Mahaveer Project

8/13/2019 Mahaveer Project

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A

SUMMER TRAINING REPORT

ON

Mechanism of Indian Stock Market &

Consumer eha!ior on commodities "

#or

Anand Rathi Share & Stock $rokers %td

$'

Maha!eer (rasad

In partial fulfillment for the award of the degree

Mana)ement of usiness administration

*Ar'a institute of en)) And techno+o)',

-./0

Sumitted $'1 2 Sumitted To12

Maha!eer Prasad 3amni )u(ta

*AIET 4ai(ur , *Asst Mana)er25R,


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ACKNOWLEDGEMENT

A Pro4ect usua++' fa++s short of its e6(ectation un+ess )uided ' the ri)ht

(erson at the ri)ht time Success of a (ro4ect is an outcome of sincere efforts7

channe+ed in the ri)ht direction7 efficient su(er!ision and the most !a+ua+e

(rofessiona+ )uidance

This (ro4ect 8ou+d not ha!e een com(+eted 8ithout the direct and

indirect he+( and )uidance of such +uminaries The' (ro!ide me 8ith the

necessar' recourses and atmos(here conducti!e for hea+th' +earnin) and

trainin)

I e6(ress m' sincere thanks to m' (ro4ect )uide7 Mrs 3amni )u(ta

9esi)nation 5R for )uidin) me ri)ht form the ince(tion ti++ the successfu+

com(+etion of the (ro4ect I sincere+' ackno8+ed)e him:her:them for e6tendin)

their !a+ua+e )uidance7 su((ort for +iterature7 critica+ re!ie8s of (ro4ect and

the re(ort and ao!e a++ the mora+ su((ort he:she:the' had (ro!ided to me 8ith

a++ sta)es of this (ro4ect

I 8ou+d a+so +ike to thank Mr. prakash kodwani *Sr officer2

de(ositor', and a++ the memers of Anand Rathi Share & Stock $rokers %td7

and m' co++ea)ues 8ho )a!e me fruitfu+ information to finish m' (ro4ect

Mahaveer prasad


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DECLARATION

I *Maha!eer (rasad, student of Ne8 9e+hi Institution of Mana)ement *-./0,

dec+are that e!er' (art of the Pro4ect Re(ort *Mechanism of Indian Stock

Market & Consumer eha!ior on commodit'", that I ha!e sumitted is

ori)ina+

I 8as in re)u+ar contact 8ith the nominated )uide and contacted man' times for

discussin) the (ro4ect

9ate of (ro4ect sumission1;;;;;;;;;;;;;;

#acu+t'


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EXECUTIE !UMMAR"

Theories are ein) de!e+o(ed7 desi)ned and stated on the )round8ork of

their (ractica+ im(+ementation and usa)e =ork e6(erience seems to e more

effecti!e and indis(ensa+e factor of makin) an indi!idua+ an ade(t This is

ecause one cannot do 8ithout ein) e6(osed to !ar'in) circumstances and

(ossi+e conse>uences Trainin) not on+' de!e+o(s indi!idua+ ski++s and

ai+ities ut a+so (ro!ides (roficienc' in 8ork (erformance

The researcher has done research in a ranch office of Anand Rathi

Share & Stock $rokers %td7 ?ai(ur7 8hich constitute an essentia+ (art of t8o

'ear M$A (ro)ram The research (eriod consists of @ 8eeks The researcher

se+ected the (ro4ect stud' on the to(ic Mechanism of Indian Stock Market and

consumer eha!ior on commodit'" It 8as rea++' a )reat o((ortunit' )ettin)

(ractica+ insi)ht of the market

I ha!e studied and e6(+ored 9emat a:c and in!estment (rocess of the

Share Market7 its market share in the ?ai(ur market and 8a's of increasin) its

market share

I sincere+' e+ie!e that there is no etter (+ace to +earn the (ractica+ side

of mana)ement studies than the industr' itse+f


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TA#LE O$ CONTENT!

C%A&TER DE!CRI&TION &AGE

Ackno8+ed)ement

9ec+aration

E6ecuti!e Summar'

'. INTRODUCTION O$ ORGANI(ATION

'.' Com(an' Profi+e )

'.) Product & Ser!ices *

'.+ Mana)ement Team ',

). INTRODUCTION O$ TO&IC

).' Indian Share Market '+

).) Indian Stock E6chan)es '-

).+ 9e(ositor' +

). Commodit' /-

+. O#0ECTIE O$ !TUD" *

. RE!EARC% MET%ADOLOG" */

.' Ana+'sis & Inter(retation *1

.) S=OT Ana+'sis -

/. CONCLU!ION! -*

*. RECOMMENDATION 2 !UGGE!TION! --

-. GLO!!AR"3TERMINOLOG" -4

1. #I#LIOGRA&%" 14

4. 5UE!TIONNAIRE 4,


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To be a shining example

as a leader in innovation

and the first choice

for clients and employees

$ehind e!er' successfu+ in!estor

C%A&TER 6 '


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INTRODUCTIO

N O$

ORGANI(ATIO

N


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'.' COM&AN" &RO$ILE

Anand Rathi *AR, set u( in /B7is one of Indiauities7

commodities7 mutua+ fund and insurance The )rou( caters to the financia+

needs of di!ersified )rou( of c+ients7 8hich inc+ude the 8e++ re(uted cor(orate)rou(s7 institutions7 forei)n in!estors7 indi!idua+s as 8e++ as 8ea+th' fami+ies

and 8as recent+' ranked ' an Asia Mone' -..@ (o++ amon)st south Asia


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'4447

%ead mana)ed firstIPO and e6ecuted first M & A dea+

),,'7

Initiated =ea+th Mana)ement Ser!ices

),,)7

Retai+ usiness e6(ansion recommences 8ith o8nershi( mode+

),,+7

=ea+th Mana)ement assets cross Rs/.. crores

Insurance rokin) +aunched

%aunch of =ea+th Mana)ement ser!icesin 9uai

Retai+ $ranch net8ork e6ceeds .

),,7

Commodities rokera)e and rea+ estate ser!ices introduced

=ea+th Mana)ement assets cross Rs0...crores

Institutiona+ e>uities usiness re+aunched and senior research

team (ut in (+ace

Retai+ $ranch net8ork e6(ands across /.. +ocations 8ithin India

),,/7

Rea+ Estate Pri!ate E>uit' #und %aunched

Retai+ $ranch net8ork e6(ands across -.. +ocations 8ithin India

),,*7

AR Midd+e East7 =OS ac>uires memershi( of 9uai Go+d &

Commodit' E6chan)e *9GCF,

Ranked amon)st South Asias to( 8ea+th mana)ers for the u+tra2

rich ' Asia Mone' -..@ (o++


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Ranked @th in #3-..@ for A++ India $roker Performance in e>uit'

distriution in the 5i)h Net 8orth Indi!idua+s *5NI, Cate)or'

Ranked th in the Retai+ Cate)or' ha!in) more than H market

share

Com(+etes its (resence in a++ States across the countr' 8ith offices

at 0.. +ocations 8ithin India

),,-7

Cit' Grou( enture Ca(ita+ Internationa+ (icks u( /H e>uit'

stake

Retai+ customer ase crosses -.. thousand

These 8ere the mi+estones7 8hich chan)e the Anand Rathi )rou( com(+ete+'

and +aunch it on the (ath of success This )rou( c+aims that man' more these

t'(e of mi+estone are aout to come 8hich 8i++ take the com(an' at hei)ht of

success +ike it is (+annin) to +aunch its o8n share in the market 8hich 8i++a)ain chan)e the future and ima)e of the com(an'


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'.) &RODUCT AND !ERICE!

