Stock Market in India

A stock exchange is an organization which provides a platform for trading shareseither physical or virtual. The origin of the stock market dales back to the year 1494, when the Amsterdam Stock Exchange was first set up. In a stock exchange, investors through stock brokers buy and sell shares in a wide range of listed companies: A given company may list in one or more exchanges by meeting and maintaining the listing requirements of the stock exchange.
In financial terminology, stock is the capital raised by a corporation, through the issuance and sale of shares. In common parlance, however, stocks and shares are used interchangeably .A shareholder is any person or organization which owns one or more shares issued by a corporation. The aggregate value .of a corporation's issued shares, at current market prices, is its market capitalization. Stock broker buys and sells for an investor and does the work of arranging the transfer of stock from a seller to a buyer.
Importance of Stock Exchanges
For efficient working of the economy and for the smooth functioning of the corporate form of organization, the stock exchange is an essential institution.
an efficient medium for raising long term resources for business
Help raise savings from the g~neral public by the way of issue of equity / debt capital
attract foreign currency
exercise discipline on companies and make them profitable
investment in backward regions for job generation
another vehicle for investors' savings
Stock Exchanges in India
The first company that issued shares was the VOC or Dutch East India Company in the early 17th century (1602). Since then we have come along way. With over 25m shareholders today, India has the third largest investor base in the world after the USA and Japan. Over 9,000 companies are listed on the stock exchanges, which are serviced by approximately 7,500 stockbrokers. The Indian capital market issigmficant in terms of the degree of development:" volume of trading and its tremendous' growth potential.
stock exchange provide an organised market for transaction in securities and other securities. There are 24 stock exchanges in the country, 21 of them being regional ones with allocated areas. Three others are set up in the reforms era. viz., National Stock Exchange (NSE), the Over the Counter Exchange of India Limited (OTCEI) and Inter-connected Stock Exchange of India Limited (ISE). Important Stock Exchanges in India are Bombay. Stock Exchange, popularly known as BSE and National Stock Exchange located in Bombay.
BSE
The Bombay Stock Exchange, or BSE is the oldest stock exchange in Asia.
Bombay Stock Exchange Limited of BSE is the oldest stock exchange in Asia located at Dalal Street in Mumbai. India. Established in the year 1875. it is the largest securities exchange in India with more than 6,000 listed Indian companies. BSE is also the fifth argest exchange in the world with market capitalization of US $466 billion.
Overall performance of BSE is measured using the BSE SENSEX or the BSE 30 index. This index is composed of 30 of the most developed BSE stocks. These stocks are selected from specified group shares on the basis of market cap liquidity, depth, trading frequency and industry representation. BSE 30 was introduced in 1986. Apart from BSE 30 there are various other indices usedd in the BSE:. Some of these unclude BSE 100, BSE 200, BSE 500, BSE PSU, BSE MIDCAP, BSE SMLCAP etc.
One of the unique fetures inside the BSE Stock Exchange includes the automatic online trading system known as BOLT that ensures an efficient and transparent market for trading in equity, debt instruments and derivatives. BSE has its phenomenally to the overall economic develoment and capital markets in India.
In 2005, the status of the exchange changed from an Association of Persons (AoP) to a full fledged corporation under the BSE (Corporatization and Demutulization) Scheme, 2005 amd its name was changed to The Bombay Stock Exchange Limited. Classification of companies listed in BSE
Group
Classification
A
Companies with large capital base, large shareholder base, and good growth record with regular dividends & greater volumes in secondary market.
BI
Relatively liquid scrips with good management & satisfactory growth prospects & volumes
F
Segment for Non-convertible debentures
G
Central and State Government Securities
Z
It comprises of companies not complying with clauses of the listing agreement and are not redressing the grievances of the investor.
Sensex or Sensitive Index is a value-weighted index composed of 30 companies with the base 1978-1979 = 100. It consists of the 30 largest and mot actively traded blue chip stocks, representative of various sectors, on the Bombay Stock Exchange. Inclusion of the company is basically on the basis of market capitalization. The 30 companies in the index are revised periodically - some are replaced by other and new sectors may find representation as the economy evolves.
The Sensex is generally regarded a mirror or barometer of the Indian stock markets and economy.
