ANDHRA LOYOLA COLLEGE
(AUTONOMOUS)
VIJAYAWADA – 520008
“A COLLEGE WITH POTENTIAL FOR EXCELLENCE”
DEPARTMENT OF COMMERCE
A STUDY ON”STOCK EXCHANGE & SEBI SERVICES – BSE & NSE”
Under The Guidance Of
Mr .P. Ramalinga Prasad Sir
Submitted By
SK. JANI SAIDA(195110)
K. RAJA (195122)
Y. MANI RATNA RAJU(195150)
V. CHANDRA SEKHAR REDDY(195158)
SK. SAIDA(195162)
SK. KAJA(195166)
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ANDHRA LOYOLA COLLEGE (AUTONOMOUS)
VIJAYAWADA – 520008
“A COLLEGE WITH POTENTIAL FOR EXCELLENCE”
Accredited at A+ Grade with a CGPA of 3.66/4.00 in 3rd Cycle by NAAC
DEPARTMENT OF COMMERCE
CERTIFICATE
This is to certify that the dissertation record of project work done on “A STUDY ON
STOCK EXCHANGE – BSE & NSE”, done by SK. JANI SAIDA, K. RAJA, Y.MANI,
V.CHANDRA SEKHAR, SK. SAIDA, SK.
KAJA for the partial fulfilment of the requirement for the award of the Bachelor Of
Commerce Degree as a part of the curriculum during the academic year 2021-2022
Head of the Department
Under Guidance Of
Dr Syam Sundar
P. Ramalinga Prasad
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CHAPTER - 1
INTRODUCTION
“Project Report on Working of Stock Exchange & SEBI with reference to NSE &
BSE”
STOCK EXCHANGE :
A capital market deals in financial assets, excluding coin and currency. Banking accounts compromises the
majority of financial assets. Pension and provident funds insurance policies shares and securities. The stock
exchange is the important segment of its capital market. If the stock exchange is well regulated function smoothly,
then it is an indicator of healthy capital market. If the state of the stock exchange is good, the overall capital
market will grow and otherwise it can suffer a great set back which is not good for the country. The government
at various stages controls the stock market and the capitals market. A Stock Exchange is an exchange where
stockbrokers and traders can buy and sell securities, such as shares of stock, bonds, and other financial
instruments.
S
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Securities provide for investor.
T
-
Tax Benefits planning and exemption.
O
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Optimum return on investment.
C
-
Cautious Approach.
K
-
Knowledge of Market.
Ex
-
Exchange of Securities Transacted.
C
-
Cyclopaedia of Listed Companies.
H
-
High Yield.
A
-
Authentic Information
N
-
New Entrepreneur encouraged.
G
-
Guidance of Investor & Company.
E
-
Equity
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Stock exchange may also provide facilities for the issue and redemption of such securities and instruments and
capital events including the payment of income and dividends. Securities traded on a stock exchange include stock
issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchange often
function as” continuous auction “markets with buyers and sellers consummating transactions via open outcry at a
central location such as the floor of the exchange or by using an electronic trading platform.
Control of Stock Exchange :Control of stock exchange is done an elected body of members. These bodies are known by
different names in different stock exchange for example, the BOMBAY, INDORE and
AHEMDABAD stock exchange are managed by a ‘governing board’. ‘Council of management’
governs the MADRAS stock exchange. A committee manages the CALCUTTA stock exchange.
While the ‘ board of director’ manages stock exchange.
These governing bodies are powerful bodies enjoying extensive administrative power of
management and control over their respective stock exchange the day-to-day function of the stock
exchanges are executed by the sub-committee like the ‘defaulters committee’ ‘listing committee’,
‘settlement committee’ etc.
History of Stock Exchange :The first stock exchange was established in London in the year 1773. Just after establishment
of London stock exchange various countries like France, Germany and USA also established their
own stock exchange markets. In India, the first exchange established in Bombay in the year 1875.
Later, in year 1908, Calcutta stock exchange was established which was recognized in the company
in 1923. Mean which in 1920 the madras stock exchange limited in 1973. So far the government
of India has recognized 22 stock exchange , which was located at major business centers in different
parts of country.
Till the mid fifties the stock exchange was governed by their own bye laws and regulations with
very little interface by the government. In the year 1925, the government of Bombay promulgated
an act “securities contracts and control act, 1625 for regulation and the stock exchange. During the
world was second trading outside the stock exchange flourished with adverse effect on investor’s
confidence due to base-less issues and higher rate of liquidation of companies. In 1956, the center
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government passed contracts (regulation) act 1956, which came into force through out the country
on 20th Feb. 1957.
STOCK TRADING OVERVIEW
The marketing of the securities on the stock exchange can be done through member of the stock
exchange .These member can be either individuals or corporate bodies. For the process of trading
in stock exchange there is the basic need for a transaction between an individual and the broker
execute customer's order to buy or sell on the stock exchange trading ring. The exchange of scrip
between the member of the exchange in from of buying or selling is called trading Broker is the
member of recognized stock exchange and help the customers in buying or selling the securities
for the brokerage that he receives.
Types of Stock Trading :Trading in stock exchange is conducted in two ways:
• Ready delivery contract.
• Forward delivery contract.
BASKET TRADING SYSTEM
The Basket Trading System provides the arbitrageurs an opportunity to take advantage of price
differences in the underlying Sensex and Futures on the Sensex by simultaneous buying and selling
of baskets comprising the Sensex scrips in the Cash Segment and Sensex Futures. This is expected
to provide balancing impact on the prices in both cash and futures markets. The Exchange has
commenced trading in the Derivatives Segment with effect from June 9, 2000 to enable the
investors to, inter-alias, hedge their risks. Initially, the facility of trading in the Derivatives Segment
was confined to Index Futures. Subsequently, the Exchange has introduced the Index Options and
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Options & Futures in select individual stocks. The investors in cash market had felt a need to limit
their risk exposure in the market to movement in Sensex. To participate in this system, the memberbrokers need to indicate number of Sensex basket(s) to be bought or sold, where the value of one
Sensex basket is arrived at by the system by multiplying Rs.50 to prevailing Sensex. For e.g., if the
Sensex is 4000, then value of one basket of Sensex would be 4000 x 50= i.e., Rs. 2,00,000/-. The
investors can also place orders by entering value of Sensex portfolio to be brought or sold with a
minimum value of Rs. 50,000/- for each order.
Procedure of Stock Trading :1.Select of broker
The first step is buying or selling of share is to select a broker for transaction business on behalf of
the investor. The trading of securities on the stock exchange can be done through members of the
exchange.
An investor prefers to select a broker who shall.
Act with due skill. Care and diligence in the conduct of all his business.
Not create false market either singly or in concert with other.
2 . Opening An Account With The Broker
The next step to open account with the broker. It helps the investor to provide his credit worthiness,
if the clients were not to do margin money with the broker.
3.Selection Of Securities
This is application for buying securities. The investor may be consulted with broker and take advise
for selection of securities.
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4.Selection Of Time For Trading
This is important to get the best advantage from buying or selling the securities.
5. Placing an Order
Various method of placing an order with the broker has been evolved to give the broker leverage
when he is on the floor of the stock exchange.
6. Preparation of Contract Note
SEBI circular of 4th Feb. 1991 requires that all member of the recognized stock exchange issue
contract note to the investors on the execution of trade. Brokers, therefore issue contract note to the
client, which gives the name of the company, price of trade, brokerage, time of execution, provision
regarding arbitration etc. in term of the bye-laws of stock exchange, this is statutory requirement
and mandatory.
7. Settlement
The settlement is the process where by payment is made by brokers who have made purchase and
share delivery by those brokers who have made sales.
STOCK BROKERS
SEBI registered stock – brokers interested in providing Internet based trading services will be
required to apply to the respective stock exchange for a formal permission. The stock exchange
should grant approval or reject the application as the case may be, and communicate its decision to
the member within thirty calendar days of the date of completed application submitted to the
exchange.