E89i:; 2 deriva:ives uit' so+utions to institutiona+ and

indi!idua+ in!estors consistent de+i!er' of hi)h >ua+it' ad!ice on indi!idua+

stocks7 sector trends and in!estment strate)' has esta+ished us a com(etent

and re+ia+e research unit across the countr'

C+ients can trade throu)h AR on+ine on $SE & NSE for oth e>uities and

deri!ati!es The' are su((orted ' dedicated sa+es & tradin) desks across the

countr' Research and in!estment ideas can e accessed ' c+ients either

throu)h their desi)nated dea+ers7 emai+7 8e or SMS

M9:9a> $9nds

AR is one of the India


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inc+ude sett+ement7 c+earin) and custod' of securities7 re)istration of shares and

demateria+iJation AR offer dai+' u(dated internet access to ho+din) statement

and transaction summar'

Co@@odi:ies

Commodities rokin)2a 8ho+e ne8 o((ortunities to hed)e usiness risk

and an attracti!e in!estment o((ortunit' to de+i!er su(erior returns for

in!estors AR


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in de(th o!er!ie8 of forthcomin) IPOs as 8e++ as in!estment

recommendations On+ine fi++in) of form is a+so a!ai+a+e

Loan A=ains: !hares

Re=is:ra:ion o C>ien:

K Minimum Rs- +acs (ortfo+io of a((ro!ed shares

K Rs /.. +acs Mar)in either in Cash or E+i)i+e Securities

K To E6ecute Master %oan A)reement

K To E6ecute )enera+ (o8er of attorne'

K To si)n %oan documents

K O(enin) of 59#C $ank A:c to e o(erated ' RG#%

Re89ire@en:7

K C+ient shou+d a+read' ha!e a Tradin) and 9P Account 8ith Anand Rathi

#inancia+ Ser!ices %td : Anand Rathi Shares & Stock $rokers %td 8ith

Auto2Pa'2in #aci+it'

K E6ecution of Master %oan A)reement& $ank Account O(enin) #orm

&resen: $9ndin= 2 !89are Up &o>i?;7

Ca:e=or; o !hares A # C

%air6?9: Ra:e H +/H ,H /,B

A((ro!ed %ist are re!ie8ed on the time to time asis

An' de!iation from the ao!e re>uires S(ecia+ A((ro!a+ from the Mana)ement

Mar)in Ca++s on shortfa++s on dai+' asis

S>uare u( action if tota+ co!era)e fa++s e+o8 -Hafter (re2intimation


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&or:o>io Mana=e@en:

Portfo+io Mana)ement is an im(ortant foundation of shares and mutua+ fund

usiness #rom the in!estors (ers(ecti!e Acti!e Portfo+io Mana)ement

function is o!ious+' im(ortant Acti!e (ortfo+io mana)ement re>uires detai+ed

research of stock traded in the market =hi+e the o4ecti!e of research is to

esta+ish a !ie8 on the future stock (rices it usua++' takes an' of the fo++o8in)

three a+ternate forms

$9nda@en:a> Ana>;sis 76This ana+'sis in!o+!es research into the o(erations

and finances of the com(an' 8ith the o4ecti!e of estimatin) its future earnin)s

and risk (rofi+e The researchers considers man' factors such as com(an' Ana>;sis76.Technica+ ana+'sis is second ana+'sis too+ for short term

or for da' tradin) As fundamenta+ ana+'sis is used for +on) term in!estments

ana+'sis +ike8ise technica+ ana+'sis is made for da' tradin) or short term

tradin)

Technica+ ana+'sis a+so make use of !o+umes7 su((ort and resistance +e!e+s7

technica+ indicators and other (arameters 8hich are usefu+ to ana+'Je the share

(rice mo!ements in short term or in da' tradin)

59an:i:a:ive Ana>;sis76 This ana+'sis uses mathematica+ mode+s for e>uit'

!a+uation and ma' a+so use fundamenta+ and technica+ information In toda'


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'.+ MANAGEMENT TEAM

Our senior mana)ement com(rises a di!erse ta+ent (oo+ that rin)s to)ether

rich e6(erience from across industr' as 8e++ as financia+ ser!ices

Mr. Anand Ra:hi Gro9p Chair@an

Charted Accountant

Past President7 $SE

Mr. &radeep G9p:a i?e Chair@an

P+us /D 3ears of e6(erience in #inancia+

Ser!ices

Mr. A@i: Ra:hi Mana=in= Dire?:or

Charted Accountant & M$A

P+us // 'ears of e6(erience in #inancia+Ser!ices


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#oard o Dire?:ors

Ra:nesh K9@ar %ead Ins:i:9:iona> E89i:ies

Pre!ious+' M9 & E>uti' Strate)ist & 5ead of India Research 8ith citi)rou( *L

'ears, and C%sA *B 'ears, 5as / 'ears India research e6(erience %ed India

research teams to / rankin)s in Institutiona+ In!estor (o++s in out of +ast

'ears

Rakesh Rawa> %ead6Wea>:h Mana=e@en:

Pre!ious+' ice President7 Pri!ate =ea+th Mana)ement7 9eutsche $ank =ith

o!er - 'ears career in =ea+th Mana)ement7 he has he+d ke' +eadershi( ro+es

in i++ustrious or)aniJations +ike 5industan %e!er and Rana6' %aoratories $

Tech *IIT2an(ur, and M$A *#inance, from ?$IMS

Ro; Rodri=9es %ead6Inves:@en: #ankin=

Pre!ious+' 5ead In!estment $ankin) for India at $ear Stearns *Ne8 3ork,

5e a+so 8as G+oa+ 5ead of IT Ser!ices and $PO in!estment ankin)

co!era)e 5e has a+so s(ent four 'ears 8ith Arthur Anderson in $oma'

*India, An M$A *#inance and Internationa+ $usiness, from Stern Schoo+ of

$usiness7 Ne8 3ork Uni!ersit' 5e is a+so a >ua+ified Chartered Accountant

and Cost Accountant

A@andeep ! Chaha> %ead Re:ai>

An M$A from S'miosis7 in his /B 'ears of 8ork e6(erience Aman has

8orked 8ith Standard Chartered $ank Nationa+ Sa+es Mana)er Ca(ita+ Markets

Retai+ and Re)iona+ 5ead Priorit' $ankin) 5e has 8orked 8ith i++ustrious

or)aniJations as Citiank and 3es $ank amon)st others Prior to 4oinin)

AR#S% in Ma' -..@7 he 8as the head of 3es $ank


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C%A&TER )

INTRODUCTIO

N O$

TO&IC


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).' INDIAN !%ARE MARKET

In:rod9?:ion

There is a market ca++ed ca(ita+ market7 8hich is a !er' im(ortant (art of

Indian financia+ s'stem This market faci+itates com(anies ' meetin) their

re>uirements of the +on)2term funds It means 8hene!er the com(anies re>uire

funds for its usiness o(erations7 it can raise mone' ' issuin) e>uit' shares7

deentures and etc to the (u+ic These shares & deentures raise the need for

such or)aniJations 8hich 8i++ faci+itate the u'in) & se++in) of these shares &

deentures Then stock e6chan)e came into e6istence

In this securities market7 there are three cate)ories of (artici(ants first cate)or'

contain issuer of securities7 second t'(e of (artici(ants are the in!estors in the

securities and +ast cate)or' contain intermediaries The issuers are the

orro8ers7 8ho issue securities to raise funds The in!estors7 8ho ha!e mone'

in sur(+us to in!est in securities and the intermediaries7 are the a)ents 8ho

match the needs of users and su((+iers of funds ' char)in) commission for

that These intermediaries (erform their function to he+( oth the issuers and

in!estors to achie!e their res(ecti!e )oa+s There are +ar)e !ariet' and numer

of intermediaries (ro!idin) !arious ser!ices in the Indian securities market

Meanin= o s:o?k e?han=e

The stock e6chan)e in India has 8itnessed a s(ectacu+ar )ro8th durin) the +ast

decade The de!e+o(ment of the ca(ita+ market is ' and +ar)e +inked 8ith the

de!e+o(ment of (u+ic +imited com(anies The stock e6chan)e is an im(ortant

se)ment of ca(ita+ market7 8hich7 not on+' (ro!ides ca(ita+ ut a+so he+(s

in!estors to trade in the securities The Stock E6chan)e is asica++' a market(+ace 8here securities are (urchased and so+d for a consideration throu)h its


