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Stock Market In
India
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Various Markets & Its Features
Development of securities market in India
Regulation of securities Market
Primary market
Secondary market
Trading and settlement
Clearing and settlement procedures
Covering in Lesson
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Existence of buyers and sellers
Existence of price for every asset
Allocation of resources
Existence of regulatory mechanism
Essential Features of a Market
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Breadth
Depth
Information arbitrage efficiency
Fundamental valuation efficiency
Full insurance efficiency
Operational efficiency
Allocational efficiency
Properties of efficient market
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Securities market
◦ Equity Market
◦ Debt Market
 Government securities Market (gilt securities)
 Corporate Securities
 Money Market
◦ Derivative Market
 Options Market
 Futures Market
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Foreign exchange market
Classification of markets
Primary Market: it deals in the issuance of
new securities and bring the savers and
users of capital together.
Secondary Market: it is the financial market
where previously issued securities and
financial instruments such as stock,
bonds, options, and futures are bought
and sold.
It provide liquidity to the investors.
It helps the players to keep transaction cost
very low.
Functions of the market
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1875 BSE established as 'the native Share and
Stock Brokers Association‘
1956 BSE became the first stock exchange to be
recognized under the Securities Contract Act.
1993 NSE recognized as a stock exchange.
2000 Commencement of Internet trading at NSE.
2000 NSE commences derivatives trading (Index
futures)
2001 BSE commences derivatives trading
29 August 2008 NSE started trading in currency
derivatives
Milestones in development of
Indian Stock Market
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Objectives:
◦ To protect the interest of the investors in
securities
◦ To promote the development of securities
market in India
◦ To regulate the securities market
Securities and exchange board
of India
Important Functions of SEBI
1. Regulating the business in stock exchanges and any other securities
markets
2. Recognition and regulation of the stock exchanges
3. Registering and regulating the working of the depositories [participants],
custodians of securities, foreign institutional investors, credit rating
agencies
4. Registration of FII
5. Registering and regulating the working of venture capital funds and
collective investment schemes, including mutual funds
6. Promotion and regulation of Self regulatory organization.
7. Prohibiting fraudulent and unfair trade practices relating to securities
markets
8. Conducting research relating to securities market.
Departments of SEBI
1)MARKET INTERMEDIARIES REGULATION AND SUPERVISION DEPARTMENT
(MIRSD)
2) MARKET REGULATION DEPARTMENT (MRD)
3) DERIVATIVES AND NEW PRODUCTS DEPARTMENT (DNPD)
4) CORPORATION FINANCE DEPARTMENT (CFD)
5) INVESTMENT MANAGEMENT DEPARTMENT (IMD)
6) INTEGRATED SURVEILLANCE DEPARTMENT (ISD)
7) INVESTIGATIONS DEPARTMENT (IVD)
8) ENFORCEMENT DEPARTMENT (EFD)
9) LEGAL AFFAIRS DEPARTMENT (LAD)
10 ) ENQUIRIES AND ADJUDICATION DEPARTMENT (EAD)
11) OFFICE OF INVESTOR ASSISTANCE AND EDUCATION (OIAE).
12 ) GENERAL SERVICES DEPARTMENT (GSD)
13)RESEARCH AND TRAINING DEPARTMENT (RTD).
14) OFFICE OF THE CHAIRMAN (OCH)
15) THE REGIONAL OFFICES (RO’s)
PRIMARY EQUITY MARKET
• PUBLIC ISSUE
• RIGHTS ISSUE
• PRIVATE PLACEMENT
• PREFERENTIAL ALLOTMENT
ISSUE TYPE
OFFER PRICE
DEMAND
PAYMENT
Fixed Price
Issues
Price at which the
securities are offered
and would be allotted
is made known in
advance to the
investors
Demand for
the securities
offered is
known only
after the
closure of the
issue
100 % advance payment is
required to be made by the
investors at the time of
application.
Book Building
Issues
A 20 % price band is
offered by the issuer
within which
investors are allowed
to bid and the final
price is determined
by the issuer only
after closure of the
bidding.
Demand for
the securities
offered , and
at various
prices, is
available on a
real time
basis..
10 % advance payment is
required to be made by the
QIBs along with the
application, while other
categories of investors have to
pay 100 % advance along with
the application.
Reverse Book Building
The reverse book building is an efficient price
discovery mechanism of de-listing of securities,
which is provided for capturing the sell orders on
online basis from the shareholders through
respective BRLM.
Secondary Market refers to a market where
securities are traded after being initially
offered to the public in the primary
market and/or listed on the Stock
Exchange.
