a double edge sword for which one requires an equity advisor .Our equity advisor will help to maximize our gains from our existing corpus. Our advisors will also help us with various strategies like Bull Spread, Bear Spread, Cover call writing, hedging strategies etc. This is to help us to make better trading returns. This allows us to give us a convenient single window service and our advisor becomes the single point contact for all our equity related matters.

Through Suresh R, we can now trade in index and stock futures on the NSE. In futures trading, we take buy/sell positions in index or stock contracts having a longer contract period of up to 3 months. Presently only selected stocks, which meet the criteria on liquidity and volume, have been enabled for futures trading.

Investors often use them as a risk management tool to protect the value of their portfolio from adverse market movements. Derivatives can be an important tool, even for the most conservative investor. For the mature investor, who is aware of risks in the market, the strategies are many.

Derivatives trading solutions, including options and futures, offer the potential to profit from our view of future price fluctuations (both rises and falls) without holding actual shares or assets. Derivatives lets us trade in a large quantity of stocks or Indices, for a small margin.

COMMODITIES:-

Just like Equities - Commodities may also offer good returns in Trading. Indian markets have recently thrown open a new avenue for retail investors and traders to participate: commodity derivatives. For those who want to diversify their portfolios beyond shares, bonds and real estate, a commodity is one of the best options.

Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Commodities are easy to understand and are based on the fundamentals of demand and supply. Historically, prices in commodities futures have been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option the commodities asset class has experienced strong growth in recent years. The low correlation to financial assets, equity-type returns and risk characteristics offered by commodities offer investors a means to diversify their portfolios.

Our endeavor is to reach to the producers, end-users, and even the retail investors, at a grassroots level. Education and awareness has a key role to play in achieving this vision.

Suresh R offers futures trading through "Suresh R Commodities (P) Ltd.". We have membership with two of the major Commodity exchanges of the country.

· Multi Commodity Exchange of India Ltd, Mumbai (MCX) · National Commodity and Derivative Exchange, Mumbai (NCDEX)

DEPOSITORY

Registered with Central Depository Service (India) Ltd (CDSL), the depository arm of Suresh R offers various Depository Services to its clients. State of the art technology ensures that our Depository is always convenient, dependable, and secure for any entity involved with the

depository.

Our customer-centric account schemes have been designed keeping in mind the investment psyche of our clients. Our DP account with us takes care of our Depository needs like dematerialization, rematerialization and pledging of shares.

Clients are also offered with ‘easi’ which allows them to access the demat account through internet. Information regarding recent transactions, holdings (with current value) is also available through ‘easi’.

SMS alert facility ‘SMART’ is also available wherein the client can received the SMS for IPO shares credit and other debit entries in his demat account.

MUTUAL FUND

Suresh R offers personalized mutual fund investment advice tailored to our investment needs through a disciplined investment process. It provides in-depth research to help us to meet our financial goals. It takes care of the most important task of selecting the best options out of whole bunch of mutual fund schemes for the safety and growth of our hard earned money.

We not only get unbiased investment advice, but we also make sure that we receive our dividends and account statements on time, give an update on our portfolio and advise us if.

MONEY MARKET:-

In finance, the money market is the global financial market for short-term borrowing and lending. It provides short-term liquidity funding for the global financial system. The money market is where short-term obligations such as Treasury bills, commercial paper and bankers' acceptances are bought and sold.

The money market consists of financial institutions and dealers in money or credit who wish to either borrow or lend. Participants borrow and lend for short periods of time, typically up to thirteen months. Money market trades in short-term financial instruments commonly called "paper." This contrasts with the capital market for longer-term funding, which is supplied by bonds and equity.

The core of the money market consists of banks borrowing and lending to each other, using commercial paper, repurchase agreements and similar instruments. These instruments are often benchmarked (to i.e. priced by reference to) the London Interbank Offered Rate (LIBOR) for the appropriate term and currency.

Finance companies, such as GMAC, typically fund themselves by issuing large amounts of asset-backed commercial paper (ABCP) which is secured by the pledge of eligible assets into an ABCP conduit. Examples of eligible assets include auto loans, credit card receivables, residential/commercial mortgage loans, mortgage-backed securities and similar financial assets. Certain large corporations with strong credit ratings, such as General Electric, issue commercial paper on their own credit. Other large corporations arrange for banks to issue commercial paper on their behalf via commercial paper lines.

We have a dedicated team looking into the Mutual Fund product analysis and we use sophisticated tools to provide reports to clients.

Mutual Fund Desk offers following services to the clients. 1. NFO Reports and Recommendation 2. Investment Planning 3. Existing Portfolio Restructuring 4. Investment Monitoring 5. Weekly Statement on Portfolio Performance

In the United States, federal, state and local governments all issue paper to meet funding needs. States and local governments issue municipal paper, while the US Treasury issues Treasury bills to fund the US public debt.

Trading companies often purchase bankers' acceptances to be tendered for payment to overseas suppliers.

Arbitrage ABCP conduits, which seek to buy higher yielding paper, while themselves selling cheaper paper.

Common money market instruments:-

Bankers' acceptance - A draft issued by a bank that will be accepted for payment, effectively the same as a cashier's check.

Certificate of deposit - A time deposit at a bank with a specific maturity date; large-denomination certificates of deposits can be sold before maturity.

Repurchase agreements - Short-term loans—normally for less than two weeks and frequently for one day—arranged by selling securities to an investor with an agreement to repurchase them at a fixed price on a fixed date.

Commercial paper - Unsecured promissory notes with a fixed maturity of one to 270 days; usually sold at a discount from face value.

Eurodollar deposit - Deposits made in U.S. dollars at a bank or bank branch located outside the United States.

Federal Agency Short-Term Securities - (in the U.S.). Short-term securities issued by government sponsored enterprises such as the Farm Credit System, the Federal Home Loan Banks and the Federal National Mortgage Association.

Federal funds - (in the U.S.). Interest-bearing deposits held by banks and other depository institutions at the Federal Reserve; these are immediately available funds that institutions borrow or lend, usually on an overnight basis. They are lent for the federal funds rate.

Municipal notes - (in the U.S.). Short-term notes issued by municipalities in anticipation of tax receipts or other revenues.

Treasury bills - Short-term debt obligations of a national government that are issued to mature in three to twelve months. For the U.S., see Treasury bills.

Money market mutual funds - Pooled short maturity, high quality investments which buy money market securities on behalf of retail or institutional investors.

Foreign Exchange Swaps - Exchanging a set of currencies in spot date and the reversal of the exchange of currencies at a predetermined time in the future.

India Money Market:-

The money market is a mechanism that deals with the lending and borrowing of short term funds. The India Money Market has come of age in the past two decades. In order to study the money market of India in detail, we at first need to understand the parameters around which the money market in India revolves.

The performance of the Indian Money Market is heavily dependent on real interest rate that is the interest rate that is inflation adjusted. Though the money market is free from interest rate ceilings, structural barriers and other institutional factors can be held responsible for creating distortions in India Money Market. Apart from the call market rates, the other interest rates in the Indian Money Market usually do not change in the short run.

It is due to this disparity between the opposite forces that is prevalent in the money market in India that a well defined income path cannot be traced.

Owing to the deregulation of the interest rate in the early nineties following the economic reforms laid down by the then finance minister Dr. Manmohan Singh, studies concerning the behavior of interest rate were restricted. However the liquidity of the market makes it’s a good subject for empirical research.

The Indian Money Market involves a wide range of instruments. Here, maturities range from one day to a year, issued by banks and corporate of various sizes. The money market is also closely linked with the Foreign Exchange Market through the process of covered interest arbitrage in which the forward premium acts as a bridge between domestic and foreign interest rates.