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memers actin) as rokers The Stock E6chan)es are !er' im(ortant in the

economic +ife of the countr' Stock market he+(s in the )ro8th of industr' and

trade

Accordin) to sec -*4, of the securities contracts *Re)u+ation, act /@7 Stock

E6chan)e means an'od' to indi!idua+s 8hether incor(orated or not

constituted for the (ur(ose of assistin)7 re+atin) or contro++in)7 the usiness of

u'in)7 se++in) or dea+in) in securities"

I@por:an?e o !:o?k E?han=e

The Stock E6chan)e are the im(ortant se)ments of their ca(ita+ market7 if the

Stock E6chan)e are 8e++ re)u+ated and 8ork smooth+' then it is an indicator of

hea+th' ca(ita+ market If the state of the Stock E6chan)e is )ood and o!era++

ca(ita+ market 8i++ )ro8 and other8ise it can suffer a )reat set ack 8hich is

not )ood for the countr' Go!ernment at !arious sta)es contro+s the stock

market and ca(ita+ market The im(ortance of Stock E6chan)e is as fo++o8s1 2

Pro!idin) re)u+ar market to the securities

Encoura)in) in!estment haits in )enera+ (u+ic

Pro!idin) +i>uidit' to the securities

Pro!idin) a mechanism for continuous e!a+uation of the securities

Encoura)in) ca(ita+ formation

Actin) as an intermediar' et8een u'ers and se++ers

Pro!idin) stai+it' in the (rices of securities

Pu+ishin) re)u+ar+' stock (rice >uotation

Pro!idin) faci+it' of a tradin) ha++ for the memers transact usiness

Protectin) the interest of the in!estors

Pro!idin) a etter (+atform for in!estors to in!est their !a+ua+e mone'

Makin) the transaction more con!enient for oth7 the u'ers and se++ers


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Ori=in and Deve>op@en: o !:o?k E?han=e

The first Stock E6chan)e 8as esta+ished in %ondon in /DD07 and then the

trend of Stock E6chan)e )oes on %ater on man' other countries +ike #rance7

German'7 USA and India etc fo++o8ed the cu+ture of stock e6chan)e In India

the first stock e6chan)e 8as esta+ished in $oma' in/LD After the

esta+ishment of first stock e6chan)e man' more stock e6chan)e came into

e6istence So far )o!ernment of India has reco)niJed -0 Stock E6chan)es in

the countr'

After the esta+ishment of !arious Stock E6chan)es in India7 there 8as a need

for such or)aniJation7 8hich can contro+ the o(erations of the stock e6chan)es

Then )o!ernment of India introduced SE$I Act7 /-7 under this act SE$I

*Securities and E6chan)e $oard of India, came into e6istence No8 SE$I is

there7 to (rotect the interest of in!estors in securities market7 to monitor and

re)u+ate the 8orkin) of the Stock E6chan)es SE$I took care of the

de!e+o(ment of these Stock E6chan)es a+so

!e?9ri:ies @arke:

Securities market is the market7 8here acti!ities re+ated to shares7 deentures

Preference shares7 onds7 etc are dea+t These (ro!ide the market (+ace 8here

u'in) and se++in) of securities and shares are done There are t8o t'(e of

securities market7 these are1 2

&ri@ar; @arke:

Primar' market dea+s 8ith ne8 securities that are securities7 8hich 8ere not

(re!ious+' a!ai+a+e and are offered for in!estin) to the (u+ic It is the market

for raisin) fresh ca(ita+ in the form of shares and deentures It (ro!ides the

issuin) com(an' 8ith additiona+ funds for startin) a ne8 enter(rise or for


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either e6(ansion or di!ersification of an e6istin) one7 and thus its contriution

to com(an' financin) is direct The ne8 offerin)s ' the com(anies are made

either as an initia+ (u+ic offerin) *IPO, or ri)ht issue

!e?ondar; @arke:

Secondar' market is the market for u'in) and se++in) securities of the e6istin)

com(anies Under7 these securities are traded after ein) initia++' offered to the

(u+ic in the (rimar' market and +isted on the stock e6chan)e The stock

e6chan)es are the e6c+usi!e centers for tradin) of securities It is a sensiti!e

arometer that ref+ects the trends in the econom' throu)h f+uctuation in the

(rices of !arious securities It can e define as7 a od' of indi!idua+s7 8hether

incor(orated or not7 constituted for the (ur(ose of assistin)7 re)u+atin) and

contro++in) the usiness of u'in)7 se++in) and dea+in) in securities" SE$I has

issued !arious )uide+ines for the o(erations of secondar' market

The secondar' market o(erates throu)h t8o mediums7 name+'7 the o!er2the2

counter *OTC, market and the e6chan)e2traded market OTC markets are

informa+ markets 8here trades are ne)otiated Most of the trades in the

)o!ernment securities are in the OTC market A++ the s(ot trades 8here

securities are traded for immediate de+i!er' and (a'ment take (+ace in the OTC

market The e6chan)es in India fo++o8 a s'stematic sett+ement (eriod A++ the

trades takin) (+ace o!er a tradin) c'c+e *da'T, are sett+ed to)ether after a

certain time *T- da', The trades e6ecuted on e6chan)es are c+eared andsett+ed ' a c+earin) cor(oration The c+earin) cor(oration acts as a counter

(art' and )uarantees sett+ement A !ariant of the secondar' market is the

for8ard market7 8here securities are traded for future de+i!er' and (a'ment A

!ariant of the for8ard market is #utures and O(tions market Present+' on+'

t8o e6chan)es !iJ7 Nationa+ Stock E6chan)e of India %td *NSE, and $oma'

Stock E6chan)e *$SE, (ro!ide tradin) in the #utures & O(tions


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).) INDIAN !TOCK EXC%ANGE!

In a++ there are -0 stock e6chan)es in India7 ut the t8o most (o(u+ar

amon)st a++ of them are12

/ Nationa+ Stock E6chan)e*NSE,

- $oma' stock e6chan)e*$SE,

No87 +et !:o?k E?han=e

*NSE


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NSEI% 8as (romoted ' +eadin) #Is at the ehest of Go!ernment of

India and 8as incor(orated in No!emer /- as a ta62.(a'in) com(an'

un+ike other stock e6chan)es in the countr' On its reco)nition as a stock

e6chan)e under the Securities Contracts *Re)u+ation, Act7 /@ in A(ri+ /0

NSEI% commenced o(erations in the =ho+esa+e 9et Market *=9M, se)ment

in ?une7 /B7 o(erations in the Ca(ita+ Market *CM, in No!emer /B7 and

o(erations in deri!ati!es se)ment in ?une -... 9urin) /2-...7 NSEI%

accounted for B/H of tota+ turno!er in e>uities and H of turno!er of

)o!ernment securities in the countr'

Capi:a> Marke: !e=@en:12 The Ca(ita+ Market *CM, se)ment of NSEI%

(ro!ides a fu++' automated screen ased tradin) s'stem for tradin) of e>uit'

and (reference shares7 deentures7 8arrants and cou(ons The tradin) s'stem7

kno8n as the Nationa+ E6chan)e for Automated Tradin) *NEAT, s'stem7 is an

anon'mous order2dri!en s'stem and o(erates on a strict (rice:time (riorit' It

ena+es memers from across the countr' to trade simu+taneous+' 8ith

enormous ease and efficienc'