Demutualization
Mutalization refers to ownership and management of the exchange being combined in the same hands - brokers elected by the broker community from among themselves. Brokers are the owners of the BSE. Demutulization is when management and ownership are separated. Ownership is divested from the brokers and the company becomes a public company. All stock exchanges are to be demutualised according to the Government law made in 2004. Demutulization, thus means that ownership. management and trading rights are separated in a stock exchange. NSE has been a corporate entity since its inception.
National Stock Exchange of India
The National Stock Exchange of India (NSE), is one of the largest and most advanced stock markets in India. In the year 1991 Pherwani Committee recommended to establish National Stock Exchange (NSE) in India. In 1992 the Government of India authorized IDBI for establishing this exchange. the National Stock Exchange of India was promoted by leading Financial Institutions and was incorporated in 1992. In 1993, it was recognized as a stock exchange NSE commenced operations in 1994. The NSE is the world's third largest stock exchange in terms of transactions. It is located in Mumbai, the financial capital of India.
The Standard & Poor's CRISIL NSE Index 50 or S&P CNX Nifty - Nifty 50 or simply Nifty is the leading index for large companies on the National Stock Exchange of India. The Nifty is a will diversified 50 stock index accounting for 21 sectors of the economy.
The CNX Nifty Junior is an index for companies on the National stock Exchange of India. It consists of 50 companies on the National Stock Exchange of India. If has the second tier of stocks in terms of market cap and don't make it into Nifty The Inter-Connected Stock Exchange of India Limited (ISE)
The Inter-Connected Stock Exchange of India Limited (ISE) is being promoted by 14 regional stock exchanges to set up a new national level stock exchange. The ISE would provide a national market in addition to the trading facility at the regional stock exchanges.
Indonext
BSE, Federation of Indian Stock Exchanges and 18 regional stock ecchanges have promoted IndoNext, which has 350 scrips listed on it. The regional stock exchanges that are part of Indonext include Madras Stock Exchange, Bangalore Stock Exchange, Interconnected Stock Exchanges of India, Ludhiana Stock Exchange and Vadodara Stock Exchanges of India, Ludhiana Stock Exchange and Vadodara Stock Exchange. IndoNext is envisaged to bring liquidity and attention to stocks that are listed on RSEs.
Over the Counter Exchange of India (OTCEI)
The OTC Exchange of India (OTCEI) incorporated under the provisions of the Companies Act 1956, is a public limited company. It allows listing of small and medium sized companies. OTCEI is promoted by the Unit Trust of India, Industrial Development Bank of India, the Industrial Finance Corporation of India and thers and is a recognised stock exchange.
SEBI
The capital markets in India are regulated by the Securities and Exchange Board of India. (SEBI) It was established in 1988 and given a statutory basis in 1992 on the basis of the Parliamentary Act-SEBI Act 1992 to regulate and develop capital market. SEBI regulates the working of stock exchanges and intermediaries such as stock brokers and merchant bankers, accords approval for mutual funds, and registers foreign Institutional Investors who wish to trade in Indian scrips. Section 11(1) of the Sebi Act says that it shall be the duty of the Board to protect the interests of investors in securities.
SEBI promoters investor's education and training of intermediaries of securities markets. It prohibits fraudulent and unfair trade practices relating to securities markets, and insider trading in securities, with the imposition of monetary penalties, on erring market intermediaries. It also regulates substantial acquisition of shares and takeover of companies and calling for information from, carrying out inspection, conducting inquiries and audits of the stock exchanges and intermediaries and self regulatory organizations in the securities market
SEBI has its head office in Mumbai and its three regional offices in New Delhi Calcutta and Chennai.
SEBI's powers were enhanced in 2002 - strengthen the SEBI's board, enlarge it to nine from six and appoint three full-time directors; given enhanced powers to conduct search and seizure etc.
SEBI and the Reforms
The Stock Exchange Scam of 1992 (Harshad mehta) and the scam in 2000 (ketan Parekh) led to led to various measures by the Government to protect the interests of the small investors. SEBI introduced reforms like improved transparency, computerisation, enactment against insider trading, restrictions on forward trading, introduction of T + 2 system of settlement etc. The restrication and elimination of forward or Contango trading, refereed to in india as 'Badla' is a bold step to check speculation and manipulation of the market, Some more steps taken by SEBI to strengthen markets are
SEBI reconstituted governing· boards of the stock exchanges, introduced capital adequacy norms for -brokers, and makes rules for making client / broker relationship more transparent, including separation of client and broker accounts.