To analyze the interest rates that characterize the Indian Money Market, the following elements need to be covered:

1. The term structure of interest rate.

2. The difference between domestic and international interest rates

3. The market structure differences between the auction markets that clear continuously and the customer markets.

4. The distortion in the Indian Money Market.

Market capitalization:-

Market capitalization/capitalisation (aka market cap, mkt cap or capitalized/capitalised value) is a measurement of corporate or economic size equal to the share price times the number of shares outstanding of a public company. As owning stock represents owning the company, including all its assets, capitalization could represent the public opinion of a company's net worth and is a determining factor in stock valuation. Likewise, the capitalization of stock markets or economic regions may be compared to other economic indicators. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007[1] and rose as high as US$57.5 trillion in May 2008[2] before dropping below US$50 trillion in August 2008 and slightly above US$40 trillion in September 2008.[2]

Valuation

Stock market capitalization in 2005

Market capitalization represents the public consensus on the value of a company's equity. A corporation, including all of its assets, may be freely bought and sold through purchases and sales of stock, which will determine the price of the company's shares. Its market capitalization is this share price multiplied by the number of shares in issue, providing a total value for the company's shares and thus for the company as a whole.

Many companies have a dominant shareholder, which may be a government entity, a family, or another corporation. Many stock market indices such as the S&P 500, Sensex, FTSE, DAX, Nikkei, Ibovespa, and MSCI adjust for these by calculating on a "free float" basis, i.e. the market capitalization they use is the value of the publicly tradable part of the company.

Note that market capitalization is a market estimate of a company's value, based on perceived future prospects, economic and monetary conditions. Stock prices can also

be moved by speculation about changes in expectations about profits or about mergers and acquisitions.

It is possible for stock markets to get caught up in an economic bubble, like the steep rise in valuation of technology stocks in the late 1990s followed by the dot-com crash in 2000. Speculation can affect any asset class, such as gold or real estate. In such events, valuations rise disproportionately to what many people would consider the fundamental value of the assets in question. In the case of stocks, this pushes up market capitalization in what might be called an "artificial" manner. Market capitalization is therefore only a rough measure of the true size of a market.

Categorization of companies by capitalization:-

Traditionally, companies are divided into large-cap, mid-cap, and small-cap. People have rules of thumb to determine category from market capitalization. These need to be adjusted over time due to inflation, population change, and overall market valuation (for example, $1 billion was a large market cap in 1950 but is now not very large), and they may be different for different countries. A common rule of thumb may look like:

Large-cap: over $5 billion

Mid-cap: from $1 billion to $5 billion

Small-cap: under $1 billion

Different numbers are used by different indexes; there is no official definition of or general agreement about the exact cutoffs.

Capital market:-

The capital market is the market for securities, where companies and governments can raise long-term funds. The capital market includes the stock market and the bond market. Financial regulators, such as the U.S. Securities and Exchange Commission, 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 (underwritten) 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. - New York Stock Exchange).

Definitions of Capital market on the Web:

The capital market is the market for securities, where companies and governments can raise long-term funds. ...

The market in which corporate equity and longer-term debt securities (those maturing in more than one year) are issued and traded.

Includes all financial transactions between users of funds and suppliers of funds.

The market for long- and medium-term financing, i.e. more than a year.

SECTORS of Capital Market:-

The Capital Markets Committee has been set with the aim to ensure development of healthy and vibrant Indian Capital Market. This Committee has been interacting with SEBI at regular intervals to discuss and debate various rules and regulations introduced by SEBI from time to time. The committee organizes an annual Convention on Capital Markets viz. "CAPAM" which aims at analyzing the present condition of India's capital market in the Global setting and lays down a road map to improve its depth, reach and efficiency.

Financial market:-

In economics, a financial market is a mechanism that allows people to easily buy and sell (trade) financial securities (such as stocks and bonds), commodities (such as precious metals or agricultural goods), and other fungible items of value at low transaction costs and at prices that reflect the efficient-market hypothesis.

Financial markets have evolved significantly over several hundred years and are undergoing constant innovation to improve liquidity.

Both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded) exist. Markets work by placing many interested buyers and sellers in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate

resources is known as a market economy in contrast either to a command economy or to a non-market economy such as gift economy. In finance, financial markets facilitate –

The raising of capital (in the capital markets);

The transfer of risk (in the derivatives markets);

International trade (in the currency markets)

In economics, typically, the term market means the aggregate of possible buyers and sellers of a thing and the transactions between them.

The term "market" is sometimes used for what are more strictly exchanges, organizations that facilitate the trade in 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.

Trading of currencies and bonds is largely on a bilateral basis, although some bonds trade on a stock exchange, and people are building electronic systems for these as well, similar to stock exchanges.

The capital markets consist of primary markets and secondary markets. Newly formed (issued) securities are bought or sold in primary markets. Secondary markets allow investors to sell securities that they hold or buy existing securities.

Raising capital:-

Without financial markets, borrowers would have difficulty finding lenders themselves. Intermediaries such as banks help in this process. Banks 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. Banks popularly lend money in the form of loans and mortgages.

More complex transactions than a simple bank deposit require markets where lenders and their agents can meet borrowers and their agents, and where existing borrowing or lending commitments can be sold on to other parties. A good example of a financial market is a stock exchange. A company can raise money by selling shares to investors and its existing shares can be bought or sold.

Companies tend to be borrowers of capital. When companies have surplus cash that is not needed for a short period of time, they may seek to make money from their cash surplus by lending it via short term markets called money markets.

There are a few companies that have very strong cash flows. These companies tend to be lenders rather than borrowers. Such companies may decide to return cash to lenders (e.g. via a share buyback.) Alternatively, they may seek to make more money on their cash by lending it (e.g. investing in bonds and stocks.)

Borrowers

Individuals borrow money via bankers' loans for short term needs or longer term mortgages to help finance a house purchase.

Companies borrow money to aid short term or long term cash flows. They also borrow to fund modernization or future business expansion.

Governments often find their spending requirements exceed their tax revenues. To make up this difference, they need to borrow. Governments also borrow on behalf of nationalized industries, municipalities, local authorities and other public sector bodies. In the UK, the total borrowing requirement is often referred to as the Public sector net cash requirement (PSNCR).

Governments borrow by issuing bonds. In the UK, the government also borrows from individuals by offering bank accounts and Premium Bonds. Government debt seems to be permanent. Indeed the debt seemingly expands rather than being paid off. One strategy used by governments to reduce the value of the debt is to influence inflation.

Municipalities and local authorities may borrow in their own name as well as receiving funding from national governments. In the UK, this would cover an authority like Hampshire County Council. Public Corporations typically include nationalized industries. These may include the postal services, railway companies and utility companies.

Many borrowers have difficulty raising money locally. They need to borrow internationally with the aid of Foreign exchange markets.

Derivative products

During the 1980s and 1990s, a major growth sector in financial markets is the trade in so called derivative products, or derivatives for short.

In the financial markets, stock prices, bond prices, currency rates, interest rates and dividends go up and down, creating risk. Derivative products are financial products, which are used to control risk or paradoxically exploit risk. It is also called financial economics.

Currency markets

Seemingly, the most obvious buyers and sellers of foreign exchange are importers/exporters. While this may have been true in the distant past, whereby importers/exporters created the initial demand for currency markets, importers and exporters now represent only 1/32 of foreign exchange dealing, according to BIS.

Analysis of financial markets

Much effort has gone into the study of financial markets and how prices vary with time. Charles Dow, one of the founders of Dow Jones & Company and The Wall Street Journal, enunciated a set of ideas on the subject, which are now called Dow theory. This is the basis of the so-called technical analysis method of attempting to predict future changes. One of the tenets of "technical analysis" is that market trends give an indication of the future, at least in the short term. The claims of the technical analysts are disputed by many academics, which claim that the evidence points rather to the random walk hypothesis, which states that the next change is not, correlated to the last change.

The scale of changes in price over some unit of time is called the volatility. It was discovered by Benoît Mandelbrot that changes in prices do not follow a Gaussian distribution, but are rather modeled better by Lévy stable distributions. The scale of change, or volatility, depends on the length of the time unit to a power a bit more than 1/2. Large changes up or down are more likely than what one would calculate using a Gaussian distribution with an estimated standard deviation.

