l7 p2 sahara and nsel

8/10/2019 L7 P2 Sahara and NSEL

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SENSEX calculation?

1.Market cap

2.Bulls and bears3.Harshad Mehta, Ketan Parekh

4.Dematerialization


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SENSEX calculation: 1979

30k with

Mallya

70k with

public


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Free float Market cap(FFMC)

=Price of each share xtotal # of shares withpublic.

=10 x 70,000

=7,00,000 Rs. (1stApril1979)

Shares with public (1979)


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Financial Market

Money Market Capital Marke

Primary

Secondary

FRESH

Short term Long t

Resold

STAG

Male deer


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Bull

Hopes that prices willrise,

Hence purchases.

Fears that pricesfall,

Hence sells.

Bear

Types of investors


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Free float Market cap(FFMC)

=Price of each share xtotal # of shares withpublic.

=2000 x 70,000

=14,00,00,000 Rs.(2014)

=14 crore. (2014)

Shares with public (2014)


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(FFMC @Present / @base year) x 100

(@2014 /@1979) x 100 (14 Crore/ 7 lakh) x 100

20,000 = SENSEX

In real SENSEX: total FFMC of 30companies.

Base market cap. Adjustment formula(INDEX Cell)weighted average.

BSE-SENSEX Formula


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1. Axis Bank

2. Bajaj Auto

3. Bharat Heavy Electricals

4. Bharti Airtel5. Cipla

6. Coal India

7. Dr.Reddy's Laboratories

8. GAIL (India)

9. HDFC Bank

10. Hero MotoCorp11. Hindalco Industries

12. Hindustan Unilever

13. HDFC

14. ICICI Bank

15. Infosys

1. ITC

2. Larsen & Toubro

3. Mahindra and Mahindra

4. Maruti Suzuki India5. NTPC

6. ONGC

7. Reliance Industries

8. Sesa Goa

9. State Bank of India

10. Sun Pharmaceutical Ind11. Tata Consultancy Servic

12. Tata Motors

13. Tata Power Company

14. Tata Steel

15. Wipro

BSE-30 companies


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Sensex =Sensitive + Index.

ASIA oldest: Bombay Stock Exchange(1875)

Worlds Oldest: Amsterdam Stock exch(1602) Netherlands

Chronology India: BSE-Abad-Kolkata-

BSE-SENSEX Formula


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CSDL

NSDL

Depository

SBI

HDFC

ICICI

Dep.

Participant You

Cus

Demat System

Financial

inclusion

#PAN

#DEMAT


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PAN card

PAN: 10 digitalphanumeric number

By Income Taxdepartment

12 digit unique n By UniqueIdentification Auof India (UIDAI)

UID numbe

cards


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PAN card

All residents Doesnt change withaddress

Same.

UID numbe

cards


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PAN card

No minimum /maximum age limit.

No biometric dataexcept photo.

~Rs100 fees

Less 3 years=>biometric infoX

Eye, photo, finge

No fees.

UID numbe

cards


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PAN card

individual, firm, jointventure

all residents and NRI

Only individual all residents and

UID numbe

cards

O li T di


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BOLT: (BSEs online trading system)

NEAT: NSE for automated trading

VSAT (Very Small Aperture Terminal)

Solar flare

Equinox

Online Trading


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VSAT G t ti t llit


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VSAT= Geostationary satellite

D i E i


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During Equinox


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Badla System

T di t t


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T+2

(T) Trading today

settlement in (+2) two days

Trading: present system


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Financing ponly interest paid (25%)

100, 200, 500

1,00,000

1,50,000


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Harshad Mehta

Ketan Parekh

Ready forward deal


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Ready forward deal

Re purchase

@108 Cr.

Purchase

@100 Cr.