The SEBI enforces corporate disclosures.
SEBI empowered to register and. regulate venture capital funds.
introducing a code of conduct for all credit rating agencies operating in India.
Clause 49 of the listing agreement that SEBI introduced, mandates that all listed companies should have hal f the Directors on the Board from Independent Directors
Sebi makes new rules: June 2009
The Securities and Exchange Board. of India (SEBI) approved the "anchor investor" concept under which an investor can subscribe to up to 30 percent of the quota for institutional investors in an initial public offering, This is in response to the requests of issuers that there was a need for investors with prior commitment who will enhance their ability to sell the issue and bring more confidence.
Under the new rules, an anchor investor would pay 25% of the total investment at the time applying for the initial public offering, and the balance within two days of the closure of the issue. Such anchor investors would have to adhere to a lock-in period of one month from the date of the share allotment.
The market regulator also said entry load ( fees) for investments in mutual runds would be removed, which is expected to result in increased participation.
It would also cut registration fees for market intermediaries (brokers, sub brokers) by about 50%.
Capital market reforms
Since 1991 when the Government launched economic reforms, the following measures were taken
SEBI given statutory status- that is Act of Parliament
Electronic trade
Rolling settlement to reduce speculation
FIls are permitted since 1992
setting up of clearing house
settlement guarantee funds at all stock exchanges
compulsory dematerialization of share certificates so as to remove problems associated with paper trading; and speed up the transfer
clause 49 of the listing agreement for corporate governance
restrictions on PNs
Primary market
The primary market is that part of the capital markets that deals with the issuance of new securities directly by the company to the investors. Companies, governments or public sector institutions can obtain funding through the sale of a new stock or bond issue. In the case of a new stock issue, this sale is called an initial public offering (IPO).
Secondary market
The secondary market is the financial market for trading of securities that have already been issued in an initial private or public offering. Alternatively. secondary market can refer to the market for any kind of used goods. Once a newly issued stock is listed on a stock exchange, investors and speculators can trade on the exchange as there are buyers and sellers.
Types of shares
There are essentially two types of shares: common stock and preferred stock.
Preferred stock is generally issued ro banks by the companies though retail investors are also eligible for them. They are preferred for the following two reasons
In terms of djvidend payment, generally, they are given dividends even if the common stock holders are not
When the company is to be closed, preference stock holders are given money first from the proceeds of the sale of the assets of the companies .
They may have enhanced voting rights such as the ability to veto mergers or acquisitions or the right of .first refusal when new shares are issued (i.e. the holer of the preferred stock can buy as much as they want before the stock is offered to others).
Derivatives
It derives from an underlying asset - securities, shares, debt instruments, commodities etc. Derivative is a financial instrument. The price of the derivative is directly dependent upon the value of the underlying asset in the present and the projected future trends. Futures and options are the two classed of derivates.
Futures
Futures are financial instruments based on a physical underlying (commodity, equities etc.) A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future for a certain price.
Futures are part of a class of securities called derivatives, so named because such securities derive their value from the worth of an underlying investment futures are different form forwards as the former are traded on exchange while the later may be merely a signed contract between two parties.
Options are a class of futures where the buyer or seller has the option whether to buy or not - put option is the right but not the obligation to sell. Cell option is right but not the obligation to buy.
Buyback of Shares
Buyback of shares is the process of a corporation's repurchase of stock or bonds it has issued. In the case of stocks, this reduces the number of shares outstanding, giving each remaining shareholder a larger percentage ownership of the company. This is usually considered a sign that the Company's management is optimistic about the future and believes that the current share price is undervalued. The company also should have reserves to do so.
Reasons for buybacks include
putting unused cash to use
raising earnings per share
increasing internal control of the company
reducing the number of shareholders to reduce the cost for servicing them, etc.
Shares bought back need to be cancelled and thus the total equity shrinks and the shareholders benefit.. Generally, the buyback price is more than the market prices. Companies can buy back on with the reserves but can not borrow
It is allowed in India since 1998.