Financial markets in popular culture

Financial markets are merely tools. Like all tools they have both beneficial and harmful uses. Honest people use overall, financial markets. Otherwise, people would turn away from them en masse. As in other walks of life, the financial markets have their fair share of rogue elements.

INDIAN FINANCIAL MARKETING:-

India Financial Market promotes the savings of the economy, providing an effective channel for transmitting the financial policies. It is a well-developed, competitive, efficient and integrated financial sector. There is large number of buyers and sellers of the financial product, the prices are fixed by the market forces of demand and supply within the Indian Financial Market. The other markets of the economy assist the functioning of the financial market in India.

The Financial Market in India focuses on these features:

Real-time India Financial Indices – BSE 30 Index, Sector Indexes, Stock Quotes, Sensex Charts, Bond prices, Foreign Exchange, Rupee&Dollar Chart

Indian Financial Market news

Stock News – Bombay Stock Exchange, BSE Sensex 30 closing index, S&P CNX-Nifty NSE, stock quotes, company information, issues on market capitalization, corporate earnings statements, Indian Business directory.

Fixed Income – Corporate Bond Prices, Corporate Debt details, Debt trading activities, Interest Rates, Money Market, Government Securities, Public Sector Debt, External Debt Service

Foreign Investment – Foreign Debt Database composed by BIS, IMF, OECD,& World Bank, Investments in India & Abroad

Global Equity Indexes – Dow Jones Global indexes, Morgan Stanley Equity Indexes

Currency Indexes – FX & Gold Chart Plotter, J. P. Morgan Currency Indexes

National and Global Market Relations

Mutual Funds

Insurance

Loans

Forex and Bullion

A clear insight with information’s on the Indian Financial Market will thus be the most useful tip for the investors and the marketers of both India and the foreign countries.

FINANCIAL MARKET ANALYSIS:-

Financial Market Analysis deals with the performance of a particular financial market. The performance of a financial market depends upon the performance of the total number of securities that are traded in that market. On a given day when the market closes with the prices of most of its securities on the higher side, then it could be said to have performed well. This is reflected in a market indicator called Index which tracks the performance of some of the more popular and steady securities that are traded in that particular financial market.

Some of the most famous securities market indexes of the world are:

Footsie – London financial market

Dow Jones – New York financial market

Hang Seng – Hong Kong financial market

BSE Sensex – Mumbai financial market

Nikkei – Tokyo financial market

Nifty – Indian national financial market

The financial market index has become particularly important in today’s market economy, which is integrating very fast on a global scale. Traders do not confine trading in securities to just one or two markets in the country of their origin but invest in a large number of markets across the globe. With more and more investment companies developing global dimensions financial markets around the world are integrating on a scale never imagined before.

As a result, analysis of the financial markets has become one of the main activities covering a very large number of factors both within the market and outside it. For instance, when the government of the country where the market is located, announces a new policy measure aimed at deregulating a particularly stifling part of an industry segment, it may have a positive impact on the financial market. Financial market analysts cannot anticipate such factors and therefore the impact of these factors do not come under the main purview of financial market analysis. However, most analysts do

set aside some space for the impact of extraneous factors on the market and they do so in equal measure for both positive as well as negative factors.

Financial market analysis has become a highly specialized activity confined to select groups of experts known as technical analysts. In most cases they are professionally trained in financial analysis and are reasonably familiar with the tools used to analyze a particular market. In certain other cases they are economists or veteran investors with a special interest in financial market analysis and market economics. The numbers of factors that directly or indirectly impact the financial markets are increasing rapidly with more analysts digging deeper into the circumstances that influence financial market behavior. On the other hand, the integration of information technology in market analysis is increasingly meeting the challenge posed by the complexities of financial market analysis.

Some of the most important types of analysis affecting financial markets are:

Fundamental Analysis

Securities Market Analysis

Securities Market Technical Analysis

Index Momentum Analysis

Securities Momentum Analysis

Securities Chart Analysis

Market Analysis

Market Trend Indicators

STOCK MARKET:-

A stock market, or equity market, is a private or public market for the trading of company stock and derivatives of company stock at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

The size of the world stock market is estimated at about $36.6 trillion US at the beginning of October 2008. The world derivatives market has been estimated at about $480 trillion face or nominal value, 12 times the size of the entire world economy. The value of the derivatives market, because it is stated in terms of notional values, cannot be directly compared to a stock or a fixed income security, which traditionally refers to an actual value. Many such relatively illiquid securities are valued as marked to model, rather than an actual market price.

The stocks are listed and traded on stock exchanges which are entities a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together. The stock market in the United States includes the trading of all securities listed on the NYSE, the NASDAQ, the Amex, as well as on the many regional exchanges, e.g. OTCBB and Pink Sheets. European examples of stock exchanges include the London Stock Exchange, the Deutsche Börse and the Paris Bourse, now part of Euronext.

Trading: -

Participants in the stock market range from small individual stock investors to large hedge fund traders, who can be based anywhere. Their orders usually end up with a professional at a stock exchange, who executes the order.

Some exchanges are physical locations where transactions are carried out on a trading floor, by a method known as open outcry. This type of auction is used in stock exchanges and commodity exchanges where traders may enter "verbal" bids and offers simultaneously. The other type of stock exchange is a virtual kind, composed of a network of computers where trades are made electronically via traders.

Actual trades are based on an auction market paradigm where a potential buyer bids a specific price for a stock and a potential seller asks a specific price for the stock. (Buying or selling at market means you will accept any ask price or bid price for the stock, respectively.) When the bid and ask prices match, a sale takes place on a first come first served basis if there are multiple bidders or askers at a given price.

The purpose of a stock exchange is to facilitate the exchange of securities between buyers and sellers, thus providing a marketplace (virtual or real). The exchanges provide real-time trading information on the listed securities, facilitating price discovery.

New York Stock Exchange: -

The New York Stock Exchange is a physical exchange, also referred to as a listed exchange — only stocks listed with the exchange may be traded. Orders enter by way of exchange members and flow down to a floor broker, who goes to the floor trading post specialist for that stock to trade the order. The specialist's job is to match buy and sell orders using open outcry. If a spread exists, no trade immediately takes place--in this case the specialist should use his/her own resources (money or stock) to close the difference after his/her judged time. Once a trade has been made the details are reported on the "tape" and sent back to the brokerage firm, which then notifies the investor who placed the order. Although there is a significant amount of human contact in this process, computers play an important role, especially for so-called "program trading".

The NASDAQ is a virtual listed exchange, where all of the trading is done over a computer network. The process is similar to the New York Stock Exchange. However, buyers and sellers are electronically matched. One or more NASDAQ market makers will always provide a bid and ask price at which they will always purchase or sell 'their' stock.

The Paris Bourse, now part of Euronext, is an order-driven, electronic stock exchange. It was automated in the late 1980s. Prior to the 1980s, it consisted of an open outcry exchange. Stockbrokers met on the trading floor or the Palais Brongniart. In 1986, the CATS trading system was introduced, and the order matching process was fully automated.

From time to time, active trading (especially in large blocks of securities) has moved away from the 'active' exchanges. Securities firms, led by UBS AG, Goldman Sachs Group Inc. and Credit Suisse Group, already steer 12 percent of U.S. security trades away from the exchanges to their internal systems. That share probably will increase to 18 percent by 2010 as more investment banks bypass the NYSE and NASDAQ and pair buyers and sellers of securities themselves, according to data compiled by Boston-based Aite Group LLC, a brokerage-industry consultant.

Now that computers have eliminated the need for trading floors like the Big Board's, the balance of power in equity markets is shifting. By bringing more orders in-house, where clients can move big blocks of stock anonymously, brokers pay the exchanges less in fees and capture a bigger share of the $11 billion a year that institutional investors pay in trading commissions.