Who>esa>e De


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the 9eri!ati!es Se)ment A++ trades on the 9eri!ati!es se)ment are c+eared

throu)h a CM of NSCC%

Nift' Inde6 futures contracts are case sett+ed7 ie throu)h e6chan)e of case

differences in !a+ue Sett+ement is done on a dai+' asis ' markin) to market

a++ o(en (ositions on the asis of the dai+' sett+ement (rice The contracts are

fina++' sett+ed on e6(ir' of the Nift' inde6 futures contract 8hen NSCC%

marks the o(en (ositions of a CM to the c+osin) (rice of the under+'in) inde6

and resu+tin) (rofit:+oss is sett+ed in cash

Tradin= and !e::>e@en: a: N!E76

NSE introduced for the first time in India7 fu++' automated screen ased

tradin) It uses a modem7 fu++' com(uteriJed tradin) s'stem desi)ned to offer

in!estors across the +en)th and readth of the countr' a safe and eas' 8a' to

in!est The NSE tradin) s'stem ca++ed QNationa+ E6chan)e for Automated

Tradin)< *NEAT,< is a fu++' automated screen ased tradin) s'stem7 8hich

ado(ts the (rinci(+e of a order dri!en market

2. #o@


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*$SEuote dri!en is current+' on+' order dri!en The faci+it' of (+acin) of

>uotes has een discontinued 8ef7 Au)ust /07 -../ in !ie8 of +ack of market

interest and to im(ro!e s'stem2 matchin) efficienc' The s'stem7 8hich is no8


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on+' order dri!en7 faci+itates more efficient2in2(uttin)7 (rocessin)7 automatic

matchin) and faster e6ecution of orders in a trans(arent manner

The tradin) in securities at the e6chan)e is conducted in an anon'mous

en!ironment and the counter(art' identit' is not re!ea+ed The u'ers and

se++ers of securities do not kno8 the names of each other

The scri(s traded on the $SE ha!e een c+assified into QA


28/100

The e6chan)e a+so (ro!ides a faci+it' to the market (artici(ants for on2

+ine tradin) in C" )rou( 8hich co!ers the odd +ot securities in (h'sica+ form

in QAuired to e com(u+sori+' sett+ed ' a++ in!estors in demat mode

This faci+it' of se++in) (h'sica+ shares in com(u+sor' demat scri(s is ca++ed in

E6it Route Scheme

NI$T"

NI#T3 is the sensiti!it' inde6 NSE *NATIONA% STOC EFC5ANGE, The

NSEs ke' inde6 is the S&P CNF Nift'7 kno8n as the Nift'7 an inde6 of fift'

ma4or stocks 8ei)hted ' market ca(ita+isation NI#T3 is a asket of .

constituent stocks It consists of the . +ar)est and most acti!e+' traded stocks7

re(resentati!e of !arious sectors7 on the Nationa+ Stock E6chan)e

!EN!EX

SENSEF is the sensiti!e inde6 of $SE *$OM$A3 STOC EFC5ANGE,

SENSEF is a asket of 0. stocks It consists of the 0. +ar)est and most acti!e+'

traded stocks7 re(resentati!e of !arious sectors7 on the $oma' Stock

E6chan)e

Re=iona> !:o?k E?han=es76

Ahmedaad Stock E6chan)e

$an)a+ore Stock E6chan)e

$huanesh8ar Stock E6chan)e
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Ca+cutta Stock E6chan)e

Cochin Stock E6chan)e

Coimatore Stock E6chan)e

9e+hi Stock E6chan)e

Gu8ahati Stock E6chan)e

5'deraad Stock E6chan)e

?ai(ur Stock E6chan)e

%udhiana Stock E6chan)e

Madh'a Pradesh Stock E6chan)e

Madras Stock E6chan)e

Ma)adh Stock E6chan)e

Man)a+ore Stock E6chan)e

Meerut Stock E6chan)e

OTC E6chan)e Of India

Pune Stock E6chan)e

Saurashtra utch Stock E6chan)e

Uttar Pradesh Stock E6chan)e

adodara Stock E6chan)e

$9n?:ions o s:o?k e?han=e
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30/100

There -0 stock e6chan)es in India inc+udin) O!er The Counter

E6chan)e of India *OTCEI,7 Nation Stock E6chan)e *NSE, and inter2

Connected Stock E6chan)e *ICSE, A++ of them are re)u+ated in terms of

Securities Contract *Re)u+ation, Act7 /@ and SE$I Act7 /- and the ru+es

and re)u+ations made there under Some of the e6chan)es started of as

!o+untar' non2 (rofit associations such as $oma' Stock E6chan)e *$SE,

And Indore Stock E6chan)e The stock e6chan)e at Chennai7 ?ai(ur7

5'deraad and Pune 8ere incor(orated as com(anies +imited ' )uarantee

The other stock e6chan)es are com(anies +imited ' shares and incor(orated

under the Com(anies Act7 /@ or ear+ier acts

The stock e6chan)es are mana)ed ' $oard of 9irectors or Counci+ or

Mana)ement consistin) of e+ected rokers and re(resentati!es of Go!ernment

and Pu+ic a((ointed ' SE$I The $oards of stock e6chan)e are em(o8ered

to make and enforce ru+es7 'e2+a8s and re)u+ations 8ith 4urisdiction o!er a++

its memers

Memershi( of stock e6chan)e is )enera++' )i!en to (erson financia++'

sound and 8ith ade>uate e6(erience: trainin) in stock market Their enro+ment

as memer is re)u+ated and contro++ed ' SE$I to 8hom the' ha!e to (a' an

annua+ char)e A memer of the stock e6chan)e is ca++ed Qroker< 8ho can

transact on eha+f of his c+ients as 8e++ as on his o8n eha+f A non2memer

can dea+ in securities on+' throu)h memers A memer can Act as a $ad+a

#inancier7 Commission $roker7 9ea+er in Odd +ots7 Go!ernment Securities7

?oer7 Market Maker or Under 8riter 5e can a+so take the assistance of su2

roker 8hom he can a((oint under the (rocedure of re)istration

=e can rief+' understand the fo++o8in) functions of stock e6chan)e

/ The or)aniJed and re)u+ated ca(ita+ market moti!ates indi!idua+ to sa!e

and in!est funds The a!ai+ai+it' of safe and (rofita+e source of


31/100

in!estment is an essentia+ criteria to create (ro(ensit' to sa!e and in!est

on the (art of the earnin) (u+ic

- It (ro!ides for the in!estors a safe and (roducti!e channe+ for in!estment

of sa!in)s and secures the recurrin) enefit of return thereon7 as +on) as

the sa!in)s are retained

0 It (ro!ides +i>uidit' to the sa!in)s of the in!estors7 ' de!e+o(in) a

secondar' ca(ita+ market7 and thus makes e!en short term sa!in)s7

consistent+' a!ai+a+e for +on)2term users

B It thus moi+iJes sa!in)s of +ar)e numer of indi!idua+s7 fami+ies and

associations and make the same a!ai+a+e for meetin) the +ar)e ca(ita+

needs of or)aniJed industr'7 trade and usiness and for (ro)ress and

de!e+o(ment of the countr' as a 8ho+e and its econom'

To dischar)e these functions7 the or)aniJed ca(ita+ market acce(ts a dua+

res(onsii+it'

To de!e+o( the market and to (romote sa!in)s & In!estment

To re)u+ate the (+a'ers in the market !is22!is the in!estor and to enforce

market disci(+ine7 throu)h market re)u+ators and re)istered

intermediaries Such that the unor)aniJed sma++ man is a+e to dea+

throu)h these re)u+ator' odies and the intermediaries7 and need not

necessari+' has to come into direct contact 8ith the u+timate seekers of

his sa!in)s

!:o?k E?han=e Tradin= Me?hanis@

The stock e6chan)e is a ke' institution the issue and sa+e of !arious

t'(es of securities It is a (i!ot around 8hich e!er' acti!it' of the ca(ita+

market re!o+!es In the asence of the stock e6chan)e7 the (eo(+e 8ith sa!in)

8ou+d hard+' in!est in cor(orate securities for 8hich there 8ou+d e no


32/100

+i>uidit' *u'in) and se++in) faci+it', Cor(orate in!estments from the )enera+

(u+ic 8ou+d ha!e een thus +o8er

Stock e6chan)e thus re(resents the market (+ace for u'in) and se++in)

of stock e6chan)e and ensurin) +i>uidit' to them in the interest of the in!estors