Rolling Settlement
Rolling Settlements is a mechanism of settling trades. In Rolling Settlements, trades done on a single day are settled separately from the trades of other day on the basis of Trade day + 2 days (T+2). Such netting of trades is done only for the day. As such, in Rolling Settlement, settlement is carries out on a daily basis. Since trades done on a given day can not be bunched with those of another day. Thus, speculation is drastically reduced.
Commodity exchanges
Commodity exchanges are institutions which provide a platform for trading in 'commodity futures' just as how stock markets provide space for trading in equities and their derivatives. They thus play a critical role in price discovery where several buyers and sellers interact and determine the most efficient price for the product. Indian commodity exchanges offer trading in commodity futures in a number of commodities. Presently, the regulator, Forward Markets Commission allows futures trading in over 120 commodities. There are two types of commodity exchanges in the country - 3 national level and 21 regional. The three exchanges are:
National Commodity & Derivatives Exchange limited (NCDEX)
Multi Commodity Exchange of India Limited (MCX)
National Multi-Commodity Exchange of India Limited (NMCEIL)
The unique features of national level commodity exchanges are:
They are demutualized,
They provide online platforms or screen based trading
They allow trading in a number of commodities and are hence multi-commodity exchanges.
They are national level exchanges which facilitate trading from anywhere in the country.
The three national multi-commodity exchanges - National Commodity and Derivative Exchange of India (NCDEX), multi Commodity Exchange of India (MCX) and National Multi-Commodity Exchange of india Ltd (NMCE) together accounted for 94 % of the trade in futures.
The NCDEX share was Rs 10,46,000 crore and MCX Rs 9,62,000 crore. FMC did not give figures for the Ahmedabad-based NMCE.
The top five commodities traded in the futures market are gold, silver, guar seeds, channa and urad. There was significant growth in the trading volumes of other commodities also. At present, the futures trading is going on in about 90 commodities in the three national exchanges and 21 regional. exchanges.
FMC
Forward Markets Commission (FMC) headquartered at Mumbai is a regulatory authority, which is overseen by the ministry of Consumer Affairs and Public Distribution, Govt. of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation ) Act, 1952. The commission consists of 2-4 members.
It monitors and disciplines the working of the exchanges. It recognizes on exchange or can withdraw such recognition. It collects and whenever the Commission thinks it necessary, published information regarding the trading conditions in respect of goods.
It makes inspection of the accounts and other documents of any recognized association or registered associationor any member of such association whenever it considerers it necessary.
Mutual Fund
Mutual fund- a financial intermediary that mops up money, from a group of investors, to invest in capital market so as to generte returns for the investors. Mutual fund does it for a fees. There are two types of Mfs.
Open-ended Funds
Open-ended or open mutual funds issue shares (units) to the investors directly at any time. the price of share is based on the fund's net asset value. Open funds have no time duration, and can be purchased or redeemed at any time on demand, but not on the stock market.
An open fund issues and redeems shares on demand, whenever investors put money into the stock market.
Closed-ended fund
It is a collective investment scheme issued by a fund. Only a fixed number of shares are issued in an initial public offering which may be called New fund Offering (NEO). They trade on an exchange. Share rices are determined not by the total net asset value (NAV), but by investor demand.
Once the offering closes, new shares are rarely issued. they can be traded only on the secondary market (Stock exchanges). Shares are not normally redeemable until the fund liquidates. On the other hand, an open - end fund where the fund company creates new shares and can redeem existing shares.
The total value of all the securities in the fund divided by the number of shares in the fund is called the net asset value.
FIIs
Foreign institutional investors are organisations which invest huge sums of money in financial assets-debt and shares - of companies and in other countries a country different from the one where they are incorporated. they include banks, insurance companies, retirement or pension funds, hedge funds and mutual funds.
Foreign individuals are not allowed to participle on their own but go through FIIs.
FIIs are allowed to invest in the primary and secondary capital markets in india through the portfolio investment scheme (PIS). The ceiling for overall investment for FIIs is 24% of paid up capital of the Indian company. the limit is 20% of the paid up capital in the case of public sector banks, including the State Bank of India.