Market participants: -

Many years ago, worldwide, buyers and sellers were individual investors, such as wealthy businessmen, with long family histories (and emotional ties) to particular corporations. Over time, markets have become more "institutionalized"; buyers and sellers are largely institutions (e.g., pension funds, insurance companies, mutual funds, index funds, exchange traded funds, hedge funds, investor groups, banks and various other financial institutions). The rise of the institutional investor has brought with it some improvements in market operations. Thus, the government was responsible for "fixed" (and exorbitant) fees being markedly reduced for the 'small' investor, but only after the large institutions had managed to break the brokers' solid front on fees they then went to 'negotiated' fees, but only for large institutions.

However, corporate governance (at least in the West) has been very much adversely affected by the rise of (largely 'absentee') institutional 'owners'.

History: -

Historian Fernand Braudel suggests that in Cairo in the 11th century, Muslim and Jewish merchants had already set up every form of trade association and had knowledge of many methods of credit and payment, disproving the belief that Italians originally invented these later. In 12th century France the courratiers de change were concerned with managing and regulating the 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 [2]; 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 and neighboring 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 a share of their profits - or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds.

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 other speculative instruments, much as we know them" (Murray Sayle, "Japan Goes Dutch", London Review of Books XXIII.7, April 5, 2001). There are now stock markets in virtually every developed and most developing economies, with the world's biggest markets being in the United States, Canada, China (Hongkong), India, UK, Germany, France and Japan.

Importance of stock market :-

Function and purpose-

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.

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 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'être 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 those 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.

Relation of the stock market to the modern financial system:-

The financial system in most western countries has undergone a remarkable transformation. One feature of this development is disintermediation. A portion of the funds involved in saving and financing flows directly to the financial markets instead of being routed via the traditional bank lending and deposit operations. The general public's heightened interest in investing in the stock market, either directly or through mutual funds, has been an important component of this process. 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.

The stock market, individual investors, and financial risk:-

Riskier long-term saving requires that an individual possess the ability to manage the associated increased risks. Stock prices fluctuate widely, in marked contrast to the stability of (government insured) bank deposits or bonds. This is something that could affect not only the individual investor or household, but also the economy on a large scale. The following deals with some of the risks of the financial sector in general and the stock market in particular. This is certainly more important now that so many

newcomers have entered the stock market, or have acquired other 'risky' investments (such as 'investment' property, i.e., real estate and collectables).

With each passing year, the noise level in the stock market rises. Television commentators, financial writers, analysts, and market strategists are all overtaking each other to get investors' attention. At the same time, individual investors, immersed in chat rooms and message boards, are exchanging questionable and often misleading tips. Yet, despite all this available information, investors find it increasingly difficult to profit. Stock prices skyrocket with little reason, then plummet just as quickly, and people who have turned to investing for there children's education and their own retirement become frightened. Sometimes there appears to be no rhyme or reason to the market, only folly.

This is a quote from the preface to a published biography about the long-term value-oriented stock investor Warren Buffett. Buffett began his career with $100, and $105,000 from seven limited partners consisting of Buffett's family and friends. Over the years he has built himself a multi-billion-dollar fortune. The quote illustrates some of what has been happening in the stock market during the end of the 20th century and the beginning of the 21st century.

The behavior of the stock market: -

From experience we know that investors may temporarily pull financial prices away from their long-term trend level. Over-reactions may occur—so that excessive optimism (euphoria) may drive prices unduly high or excessive pessimism may drive prices unduly low. New theoretical and empirical arguments have been put forward against the notion that financial markets are efficient.

According to the efficient market hypothesis (EMH), only changes in fundamental factors, such as profits or dividends, ought to affect share prices. (But this largely theoretic academic viewpoint also predicts that little or no trading should take place—contrary to fact—since prices are already at or near equilibrium, having priced in all public knowledge.) But the efficient-market hypothesis is sorely tested by such events as the stock market crash in 1987, when the Dow Jones index plummeted 22.6 percent—the largest-ever one-day fall in the United States.

This event demonstrated that share prices can fall dramatically even though, to this day, it is impossible to fix a definite cause: a thorough search failed to detect any specific or unexpected development that might account for the crash. It also seems to be the case

more generally that many price movements are not occasioned by new information; a study of the fifty largest one-day share price movements in the United States in the post-war period confirms this.

Moreover, while the EMH predicts that all price movement (in the absence of change in fundamental information) is random (i.e., non-trending), many studies have shown a marked tendency for the stock market to trend over time periods of weeks or longer.

Various explanations for large price movements have been promulgated. For instance, some research has shown that changes in estimated risk, and the use of certain strategies, such as stop-loss limits and Value at Risk limits, theoretically could cause financial markets to overreact.

Other research has shown that psychological factors may result in exaggerated stock price movements. Psychological research has demonstrated that people are predisposed to 'seeing' patterns, and often will perceive a pattern in what is, in fact, just noise. (Something like seeing familiar shapes in clouds or ink blots.) In the present context this means that a succession of good news items about a company may lead investors to overreact positively (unjustifiably driving the price up). A period of good returns also boosts the investor's self-confidence, reducing his (psychological) risk threshold.

Another phenomenon—also from psychology—that works against an objective assessment is group thinking. As social animals, it is not easy to stick to an opinion that differs markedly from that of a majority of the group. An example with which one may be familiar is the reluctance to enter a restaurant that is empty; people generally prefer to have their opinion validated by those of others in the group.

In one paper the authors draw an analogy with gambling. In normal times the market behaves like a game of roulette; the probabilities are known and largely independent of the investment decisions of the different players. In times of market stress, however, the game becomes more like poker (herding behavior takes over). The players now must give heavy weight to the psychology of other investors and how they are likely to react psychologically.

The stock market, as any other business, is quite unforgiving of amateurs. Inexperienced investors rarely get the assistance and support they need. In the period running up to the recent Nasdaq crash, less than 1 percent of the analyst's recommendations had been to sell (and even during the 2000 - 2002 crash, the average did not rise above 5%).

The media amplified the general euphoria, with reports of rapidly rising share prices and the notion that large sums of money could be quickly earned in the so-called new economy stock market. (And later amplified the gloom, which descended during the 2000 - 2002 crash, so that by summer of 2002, predictions of a DOW average below 5000, was quite common).

Irrational behavior: -

Sometimes the market tends to react irrationally to economic news, even if that news has no real affect on the technical value of securities itself. Therefore, the stock market can be swayed tremendously in either direction by press releases, rumors, euphoria and mass panic.

Over the short-term, stocks and other securities can be battered or buoyed by any number of fast market-changing events, making the stock market difficult to predict. Emotions can drive prices up and down. People may not be as rational as they think. Behaviorists argue that investors often behave irrationally when making investment decisions thereby incorrectly pricing securities, which causes market inefficiencies, which, in turn, are opportunities to make money.

Crashes: -

Robert Shiller's plot of the S&P Composite Real Price Index, Earnings, Dividends, and Interest Rates, from Irrational Exuberance, 2d ed.[8] In the preface to this edition, Shiller warns, "The stock market has not come down to historical levels: the price-earnings ratio as I define it in this book is still, at this writing [2005], in the mid-20s, far higher than the historical average. . . . People still place too much confidence in the markets and have too strong a belief that paying attention to the gyrations in their investments will someday make them rich, and so they do not make conservative preparations for possible bad outcomes."

A stock market crash is often defined as a sharp dip in share prices of equities listed on the stock exchanges. In parallel with various economic factors, a reason for stock market crashes is also due to panic. Often, stock market crashes end speculative economic bubbles.

There have been famous stock market crashes that have ended in the loss of billions of dollars and wealth destruction on a massive scale. An increasing number of people are

involved in the stock market, especially since the social security and retirement plans are being increasingly privatized and linked to stocks and bonds and other elements of the market. There have been a number of famous stock market crashes like the Wall Street Crash of 1929, the stock market crash of 1973–4, the Black Monday of 1987, the Dot-com bubble of 2000.