Ready forward deal


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Ready forward deal

Bank

Receipt

Ready forward deal


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Ready forward deal

Bank

Receipt

1992


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Harshad Mehta ~1000 Cr. Invest

SENSEX 2000 => 4500 (Jan-April)

ACC Cement: 200 => 9000

1992: SEBI Banned Badla

1996: approved with modification

1992

2001: Ketan Parekh


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Global Trust Bank (250 cr)Madhupura Coop (1,000 Cr). RBI 15 c

Visualsoft: 600=> 8,000SonataSoft: 90=> 2000Benami subscription

Bear cartel starts selling2010: SKS Microfin.ONGC gas pricing

2001: Ketan Parekh

Circuit Breaker


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High volatility = genuine investors turnaway

Gold / real estate=>CAD=>Weak rupe=>inflation

Two types

Individual share: BSE/NSEMarket wide: SEBI

Circuit Breaker


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Types of companies


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Companies

Act

2013

One Person

Company

Private ltd.

2-200

Public Ltd.

7-unlimited

Types of companies

Types of companies


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Company

One person

Private ltd.

Public Ltd.

Li

Vodafo

Un

Noki

Types of companies

Public ltd Companies: Listed vs Unli


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Listed

Public offer/Issue=>SEBI

Offer OPEN

Equity (IPO)=> 15-30

days Debt (Bond/OFCD)=>3-10 days

Private offer (2=>Corporate Aff

SC: >50investors=>Pub

=> SEBI. Companies Act

unlisted

Public ltd. Companies: Listed vs Unli

Infosys


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Infosys

Holding Vs Subsidiary


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Reliance

industries Ltd(Holding)

Delight protein

Ltd. (Subsidiary)

Gujarat Urja VNigam Ltd. (GU

(earstwhile GEGujarat StateElectricityCorporation Lim

(subsidiary)=>GNR, Kadana,Dhuvaran therplants

Holding Vs Subsidiary

PSU = RTI applies


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Governmentcompanies

ONGC, SAIL, Coal Indialtd.

Registered underCompanies Act

Government owns >50%

shares Majority BoD.

Employees Not publicGovt.

CAG appointed pvt.

auditors

LIC, Air India, IDBAct of Parliament /Legislature

Wholly financed byGovernment

all BoD. Employees Not pu

Govt.

Directly by CAG (sexception)

Public Corpor

PSU RTI applies

Dept.undertaking =NOT PSU


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Indian Railways, postal Department

commercial activity such as engineerin

manufacturing etc.directly controlled, just like any otherdepartment

not under the companies actEmployees = Government servant

Directly CAG + RTI

ep u de a g O SU


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SEBI SaharaOFCD

2008-11: Game begins


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Sahara Housing Investment Corporatio(unlisted)

Sahara India Real Estate Corporation(unlisted)

Issue OFCDfor more than TWO Yea

10 days)>2 crore people (50 people)

>24,000 crores

g

Case begins


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SEBI (2011)

Stop OFCD Refund $$ + 15% interest

Give proof of Refund Untraceable Account=>Govt.

SAT (2011)

Upheld SEBI order

SC (2012)

Upheld SEBI order

SAHARA

- Only refunded ~

- Refused to give (TRUCK)

- contempt

g

Arguments


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SEBI act: All CIS,Except

1. Nidhi2. Chit Funds

3. Co-operatives

SAHARA argum

Unlisted compan

Under Corp. Affa

SEBI= only liste

Need time to Re

g

SEBI: a Brief History


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1992: Securities and Exchange board India (Statutory Body)

1999: Amendment- CIS brought under(Except Nidhi, Chit fund a and coopera

2002: powers of search and seizure.

2005: Patil CommitteeSEBI = corporate bondRBI = Repo & RR

y

SEBI Ordinance


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2013=> March 2014

Raid, attach,

Arrest for non-compliance

Fund gathered >100 Cr. = under SEBIinvestors, CIS

Fast track court, info.-exchange with foagencies


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NSEL Crisis

1. What is commodity trading?

2. Why NSEL Crisis?

3. Steps taken?

4. Long term solution?

Commodity Market


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1. METAL: Aluminum, gold, silver

2. AGRI: castor seeds, cotton, wheat, basm

3. ENERGY: Oil, coal


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2 Month Rent: Rs. 200

LOAN

T+1 = Rs. 1000/Qt.