The ceiling of 24% for FII investment can be raised up to sectoral cap / statutory ceiling, subject to the approval of the board and the general body of the company passing a special resolution to that effect.
FIIs had been net sellers in Indian equities to the extent of USD 13.3 billion in calender year 2008, the first time since 1999. And this outflow was on the back of a record inflow of USD 17.4 billion in 2007. Foreign institutional investors (FIIs) pumped in almost US$ 4.17 billion into the equity market in the month of May 2009. Total net FII investments in domestic equities is over US$ 60.3 billion till June 2009 since early 1990's.
This data pertains to all FII activities in India, including trade in secondary and primary (IPO) markets and in rights issues, private placement and M&As. The number of registered FIIs is 1,660 and that of registered sub-accounts is above the 5,000 mark. Besides buying equities from the market, FIIs have participated in Qualified institutional Placements (QIPs), directly from the promoters requiring huge capital.
FII inflows of US$ 7 billion since march 2009 have helped the rupee strengthen from its low of 52.2
SEBI prescribes norms to register FIIs and also to regulate FII investments.
There are more than 1600 FIIs registered in India (2009). The FIIs total investments in domestic markets amount to $60 billion since india allowed them to invest here in 1992. The FIIs invested about $17b in 2007 alone the highest in a single year so far Reasons for FIIs having India as a favourite destination
growing economy
corporate frofits are high
government policies are encouraging
compared to other countries, India has brighter prospects
FII investment is referred to as hot money for the reason that it can leave the country at the same speed at which it comes in.
FIIs and debt market
FIIs also invest in debt market - government and corporate. The Government of India has reviewed the External Commercial Borrowing policy and has increased the cumulative debt investment limit from US$3 billion to US $6 billion for FII investments in Corporate Debt in 2008
Global Depository Receipts (GDR)
Indian companies are allowed to raise equity capital in the international market through the issue of Global Depository Receipt (GDRs). GDRs are designated in dollars / euros.
The proceeds of the GDRs can be used for financing capital goods imports, capital expenditure including domestic purchase / installation of plant, equipment and building and investment in software development, prepayment or scheduled rapayment of earlier external borrowings, and equity investment in JVs in India.
GDRs are listed on London SE or louxembourg or elsewhere. They are also called euroissues.
ADRs
American depository receipts are like shares. They are issued to US retail and institutional investors. They are entitledlike the shares to bonus. stock split and dividend. they are listed either on Nasdaq or NYSE.
Like GDRs, they help raise equity capital in forex for various benefits like expansion, acquisition etc.
ADR route is taken as non-USA companies are not allowed to list on the US stock exchanges by issuing shares.
Similarly with Indian Depository Receipts (IDRs) as and when they are allowed.
Participatory notes
Participatory notes are instruments used for making investments in the stock markets. In India, foreign institutional investors (FIIs) use these instruments for facilitating the participation of overseas funds like hedge funds and others who are either not generally interested or not eligible for participating directly in the Indian stock market. Any entity investing in participatory notes is not required to register with SEBI (Securities and Exchange board of India), whereas all FIIs have to compulsorily get registered. Participatory notes are popular because they provide a high degree of anonymity, which enables large hedge funds to carry out their operations without disclosing their identity.
Since the source of funds is not revealed, the PNs are potentially unsafc. Therefore, SEBI in 2007 October imposed certain conditions like limits on the PNs that a single FII can issue etc. SEBI wants the PN holders to register with the SEBI and invest directly as India is a long term growth story. Sebi policy paid off with the number of FIIs registering with the regulator going upto over 1600 by 2009.
The SEBI action aims at ensuring that the quality of flows into stock markets and Indian forex market is clean.
Hedge fund
A hedge fund is an investment fund open to only a limited range of investors. They are mostly unregulated. The term-hedge funds, is usedd to distinguish them from regulated investment funds such as mutual funds and pension funds, and insurance companies. Hedge funds are not allowed into India as they do not disclose data required by the Sebi. Some of them are registering as FIIs since 2007 rules changed regarding PNs.
Clearing house
An organisation which registers, monitors, matches and guarantees the trades of its members and carries out the final settlement of all futures transactions. The National Securities Clering Corporation is the clearing house for the NSE.