One of the most famous stock market crashes started October 24, 1929 on Black Thursday. The Dow Jones Industrial lost 50% during this stock market crash. It was the beginning of the Great Depression. Another famous crash took place on October 19, 1987 – Black Monday. On Black Monday itself, the Dow Jones fell by 22.6% after completing a 5 year continuous rise in share prices. This event not only shook the USA, but quickly spread across the world. Thus, by the end of October, stock exchanges in Australia lost 41.8%, in Canada lost 22.5%, in Hong Kong lost 45.8%, and in Great Britain lost 26.4%. The names “Black Monday” and “Black Tuesday” are also used for October 28-29, 1929, which followed Terrible Thursday--the starting day of the stock market crash in 1929. The crash in 1987 raised some puzzles-–main news and events did not predict the catastrophe and visible reasons for the collapse were not identified.

This event raised questions about many important assumptions of modern economics, namely, the theory of rational human conduct, the theory of market equilibrium and the hypothesis of market efficiency. For some time after the crash, trading in stock exchanges worldwide was halted, since the exchange computers did not perform well owing to enormous quantity of trades being received at one time. This halt in trading allowed the Federal Reserve System and central banks of other countries to take measures to control the spreading of worldwide financial crisis.

In the United States the SEC introduced several new measures of control into the stock market in an attempt to prevent a re-occurrence of the events of Black Monday. Computer systems were upgraded in the stock exchanges to handle larger trading volumes in a more accurate and controlled manner. The SEC modified the margin requirements in an attempt to lower the volatility of common stocks, stock options and the futures market. The New York Stock Exchange and the Chicago Mercantile Exchange introduced the concept of a circuit breaker. The circuit breaker halts trading if the Dow declines a prescribed number of points for a prescribed amount of time.

Stock market index:-

The movements of the prices in a market or section of a market are captured in price indices called stock market indices, of which there are many, e.g., the S&P, the FTSE and the Euronext indices. Such indices are usually market capitalization weighted, with the weights reflecting the contribution of the stock to the index. The constituents of the

index are reviewed frequently to include/exclude stocks in order to reflect the changing business environment

Derivative instruments:-

Financial innovation has brought many new financial instruments whose pay-offs or values depend on the prices of stocks. Some examples are exchange-traded funds (ETFs), stock index and stock options, equity swaps, single-stock futures, and stock index futures. These last two may be traded on futures exchanges (which are distinct from stock exchanges—their history traces back to commodities futures exchanges), or traded over-the-counter. As all of these products are only derived from stocks, they are sometimes considered to be traded in a (hypothetical) derivatives market, rather than the (hypothetical) stock market.

Leveraged strategies:-

Stock that a trader does not actually own may be traded using short selling; margin buying may be used to purchase stock with borrowed funds; or, derivatives may be used to control large blocks of stocks for a much smaller amount of money than would be required by outright purchase or sale.

Short Selling:-

In short selling, the trader borrows stock (usually from his brokerage which holds its clients' shares or its own shares on account to lend to short sellers) then sells it on the market, hoping for the price to fall. The trader eventually buys back the stock, making money if the price fell in the meantime or losing money if it rose. Exiting a short position by buying back the stock is called "covering a short position." This strategy may also be used by unscrupulous traders to artificially lower the price of a stock. Hence most markets either prevent short selling or place restrictions on when and how a short sale can occur. The practice of naked shorting is illegal in most (but not all) stock markets.

Margin buying:-

In margin buying, the trader borrows money (at interest) to buy a stock and hopes for it to rise. Most industrialized countries have regulations that require that if the borrowing is based on collateral from other stocks the trader owns outright, it can be a maximum of a certain percentage of those other stocks' value. In the United States, the margin requirements have been 50% for many years (that is, if you want to make a $1000

investment, you need to put up $500, and there is often a maintenance margin below the $500).

A margin call is made if the total value of the investor's account cannot support the loss of the trade. (Upon a decline in the value of the margined securities additional funds may be required to maintain the account's equity, and with or without notice the margined security or any others within the account may be sold by the brokerage to protect its loan position. The investor is responsible for any shortfall following such forced sales.) Regulation of margin requirements (by the Federal Reserve) was implemented after the Crash of 1929. Before that, speculators typically only needed to put up as little as 10 percent (or even less) of the total investment represented by the stocks purchased. Other rules may include the prohibition of free-riding: putting in an order to buy stocks without paying initially (there is normally a three-day grace period for delivery of the stock), but then selling them (before the three-days are up) and using part of the proceeds to make the original payment (assuming that the value of the stocks has not declined in the interim).

New issuance:-

Global issuance of equity and equity-related instruments totaled $505 billion in 2004, a 29.8% increase over the $389 billion raised in 2003. Initial public offerings (IPOs) by US issuers increased 221% with 233 offerings that raised $45 billion, and IPOs in Europe, Middle East and Africa (EMEA) increased by 333%, from $ 9 billion to $39 billion.

Investment strategies:-

One of the many things people always want to know about the stock market is, "How do I make money investing?" There are many different approaches; two basic methods are classified as either fundamental analysis or technical analysis. Fundamental analysis refers to analyzing companies by their financial statements found in SEC Filings, business trends, general economic conditions, etc. Technical analysis studies price actions in markets through the use of charts and quantitative techniques to attempt to forecast price trends regardless of the company's financial prospects. One example of a technical strategy is the Trend following method, used by John W. Henry and Ed Seykota, which uses price patterns, utilizes strict money management and is also rooted in risk control and diversification.

Additionally, many choose to invest via the index method. In this method, one holds a weighted or unweighted portfolio consisting of the entire stock market or some segment

of the stock market (such as the S&P 500 or Wilshire 5000). The principal aim of this strategy is to maximize diversification, minimize taxes from too frequent trading, and ride the general trend of the stock market (which, in the U.S., has averaged nearly 10%/year, compounded annually, since World War II).

Taxation:-

According to much national or state legislation, a large array of fiscal obligations are taxed for capital gains. Taxes are charged by the state over the transactions, dividends and capital gains on the stock market, in particular in the stock exchanges. However, these fiscal obligations may vary from jurisdiction to jurisdiction because, among other reasons, it could be assumed that taxation is already incorporated into the stock price through the different taxes companies pay to the state, or that tax free stock market operations are useful to boost economic growth.

STOCK MARKET timing

More than any other factor, it is the primary, or underlying, direction of the stock market that will determine the success or failure of a trading position. A stock can have a fabulous story, great fundamentals, a good technical position, strong sponsorship and yet turn into a bad trade if you are going long and the market is headed down. The same is true of an undistinguished stock that just goes up because it is being carried along in a strong up market.

Stock Market Timing is a Stock Market direction system that forecasts the future short-term direction of the market. These direction forecasts are based upon the Weintraub Oscillator System, a proprietary computerized methodology developed by Victor Weintraub. The methodology is totally quantitative and no human judgment is involved in future market direction forecasts.

Indian Shares - Indian Stock Market Tips for BSE & NSE Stocks :-

About Today's Daily Indian Stock Market Report:-

Our India Stock Market Tips for both BSE Indian shares and NSE Indian Shares are selected by technical analysis programme, which scans both BSE, and NSE Indian Stock markets for the top performing Indian Shares. This daily Indian Share Market Investment Report is uploaded every day and is free, no registration is required.

Indian Stock market tips and performance analysis creates a short list of the best performing Indian stocks from the BSE and NSE Stock Exchanges for your information. A detailed analysis of the BSE Sensex Indian Share Index is also provided for investors. Daily stock tips info updates.

Stock exchange

A stock exchange, securities exchange or (in Europe) bourse is a corporation or mutual organization, which provides "trading" facilities for stockbrokers and traders, to trade stocks and other securities. Stock exchanges also provide facilities for the issue and redemption of securities as well as other financial instruments and capital events including the payment of income and dividends. The securities traded on a stock exchange include: shares issued by companies, unit trusts and other pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it has to be listed there. Usually there is a central location at least for recordkeeping, but trade is less and less linked to such a physical place, as modern markets are electronic networks, which gives them advantages of speed and cost of transactions. Trade on an exchange is by members only. The initial offering of stocks and bonds to investors is by definition done in the primary market and subsequent trading is done in the secondary market. A stock exchange is often the most important component of a stock market. Supply and demand in stock markets are driven by various factors which, as in all free markets, affect the price of stocks (see stock valuation).