The stock e6chan)e are !irtua++' the ner!e centre of the ca(ita+ market and

ref+ect the hea+th of the countr'< econom' as a 8ho+e

Securities are traded in three different 8a's in stock e6chan)es rin)7

name+'2 sett+ement asis7 s(ot asis and cash asis

Shares of com(anies 8hich are not in the s(ot +ist are kno8n as Qcashuirements

and (+a'ed ' the $oard on the +ist of c+eared securities are ca++ed

' this name


33/100

- Permitted securities1 the securities +isted on some of the

reco)nised stock e6chan)e7 8hen (ermitted to e traded ' those

stock e6chan)es 8here the' are not +isted are ca++ed (ermitted

securities Such (ermission is )i!en if suita+e (ro!isions e6ist in

the re)u+ations of the concerned stock e6chan)es

Mar=ins

An ad!ance (a'ment of a (ortion of the !a+ue of a stock transaction The

amount of credit a roker or +ender e6tends to a customer for stock (urchase

Mar=in Tradin=

Mar)in tradin) 8as introduced ' SE$I to cur s(ecu+ati!e dea+in)s in

shares +eadin) to !o+ati+it' in the (rices of stock e6chan)es

Initia+ mar)in" means the minimum amount7 ca+cu+ated as a (ercenta)e

of market !a+ue of the securities7 ca+cu+ated 8ith res(ect to +ast tradin) da'uidate the securities if the c+ient fa++s to meet the

mar)in ca++s made ' the roker or fai+s to de(osit the che>ue on the da'

fo++o8in) the da' on 8hich the mar)in ca++ has een made or the che>ue has

een dishonored

The roker ma' a+so +i>uidate the securities in case the c+ient


34/100

The roker must disc+ose to the stock e6chan)e detai+s on )ross e6(osure

inc+udin) the name of the c+ient7 uni>ue identification numer7 name of the

scri( and if the roker has orro8ed funds for the (ur(ose of (ro!idin) mar)in

tradin) faci+ities7 name of the +ender and amount orro8ed7 on or efore /-

Noon on the fo++o8in) da'

Stock e6chan)e disc+oses scri( 8ise )ross outstandin) in mar)in

accounts 8ith a++ rokers to the market Such disc+osures re)ardin) mar)in

tradin) done on an' da' sha++ e made a!ai+a+e after the tradin) hours on the

fo++o8in) da' throu)h the 8esite

Thus7 mar)in tradin) acts as a check on the tendenc' of c+ients to

mani(u+ate markets ' (+acin) orders on rokers 8ithout ha!in) ade>uate

mone' or securities to acku( the transaction

Mar)in tradin) 8i++ a+so acts as cur on short se++in) and short u'in)

The reduction in ao!e tendencies on the (art of c+ients reduces

!o+ati+it' of (rices on the stock e6chan)e and (ro!ides stai+it' to the common

in!estors

Mar)in tradin) mechanism a+so ensures trans(arenc' in dea+in)s in

securities and (u+ic e6(osure of the information re)ardin) the ackin) ehind

a++ ma4or securities transactions

In the Indian ca(ita+ markets (articu+ar+' e6cessi!e short se++in) and

market (ositionin) ha!e een ram(ant Mar)in tradin) has acted as a

stai+iJin) force

#ook C>os9re and Re?ord Da:e

$ook c+osure is the (eriodic c+osure of the Re)ister of Memers and

Transfer $ooks of the com(an'7 to take a record of shareho+ders to determine

their entit+ement to di!idends or to onus or ri)ht shares or an' other ri)hts


35/100

(ertainin) to shares Record date is the date on 8hich the records of a com(an'

are c+osed for the (ur(ose of determinin) the stock ho+ders to 8hom di!idends7

(ro6'


36/100

shar( rise in the dai+' turno!er of ke' scri( and in a $EAR (hase the re!erse

8i++ e the case

T9rnover and O9:s:andin= &osi:ion

The net turno!er and outstandin) (ositions in !arious scri(s sho8 the

e6tent of $U%%IS5 interest in them and are used a+on) 8ith tradin) !o+ume to

4ud)e the intensit' of the (hase 8hether $U%%IS5 or $EARIS5 In a $U%%

(hase there 8i++ e a share rise in the dai+' turno!er of ke' scri( and in a

$EAR (hase the re!erse 8i++ e the case

Marke: Makin=

Thou)h there are L7.. com(anies +isted on the stock e6chan)e in India

on+' a fe8 of them are ein) acti!e+' traded in the market Thus the market

sentiment 8as not re(resentati!e of a 8ide ran)e of industries or com(anies7

ecause most+' concentrated on a fe8 scri(s This +eads one to conc+ude that

mere +istin) of securities does not (ro!ide +i>uidit' to scri(s A (rocess kno8n

as market makin) 8as c+ear+' needed to ui+d u( +i>uidit' The market maker

' offerin) a t8o 8a' >uote not on+' increases the su((+' of scri(s ut a+so

tri))ers of demand in the scri(s SE$I has taken the !ie8 that market makin)

8i++ )o a +on) 8a' in reducin) the ane of concentration an thus e+iminatin)

the inf+uence of the una+anced Sensiti!e Inde6

In the case of OTCEI e!er' com(an' seekin) +istin) shou+d a((oint t8o

market makers The s(onsor has to e com(u+sori+' a market maker for 0 'ears

and arran)ed for at +east one more market maker for one 'ear Market makers

are merchant $ankers 8i++in) to make a secondar' market in securities throu)h

se+ection and s(ecia+iJation The' Act as dea+er cum stockiest and dis(+a' id

and other (rice 8ithout char)in) an' commission or rokera)e

Their (rofit mar)in is s(read et8een id and offer (rices A !o+untar'

market maker can e a((ointed for a (eriod of @ months The minimum market


37/100

de(th for market makers is 0 market +ots of /.. shares each After the initia+

(eriod the 4o of market markin) can e assi)ned to another memer or dea+er

In A(ri+ /07 SE$I issued )uide+ines for market makin) to e introduced in

the B Metro(o+itan E6chan)es of Mumai7 o+kata7 Chennai and 9e+hi

!e::>e@en: !;s:e@

Sett+ement is the (rocess of nettin) of transactions and actua+

de+i!er':recei(t of securities and transfer deeds a)ainst recei(ts: (a'ment of

a)reed amount It is necessar' to make a sett+ement to kno8 the net effect of a

series of transaction durin) a )i!en (eriod

Sett+ement date is the date s(ecified for de+i!er' of securities et8een

securities firms #or administrati!e con!enience7 a stock e6chan)e di!ides the

'ear into a numer of sett+ement (eriods so as to ena+e memers to sett+e their

trades A++ transactions e6ecuted durin) the sett+ement (eriod are sett+ed at the

end of the sett+ement (eriod

Sett+ement risk or (rinci(a+ risk is the risk that the se++er of a securit' or

funds de+i!ers its o+i)ation ut does not recei!e (a'ment or that the u'er of a

securit' or funds makes (a'ment ut does not rece0i!e de+i!er' In this e!ent7

the fu++ (rinci(a+ !a+ue of the securities or funds transferred is at risk

!ECUTITIE! AND EXC%ANGE #OARD O$ INDIA F!E#I


38/100

$efore /-7 the three (rinci(a+ Acts7 )o!ernin) the securities market

8ere *a, the ca(ita+ issues *Contro+, Act7 /BD7 8hich restricted issuer


39/100

and the market 8as a++o8ed to a++ocate resources to com(etin) uses The

Go!ernment has set u( the Securities and E6chan)e $oard of India *SE$I, in

A(ri+7 /LL 5o8e!er to ensure effecti!e re)u+ation of the market7 SE$I Act7

/- 8as enacted to em(o8er SE$I 8ith statutor' (o8ers

*SE$I


40/100

mana)ers7 in!estment ad!isers and such other intermediaries 8ho

ma' e associated 8ith securities markets in an' manner

F? Re)isterin) and re)u+atin) the 8orkin) of the de(ositories7

(artici(ants7 custodians of securities7 forei)n institutiona+ in!estors7

credit ratin) a)encies and such other intermediaries as SE$I ma'7 e

notification7 s(ecif' in this eha+f

FdRe)isterin) and re)u+atin) the 8orkin) of !enture ca(ita+ funds and

co++ecti!e in!estment schemes inc+udin) mutua+ funds

Fe Promotin) and re)u+atin) se+f2re)u+ator' or)aniJations

F Prohiitin) fraudu+ent and unfair trade re+atin) to securities markets

F=Promotin) in!estor< education and trainin) of intermediaries of

securities markets

FhProhiitin) insider tradin) in securities

Fi Re)u+atin) sustantia+ ac>uisition of shares and take2o!er of

com(anies

FH Ca++in) for information from7 undertakin) ins(ection7 conductin)