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T+35 = Rs. 1800/Qt.

T+35 = Rs. 1800/Qt.


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2 Month Rent: Rs. 200Broker

Investors

Collateral / GuaranteeT+35 ; T+45


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2 Month Rent: Rs. 200Broker

Investors

Profit

Collateral / Guarantee


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Broker

Investors

Profit

2Govt.

T+20

E-series


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Dematerialized form

Broker => warehouse receipt =>Contra

BrokerageNSEL commission: 2,000 Cr (2009) =lakh Cr. (2013)

July 2013


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Broker

Investors

Profit

FM

T+

Inflation, i

Crisis beings: July 2013


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FMC orders T+10

NSEL directed all brokers / investors to set

T+10 Brokers: Motilal Oswal, Indian Infoline => Rcrore.

>Rs.5000 crore contracts

>15000 Investors

Crisis : August 2013


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NSEL: weekly settlement of dues

Will auction from warehouses

Weekly Rs.100 Cr. (Auction) Total 5600 Cr.

Not enough stock, fake receipt

Steps Taken


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Government banned E-series system

FMC investigation

Arvind Mayaram Panel (PM) FMC (Consumer Affairs)=> Finance Ministr

IT Dept. => NSEL allied companies

Reforms necessary?


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FMC => give more teeth

Hand over to SEBI

CBI PE against Bhave


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CBI PE against BhaveMCX-SX

Jignesh Shah


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FTIL

NSEL

Commodity Exchange

NAFED

License

2008

MCX-S

Stock Exch

Currency

CBI Preliminary inquiry (PE)


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CB Bhave (2008-13) SEBI Chairman

KM Abraham: SEBI board member

2007: Jignesh Shah IT raid (MCX, FTI2008: Jignesh Shah (FTIL) applies for SX license (SEBI)

Finance ministry 2SEBIdont untilinvestigation over

August 08: Bhave (SEBI) gives license

Fit and Prop


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FIT and Proper


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SEBI

Insolvent Not Convicted

Character- reputation

.

IT Raid = Not Fproper

Jignesh Shah / MSX..dont.

CBI

1 NSE dominant player in Currency DerCB BhavesDefense


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1. NSE dominant player in Currency Der.2. BSE unable to compete3. Needed competition4. Wrote letter to IT about Status5. IT replied: no merit in case.6. SEBI legal team: no conviction7. NSEL crisis @FMC

8. MCX-SX running separately.9. Character certi. From Vinod Rai, GK Pill10.PE inquiry should not be released in me

Future of MCX-SX?


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(FMC order): Jignesh +FTIL not fit & proper

to run any exchange SEBI ordered FTIL tosell shares of MCX-SX

SEBI can cancel

license.


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After thoughtsSEBI-Sahara-OFCD

NSEL Crisis

Delays


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Banking Finance SEBI) Insurance IRDA)

In house SCORES Inhouse

B.Om SEBI I.Om

Consumer

courtSAT

Consumer

court

C

Court Supreme court Court


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FSLRC (Fi Mi ) 11 13Nachiket Mor (R

Regulatory Reforms: Committees


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FSLRC (FinMin) 11-13Nachiket Mor (R

14

FSLRC: Present vs Future AgencieRBI


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RBIRBI

Debt Mgmt

SEBIFMC

IRDA

PFRDA

UFA

SAT

FSAT

FRA

Financial Redress Agency (FRA)Nachiket


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Financial Redress Agency (FRA)

For all six regulator RBI, SEBI, IRDA,

PFRDA, EPFO, and FMCFRA: not an individual

Board of directors

Powers of Consumer courtsSimilar body @State level:

MFI-NGO, Chit-fund, Local moneylend

Customer complaints against bankBanking ombudsman


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Customer complaints against bank

From UK => India 1995

RBIs general managers => 3 years =>reappointment

Except J&K

Jurisdiction of BO?


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Loan giving

Only

upt

A

GuD

H

(B


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l7 p2 sahara and nsel

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