The Exchange closely monitors outstanding position of top buying member-brokers and top selling
member-brokers on a daily basis. For this purpose, it has developed various market monitoring
reports based on certain pre-set parameters. These reports are scrutinized by officials of the
Surveillance Dept. to ascertain whether a member-broker has built up excessive purchase or sale
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position compared to his normal level of business. Further, it is examined whether purchases or
sales are concentrated in one or more scrips, whether the margin cover is adequate, whether
transactions have been entered into on behalf of institutional clients and even the quality of scrips,
i.e., liquid or illiquid is looked into in order to assess the quality of exposure. The Exchange also
scrutinizes the pay-in position of the member-brokers and the member-brokers having larger funds
pay-in positions are at times, at the discretion of the Exchange, required to make advance pay-in
on T+1 day instead of on T+2 day.
BASIC REQUIREMENTS FOR STOCK BROKERS :-
Trading will be on existing stock exchanges through order routing system for execution of trades.
Therefore, stockbrokers are to comply with the following before the start of trade on Internet.
The broker must have a net worth of Rs. 50lakh if he wants to avail the facility of Internet for his
own.
Provision for maintenance of adequate backup system.
The software system to be used by him should be secured and reliable.
To employ the qualified staff for this purpose.
To send order/trade confirmation to the client also through e-mail.
The contract notes must be issued to the clients as per existing regulation within 24 hours of the
execution of trades.
The broker and his client should use authentication technologies.
The above is some of the important pre-requisites for the stockbroker should intend to take benefits
of trading on Internet. However, detailed guidelines issued by the SEBI for the stock exchange
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TYPES OF STOCK BROKERS :-
Commission Broker
Near about all the brokers buy and sell securities for earning a commission for investor point of
view he is the most important person and responsibility is to buy and sell stoke for his customer. It
means that he acts as an agent of investor and earns commission for his services rendered. The
broker is also an independent dealer in securities. He purchase and sell securities in his own name
but he is not allowed to deal with non-member.
Jobber
He is an professional speculator who works for a profit called ‘turn’ he makes a continuous auction
in the market in the stoke in which he specialized. He trades in the market evens for small difference
in the prices and helps to maintain liquidity in the stoke exchange.
Floor Broker
The floor broker purchases and sell shares for the other broker on the floor of the exchange. He is
an individual member owns his seat and receives his own commission on the orders he execute.
He helps other brokers when they are buy and as compensation receives a portion the broker.
Odd lit dealer
For trading in stock exchange there a certain number of share a fixed to be transacted in a lot, this
is known as round lat which is usually a, 100 share a anything less than the round lot are add lot. If
a person is in possession of add lot of share i.e. 10, 20, 30, 40 etc. They he will has to look for the
add lot dealer.
Arbitrageur
A person who is specialist in dealing with securities in different stoke exchange centers at the same
time. He makes a profit by the difference in the piece prevailing in different centers of the market
activity. For example the rte of a certain scrip is higher in some stoke exchange than other on. In
this case the broker will buy the scrip from the marked lower price and will sell the scrip in the
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market at higher price. The profit of the arbitrageur depends on the ability to get the prices from
different centres before trading in other stoke exchanges.
SEBI (SECURITIES EXCHANGE BOARD OF INDIA)
INTRODUCTION:
The SEBI is a capital market company, which regulate the Indian capital market. The government
of India has enacted an act (SEBI Act 1952), which provides for the establishment of a board to
protect the interest of investor in securities. The SEBI has emerged as a monitoring institution of
the country fir the development and regulation of stock market through establishing rules and
regulations, SEBI has issued from time to time guideline to insider trading listing of securities,
registration of intermediaries mutual funds etc.
The Securities and Exchange Board of India describes the basic functions of the Securities and Exchange
Board of India .It prohibits fraudulent and unfair trade practices, reduce malpractices, establishes code of
conduct and promotes healthy speculation.
SEBI has to be responsive to the needs of three groups, which constitute the market:
•
issuers of securities
•
investors
•
market intermediaries
SEBI has three powers rolled into one body: quasi-legislative, quasi-judicial and quasi-executive.
It drafts regulations in its legislative capacity, it conducts investigation and enforcement action in
its executive function and it passes rulings and orders in its judicial capacity. Though this makes it
very powerful, there is an appeal process to create accountability. There is a Securities Appellate
Tribunal which is a three-member tribunal and is currently headed by Justice “Tarun Agarwal”,
former Chief Justice of the Meghalaya High Court .A second appeal lies directly to the Supreme
Court. SEBI has taken a very proactive role in streamlining disclosure requirements to international
standards.
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Powers :For the discharge of its functions efficiently, SEBI has been vested with the following powers:
•
To approve by−laws of Securities exchanges.
•
To require the Securities exchange to amend their by−laws.
•
Inspect the books of accounts and call for periodical returns from recognised Securities
exchanges.
•
Inspect the books of accounts of financial intermediaries.
•
Compel certain companies to list their shares in one or more Securities exchanges.
Registration of Brokers and sub-brokers
SEBI Committees
•
Technical Advisory Committee
•
Committee for review of structure of infrastructure institutions
•
Advisory Committee for the SEBI Investor Protection and Education Fund
•
Takeover Regulations Advisory Committee
•
Primary Market Advisory Committee (PMAC)
•
Secondary Market Advisory Committee (SMAC)
•
Mutual Fund Advisory Committee
•
Corporate Bonds & Securitisation Advisory Committee
Achievements
SEBI has enjoyed success as a regulator by pushing systematic reforms aggressively and
successively. SEBI is credited for quick movement towards making the markets electronic and
paperless by introducing T+5 rolling cycle from July 2001 and T+3 in April 2002 and further to
T+2 in April 2003. The rolling cycle of T+2means, Settlement is done in 2 days after Trade date.
SEBI has been active in setting up the regulations as required under law. SEBI did away with
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physical certificates that were prone to postal delays, theft and forgery, apart from making the
settlement process slow and cumbersome by passing Depositories Act, 1996.
SEBI has also been instrumental in taking quick and effective steps in light of the global meltdown
and the Satyam fiasco.In October 2011, it increased the extent and quantity of disclosures to be
made by Indian corporate promoters. In light of the global meltdown, it liberalised the takeover
code to facilitate investments by removing regulatory structures. In one such move, SEBI has
increased the application limit for retail investors to ₹ 200,000, from ₹ 100,000 at present.
Controversies
Supreme Court of India heard a Public Interest Litigation (PIL) filed by India Rejuvenation
Initiative that had challenged the procedure for key appointments adopted by Govt of India. The
petition alleged that, "The constitution of the search-cum-selection committee for recommending
the name of chairman and every whole-time members of SEBI for appointment has been altered,
which directly impacted its balance and could compromise the role of the SEBI as a watchdog."
On 21 November 2011, the court allowed petitioners to withdraw the petition and file a fresh
petition pointing out constitutional issues regarding appointments of regulators and their
independence. The Chief Justice of India refused the finance ministry's request to dismiss the PIL
and said that the court was well aware of what was going on in SEBI. Hearing a similar petition
filed by Bengaluru-based advocate Anil Kumar Agarwal, a two judge Supreme Court bench of
Justice Surinder Singh Nijjar and Justice HL Gokhale issued a notice to the Govt of India, SEBI
chief UK Sinha and Omita Paul, Secretary to the President of India.
Further, it came into light that Dr. K. M.Abraham(the then whole time member of SEBI Board)
had written to the Prime Minister about malaise in SEBI. He said, "The regulatory institution is
under duress and under severe attack from powerful corporate interests operating concertedly to
undermine SEBI". He specifically said that Finance Minister's office, and especially his advisor
Omita Paul, were trying to influence many cases before SEBI, including those relating to Sahara
Group, Reliance, Bank of Rajasthan and MCX
SEBI and Regional Securities Exchanges
SEBI in its circular dated May 30, 2012 gave exit – guidelines for Securities exchanges. This was
mainly due to illiquid nature of trade on many of 20+ regional Securities exchanges. It had asked
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many of these exchanges to either meet the required criteria or take a graceful exit. SEBI's new
norms for Securities exchanges mandates that it should have minimum net-worth of Rs. 1 billion
and an annual trading of Rs. 10 billion. The Indian Securities market regulator SEBI had given the
recognized Securities exchanges two years to comply or exit the business.
Process of de-recognition and exit
Following is an excerpts from the circular:
Exchanges may seek exit through voluntary surrender of recognition.