Equity
Common stock and preferred stock that is, shares issued by the company. Also, funds provided to a business by the sale of stock.
Share
Share is a certificate representing ownership of the company that issued it. Shares can yield dividends and entitle the holder to vote at general meetings. The company may be listed on a stock exchange. Shares are also known as stock or equity.
Bond
A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing.
Debenture
Debt not secured by a specific asset of the corporation, but issued against the issuer's general credit-that is, it is unsecured debt. Investment earns an interest for the debenture holder. The following are various types of debentures
convertible debentures can be converted into equity at a future data
Non-convertible debentuers will not be converted
Partly convertible debentures will have some part converted into shares.
Bear
Bear is an investor who believes that market will go down.
Bull
Bull is an investor who believes that the market will go up-optimistic
Bear Market
A stock market that is characterized by rising prices over a long period of time. the time span is not precise; but it represents a period of investor optimism, lower interest rates and economic growth. The opposite of a bear market.
Gilt
Gilt is a bond issued by the govenment. It is issued by the Central Bank of a country on behalf of the government. In india, Reserve Bank of India issues the treasury bills or gilt Edged Market is the market for government securities.
Blue chip
Blue chip shares are the shares of the companies that are the most valuable. Companies that are profit making; usually dividend-paying and are liquid in the market-that is there is almost always in demand on the market.
Mideap company
Generally, companies with a market capitalization of up to Rs 500 crore are classified as small. Those companies that have a market eap between Rs 500 crore and Rs 1,000 crore are classified as medium sized. Above that level is the large cap company. But these definitions may change.
Small investor
Small investors are generally those who buy or sell securities up to Rs. 50,000 on any business day.
Primary Dealers
The Reserve Bank of India introduced a system of Primary Dealers (PDs) in government securities market in 1995 with the objective to strengthen the infrastructure in the government securities market in order to make it vibrant, liquid and broad-based. The following can be the PD: subsidiaries of scheduled commercial banks and all India financial institutions and engaged predominantly in securities business and in particular the governmnet securities market; or companies incorporated under the Companies Act, 1956 and engaged predominantly in securities busness and in particular the government securities market.; The company should have net owned funds of Rs. 50 crore.
Market depth
It is a dimension of market liquidity and it refers to the ability of a market to handle large trade volumes without a significant impact on prices.
Liquidity is the ease to find a trading partner for a given order.
Market breadth means the following: The fraction of the overall market that is participating in the market's up or down move. The greter the breadth the more the companies that are participating.
Trading volumes means the number of shares traded.
Retail investors are those who caan apply for shares up to Rs. 1 lakh in any public offer by a company, as defined by SEBI.
Small investor is one who buys or sells securities worth Rs 50,000 or less on any business day.
Negotiated Dealing System
Negotiated Dealing System (NDS) is an electronic platform for facilitating dealing in Government Securities and Money Market Instruments.
Short selling
The sale of a security made by an investor who does not own the security. The short sale is made in expectation of a decline in the price of security, which would allow the investor to then purchase the shares at a lower price in order to deliver the securities earlier sold short.
Market capitalization
Price per share multipled by the total number of shares outstanding; also the market's total valuation of a public company.
P / E ratio
Also known as the P / E multiple, this is the latest closing price divided by earnings per share EPS. P / E is perhaps the single most widely used factor in assessing whether a stock is overvalued or cheap. A company's P / E should be looked at against those of similar companies, and against that of the stock market as a whole, since different industries and wven different company are characterized by markedlly different P / Es. In general, fast growing technology companies have high P / Es, since the stock price is taking account of anticipated growth as well as current earnings. A high P / E is often a reflection of high expectations for a stock.
EPS
The portion of a company's profit allocated to each outstanding share of common stock. The amount is computed by dividing net earnings by the number of outstanding shares of common stock. For example, a corporation that earned Rs 10 million last year and has 10 million shares outstanding would report earnings per share of Rs. 1.
Insider Trading
Insider trading occurs when any one with information related to strategic and price-influencing information purchases or sells stocks so as to make speculative profits
Depository
A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds, Government Securities, units etc.) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities. Benefits of a depository are reduction in paperwork involved in transfer of securities; reduction in transaction cost.