There is usually no compulsion to issue stock via the stock exchange itself, nor must stock be subsequently traded on the exchange. Such trading is said to be off exchange or over-the-counter. This is the usual way that bonds are traded. Increasingly, stock exchanges are part of a global market for securities.

The First Stock Exchanges:-

In 11th century France the courtiers de change were concerned with managing and regulating the debts of agricultural communities on behalf of the banks. As these men also traded in debts, they could be called the first brokers.

Some stories suggest that the origins of the term "bourse" come from the Latin bursa meaning a bag because, in 13th century Bruges, the sign of a purse (or perhaps three purses), hung on the front of the house where merchants met.

However, it is more likely that in the late 13th century commodity traders in Bruges gathered inside the house of a man called Van der Burse, and in 1309 they institutionalized this until now informal meeting and became the "Bruges Bourse". The idea spread quickly around Flanders and neighbouring counties and "Bourses" 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. There were people in Pisa, Verona, Genoa and Florence who also began trading in government securities during the 14th century. This was only possible because these were independent city states ruled by a council of influential citizens, not by a duke.

The Dutch later started joint stock companies, which let shareholders invest in business ventures and get a share of their profits—or losses. In 1602, the Dutch East India Company issued the first shares on the Amsterdam Stock Exchange. It was the first company to issue stocks and bonds. In 1688, the trading of stocks began on a stock exchange in London.

The role of stock exchanges:-

Stock exchanges have multiple roles in the economy, this may include the following:-

Raising capital for businesses

The Stock Exchange provides 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 with banks, are mobilized and redirected to promote business activity with benefits for several economic sectors such as agriculture, commerce and industry, resulting in stronger economic growth and higher productivity levels and firms.

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.

Redistribution of wealth

Stocks exchanges do not exist to redistribute wealth. However, both casual and professional stock investors, through dividends and stock price increases that may result in capital gains, will share in the wealth of profitable businesses.

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, often owned by the company founders and/or their families and heirs, or otherwise by a small group of investors). However, some well-documented cases are known where it is alleged that there has been considerable slippage in corporate governance on the part of some public companies. The dot-com bubble in the early 2000s, and the subprime mortgage crisis in 2007-08, are classical examples of corporate mismanagement. Companies like Pets.com (2000), Enron Corporation (2001), One.Tel (2001), Sunbeam (2001), Webvan (2001), Adelphia (2002), MCI WorldCom (2002), Parmalat (2003),

Fannie Mae (2008), Freddie Mac (2008), Lehman Brothers (2008), were among the most widely scrutinized by the media.

Creating investment opportunities for small investors

As opposed to other businesses that require huge capital outlay, investing in shares is open to both the large and small stock investors because a person buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors.

Government capital rising for development projects

Governments at various levels may decide to borrow money in order to finance infrastructure projects such as sewage and water treatment works or housing estates by selling another category of securities known as bonds. These bonds can be raised through the Stock Exchange whereby members of the public buy them, thus loaning money to the government. The issuance of such bonds can obviate the need to directly tax the citizens in order to finance development, although by securing such bonds with the full faith and credit of the government instead of with collateral, the result is that the government must tax the citizens or otherwise raise additional funds to make any regular coupon payments and refund the principal when the bonds mature.

Barometer of the economy

At the stock exchange, share prices rise and fall depending, largely, on market forces. Share prices tend to rise or remain stable when companies and the economy in general show signs of stability and growth. An economic recession, depression, or financial crisis could eventually lead to a stock market crash. Therefore the movement of share prices and in general of the stock indexes can be an indicator of the general trend in the economy.

Listing requirements:-

Listing requirements are the set of conditions imposed by a given stock exchange upon companies that want to be listed on that exchange. Such conditions sometimes include minimum number of shares outstanding, minimum market capitalization, and minimum annual income.

Requirements by stock exchange:-

Companies have to meet the requirements of the exchange in order to have their stocks and shares listed and traded there, but requirements vary by stock exchange:

Bombay Stock Exchange: Bombay Stock Exchange (BSE) has requirements for a minimum market capitalization of Rs.250 Million and minimum public float equivalent to Rs.100 Million.

London Stock Exchange: The main market of the London Stock Exchange has requirements for a minimum market capitalization (£700,000), three years of audited financial statements, minimum public float (25 per cent) and sufficient working capital for at least 12 months from the date of listing.

NASDAQ Stock Exchange: To be listed on the NASDAQ a company must have issued at least 1.25 million shares of stock worth at least $70 million and must have earned more than $11 million over the last three years.

New York Stock Exchange: To be listed on the New York Stock Exchange (NYSE) a company must have issued at least a million shares of stock worth $100 million and must have earned more than $10 million over the last three years.

Ownership: -

Stock exchanges originated as mutual organizations, owned by its member stockbrokers. There has been a recent trend for stock exchanges to demutualize, where the members sell their shares in an initial public offering. In this way the mutual organization becomes a corporation, with shares that are listed on a stock exchange. Examples are Australian Securities Exchange (1998), Euronext (merged with New York Stock Exchange), NASDAQ (2002), the New York Stock Exchange (2005), Bolsas y Mercados Españoles, and the São Paulo Stock Exchange (2007). The Shenzhen and Shanghai stock exchanges can been characterized as quasi-state institutions insofar as they were created by government bodies in China and their leading personnel are directly appointed by the China Securities Regulatory Commission.

Other types of exchanges: -

In the 19th century, exchanges were opened to trade forward contracts on commodities. Exchange traded forward contracts are called futures contracts. These commodity exchanges later started offering future contracts on other products, such as interest

rates and shares, as well as options contracts. They are now generally known as futures exchanges.

The future of stock exchanges:-

The future of stock trading appears to be electronic, as competition is continually growing between the remaining traditional New York Stock Exchange specialist system against the relatively new, all Electronic Communications Networks, or ECNs. ECNs point to their speedy execution of large block trades, while specialist system proponents cite the role of specialists in maintaining orderly markets, especially under extraordinary conditions or for special types of orders.

The ECNs contend that an array of special interests profit at the expense of investors in even the most mundane exchange-directed trades. Machine-based systems, they argue, are much more efficient, because they speed up the execution mechanism and eliminate the need to deal with an intermediary.

Historically, the 'market' (which, as noted, encompasses the totality of stock trading on all exchanges) has been slow to respond to technological innovation, thus allowing growing pure speculation to continue. Conversion to all-electronic trading could erode/eliminate the trading profits of floor specialists and the NYSE's "upstairs traders", who, like in September and October 2008, earned billions of dollars selling shares they did not have, and days later buying the same amount of shares, but maybe 15 % cheaper, so these shares could be handed to their buyers, thereby making the market fall deeply.

William Lupien, founder of the Instinet trading system and the OptiMark system, has been quoted as saying "I'd definitely say the ECNs are winning... Things happen awfully fast once you reach the tipping point. We're now at the tipping point."

One example of improved efficiency of ECNs is the prevention of front running, by which manual Wall Street traders use knowledge of a customer's incoming order to place their own orders so as to benefit from the perceived change to market direction that the introduction of a large order will cause. By executing large trades at lightning speed without manual intervention, ECNs make impossible this illegal practice, for which several NYSE floor brokers were investigated and severely fined in recent years.[6] Under the specialist system, when the market sees a large trade in a name, other buyers are immediately able to look to see how big the trader is in the name, and make inferences about why s/he is selling or buying. All traders who are quick enough are able to use that information to anticipate price movements.

ECNs have changed ordinary stock transaction processing (like brokerage services before them) into a commodity-type business. ECNs could regulate the fairness of initial public offerings (IPOs), oversee Hambrecht's OpenIPO process, or measure the effectiveness of securities research and use transaction fees to subsidize small- and mid-cap research efforts.