Securities where the annual trading turnover on its own platform is less than Rs 10 billion can
apply to SEBI for voluntary surrender of recognition and exit, at any time before the expiry of two
years from the date of issuance of this Circular.
If the Securities exchange is not able to achieve the prescribed turnover of Rs 10 billion on
continuous basis or does not apply for voluntary surrender of recognition and exit before the expiry
of two years from the date of this Circular, SEBI shall proceed with compulsory derecognition and
exit of such Securities exchanges, in terms of the conditions as may be specified by SEBI.
Securities Exchanges which are already de-recognised as on date, shall make an application for exit
within two months from the date of this circular. Upon failure to do so, the de-recognised exchange
shall be subject to compulsory exit process.
SEBI DEPARTMENTS :-
SEBI regulates Indian financial market through its 20 departments.
•
Commodity Derivatives Market Regulation Department (CDMRD)
•
Corporation Finance Department (CFD)
•
Department of Economic and Policy Analysis (DEPA)
•
Department of Debt and Hybrid Securities (DDHS)
•
Enforcement Department – 1 (EFD1)
•
Enforcement Department – 2 (EFD2)
•
Enquiries and Adjudication Department (EAD)
•
General Services Department (GSD)
•
Human Resources Department (HRDM)
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•
Information Technology Department (ITD)
•
Integrated Surveillance Department (ISD)
•
Investigations Department (IVD)
•
Investment Management Department (IMD)
•
Legal Affairs Department (LAD)
•
Market Intermediaries Regulation and Supervision Department (MIRSD)
•
Market Regulation Department (MRD)
•
Office of International Affairs (OIA)
•
Office of Investor Assistance and Education (OIAE)
•
Office of the chairman (OCH)
Regional offices (ROs).
ROLE AND FUNCTIONS OF SEBI :
•
Primary Markets: SEBI has regulated the primary market through
•
The regulation of issuers’ access to market
•
Regulation of information production at the time of issue
•
Regulation of processes and procedures relating to the issuance of securities
•
Disclosure: Disclosure standards are not limited to according information but was extended to
other issue related communications such as advertisements.
•
Corporate Governance: SEBI has made a constant effort to improve the standards of Corporate
Governance in India.
•
Settlement Systems
•
Dematerialization of securities
•
Institutionalization of Trading and ownership of securities
•
Market Integrity and Insider Trading
•
To help in developing the capital market so that the business activities don’t get hampered
•
To bring companies and organizations under its regulation so that the interests of investors are
not harmed
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•
To curtail unethical trading which includes insider trading also
•
To get done the registration of Mutual Funds and Systematic Investment Plans(SIPs) and all
such funds comply with laid down rules and regulations of Mutual funds and SIPs
To impart
training to market participants on a regular basis
OBJECTIVES OF SEBI :-
The fundamental objective of SEBI is to safeguard the interest of all the parties involved in trading.
It also regulates the functioning of the stock market. SEBI’s objectives are: · To monitor the
activities of the stock exchange.
· To safeguard the rights of the investors
· To curb fraudulent practices by maintaining a balance between statutory regulations and self
regulation.
· To define the code of conduct for the brokers, underwriters, and other intermediaries.
•
To bring companies and organizations under its regulation so that the interests of investors are not
harmed
•
To curtail unethical trading which includes insider trading also
•
To get done the registration of Mutual Funds and Systematic Investment Plans(SIPs) and all such
funds comply with laid down rules and regulations of Mutual funds and SIPs
to market participants on a regular basis
•
To study the capital market of India
•
To study the mutual fund registration in SEBI
•
To study the protection given to the investors by SEBI
•
To study the government regulations to stop the insider trading
•
To study the role of SEBI in Indian economy
•
To regulate the activities of stock exchange
•
To protect the rights of investors
•
To ensure the safety of investments
•
To prevent fraudulent and malpractices in stock market
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To impart training
•
To develop a code of conduct for intermediaries
STRUCTURE OF SEBI :-
SEBI has a corporate framework comprising of various departments each managed by a department
head. There are about 20 departments under SEBI. Some of these departments are corporation
finance, economic and policy analysis, debt and hybrid securities, enforcement, human resources,
investment management, commodity derivatives market regulation, legal affairs, and more. The
hierarchical structure of SEBI consists of the following members:
The chairman of SEBI is nominated by the Union Government of India.
Two officers from the Union Finance Ministry will be a part of this structure.
One member will be appointed from the Reserve Bank of India.
Five other members will be nominated by the Union Government of India.
Mutual funds schemes must invest only in the listed non-convertible debentures (NCD). Any fresh
investment in commercial papers (CPs) and equity shares are allowed in listed securities as per the
guidelines issued by the regulator.
Liquid and overnight schemes are no longer allowed to invest in short-term deposits, debt, and
money market instruments that have structured obligations or credit enhancements.
When investing in debt securities having credit enhancements, a minimum of four times security
cover is mandatory for investing in mutual funds schemes. A prudential limit of 10% is prescribed
on total investment by such schemes in debt and money market instruments.
SEBI ACT and SEBI GUIDELINES :
SEBI was established as a non-statutory body in 1988, entrusted with observing the stock market
activities. The SEBI Act of 1922 converted SEBI into a statutory authority with autonomous powers. The Act
provided SEBI with the authority to regulate capital markets, not just observe but enforce guidelines.
The SEBI Act 1992 covers the following areas:

Composition and actions of the SEBI Board members
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




Powers and Functions of the Board
Fund sources of SEBI, as in grants made available by the Union Government
Rules on Penalties and legal pathways
Defines the judicial authority of SEBI
The extent of powers of the Union Government to supersede SEBI
SEBI also has to adhere to a list of SEBI guidelines, pertaining to areas such as:






Employee Stock Option schemes
Disclosure and Investor Protection norms
Legal Proceedings
Anti-money laundering norms
Listing and delisting of securities
Opening of trading terminals overseas
SEBI LODR REGULATIONS
“Listing Obligations and Disclosure Requirements (LODR)” regulations for SEBI form
one of the most important mandates. The regulation covers the extent of transparency
and disclosures that listed companies have to abide by. In addition to the compulsory
disclosure norms, the regulation also refines the listing agreement, which has to be
entered between the stock exchange and the companies being listed.
The agreement consists of terms and conditions on governance, disclosures, and terms to maintain the listing
status of the company. However, the new regulation in 2015 on LODR intends to consolidate all the previous
amendments into one single document, making the document uniform across different segments of the capital
market.
The SEBI (LODR) Regulations, 2015 entails the following:







Disclosures and obligations that have to be acknowledged by the compliance officers of the listed
company
Listing down obligations uniform to all listed companies
Distinct obligations for certain types of securities
Segregating initial issuance and post-IPO norms
Communication of the companies’ fundraising activities
Establishing timelines for notifying the exchanges of certain events
Bringing SMEs under the ambit of the SEBI (LODR) Regulations
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SEBI New Margin Rules
In September 2020, SEBI implemented new rules on margin pledge. The rule is expected to bring transparency
and prevent misuse of clients’ securities by brokerage firms. The new margin rules were directed to come into
effect from June 1, but were delayed due to pandemic pushing the implementation date to September 1.
The new margin rules by SEBI mandate the following:





The stock, being pledged, is to remain in the investor’s de-mat account. As the stock is not changing
accounts, the benefits from corporate events accrue directly to the investors
Upfront collection of margins by brokers for any purchase or sale of securities, penalizing any sort of
failure to do so. Clients could meet the margin requirements by the end of the day, which is now
changed to the beginning of the day
Power of Attorney (POA) cannot be assigned in the favor of the brokers for pledging. As under the old
system, brokers could demand POA from the investors to execute decisions on their behalf
Margin pledge created separately for investors requiring margin
Buy Today Sell Tomorrow (BTST) not allowed anymore for shares bought on margin. Investors are
required to honor the delivery of share (T+2 days is the usual settlement period). Typically, investors
would use intraday realized profits to meet the margin requirements, which is now amended by the new
regulations. For a BTST trade, it can be initiated only if the net available margin is equal to or greater
than 20 percent of the transaction value.