National Securities Depository Limited (NSDL)
In the depository system, securities are held in depository accounts, which is more or less similar to holding hunds in bank accounts. Transer of ownership of securities is done through simple account transers. The enactment of Depositories Act in 1996 paved the way for establishment of NSDL., the first depository in India.
It holds more than 85% of the securities held in dematerialised mode in India, is the first and the largest depository in India. Promoted by institutions of national stature viz.; IDBI, UTI and NSE responsible for economic development of the country, NSDL has established a national infrastructure that handles most of the securities held and settled in dematerialised form in the Indian capital markets. NSDL services more than 9 million investors through its participants from over 7,300 locations across 800 cities / towns across India. NSDL holds securities valued at more than US$ 1 trillion.
NSDL offers facilities like dematerialisation i.e., converting physical share certificates to electronic form; rematerialisation i.e., conversion of securities in demat form into physical certificates etc.
Nasdaq
Nasdaq stands for the National Association of Securities Dealers Automated Quotation System. Unlike the New York Stock Exchange where trades take place on an exchange, Nasdaq is an electronic stock market that uses a computerized system to provide brokers and dealers with price quotes. It is an electronic stock market-first in the would-run by the National Associationof Securities Dealers. many of the stocks traded through Nasdaq ae in the technology sector.
Dow Jones Index
The New York Stock Exchange (NYSE) index, which reflects the movement of the world's first stock market. It is composed of the 32 most traded stocks of the NYSE. Currently there are three Don Jones Indices: The Don Jones Industrial Averge (DJIA). The Dow Jones Transport Average (DJTA) and finally DJUA (Dow Jones Utility Average).
In recent years, broader indices such as th Standard & Poor's 500 (for large companies), the Russell 2000 (for smaller sompanies) and the Wilshire 5000 (for an especially broad measure) have gained currency, in part due to the rising popularity of index investing.
Important indices in the world
Market index is a number to indicate the average movment of prices of a securities market. It usually tracks select stocks.
American Dow Jones Industrial Average and S&P Index
British FTSE 100: It is a share index of the 100 most highly capitalised companies listed on the London Stock Exchange. The index began in 1984 with a base level of 1000. The index is maintained by the FTSE Group an independent company which originated as a joint venture between the Financial Times and the London Stock Exchange.
French CAC 40
German DAX
Japanese Nikkei 225
Indian Sensex and Nifty
Australian All Ordinaries
Hong Kong Hang Seng Index
South Dorea's Kospi
Straits Times Index STI of Singapore
Bovespa Index
RTS Index (RTSI) is an index of 50 Russian stocks that trade on the RTS Stock Exchange in Moscow
SSE (Shenzhen Stock Exchange) Composite Index-China
SSE (Shanghai Stock Exchange ) composite index-China
Ethical investing
A notable specialised index type is those for ethical investing indexes that include only those companies sstisfying ecological or social criteria, e.g. those of Dow Jones Sustainability Index.
Ponzi scheme or pyramid scheme
A Ponzi scheme is a fraudulent investment operation that pays high returns to investors and promises higher returns to those who join the scheme later. the payments are done from investors own money or money paid by subsequent investors rather than from any actual profit earned because it is not possible to earn such high reurns on any investment. The system is destined to collapse because the earnings, if any, are less than the payments. The scheme is named after Charles Ponzi, who became notorious for using the technique after emigrating from Italy to the United States in 1903.
Decoupling
It means that a nation's economy may have an autonomous logic and need not be entirely dependent on the global economy. For example, if the world goes into a recession, all counties need not. India, for example grew at 6.7% (2008 - 09) while the USA and teh west were contracting. Reflecting the economic realities, equity markets also perform autonomously after a point. It is called decoupling that is, isolation from the rest.
China is more integrated with the world as itss economy is driven by exports. However, even china is decoupled as it has a lot of domestic consumption driving its growth.
Clause 49
Clause 49 of the Listing agreement to the Indian stock exchange came into effect in 2005.
In has been formulated for the improvement of corporate governance in all listed companies as it mandates that there should be certain independnt directors on the Board of a Company.
IDR
Indian Depository Receipts are ussued by a non-Indian company to Indian investors for its listing on Indian stock exchanges. It is like ADR.