in>uiries and audits of the stock e6chan)es7 mutua+ funds7 other

(ersons associated 8ith the securities market7 intermediaries and se+f2

re)u+ator' or)aniJations in the securities market

FkCa++in) for information and record from an' ank or an' other

authorit' or oard or cor(oration esta+ished or constituted ' or

under an' Centra+7 State or Pro!incia+ Act in res(ect of an'transaction in securities 8hich is under in!esti)ation or in>uir' ' the

oard

F> Performin) such functions and e6ercisin) accordin) to Securities

Contracts *Re)u+ation, Act7 /@7 as ma' e de+e)ated to it ' the

Centra+ Go!ernment

F@ %e!'in) fees or other char)es for carr'in) out the (ur(ose of this

section


41/100

FnConductin) research for the ao!e (ur(oses

Fo Ca++in) from or furnishin) to an' such a)encies7 as ma' e s(ecified

' SE$I7 such information as ma' e considered necessar' ' it for

the efficient dischar)e of its functions

FpPerformin) such other functions as m' e (rescried

!o@e O:her Ter@s re>a:ed :o !hare Marke:

#9>>

A (articu+ar kind of in!estor 8ho (urchases shares in the e6(ectation that the

market (rice of that com(an'uantit' of shares at a +o8er (rice


42/100

If a ear se++s first7 sa' /.. shares of Rana6' at Rs B..7 and +ater (urchases

the same numer of shares at Rs 0D7then her:his (rofit is Rs - (er share

This 8a' s:he has )ot ack the /.. shares of Rana6' and simu+taneous+'

made a (rofit of rs -..The shares can +ater e returned to the ear


43/100

A correction *or a measured fa++, in the Sense6 and Nift' takes (+ace 8hen

these indices rise for a fe8 da's and then retrace or sha!e off some of these

)ains

Sa' if the market ra++' from /07... to /B7... (oints in /. da's And the a)ain

fa++ to /07D.. (oints in the ne6t fi!e si6 da's then this action is termed as a

market correction

Market e6(erts consider such corrections hea+th' ecause durin) this (eriod the

o8nershi( of shares mo!es from 8eak hand *short term in!estors, to stron)

hands *+on) term in!estors,Corrections are )enera++' considered as si)ns of

stren)th after 8hich the markets*the Sense6 and Nift', )et once a)ain (oised

for a further ra++'

Dividend

It is a 8a' of re8ardin) a com(an'


44/100

in!estment anker to under8rite the offer The actua+ sa+es of the shares is

)enera++' offered ' Stock e6chan)e and re)u+ators =hen the com(an' starts

to offer IPOuired to re!ea+ financia+ information aout

the com(an' so that in!estors kno8 8hether the com(anies a )ood in!estment

or not

$ein) a+e to ans8er the >uestion 8hat is an IPO And kno8in) 8hat IPO

stands for is im(ortant if 'ou are )oin) to e in!estin) in stocks or com(anies

once 'ou understand the definition of IPO and stock market IPO7 'ou can ein)

+earnin) ho8 to use this in!estment o((ortunit' to make a (rofit ecause the'

are ine6(ensi!e In fact7 man' of the dot com mi++ionaires of the /.s made

their mone' sim(+' throu)h IPO


45/100

!hare Tradin=

Tradin) means u' and se++in) and share tradin) means u'in) and se++in) of

shares in share market

I@por:an: :er@s in share @arke: and in share :radin=

Open2 The first (rice at 8hich the stock o(ens 8hen market o(ens in the

mornin)

%i=h2 The stock (rice reached at the hi)hest +e!e+ in a da'

Low 2 The stock (rice reached the +o8est +e!e+ in a da'

C>ose2 The stock (rice at 8hich it remains after the end of market timin)s or

the fina+ (rice of the stock 8hen the market c+oses for a da'

o>9@e2 o+ume is nothin) ut >uantit'

#id 2 The $u'in) (rice is ca++ed as $id (rice

Oer2 The se++in) (rice is ca++ed offer (rice

#id 59an:i:; 2 The tota+ numer of shares a!ai+a+e for u'in) is ca++ed $id

Vuantit'

Oer 59an:i:; 2 The tota+ numer of shares a!ai+a+e for se++in) is ca++ed

Offer Vuantit'

#9;in= and se>>in= o shares 2 $u'in) is a+so ca++ed as demand or id and

se++in) is a+so ca++ed as su((+' or offer #irst se++in) and then u'in) *this on+'

ha((ens in da' tradin), is ca++ed as shortin) of shares or short se++

!hare Tradin=2 $u'in) and se++in) of shares is ca++ed share tradin)

Transa?:ion2 One com(+ete c'c+e of u'in) and se++in) of shares is ca++ed

One Transaction


46/100

!89arin= o2 This term is used to com(+ete one transaction Means if 'ou u'

then ha!e to se++ *means s>uare off, and if 'ou se++ then 'ou ha!e to

u'*means s>uare off,

T;pes o !hare Tradin=

Main+' there are t8o 8a's of share tradin)

/, Off+ine Share Tradin)

-, On+ine Share Tradin)

O>ine !hare Tradin=

9oin) share tradin) 8ith the he+( of roker or throu)h te+e(hone is

ca++ed off+ine share tradin)

In other 8ords tradin) 8i++ e done ' another (erson on 'our eha+f ased on

the instructions )i!en ' 'ou The other (erson 8ou+d e a roker

The roker 8i++ do u'in) and se++in) of shares on 'our eha+f de(endin) on

the instructions )i!en ' 'ou So in off+ine share tradin) 'ou donin= o shares

#o++o8in) are the t8o methods of u'in) and se++in) of shares in Indian share


47/100

market

/, Market Order

-, %imit Order

0, Sto( %oss Order

Marke: Order

=hen 'ou (ut u' or se++ (rice of a stock at market rate or se+ect market order

o(tion in tradin) termina+ then the (rice )et e6ecutes at the current rate of

market The market order )ets e6ecuted immediate+' at the current a!ai+a+e(rice

In market order the shares 8i++ )et e6ecuted at the est current a!ai+a+e (rice

Market order is used if 'ou 8ant to e6ecute 'our order !er' fast and at

a!ai+a+e (rice

If 'ou 8ish to u' or se++ shares at an' s(ecific (rice then market orders is not

suita+e for 'ou then ha!e to )o for +imit order Market order is for those 8ho

8ant to u' or se++ immediate+' at the current a!ai+a+e (rice

Li@i: Order

It


48/100

order then 'our order 8i++ e o(en *(endin), and then 'ou ha!e to )o throu)h

the (ena+ties Im(ortant+' +imit order and sto( +oss order are used to)ether to

minimiJe the risk

!:op Loss Order

Sto( +oss orders are used to reduce or to minimiJe the +osses This is !er'

im(ortant term es(ecia++' if 'ou are doin) da' tradin) *intrada' tradin),

Sto( %oss order as the name indicates this is used to reduce the +osses

In Sto( +oss order the tri))er (rice has to e mentioned7 ' the trader7 and once

the (rice reaches the tri))er (rice the order )et e6ecuted 8ith the est (rice

a!ai+a+e et8een the tri))er (rice and the +imit (rice

Dieren: T;pes O !hare Tradin=

/, 9a' tradin) *Intra da', and

-, 9e+i!er' tradin) *it is a+so ca++ed as in!estin),

Da; Tradin=

$u'in) and se++in) of shares on dai+' asis is ca++ed da' tradin) this is a+so

ca++ed as In:rada; :radin=

=hate!er 'ou u' toda' 'ou ha!e to se++ it toda' OR 8hate!er 'ou se++ toda'