Trading 25,000 shares of General Electric stock (recent [when?] quote: $34.76; recent [when?] volume: 44,760,300) would be a relatively simple e-commerce transaction; trading 100 shares of Berkshire Hathaway Class a stock (recent quote: $139,700.00; recent volume: 850) may never be. The choice of system should be clear (but always that of the trader), based on the characteristics of the security to be traded.

Even with ECNs forming an important part of a national market system, opportunities presumably remain to profit from the spread between the bids and offer price. That is especially true for investment managers that direct huge trading volume, and own a stake in an ECN or specialist firm. For example, in its individual stock-brokerage accounts, "Fidelity Investments runs 29% of its undesignated orders in NYSE-listed stocks, and 37% of its undesignated market orders through the Boston Stock Exchange, where an affiliate controls a specialist post."

General Information - Bombay Stock Exchange:-

From the 22 stock exchanges in the country, Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognized by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognized and it is the only one that had the privilege of getting permanent recognition ab-initio.

Approximately 70,000 deals are executed on a daily basis, giving it one of the highest per hour rates of trading in the world. There are around 3,500 companies in the country, which are listed and have a serious trading volume. The market capitalization of the BSE is Rs.5 trillion. The BSE `Sensex' is a widely used market index for the BSE.

The main aims and objectives of the BSE is to provide a market place for the purchase and sale of security evidencing the ownership of business property or of a public or business debt. It aims to promote, develop and maintain a well regulated market for dealing in securities and to safeguard the interest of members and the investing public

having dealings on the Exchange. It helps industrial development of the country through efficient resource mobilization. To establish and promote honourable and just practices in securities transactions

BSE Sensex

The BSE Sensex is a value-weighted index composed of 30 companies with the base April 1979 = 100. It has grown by more than four times from January 1990 till date.The set of companies in the index is essentially fixed. These companies account for around one-fifth of the market capitalization of the BSE. We can use information from April 1979 onwards in estimating the long-run rate of return on the BSE Sensex and that comes to 0.52% per week (continuously compounded) with a standard deviation of 3.67%. This translates to 27% per annum, which translates to roughly 18% per annum after compensating for inflation.

New Developments

In November, 1996, as a move to reduce the counter party risk, the Exchange set up a trade guarantee scheme i.e. all trades carried out on the BOLT are guaranteed by the Clearing House of the Exchange.

The Bank of India and the Exchange have set up a depository as a joint venture. However, it will be a subsidiary of the Bank of India. The Exchange introduced trading in fixed income securities under a separate group to give impetus to trading in debentures and other corporate debt instruments, to increase trading in government dated securities.

23 brokers opt to exit BSE derivatives business since Oct:-

The October 2008 landslide in stock prices, which caused a nearly 90 per cent drop in India’s equity derivatives business, has dealt a severe blow to Asia’s oldest bourse, the Bombay Stock Exchange (BSE). In the past three months, 23 stock brokers have opted for voluntary closure of their derivatives business on the exchange and the daily turnover on the exchange is now as low as Rs 85 lakh, compared to Rs 1,500 crore to Rs 2,000 crore, when the market peaked in January this year.

The BSE benchmark index Sensex was hovering between 12,500 and 15,000 before October. Since then, it has traded in a narrow range on wafer-thin volumes.

As a result, said a stock broker, brokers thought it logical to suspend their derivatives business on the BSE since there was no use paying the exchange margins. “It is part of our cost-cutting exercise. Although there is no business in the futures segment on the National Stock Exchange (NSE), we still pay margins so that we are ready to take opportunities when there is activity. But incurring costs for this on the BSE is useless since hardly anyone trades in derivatives there,” said a broker.

Every broker has to deposit margin money, depending on which they are given a trading limit by the stock exchange. Large brokerage houses mainly raise this money through debt placement at high interest rates.

Overall, nearly 30 brokers have suspended their derivatives business on the BSE this year. There were over 300 brokers in this segment, but not even 10 per cent are active.

On the NSE, more than 1,000 brokers trade in derivatives, but the daily turnover has declined significantly. At the start of this year, the turnover ranged from Rs, 80,000 crore to Rs 90,000 crore, but it is now down to Rs 15,000 to Rs 20,000 crore.

The NSE is mainly able to generate volumes because most large institutional investors prefer this exchange. On the BSE, on the other hand, a major chunk of the volumes has mainly come from block or bulk deals in the cash segment. These deals are also thin on the ground.

Market players, however, say it may be tough for the NSE to maintain its leadership in the equity space with new players emerging.

Financial Technologies, the promoter of the Multi Commodity Exchange, is setting up infrastructure for an equity exchange after it successfully launched a currency derivatives exchange, MCX SX, recently. MCX SX, which went live nearly a month after the NSE launched currency futures trading, is already neck-and-neck with the NSE in terms of turnover and volumes.

Second bi-annual BSE follow-up report

On 20 October 1997, the Commission submitted to the European Parliament and the Council its "Final consolidated report to the temporary committee of the European Parliament on the follow-up of recommendations on BSE (COM (97)509 final)". The report describes the main progress made since February 1997 in the field of food safety and consumer protection and gives details of the principal developments in combating BSE.

In addition, the report sets out an ambitious work programmed and states the Commissions intention to report every six months to the European Parliament and the Council on progress made in programmed implementation. The Commission presented its first report in May 1998, which gave a broad overview of practical measures taken to combat BSE and to implement the new approach in the fields of scientific advice, risk analysis, risk management, control and inspection. The first report already gave details of completion of certain points in the Commissions work programmed, e.g. checks under Community law on the reporting of cases of BSE. In other areas, the first six-monthly report described progress made to date.

As the present report, the second in the six-monthly series, explains, a large part of the work programmed has now been completed, and a synopsis of this is set out in Annex 1 (Table A). There are just a few points where the desired progress has not been achieved, e.g. with the European Union becoming a full member of the WHO and the International Office of Epizootics. In general, the report reflects the priority that continues to be given to the BSE issue within the Commission.

However, despite the progress, which has been made, it is clear that further effort is needed and future work must be guided by the following considerations.

1. With regard to BSE:

Despite all the Commission’s efforts, the Council has not agreed to a common approach to removing "specific risk material" from the food and feed chain. As a consequence, recommendations issued by the scientific committees have not been properly taken into consideration. In this area, risk prevention on a Community base remains inadequate.

Progress has been made in implementing Community legislation, which was adopted to prevent the spreading of BSE, in particular the feed ban and the standards for treatment of meat-and bone meal. Concerns do, however, remain where Member States have been slow in implementing Community law concerning the control of BSE.

The Commission has been vigorously pushing ahead work on validating a post-mortem BSE test. In the first half of 1999 the validation results will show whether the European Union currently has a test that can reduce the consumer risk.

2. In relation to the Commissions new approach to consumer health protection:-

The implementation of new structures for the scientific committees and the checks carried out by the Food and Veterinary Office of the Commission have yielded important information on current working methods. This information will be properly evaluated to develop and optimise the existing structures.

Scientific recommendations and inspection visits require effective follow-up. The last year has shown how important it is to have good follow-up: deficiencies identified during inspection visits to third countries for fishery products and for milk products resulted in consequent Community actions been taken, including import restrictions. Furthermore, recommendations of FVO inspectors have contributed to improvements of the hygiene situations in third countries, which enabled the Commission to allow imports of products from third countries under defined conditions.

The WTO-agreement on Sanitary and Phytosanitary Measures (SPS) lays down the guiding principles, which the European Union follows in an international context. These principles require further development. One particularly important issue is how to implement the precautionary principle within the context of a scientifically based consumer protection policy. Furthermore, the judgement of equivalence is subject of an in-depth discussion on an international level in particular in the Codex alimentarius.

These issues of importance in the international context will be taken into consideration by the Commission in the draft negotiation mandate to be given by the Council for the forthcoming WTO-discussions on the SPS Agreement.

The Treaty infringement procedure is relatively time consuming and therefore of limited use in achieving immediate improvements in health standards in the Member States. The Commission has speeded up the procedures in order to improve its effectiveness. Experience shows clearly that in a reasonable number of cases the opening of infringement procedures has led the Member States to take action with a view to fully implement Community legislation.