GOVERNING REGULATIONS:
Securities& Exchange Board Of India Act, 1992
SEBI (Insider Trading) Regulations, 1992
SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2002
SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2003
SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2008 SEBI
(Prohibition of Insider Trading) (Amendment) Regulations, 2011
SEBI (Prohibition of Insider Trading) Regulations, 2015
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Investor Protection Measures by SEBI :-
Investors are the pillar of the financial and securities Market. They determine the level of activity
in the market. They put the money in funds, stocks, etc. to help grow the market and thus, the
Economy. It thus very important to protect the interests of the investors. Investor protection
involves various measures established to protect the interests of investors from malpractices.
Securities and Exchange Board of India (SEBI) is responsible for regulations of the Mutual Funds
and safeguard the interests of the investors. Investor protection measures by SEBI are in place to
safeguard the investors from the malpractices in shares, the stock market, Mutual Fund, etc.
Investor Protection
The investor insurance money is a symbol of assurance. In simpler words investor protection
implies that up to a specific breaking point, you get your cash back if the dealer goes into
Bankruptcy or submits extortion. It is a significant Factor to consider when you open a Trading
Account or a record with an online dealer. At the point when you open an exchanging account at a
brokerage, you normally get financial backer security.
The Role of SEBI in Investor Protection
SEBI has given out various methods and measures to ensure the investor protection from time to
time. It has published various directives, driven many investor awareness programmes, set up
investor protection Fund (IPF) to compensate the investors. We will look into the investor
protection measures by SEBI in detail:
To begin with, SEBI constructs the limit of financial backers through instruction and attention to
empower a financial backer to take educated choices. SEBI tries to guarantee that the financial
backer gets the hang of contributing. In simpler words, SEBI ensures that the investor gets and
utilizes data needed for contributing and assesses different speculation alternatives to suit his
particular objectives.
It helps the investor find out his privileges and commitments in a specific venture, bargains through
enlisted mediators, plays it safe, looks for help if there should be an occurrence of any complaint,
and so on.
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SEBI has been putting together financial backer schooling and mindfulness workshops through
financial backer affiliations and market members, and has been urging market members to sort out
comparable projects.
It keeps a refreshed, far reaching site for training of financial backers. It distributes different sorts
of alerts through media. It reacts to the questions of financial backers through phone, messages,
letters, and face to face for the individuals who visit SEBI office.
Secondly, SEBI makes everything of interest accessible in public domain. SEBI has received
revelation based administrative system. Under this structure, backers and go-betweens unveil
applicable insights concerning themselves, the items, the market and the guidelines so the financial
backer can take educated venture choices dependent on such divulgences. SEBI has endorsed and
screens different introductory and persistent exposures.
Thirdly, SEBI guarantees that the market has frameworks and practices which make exchanges
safe. SEBI has taken different estimates, for example, screen based exchanging framework,
dematerialization of protections and outlined different guidelines to direct delegates. It has also
issued an exchange of protections, corporate rebuilding, etc. to ensure the interests of financial
backers in protections. It additionally guarantees that only legitimate people are permitted to work
on the lookout, each member has motivation to agree with the recommended principles, and the
defaulters are granted praiseworthy discipline.
Lastly, SEBI encourages a redressal of financial backer complaints. SEBI has a far-reaching system
to encourage redressal of financial backer complaints against middle people and recorded
organizations. It circles back to the organizations and middle people who don’t change financial
backers’ complaints, by sending suggestions to them and having gatherings with them. It makes
proper implementation moves as given under the law (counting dispatch of settling, indictment
procedures, bearings ) where progress in redressal of financial backer complaints isn’t good. It has
set up a complete mediation instrument in stock trades and vaults for goal debates of the financial
backers. The stock trades have financial backer security assets to remunerate financial backers
when a dealer is pronounced a defaulter. Store repays financial backers for misfortune because of
carelessness of storehouse or safe member.
20
Investor Protection Measures by SEBI
Investor protection legislation is implemented under the Section 11(2) of the SEBI Act. The
measures are as follows:
•
E-Stock Exchange and other securities market Business regulation.
•
Registering and regulating the intermediaries of the business like brokers, transfer agents, bankers,
trustees, registrars, portfolio managers, investment consultants, merchant bankers, etc.
•
Recording and monitoring the work of custodians, depositors, participants, foreign investors, credit
rating agencies, etc.
•
Registering investment schemes like Mutual fund & venture Capital funds, and regulating their
Functioning.
•
Promotion and controlling of self-regulatory companies.
•
Keeping as check on frauds and unfair trading methods related to the securities market.
•
Observing and reg
•
Evaluating major transactions and Take-over of the companies.
•
Carry out investor awareness and education programme.
•
Train the intermediaries of the business.
•
Inspecting and auditing the security exchanges (SES) and intermediaries. Assessment of fees and
other charges.
SEBI (MUTUAL FUNDS) REGULATIONS 1996 :
Securities and Exchange Board Of India (Mutual Funds) Regulations, 1996 is a set of regulations
in India that govern mutual funds. It is enforced by the Securities and Exchange Board of India (SEBI). The
regulations have been primarily designed to protect the investors.[1] This replace an older set of regulations
from 1993. SEBI had been regulating the mutual fund market since 1991
Mutual funds are managed by Asset Management Companies (AMC), which need to be approved by
SEBI. A Custodian who is registered with SEBI holds the securities of various schemes of the fund. The
trustees of the AMC monitor the performance of the mutual fund and ensure that it works in compliance
with SEBI Regulations.
The firm must be established as a separate AMC to offer mutual funds. The net worth of such a
parent firm or AMC must be at least Rs 50,000,000. Mutual funds dealing exclusively with money
21
markets must register with the Reserve Bank of India (RBI); all other mutual funds must register
with SEBI.
Recently, a self-regulation agency for mutual funds has been set up called the Association of
Mutual Funds of India (AMFI). AMFI focuses on developing the Indian mutual fund industry in a
professional and ethical manner.
AMFI aims to enhance the operational standards in all areas with a view to protect and promote
mutual funds and their stakeholders. To date, there are 44 Asset Management Companies that are
registered with SEBI and are members of AMFI .Some of them are Aditya Birla Sun Life AMC
Limited, BNP Paribas Asset Management India Private Limited, Edelweiss Asset Management
Limited, and Quant Money Managers Limited. A sponsor of a mutual fund scheme, a group of the
company or an associate, which involves AMC of the fund, cannot hold the following in any
form:10% or above of the voting rights and shareholding in the AMC or any other mutual fund
scheme .An AMC cannot have representation on the board of any other mutual fund.
Shareholders can’t hold more than 10% of the shares both directly and indirectly in AMC of the
mutual fund .SEBI Guidelines on Mutual Funds Reclassification Funds must be named based on
the core intent of the fund and asset mix. It should specify the risk associated clearly. SEBI has
suggested 16 classifications for debt funds, ten classifications for equity funds, six classifications
for hybrid, two for solution funds, and two for index funds. SEBI has reclassified large-cap,
midcap, and small-cap based on market cap relative rankings rather than absolute market cap cutoffs The debt fund classification is prescribed based on the duration of the fund and the asset quality
mix. All categories except index funds can only have one fund per classification, i.e. an AMC can
have a maximum of 34 funds other than index funds.
Some of the regulations for mutual funds laid down by SEBI are:
•
A sponsor of a mutual fund, an associate or a group company, which includes the asset
management company of a fund, through the schemes of the mutual fund in any form cannot hold:
(a)10% or more of the shareholding and voting rights in the asset management company or any
other mutual fund. (b) An asset management company cannot have representation on a board of
any other mutual fund.
•
A shareholder cannot hold 10% or more of the shareholding directly or indirectly in the asset
management company of a mutual fund.
22
•
No single stock can have more than 35% weight in the index for a sectoral or thematic index;
the cap is 25% for other indices.
•
The cumulative weight of the top three constituents of the index cannot exceed 65%.
•
An individual constituent of the index should have a trading frequency of a minimum of
80%.
•
AMCs must evaluate and ensure compliance to the norms at the end of every calendar
quarter. The constituents of the indices must be made public by publishing them on their website.
•
New funds must submit their compliance status to SEBI before being launched.
•
All liquid schemes must hold a minimum of 20% in liquid assets such as government
securities (G-Secs), repo on G-Secs, cash, and treasury bills.