'ou ha!e to u' it toda' and !er' im(ortant+' durin) market hours that is

et8een .. am to 00. (m *Indian time, In da' tradin)7 rokers (ro!ide

mar)in to do tradin) Means 'ou )et e6tra amount for da' tradin)

&>ease no:e 6If 'ou donuare off 'our (ositions

I@por:an: no:e 6Ne8 comers shou+d not start ' da' tradin) as it is !er'

risk'


49/100

9a' tradin) re>uires +ots of kno8+ed)e inc+udin) share7 entire share market7

)+oa+ markets7 ne8s and man' more (arameters

De>iver; Tradin=

In 9e+i!er' Tradin)7 as the name sa'7 'ou ha!e to take the de+i!er' of shares

and after )ettin) these shares in 'our 9emat account 'ou can se++ them at

an'time *or 'ou can ho+d them ti++ 'ou 8ant7 there is no restriction,

&>ease No:e 6#irst 'ou ha!e to u' and se++ 3ou can


50/100

).+ DE&O!ITORA"

At the start of se++in) and u'in) of the securities7 there 8ere +imited

transactions The numers of transaction 8as so sma++ that it 8as easi+'

hand+ed in the (h'sica+ form $ut as this securities market )et (o(u+ariJe7 the

numers of transactions increased7 there 8as ra(id )ro8th in the securities

market7 it ecame >uite hard to hand+e a++ the transactions in (h'sica+: (a(er

mode There 8ere +ots of (ro+ems 8ith (h'sica+ form of shares for e6am(+ethese (ro+ems 8ere1 2ad de+i!eries7 de+a's in transfer and irre)u+ar

sett+ement Then ecause of these man' (ro+ems the e+ectronic mode of

securities came into e6istence There 8ere t8o 8a's to i)nore a++ the (ro+ems

re+ated to (h'sica+ form of shares7 these 8ere1 2

'. I@@oia:ion

In this securities are he+d in the (h'sica+ form ut transfer is done e+ectronica++'

or 8e can sa' throu)h ook entries on+'

). De@a:eria>ia:ion

In this share certificates are destro'ed once and then the' are admitted to the

de(ositor' and the credit a)ainst this is credited in the account7 8hich is

maintained e+ectronica++' India has o(ted for the demateria+iJation route 8hich

is etter o(tion )i!en the +ar)e amount of (a(er 8ork in!o+!ed

This e+ectronic medium of tradin) 8as first+' introduced ' nationa+ stock

e6chan)e *NSE, fo++o8ed ' the Stock E6chan)e7 Mumai *$SE, in /

inducted efficienc' in tradin) s'stem ut (h'sica+ mode of de+i!er' continued

to e a dra) 9e(ositor' s'stem (ro!ided for demateria+iJation of securities7

custod' and tradin) in e+ectronic ook entr' form ecame the una!oida+e


51/100

ans8er to the ca(ita+ market (+a)ued ' i++s The )o!ernment of India

(romu+)ated 9e(ositories Ordinance in Se(temer /7 8hich 8as re(+aced

' the 9e(ositor' Act7 /@

The deposi:or; a?:

The de(ositories act7 /@ chan)ed the ca(ita+ market entire+' It makes the

ca(ita+ market more efficient ' (ro!idin) it a im(ro!ed infrastructure7

im(ro!ed in!estor (rotection in the securities market =ith the introduction of

this de(ositor' act not on+' in!estors are enefited ut a++ the issuer com(anies

are a+so enefited7 +ike the' en4o' +ess cost in issuin) e+ectronic shares thanissuin) (h'sica+ shares and it is eas' for them to mana)e a++ its shareho+ders if

the' ha!e securities in e+ectronic form So this de(ositor' act is eneficia+ for

a++ for issuer7 in!estor and intermediar'

This de(ositor' act he+(s in remo!in) irre)u+arities7 ad de+i!eries7 odd +ots

etc7 no8 the trada+e +ot is reduced to one unit of share It a+so (rotects the

interest of the in!estors This he+(s financia+ market a+so ' makin) a++ the

thin)s in a (articu+ar order No8 ecause of de(ositor' act7 there is free

transferai+it' of securities 8ith s(eed7 accurac'7 trans(arenc' etc

Deposi:or;

A de(ositor' is an or)aniJation 8here the securities of a shareho+der are he+d in

e+ectronic form at the re>uest of the shareho+der throu)h a medium This

medium is ca++ed de(ositor' (artici(ant *9P,

Present+' in India7 there are t8o de(ositories7 these are1 2

/ Nationa+ Securities 9e(ositor' %imited7 *NS9%,

- Centra+ 9e(ositor' Ser!ices *India, %imited *C9S%,

These t8o t'(es of 9e(ositories 8ork under 9e(ositories Act7 /@ The' ho+d

the securities of in!estors in the e+ectronic mode


52/100

9e(ositor' has man' sa+ient features These features are1 2

Inves:ors has op:ion :o Hoin :he deposi:or;

In this act it is not a com(u+sion that e!er' in!estor ha!e to retain a++ securities

on+' in demateria+iJed form This a++ de(end on the 8ish of in!estor that

8eather he 8ant to kee( his securities in demateria+iJed form or in (h'sica+

form 5e ha!e the o(tion that he can some (art of shares in demateria+iJed

form and rest in (h'sica+ form

De@a:eria>ied ho>din=s are 9n=ie

Accordin) to this if once securities are demateria+iJed7 the' 8i++ not ha!e an'

uni>ue characteristics such as distincti!e numers7 fo+io numers7 etc These

ho+din)s of a (articu+ar securit' 8i++ e identica+ to each other and

interchan)ea+e

No s:a@p d9:;

It is mentioned that if the securities 8i++ e in demateria+iJed form then it 8i++

e e6em(ted from stam( dut' that is .H for (h'sica+ shares

C9s:o@ers ?an in:era?: :hro9=h par:i?ipan:s

Accordin) to this feature7 the de(ositor' 8i++ not direct+' communicate to

shareho+ders7 there 8i++ e an intermediar' et8een them =ith the he+( of this

intermediar' on+' the in!estor 8i++ e a+e to take the enefit from de(ositor'

These intermediaries are de(ositor' (artici(ants *9P, There are t8o t'(es ofde(ositories customer can choose an' of them on the asis of the ser!ices

offered ' these de(ositories

De@a:eria>ia:ion as :he on>; wa; or deposi:ories in India

There are t8o 8a's for in!estors to e attached 8ith de(ositories $ut India

had chosen the 8a' of demateria+iJation In India if in!estors 8ants to take the

faci+ities of de(ositories then the' ha!e to demateria+iJe their securities


53/100

Need o deposi:or;

Need of de(ositor' can e understood ' +ookin) at the scenario of securities

market efore and after de(ositor' act7 /@

Tradi:iona> s;s:e@ o ph;si?a> share ?er:ii?a:es

The Indian ca(ita+ market has seen an un(recedented oom in its acti!it' in the

+ast decade =e can no8 oast of a !er' +ar)e in!estor (o(u+ation and

sustantia+ !o+umes of trade 5o8e!er7 this sur)e in acti!it' has rou)ht 8ithit7 numerous (ro+ems that threaten the sur!i!a+ of the ca(ita+ market in the