SEBI’s role in Secondary Markets
NSCCL
Listing of Securities
Secondary Market
Provide liquidity to securities;
Mobilize savings for economic
development;
 Protect interest of investors by
ensuring full disclosures
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Objectives of the listing
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Initial listing—First time listing
Listing of public issue - Listing of
additional shares or debentures of
already listed entity.
Listing of rights issue of shares and
debentures
Listing of Bonus issue of shares
Listing of shares issued on
amalgamation, mergers etc.
Types of the Listing
Screen based system started by NSE
which is followed by BSE and other
regional stock exchanges
 NSE has an order driven system
 OTCEI is a quote
 BOLT (BSE Online trading) is a mix of
order driven and quote driven system
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Trading and settlement
Market timings
 Trading Process
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Locating a broker
Placement of an order
Order sent to stock exchange
Order is executed.
Trading and settlement
Depository system
BANK
DEPOSITORY
Holds funds in an account
Holds securities in an
account
Transfers funds between
Transfers securities
accounts on the instruction between accounts on the
of the accountholder
instruction of the BO
account holder
Facilitates transfer without Facilitates transfer of
having to handle money
ownership without having
to handle securities
Facilitates safekeeping of
Facilitates safekeeping of
money
securities
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Dematerialization
Account transfer and recognition
Corporate actions
Pledge and hypothecation
Linkages with clearing system
Functions of Depository
A depository participants is an agent of
the depository and intermediaries
between the depository and the investors.
 A DP has to register with SEBI to offer
depository related services.
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Depository participants (DP)
Investor approach DP to open an account.
 Then he has to submit the shares in physical
form to DP for dematerialization.
 DP will intimate the NSDL about the investor’s
intention and then submit the share certificates
to the registrar and transfer agent.
 On confirming the genuineness of certificates the
registrar destroys them and sends the
confirmation of dematerialization of shares to
NSDL.
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Process of dematerialization
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Filling up transfer deeds and lodging the
same with the company for transfer is not
necessary.
There would not be any bad deliveries.
Exemptions from paying stamp duty on
transfer of shares.
Shares purchased in electronic form will
be transferred to the investor’s name
within a day of completion of settlement.
Faster payment on sale of shares
No scope for forgery of share certificates
Advantage of the depository
system
A group
B1 Group (medium Sized, Inconsistent
profit, less liquidity)
 B2 Group (Small companies, very low
trading, poor in profit generation)
 Z Group (non compliance, poor
companies)
 F Group (debt Market)
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Category of shares at BSE
LIMIT ORDER BOOK
Shares
Buyside
500 501 502 503 504
Sellside
505
506 507 508
Limit Price
509 510 511 512
TYPES OF ORDERS
Limit Order
Those who place limit order
supply liquidity
Market Order
Those who place market order
demand liquidity
SETTLEMENT
• Security transactions are settled through electronic
delivery facilitated by depositories
• Presently, the settlement of all trades is a rolling
settlement on a T+2 basis
In case of sale:BO will give delivery instruction through Delivery
Instruction Slip (DIS) to DP to debit his account and credit
the broker’s account. Such instruction should reach the
DP’s office at least 24 hours before the pay-in, failing
which, DP will accept the instruction only at the BO’s risk.
ETF
An ETF is a basket of securities that is traded on the stock
exchange, akin to a stock. So, unlike conventional mutual
funds, ETFs are listed on a recognised stock exchange.
Their units can be bought and sold directly on the
exchange, through a stockbroker during the trading hours.
Circuit Breakers
In case of a 10% movement of either of these indices, there would
be a 1-hour market halt if the movement takes place before 1 p.m.
In case the movement takes place at or after 1 p.m. but before
2.30 p.m. there will be a trading halt for ½ hour. In case the
movement takes place at or after 2.30 p.m. there will be no
trading halt at the 10% level and the market will continue trading.
In case of a 15% movement of either index, there will be a 2-hour
market halt if the movement takes place before 1 p.m. If the 15%
trigger is reached on or after 1 p.m. but before 2 p.m., there will
be a 1 hour halt. If the 15% trigger is reached on or after 2 p.m.
the trading will halt for the remainder of the day.
In case of a 20% movement of the index, the trading will be halted
for the remainder of the day.
Circuit filters On individual stocks
When applied to individual stocks, circuit filters are
known as price bands or price filters.
There are no circuits on the 30 stocks included in the
Sensex or the 50 included in the Nifty.
The filter bands are in the range of 2%, 5%, 10% and
20%.
Buy back of shares
Buyback is the reverse of issue of shares by a company.
In buy back, company offers to take back its shares
owned by the investors at a specified price; this offer can
be binding or optional to the investors.
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