•
A debt mutual fund can invest up to only 20% of its assets in one sector; previously the cap
was 25%. The additional exposure to housing finance companies (HFCs) is updated to 15% from
10% and a 5% exposure on securitised debt based on retail housing loan and affordable housing
loan portfolios.
•
As per SEBI’s recommendation, amortisation is not the only method for evaluating debt and
money market instruments. The mark-to-market methodology is also used.
•
An exit penalty will be levied on investors of liquid schemes who exit the scheme within a
period of seven days.
•
Mutual funds schemes must invest only in the listed non-convertible debentures (NCD). Any
fresh investment in commercial papers (CPs) and equity shares are allowed in listed securities as
per the guidelines issued by the regulator.
•
Liquid and overnight schemes are no longer allowed to invest in short-term deposits, debt,
and money market instruments that have structured obligations or credit enhancements.
•
When investing in debt securities having credit enhancements, a minimum of four times
security cover is mandatory for investing in mutual funds schemes. A prudential limit of 10% is
prescribed on total investment by such schemes in debt and money market instruments
23
SCOPE OF SEBI
Securities and Exchange Board of India (‘SEBI’) notified Securities and Exchange Board of India (Listing
Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations 2015’) on 2nd September,
2015. In terms of aforesaid Listing Regulation, every listed entity shall have a policy approved by its Board of
Directors for Determination of material events. Accordingly, the Board of Directors of Almondz Global
Securities Limited approved this “Policy of Determination of Material Events” to ensure the compliance of
Listing Regulation for the purpose of proper, sufficient and timely disclosure of the same to the Stock
Exchange


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
Regulating the stock exchanges and other securities market
Registering and regulating market intermediaries
Prohibiting fraudulent and unfair trade practices relating to securities markets
Promoting investors’ education and training of intermediaries of securities markets
NEED OF THE SEBI
•
To know about the stock-exchange
•
To know the Government Regulations of SEBI
•
To know the Development of Capital market and mutual funds
To stop the unethical trading in
stock market
•
For traders, to know how efficiency and reliability
•
It plays an important role in regulating all the players operating in the Indian capital market
•
It attempts to protect the interest of investors and aims at developing the capital markets by enforcing
various rules and regulations.
24
CHAPTER - 2
RESEARCH METHODOLOGY
The analysis of the project was based on the available information. Any information about the topic is called the
data. Research methodology is a method of collecting all sorts of information and data pertaining to the subject
question. The data was gathered from various sources: primary data and secondary data.
Primary Data:
Primary Data has been collected through well structured comprehensive questionnaires. The questions were
designed keeping in view of the objectives of the study. Two sets of questionnaires were developed, one for the
SBI bank customers and one for the bank execution. In some cases, the researcher also had personal discussion
with the respondents with the objectives of soliciting additional information and using this information to
supplement the information collected through questionnaires. The final sets of questionnaires along with covering
letter were then mailed to a total of 1000 SBI bank customers and 60 bank employees selected via convenient
sampling technique from Sonipat and Rohtak Districts of Haryana state. Following procedure was adopted to
collect data from the targeted respondents.
Secondary Data :
Secondary Data is the data which is available in published form and which was collected earlier by people for
some purposes. There may be various sources of secondary data such as-newspapers, magazines, journals, books,
reports, documents and other published information.
LIMITATIONS
•
The research was carried out in a short period.
•
The due to lack of secondary data source the information gathered may be volatile.
25
•
Though due care was taken to include the related data, there is every possibility of deviation from
the content of project
•
There are chances of occurrence of agreeable errors as the data is explored through secondary
sources may not be reliable
•
As the project is time bound, it is quite impossible to include the relevance of information.
•
The quantitative data used in developing the graphs are of presumptive in few cases.
REVIEW AND LITERATURE
As the activities on a stock market tend to be specialised and not understood by common people , this chapter
will give some definitions and review stock market history , participants ,operations and importance , so as
to serve as a basic for understanding how stock market can help promote investment and trade in a monetary
zone. Besides , review of other studies will be done in this chapter to give various dimensions of stock
market.
DEFINITION:
Although common , the term stock market is somehow abstract for the mechanism that enables the trading
of company stocks. It is also used to describe the totality of all stocks, especially within a country, for
example in the phrase “ the stock market was up today”, or in the term” stock exchange bubble”.
Stock market is different from stock exchange, which is an entity (a corporation or organisation) in the
business of bringing buyers ands sellers together. For example, a stock market in India includes trading of
stocks listed on BSE,NSE.
BEHAVIOUR OF STOCK MARKET:
From the past experience, it is known that investors may temporarily pull financial prices away from the
long term trend level. Over reactions may occur, so that excessive optimism may drive prices unduly high
or expensive pessimism may drive prices unduly low.
According to efficient market hypothesis (EMH), only changes in fundamental factors such as profits,
dividends, ought to affect the share prices. But this largely academic theoretical view point 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.
26
Relation of Stock Market to 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 banks’ traditional 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, as against less than 20 percent in the 2000s.
The major part of this adjustment in financial portfolios has gone directly to shares but 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. .
Empirical Evidences about Stock Market :
Different studies have been carried out by financial economists on the implications of stock market development
for various components of an economy. Relationships have been found to exist between stock market development
and those aspects of an economy, even though some have been controversial, while other relationships have shown
clear and significant correlation.
In this section, review and summary empirical findings are made of three studies, which investigated the
relationships between stock market development and financing choices of firms by Demirguc-Kunt and
Maksimovic (1996); stock market development and financial intermediaries: stylized facts by Demirguc-Kunt
and Levine (1996) and stock market development and long run growth by Levine and Zervos (1996).
Stock Market Development and Financing Choices of Firms:
In many developing countries with emerging stock markets, banks are fearful of stock market development
because they think that stock markets will reduce the volume of their business. This article under review
empirically analysed the effects of stock market development on firms’ financing choices using data from thirty
developing and industrial countries from 1980 to 1991.
Finance literature suggests that stock markets serve important functions even in those economies in which a
well developed banking sector already exists, the reason being that equity and debt financing are in general not
prefect substitutes. Equity financing has a key role in the management of conflicts of interest that may arise
between different stakeholders in the firm. Stock markets also provide entrepreneurs with liquidity and with
opportunities to diversify their portfolios. Stock trading transmits information about the firm’s prospectus.
27
INDUSTRY PROFILE
BOMBAY STOCK EXCHANGE:
The Bombay Stock Exchange (BSE) is a stock exchange located on Dalal Street, Mumbai and is the oldest stock
exchange in Asia. The equity market capitalization of the companies listed on the BSE was US$1 trillion as of
December 2011,making it the 6th largest stock exchange in Asia and the 14th largest in the world.The BSE has
the largest number of listed companies in world. As of December 2011,there are over 5112 listed Indian companies
and over 8196 scrips on the stock exchange. The Bombay Stock Exchange has a significant trading volume.
This stock exchange, Mumbai popularly known as “BSE” was established in 1875 as “The Native share and Stock
brokers association”, has a voluntary non-profit making association. It has evolved over the years into its present
status as the premiere stock exchange in the country. It may be noted that the stock exchanges the oldest one in
Asia, even older than the Tokyo Stock Exchange, which was founded in 1878.The exchange , while providing on
efficient and transparent market for trading in securities, uphold the interests of the investors and ensures redressed
of their grievances, whether against the companies or its own member brokers. It also strives to educate and
enlighten the investors by making available necessary informative inputs and conducting investors education
programs.
BSE, which was earlier known as Bombay Stock Exchange, is the oldest stock exchange in Asia and figures in the
top 10 stock exchanges globally in terms of market capitalization. Founded in 1875, BSE has played a pivotal role in
developing the capital market space in India. Today, it lists almost 6,000 companies, and with a trade speed of 6
microseconds, it is credited as the fastest exchange in the world. To put things in perspective, that’s less than the time
it’ll take you to say “whoa!” Moreover, Sensex (BSE’s equity index), is one of the most widely tracked indexes in
the country.
BSE INDICES:
In order to enable the market participants, analysts, etc.. to track the various ups and downs in the Indian stock
market. The Exchange has introduced in 1986 an equity stock index called BSE-SENSEX that subsequently
became the barometer of the moments of the share prices in the Indian Stock market.