The European Parliaments and the Commissions joint conference on food safety - Lessons to be learned from the BSE crisis - will provide an opportunity to take stock of past progress and future challenges from a variety of angles. As such, it will make an important contribution to future discussion.

Furthermore, the Commission will push ahead the work on its response to the debate on the Green Paper on the General Principles of Food Law in the European Union.

In addition, the Commission intends to take up a number of points set out in its 1999-2001-consumer protection action programmed. Article 152 of the future Amsterdam Treaty gives more impact to the Community action in the field of health protection.

In this respect, lessons learnt from the BSE crisis will influence the Commissions consumer protection policy into the next century.

Equity Market Declines Increase Risk to Insurers' Capital Reserves

Declines in equity markets have increased the risk to the capital reserves of Canadian insurers, which have historically been well capitalized, according to André-Philippe Hardy, at RBC Capital Markets.

Fresh research by the analyst suggests Sun Life Financial Inc. (SLF) is likely to have “the most capital” at this juncture, ahead of rival Manulife Financial Corp. (MFC), after both took steps recently to top up their reserves. The research suggests Bay Street will continue to monitor capital levels of leading insurers closely, and that future moves to strengthen reserves are possible.

Great-West Lifeco Inc. (GWLOF.PK), Canada’s third largest insurer, is in the process of rising about C$1-billion, amid signs that appetite may be limited after Manulife joined Toronto-Dominion Bank (TD) and Royal Bank (RY) in tapping the market.

Bank of Montreal (BMO), which is handling the sale of about C$600-million in new shares for Great West, said last week that it was also issuing C$450-million in debt for its own reserves by selling bonds that will pay an unusually high interest rate of 10.2% and count towards its regulatory capital.

Mr. Hardy noted that:

Valuations for life insurers] are as low as they have been since the companies have been public. The combination of weak credit and equity markets, combined with low interest rates is likely to lead to continued pressure on profitability.

He added in a research note that Canadian insurance companies continue to have “less credit risk than their U.S. peers, and that their exposures to fixed income securities are generally conservative.”

National Stock Exchange of India

The National Stock Exchange of India Limited or S&P CNX NIFTY (NSE), is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms of daily turnover and number of trades, for both equities and derivative trading. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the Nifty, an index of fifty major stocks weighted by market capitalization.

NSE is mutually owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.

Origins: -

The National Stock Exchange of India was promoted by leading Financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

Innovations: -

NSE has remained in the forefront of modernization of India's capital and financial markets, and its pioneering efforts include:

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 of S&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.

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

Equity

Futures and Options

Retail Debt Market

Wholesale Debt Market

Currency futures.

SECURITIES AND EXCHANGE BOARD OF INDIA 

 Under regulation 13 (4) of Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 against M/s. Varun Stock Broking, Sub-broker INS231049912, to M/s. Suresh RathiPvt. Ltd, (Member, The National Stock Exchange, Mumbai), in the matter of M/s. Morepen Hotels Ltd

1. In December 1995, Morepen Hotels Limited (hereinafter referred to as MHL”)

came out with a public issue at a premium of Rs.20/- per share. The scrip was

listed at Jaipur Stock Exchange, Ludhiana Stock Exchange, Delhi Stock

Exchange, National Stock Exchange (hereinafter referred to as “NSE”) and The

Stock Exchange, Mumbai (hereinafter referred to as “BSE”). There was a major

spurt in the total volume in the scrip of MHL. From 29, 400 shares during January

2000 including nil volume for the entire month of July 2000, the volume of scrip of

MHL shot up to 11,34,200 shares during the period August to November 2000.

Further, the percentage of net quantity delivered to gross quantity traded during

the period 11th September 2000 to 17th November 2000 was less than 1% of the

total traded volume on the exchange. The same trend was accompanied by the

price, the price of shares of MHL touched a 52-week high at Rs.285/- on 11 th

September 2000 and was followed by a fall in price of Rs.154.65 on 15 th

November 2000 touching a 52-week low.

2. Ultimate clients had acted in concert through selected members and thus were

involved in creating artificial trade in the scrip of MHL.

3. The gross quantity traded i.e. buy and sell in the scrip at BSE and NSE during the

period June 2000 to December 2000 was 77,01,773 shares. During the course of

investigation, it was observed that most of the clients trading in the scrip were In

view of the above, Securities and Exchange Board of India (hereinafter referred to

as “SEBI”) conducted an investigation into the trading of the scrip of MHL for the

period June 2000 to December 2000 (hereinafter referred to as “investigation

period”). During the investigation it was observed that the scrip of MHL was traded

only at NSE and BSE.

4. It was observed that the P/E ratio of MHL was not in synchronization with the rest

of the hotel industry. The rise in volumes observed during the period June 2000 to

December 2000 did not appear to be justified based on its fundamentals. SEBI’s

investigation into the matter found that 80% of the total quantity traded during the

period June 2000 – December 2000 was contributed by few brokers of BSE and

NSE. It was found that the linked to each other.

5. The gross quantity traded i.e. buy and sell in the scrip at BSE and NSE during the

period June 2000 to December 2000 was 77, 01,773 shares. During the course of

investigation, it was observed that most of the clients trading in the scrip were

linked to each other.

6. It has been alleged that Sub-broker by not showing due skill, care and diligence in

its dealings with the client was alleged to be in violation of Code of Conduct as

given under Schedule II read with regulation 15 of Securities and Exchange Board

of India (Stockbrokers and sub-brokers) Regulations, 1992 (hereinafter referred to

as “Brokers Regulations”). Further, trading done by Sub-broker on behalf of the

client was alleged to be in violation of Securities and Exchange Board of India

(Prohibition of Fraudulent and Unfair trade practices relating to securities market)

Regulations, 1995 (hereinafter referred to as “PFUTP Regulations”).

7. In view of the alleged irregularities committed by Sub-broker, Chairman, SEBI,

vide order dated 18th February 2002 appointed an Enquiry Officer (hereinafter

referred to as “Enquiry Officer”) to enquire into the affairs of Sub-broker. The

Enquiry Officer after conducting the enquiry submitted a report dated 30 th April

2004 finding the Sub-broker guilty of violating Clause A (2) of Code of Conduct

laid down under Schedule II of Broker Regulations and recommended that a

minor penalty of suspension of certificate of registration of Sub-broker for a period

of two months be imposed on the Sub-broker.

8. Subsequent to the submission of the said Enquiry Report, a show cause notice

dated 6th May 2004 was issued to Sub-broker under regulation 13 (1) of Securities

and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer

and Imposing penalty) Regulations, 2002.

9. Sub-broker vide letter dated 12th July 2004 responded to the said show cause

notice, which is extracted as follows;

At the outset we had stressed that we had closed down business with M/s.

Jem Fiscal Ltd., on our own, prior to any SEBI investigation in January

2001. (Para 5.3.6) i.e., within 3 months of Jem Fiscal becoming our client.

Hence, if we had not been diligent enough M/s. Jem Fiscal Ltd would have

continued to build up artificial volumes in Morepen Hotels Ltd., thereby

trapping innocent investors also.

Hence the contention that we had not been prudent enough to doubt the

intentions of our client M/s. Jem Fiscal Ltd is not true. We would again like to

stress that we had stopped executing orders on behalf of M/s. Jem Fiscal Ltd.,

on our own.

Till date Varun Stock Broking has had no other complaints against them and

we have honoured all our commitments with reference to our broker and our

clients.

In the light of above, we request you to be lenient with us. We assure you that

we will be more cautious in the future.

REFERENCES & BIBLIOGRAPHY

WEBSITES

www.capitalmarket.com

www.financialmarket.com

www.stockmarket.com

www.sureshrathisecurities.com

www.stockexchangeboardofindia.com

www.bse.com

www.nse.com

www.moneymarket.com

www.marketing.com

SEARCH ENGINES

Google

Yahoo

Wikipedia

REFERRED BOOKS

Marketing of services – Philip Kotler

Marketing – V.S.P. Rao