It is a “market capitalization weighted” index of 30 components stocks representing the sample of large, wellestablished and leading companies. The base year of Sensex is 1978-79.The Sensex is widely reported in both
domestic and international markets through print as well as electronic media.
28
Sensex is calculated using a market capitalization weighted method. As per this methodology, the level of index
reflex the total market value of all 30-component stocks from different industries related to particular base period.
The total market value of a company determined by multiplying the price of its stock by the number of shares
outstanding. Statisticians call an index of set of various combined variables(such as price and number of sales) a
composite index. An indexed number is used to represent the results of this calculation in order to make the value
easier to work with and track over a time.
It is much easier to graph chart based on indexed values than one based on actual values world over majority of
the well-known indices are constructed using “market capitalization weighted method”.
In practice, the daily calculation of SENSEX is done by dividing the aggregate market value of the 30 companies
in the index by a number called the Index Divisor. The Divisor is the only link to the original base period value
of the SENSEX. The Divisor keeps the Index comparable over a period or time and if the reference point for the
entire Index maintenance adjustments. SENSEX is widely used to describe the mode in the Indian Stock markets.
Base year average is changed as per the formula
New base year average = Old base year average * (New market value/Old market value)
HISTORY OF STOCK BSE (BOMBAY STOCK EXCHANGE)
BSE Limited (formerly Bombay Stock Exchange) established in 1875 is Asia's first & now the world's fastest
Stock Exchange with a speed of 6 microseconds. BSE is a corporatized and demutualised entity with a broad
shareholder base that includes the leading global exchange- Deutsche Bourse as a strategic partner. BSE provides
an efficient and transparent market for trading in equity debt instruments equity derivatives currency derivatives
interest rate derivatives mutual funds and stock lending and borrowing. BSE is India's biggest bourse in terms of
listed companies with over 5000 companies listed on the exchange. In the year 2002 the name 'The Stock
Exchange Mumbai' was changed to Bombay Stock Exchange.
OBJECTIVES OF BSE:
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To make funds available to entrepreneurs of business class
To ensure maximum possible return on investment to investors
To provide platform for saving
To provide market for purchase and sale of securities
To promote and develop a well regulated market for dealings in securities
To encourage investment culture across the country
29
Organisational Structure of BSE :
The day to day was working, and operations of BSE is managed by the Board of Directors consisting of
a Chairman, a Managing Director, Public Interest Directors and Shareholder Directors. The Board
jointly formulated the policies of BSE and takes a decision relating to the trading of securities, i.e.,
equity, derivatives, etc. affecting the trading of capital markets in India via BSE. Mr Sudhakar Rao is
currently serving as the Chairman of the Board of Directors, BSE.
The board members are elected or appointed members who conferred with the powers, duties and
responsibilities. Further, the management of BSE which oversee the working consists of a Managing Director
and Chief Executive Officer, a Chief Business Officer, a Chief Regulatory Officer, a Chief Financial Officer, a
Chief Information Officer and a Chief of Business Operations.The managing director of the management of
BSE acts as the administrative head who oversee the working of all departments of BSE and all the requisite
officers appointed are accountable to him.
Business Structure of BSE :
The Bombay Stock Exchange is a securities ecosystem which provides a wide range of services starting from a
trading platform to depository services, education, risk management, etc. BSE conducts its business in alliance
with the leading global exchanges such as the Deutsche Borse and Singapore Exchange. Following are the
business carried on by BSE and its subsidiaries, and equity stake of BSE in other entities:
1. The BSE exchange provides trading services to entities dealing ion equities, equity derivatives,
currency derivatives, interest rate derivatives, mutual funds, a platform for small, medium enterprises,
institutional trading platform, corporate debt, listing, foreign institutional investment auction services,
etc.
2. BSE Investments Ltd. provides strategic investment related services.
3. Indian Clearing Corporation Limited which is a subsidiary of BSE carries out the functions of the
clearing, settlement, collateral management and risk management for various segments of BSE.
4. Central Depository Services Indian Limited who is a Depository Participant (“DP”) and is promoted
by BSE carries or facilitates in holding of securities in the electronic form. The investor investing in
the same can open a dematerialised account (“ Demat account”) whereby the investor can avail
facilities of CDSL who being a DP acts as an agent facilitating the depositary services.
5. BSE Institute Limited is a subsidiary of BSE which carries out the function of imparting and
facilitating the education relating to the primary market, secondary market, transactions, etc. through
specially designed courses for students, practitioners, academicians, etc. providing them with an
insight into the current industry practice and market trends in the capital markets in India.
6. Other services provided by the subsidiaries or wings of BSE involve the services relating to the
marketplace technology providing the Information Technology related services, Asia Index Private
30
Limited which is 50% Joint Venture (“JV”) with Standard & Poor Dow Jones Indices (“SPDJI”)
carrying out the index business, the BSE corporate social responsibility (“CSR”) Integrated
Foundation carrying out CSR activities and BSE Samaan CSR Limited.
Other Committees of BSE :
In compliance with the provisions of the Companies Act 2013 and under the SEBI (Listing Obligations and
Disclosure Requirements) (“LODR”), Regulation 2015 as applicable mandates the constitution of the following
committees:
1. Audit Committee; BSE has appointed an audit committee consisting of four public interest directors
and a shareholder director.
2. Stakeholder relationship/Share allotment committee; BSE has appointed a stakeholders relationship
committee consisting of Managing Director & Chief Executive Officer, a Public Interest Director and
two Shareholder Directors. Nomination and Remuneration Committee; BSE has appointed a
Nomination and Remuneration Committee consisting of three Public Interest Directors and two
Shareholder Directors.
3. Corporate Social Responsibility Committee; BSE has appointed a CSR Committee consisting of three
Public Interest Directors and a Shareholder Director.
4. Public Interest Directors Committee; BSE has appointed a Public Interest Directors Committee
consisting of six Public Interest Directors.
Salient features of BSE:
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All executable orders for a particular stock will match at one market opening price
Orders are collected in the order entry period & execution occurs in the order matching period
Duration of Pre-open session - 15 minutes from 9:00am – 9:15am
Limit orders will get priority over market orders at the time of execution of trades.
All orders shall be disclosed in full quantity, i.e. orders where revealed quantity function is enabled, will
not be allowed during the pre-open session.
Unexecuted, eligible orders will be moved to the continuous session
In the event of no trades in the pre-open session, the orders entered in the pre-open session will be
moved to the continuous trading session on time priority basis .The price of the first trade during the
continuous trading session will be taken as the opening price.
Indicative opening price & matchable quantity for each stock and indicative S&P BSE SENSEX will be
disseminated at regular intervals of order entry period.
31
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At the end of the matching period, the system will compute & disseminate the opening values for all
stocks, S&P BSE SENSEX and other indices.
Uniform price band of 20% will be applicable to all eligible stocks during the pre-open session.
ROLE AND FUNCTIONS OF BSE :
The primary objective of the BSE's systems regarding insider trading is prevention. Prompt disclosure
by listed companies of price-sensitive information is one of the ways to limit the possibility of insider
trading. In terms of detection, the BSE's Market Surveillance System has in place a number of proprietary
systems that have been specifically designed to detect unusual trading volumes and price movements.
The sophisticated surveillance system that has been adopted by the BSE is capable of identifying the
names, addresses, telephone numbers and other details of the parties involved in the suspicious
transactions. If suspicious trading activity is detected, a report is produced and forwarded to the CMS
Directorate at the BMA for further investigation.
To that end, the listed companies are required to update the Insiders Register within the CDS system at
the BSE, whenever or wherever there is any change in the information relating to insiders. The Agency
and the BSE shall not approve any cross-listing unless the applicant and other Exchange(s) make
all necessary requirements to update the CDS System regarding the dealings taking place on those
Exchanges, and agree to provide the Agency with the information required
LISTING REQUIREMENTS IN BSE:
The BSE SME Exchange has been setup by the Bombay Stock Exchange (BSE) to provide Small and Medium
Sized Enterprises (SMEs) a platform for raising equity capital for their growth and expansion. SMEs are the
backbone of a nation’s economy and Indian SMEs provide employment to 70 million people through 30 million
enterprises. In 2010, The Prime Minister’s Task Force recommended the setting up of a dedicated Stock Exchange
for SMEs and SEBI also laid down the regulations for the governance of a SME Exchange. Based on the above,
the BSE SME Exchange was established to provide opportunity to Entrepreneurs to raise equity capital for the
growth and expansion of SMEs. In this article, we look at how to list on the BSE SME Exchange with listing
requirements.
The following are the listing requirements for the BSE SME Exchange:

The issuer or SME must have a post-issue face value capital of Rs.1 crore to Rs.25 crores. Entities
having a post-issue face value of over Rs.25 crores has to be necessarily listing on the Main Board of the
BSE.

Net Tangible Assets of the SME must be at least Rs.1 crore, as per latest audited financial results.
32
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Net Worth (excluding revaluation reserve) must be at least Rs.1 crore as per the latest audited financial
statements.
The company must have a track record of distributable profits in terms of Section 205 of the Companies
Act, 1956, for at least two out of the immediately preceding three financial years. Otherwise, networth
must be at least Rs. 3 crores.
The company must mandatorily facilitate trading in DEMAT securities and enter into agreement with
both Depositories, namely, Central Depository Services Limited and National Securities Depository
Limited.
The company must have a website.
The company should not have any reference before the Board for Industrial and Financial
Reconstruction (BIFR).
The company should not have any winding up petition that has been accepted by a Court.
The issue must be a 100% underwritten issue. Merchant Banker must underwrite 15% on their own
accounts.
The Merchant Banker to the issue is responsible for market making for a minimum of three years
through a stock broker who is registered as market maker with the SME Exchange.
The company must have a minimum of 50 investors while listing through IPO.
NATIONAL STOCK EXCHANGE:
The NSE was incorporated in Now 1992 with an equity capital of Rs 25 crores. The International securities
consultancy (ISC) of Hong Kong has helped in setting up NSE. ISE has prepared the detailed business plans and
installation of hardware and software system.
It has been set up to strengthen the move towards professionalization of the capital market as well as provide
nation wide securities trading facilities to investors .NSE is not an exchange in the traditional sense where brokers
own and manage the exchange.
The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across
the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading
system with national reach.
33
The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has
set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures.
NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market
practices and trading volumes. The market today uses state-of art information technology to provide an efficient
and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products &
services viz. demutualization of stock exchange governance, screen based trading, compression of settlement
cycles, dematerialization and electronic transfer of securities, securities lending and borrowing,
professionalization of trading members, fine-tuned risk management systems, emergence of clearing corporations
to assume counterpart risks, market of debt and derivative instruments and intensive use of information
technology. NSE was also instrumental in creating the National Securities Depository Limited (NSDL) which allows investors
to securely hold and transfer their shares and bonds electronically. It also allows investors to hold and trade in as few as one share
or bond. This not only made holding financial instruments convenient but more importantly, eliminated the need for paper
certificates and greatly reduced incidents involving forged or fake certificates and fraudulent transactions that had plagued the
Indian stock market. The NSDL's security, combined with the transparency, lower transaction prices, and efficiency that NSE
offered, greatly increased the attractiveness of the Indian stock market to domestic and international investors.
HISTORY OF NSE
National Stock Exchange was incorporated in the year 1992 to bring about transparency in the Indian equity
markets. Instead of trading memberships being confined to a group of brokers, NSE ensured that anyone who
was qualified, experienced, and met the minimum financial requirements was allowed to trade
The exchange was incorporated in 1992 as a tax-paying company and was recognized as a stock exchange in
1993 under the Securities Contracts (Regulation) Act, 1956, when P. V. Narasimha Rao was the Prime Minister of
India and Manmohan Singh was the Finance Minister.
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. NSE offers trading, clearing and settlement services in equity, equity
derivative, debt, commodity derivatives, and currency derivatives segments. It was the first exchange in India to
introduce an electronic trading facility thus connecting the investor base of the entire country. NSE has 2500 VSATs
and 3000 leased lines spread over more than 2000 cities across India
NSE was setup with the objectives of:
1. Establishing a nationwide trading facility for all type of securities.
2. Ensuring equal access to investors all over the country through an appropriate communication network.
3. Providing a fair, efficient and transparent securities market using electronic trading system
4. Enabling shorter settlement cycles and book entry settlements.
5. Meeting international benchmarks and standards.
34
Features of NSE
Wide coverage:
As the name suggests, NSE is a country wide stock exchange and has its access throughout the country.
No fixed location for NSE:
As it is screen based, there is no need for any stock exchange floor and all the members of National Stock
Exchange are able to transact through their computer terminals, sitting at their respective offices.
Confidential trading in NSE:
The identity of members is trading in NSE is withheld by the National stock exchange. The transactions and orders
are entered only through code numbers. Thus, the anonymity of trading members is kept confidential with NSE.
Transparency of NSE:
There is total transparency in trading operations of NSE as the opening and closing prices of stocks are available
for the investors on screen in realtime. Trading individuals will also be able to see their orders being executed.
Effective matching of order in NSE:
Buy order and Sell orders are effectively and quickly matched with the help of the trading software, i.e., buying
and selling adjustments. The system also ensures best prices for securities thorough out India (both for buying
and selling). The network system enables the trader to find a perfect match for his order or the system holds the
order until a perfect match for the Buy or Sell order is found.
Borrowings made easy in NSE:
One of the salient features of NSE is that for the debt instruments, the system helps by providing a perfect match
with sensible interest rate and repayment period. This exposure is available throughout India for the sale of debt
instruments.
Settlement of transactions:
Since trading in NSE is fully online based, the matching of order in realtime makes it easy and ensures transactions
are settled quickly and efficiently.
These are some of the salient features which give a clear edge for NSE, over other regional stock exchanges.
Listing Requirements in NSE
There are certain requirements imposed by the National Stock Exchange in order to list the securities, as
follows.
1. A company has to apply for listing securities in the prescribed form.
2. Already listed companies should also apply for further issue of securities.
35
3. 1% of the amount of securities offered for subscription to the public, should be kept as deposit and
50% of it should be deposited in cash. And the balance can be in the form of a bank guarantee.
4. For IPOs, minimum paid up capital should be Rs. 20 crores.
5. The paid up equity capital for existing companies should be not less than Rs. 10 crores and market
capitalization of the applicant’s equity should be either Rs. 25 crores or Rs. 50 crores.
6. In order to accommodate hi-tech companies going public, the paid up equity capital shall be not less
than Rs. 5 crores.
7. The capitalization at the time of issue is not less than Rs. 50 crores.
8. There should be a 3-year track record for listing in NSE, out of which atleast dividends should have
been paid for one year.
Only companies that stipulate to above terms and requirements are allowed to list their securities to be traded in
the NSE.
NSE Functions




To establish a trading facility for debt, equity, and other asset classes accessible to investors across the
nation.
To act as a communication network providing investors an equal opportunity to participate in the trading
system.
To meet the global standards set for financial exchange markets.
To provide a shorter trade settlement period and enable the book-entry settlement system.
NSE Listing Benefits





Investors can get trade and post-trade information through the NSE trading system. They can see the top
sell orders and buy orders, as well as the number of securities available for transactions.
The trading expenses of investors are reduced as the impact cost on the trading activity decreases owing
to the volume of the trading activity.
The trading system of the NSE processes the transaction at a pace that allows the investors to get the best
prices.
The NSE provides monthly trade statistics to the listed companies. The companies can utilize the data to
track their performance.
The electronic system of trading provides investors with a transparent and effective exchange market.
36
NSE INDICES
NSE Indices Limited (formerly known as India Index Services & Products Limited), or NSE Indices, owns and
manages a portfolio of 67 indices under NIFTY brand as of September 30, 2016, including NIFTY 50. NIFTY
indices are used as benchmarks for products traded on NSE. NIFTY indices served as the benchmark index for
38 ETFs listed in India and 12 ETFs listed abroad as of September 30, 2016.
Indices









Broad based Indices
Thematic Indices
Sectoral Indices
Strategy Indices
G-SEC Indices
SDL Indices
Corporate Bond Indices
Target Maturity Index
Fixed Income Aggregates
NIFTY-FIFTY
The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new index, which replaces the existing
NSE-100 index, is expected to serve as an appropriate Index for the new segment of futures and "Nifty" means
National Index for Fifty Stocks.
The NSE-50 comprises 50 companies that represent 20 broad Industry groups with an aggregate market
capitalization of around Rs. 1,70,000 crs. All companies included in the Index have a market capitalization in
excess of Rs 500 crs each and should have traded for 85% of trading days at an impact cost of less than 1.5%.
The base period for the index is the close of prices on Nov 3, 1995, which makes one year of completion of
operation of NSE“s capital market segment. The base value of the index has been set at 1000.
The NSE madcap Index or the Junior Nifty comprises 50 stocks that represents 21 aboard Industry groups and
will provide proper representation of the madcap segment of the Indian capital Market. All stocks in the index
should have market capitalization of greater than Rs.200 crores and should have traded 85% of the trading days
at an impact cost of less 2.5%.
37
The base period for the index is Nov 4, 1996, which signifies two years for completion of operations of the capital
market segment of the operations. The base value of the Index has been set at 1000. Average daily turnover of the
present scenario 258212 (Laces) and number of averages daily trades 2160(Laces).
DIFFERENCES
BSE
NSE
No. of companies
More than 5,000
Less than 2,000
Electronic Trading
Switched in 1995
Supported Automated Trading
since the beginning
Trading Volume
Low despite 5,000 companies
High in spite of around 1,600
companies
Transaction charges
0.003% of total turnover, no
charges for Derivatives
0.00325% on Equity and
Delivery Trading, 0.0019% on
Futures Trading, 0.05% of total
turnover for Options Trading
Paid-up Capital for
Companies to get Listed
Not more than 25 crores
At least 10 crores
38
CHAPTER - 4
DATA ANALYSIS AND INTERPRETATION
GRAPHICAL REPRESENTATION OF DATA
Q1. What is your age?
Age
No. of Respondents
Percentage %
18 – 24
100
47
25 – 34
100
15
35 – 44
100
20
45 & Above
100
18
НАЗВАНИЕ ДИАГРАММЫ
60
55,9
44,1
50
40
30
20
10
0
Male
Female
Interpretation :
From the above diagram, the majority of the respondents are 18-24 age group. The age group of 25-34
have lower respondence.
39
Q2. What is your Gender?
Gender
Percentage
Male
55.9
Female
44.1
Interpretation:
Both Male and Female respondents are approximately equal, male respondents are slightly high.
Q3.Do you about Stock market?
Opinion
Percentage
Yes
71.7
No
28.3
40
Interpretation:
From the above pie-chart, most of the respondents know about the stock market.
Q4. Have you ever invested in Stock market?
Opinion
Percentage
Yes
55.9
No
44.1
Interpretation:
From the above pie – chart, it shows that majority of the respondents invested in stock market.
41
Q5. Do you own any investments in Stock market?
Opinion
Percentage
Yes
63.7
No
36.3
Interpretation:
As many of the respondents know about the Stock market , so they interested to own some investments
in Stock market.
Q6. Are you a Short term investor or Long term investor?
Term of investment
Percentage
Short term
27.2
Long term
35
Never invested
37.8
42
Interpretation:
From the above bar diagram, respondents who invested (short term + long term ) are more than the
respondents who never invested.
Q7. What type of investment you would like to invest in Stock market?
Type of Investment
Percentage
Shares
35.6
Mutual funds
29.7
Bonds
8.9
Others
25.7
43
Interpretation:
From the above diagram, respondents who invested in stock market are majorly invested in shares and
mutual funds.
Q8. Are you aware of investment applications like upstocks,groww..etc?
Opinion
Percentage
Yes
66
No
34
44
Interpretation:
More number of respondents aware of investment applications due to aggressive promotional activities
on TV’s.
Q9. Do you feel stock exchange is regulated and promotes fair trade practices
Opinion
Percentage
Yes
32
No
11.7
Maybe
46.6
Not at all trustworthy
9.7
45
Interpretation:
From the above chart, many respondents feel that its still need to be regulated. They believe that stock
market may or may not provide fair trade practices.
Q10. Are you interested to learn more about stock exchange?
Opinion
Percentage
Interested
76.7
Not interested
23.3
46
Interpretation:
From the pie chart, we can interpret that most of the respondents are interested to learn about stock
market.
Q11. current broker Indian trading?
Name of the stock
broker
Zerodha
Upstox
Percentage of
Response
70%
12%
Angel broking
8%
ICICI direct
6%
OTHER
4%
TOTAL NO OF
PEOPLE
100%
Percentage of Response
Zerodha
Upstox
Angel broking
I direct
OTHER
Interpretation:
Most of the people choose zerodha because it offers free equity delivery trading. Zerodha has low
fees, the web and mobile trading platforms are easy to use and well designed. so most off the people
choose zerodha. It is in the first place above all the other trading platforms. It occupies 70%, upstox
12%,angel broking8%, ICICI 6%, other 4%
47
Q12. Who would provide better service?
Particulars
No. of
Respondents
82
Broker
Percentage of Response
82%
Sub broker
18
18%
TOTAL NO OF
PEOPLE
100
100%
No. of Respondents
Sub broker
18%
Broker
82%
INTERPRETATION:
The sub broker carries out the same function a broker carries out being a middle man between two
parties. Sub broker earns nearly 60% of income a broker makes, sub broker can offered much
cheaper the Broker. But the people likes experienced broker in stock market so they choose broker.
So 82% of people choose broker and 18% of people choose sub broker.
Q13. Do you know about stock exchange?
Particulars
No. of Respondents
YES
94
Percentage of
Response
94%
NO
6
6%
TOTAL NO OF PEOPLE
100
48
100%
No. of Respondents
YES
NO
TOTAL NO OF PEOPLE
INTERPRETATION:
Most of the people in India know about the stock market but some of the
people does not aware of stock market because risk barrier and fear in their minds
make them shut.
Q14. Do you ever invested in share market?
Particulars
No. of Respondents
YES
75
Percentage of
Response
74%
NO
25
26%
49
TOTAL NO OF
PEOPLE
100
100%
No. of Respondents
NO
40%
YES
60%
Interpretation:
People do not want to invest in share market due to social and psychological factors. Normal
people keep themselves away from equity market.
Q15. Are you a long term investor are short time investor?
Particulars
No. of Respondents
YES
60
Percentage of
Response
60%
NO
40
40%
TOTAL NO OF
PEOPLE
100
100%
50
No. of Respondents
NO
40%
YES
60%
Interpretation:
Investors have historical experience much higher rate of success over the long term investors. 60% of people
invest in long term period and 40% people invest in short term period.
=
51
CHAPTER – 5
s
FINDINGS
•
SEBI can work on more important issues
•
Negatively charged SEBI’s appointment process has always been criticise
•
SEBI should take more precautions to prevent corruption by SEBI staff
•
The accountability mechanism that envelope SEBI are quite poor
•
SEBI should monitor efficiently the working of stock exchange
•
SEBI is poor in tracking the price manipulation
SUGGESTIONS
•
SEBI can work on more important issues
•
Negatively charged SEBI’s appointment process has always been criticise
•
SEBI should take more precautions to prevent corruption by SEBI staff
•
The accountability mechanism that envelope SEBI are quite poor
•
SEBI should monitor efficiently the working of stock exchange
•
SEBI is poor in tracking the price manipulation
52
CONCLUSION
From the analysis it is able to understand the capital market and rules and regulations of SEBI and
the role played by SEBI enhancing Indian Economy. It provides the security to the interest of
investors SEBI brings the all aspects of stock exchange in to one roof.
The present research dealt with the role of SEBI Indian Economy of 2016-21 SEBI showed a more
performance in stopping the insider trading and building the capital market in registration of mutual
funds.
We also come to know about the total functions of SEBI.
However the SEBI contribution in
developing the capital market is phenomenal. SEBI regulates the all the performances in security
exchanges.
53
BIBLIOGRAPHY
•
The material supplied by the faculty guide
•
Annual reports of SEBI
•
SEBI magazines
•
Books from library
•
Text books of financial studies
Web resources
 www.sebi.co.in
 www.sebi.com
 www.economictimes.timesindia.com
 www.sebi.gov.in
54