+on) run A c+oser ins(ection of the (ro+ems 8ou+d re!ea+ that most of them

arise due to the intrinsic nature of (a(er ased tradin) and sett+ement

This centur'2o+d s'stem of tradin) and sett+ement re>uires hand+in) of hu)e

!o+umes of (a(er +eadin) to increased costs and inefficiencies Simu+taneous+'7

the' e6(ort the in!estors to )reater risks Some of these are1

Un8anted de+a' in transfer of shares It takes 0.2@. da's for the

in!estors to )et the shares +od)ed in their name

Theft of shares +eadin) to defecti!e tit+e in shares (urchased and suse>uent

+iti)ation

Possii+it' of for)er' on !arious documents +eadin) to ad de+i!eries7 +e)a+dis(utes etc

Pre!a+ence of fake certificates in the market

This has made the in!estors7 oth retai+ and institutiona+7 distured of enterin)

the Indian Ca(ita+ Market In this scenario7 it 8as fe+t that the settin) u( of a

de(ositor' and the introduction of scri(2+ess tradin) and sett+ement is

im(erati!e for the efficient functionin) of the market


54/100

#enei:s o s?rip6>ess :radin= and se::>e@en:7

In the de(ositor' s'stem7 the o8nershi( and transfer of securities takes (+ace

' means of e+ectronic ook entries At the outset7 this s'stem rids the Ca(ita+

Market of the dan)ers re+ated to hand+in) of (a(er That is not a++ the

de(ositor' (ro!ides numerous other direct and indirect enefits +ike1 2

E+imination of ad de+i!eries and a++ risks associated 8ith (h'sica+

certificates7 such as +oss7 theft7 muti+ation7 etc

Reduction in hand+in) of hu)e !o+umes of (a(er

No stam( dut' for transfer of e>uit' instruments and units of mutua+ funds

in the de(ositor' *in case of (h'sica+ shares7 stam( dut' of .H is (a'a+e

on transfer of shares,

Immediate transfer and re)istration of securities7 increasin) +i>uidit' of

stocks 8ith the in!estor

Pa' in and (a' out of securities and funds is on the same da' for scri(2+ess

trades

#aster sett+ement c'c+e

#aster disursement of Cor(orate $enefits +ike ri)hts7 onus7 etc

Reduction in rate of interest on +oans )ranted a)ainst (+ed)e ofdemateria+iJed securities ' man' anks

Reduction in rokera)e ' man' rokers for tradin) in demateria+iJed

securities

Periodic status re(orts to in!estors on their ho+din) and transactions7 +eadin)

to etter contro+


55/100

Sustantia+ reduction in transaction cost in demateria+iJed securities as

com(ared to (h'sica+ securities

This makes (+ed)in) of securities :shares more easier than (h'sica+ formof shares

It ena+es >uick o8nershi( of securities on sett+ement resu+tin) in

increased +i>uidit'

It a!oids confusion in the o8nershi( tit+e of securities & (ro!ides eas'

recei(t of (u+ic issue a++otment

It a!oids risk associated 8ith for)er'7 counterfeitin)7 and +oss due to fire

and +oss ecause of theft

It a!oids incon!enience re+ated to fi++in) the transfer deeds a)ain and

a)ain

It makes the faster (a'ment on sa+e of shares

There is no risk of u'in) fraudu+ent share certificates

&ar:i?ipan:s in deposi:or; s;s:e@

This de(ositor' s'stem does not 8ork a+one there are man' (artici(ants of this

de(ositor' s'stem These (artici(ants ma' (ro!ide 8ork to de(ositor' or ma'

(erform 8ork on eha+f of de(ositor' or ma' (erform task7 8hich 8i++

faci+itate the Indian de(ositor' s'stem These (artici(ants of de(ositor' s'stem

are1 2

Iss9er or ?o@pan;

Issuer is a com(an'7 8hich issues share: securities for raisin) fund from

market =hene!er a com(an' re>uires funds for its o(eration7 it has o(tion to

ask funds from (u+ic ' issuin) shares7 deentures7 onds7 (referentia+ shares7

etc


56/100

Iss9er re=is:rar

Man' times com(an' a((oint re)istrar to hand+e a++ the dis(utes re+ated to

issue of shares or IPOs These re)istrar 8ork on eha+f of the com(an' and

mana)e a++ the thin)s re+ated to shares: securities of the com(an'

Deposi:or; par:i?ipan: FD&

A 9P is a market intermediar'7 8hich interacts 8ith customers on eha+f of

de(ositor' #or otainin) the ser!ices (ro!ided ' 9P customers first+' are

re>uired to o(en a demat account 8ith it7 then on+' the' can a!ai+ the ser!ices

of a 9P

Inves:or

In!estors are the (eo(+e 8ho in!est in securities or 8ho u's shares from

securities market These in!estor (urchases the securities for makin) (rofit out

of it

!:o?k earin= @e@


57/100

/ Tradin) memer

- Custodian

0 Susidiar' com(anies ' re)iona+ stock e6chan)es to faci+itate

their memers to trade on $SE:NSE

C>earin= ?orpora:ion

C+earin) cor(oration are ca++ed c+earin) house a+so These are the or)aniJation7

8hich faci+itate the sett+ement of trades These are !er' im(ortant (art of

tradin) s'stem

The re+ationshi(s amon) a++ these (artici(ants of the de(ositor' s'stem can e

understand ' +ookin) at this chart

N!DL

The first de(ositar' in India esta+ished in Au) /@ and (romoted '

Institutions of Nationa+ Stature Res(onsi+e for Economic 9e!e+o(ment of the

9EPOSITOR3 ISSUER: R&TAGENT

C%EARING

CORPS9EPOSITOR3

PARTICIPANT

INESTORSTOC

EFC5ANGE

C%EARING

MEM$ERS

TRA9ING

MEM$ERS


58/100

countr' has since esta+ished a nationa+ infrastructure of internationa+ standard

that hand+es most of the sett+ement of securities in demateria+iJed from in

Indian ca(ita+ market

Usin) inno!ati!e and f+e6i+e techno+o)' s'stems7 NSDL 8ork to

su((ort the in!estors and rokers in the ca(ita+ market of the countr' NSDL

aims at ensurin) the safet' and soundness of Indian market (+aces '

de!e+o(in) sett+ement so+ution that increase efficienc' minimiJe risk and

reduce costs AtNSDL8e (+a' a >uiet ut centra+ ro+e in de!e+o(in) (roducts

and ser!ices that 8i++ continue to nature the )ro8in) needs of the financia+

industries

C!DL

CSDL8as set u( 8ith the o4ecti!e of (ro!idin) con!enient7 de(enda+e

and secure de(ositor' ser!ices at afforda+e cost to a++ market (artici(ants

CSDL recei!ed the certificate of commencement of usiness from SE$I in

#eruar'7 / 5onora+e Union #inance Minister7 Shri 3ash8ant Sinha

f+a))ed off the o(erations of CSDLon ?u+' /7 / Sett+ement of trades in

the demat mode throu)h $OI shareho+din) %imited7 the c+earin) house of $SE7

standard in ?u+' /A++ +eadin) stock e6chan)es +ike the Nationa+ Stock

E6chan)e7 Ca+cutta Stock E6chan)e7 9e+hi Stock E6chan)e7 the Stock

E6chan)e7 Ahmedaad etc ha!e esta+ished connecti!it' 8ith CSDL.

At the end of 9ec -..7 o!er ... issuers ha!e admitted their securities

units of mutua+ funds7 certificate of de(osits etc into the CSDLs'stem

!ervi?es provided


59/100

(ro!ide man' other ser!ices or faci+itate its c+ients in man' 8a's 5ere are the

ser!ices (ro!ided ' 9P to its c+ients1 2

De@a: a??o9n: openin= and @ain:enan?e

An indi!idua+ 8ho 8ant to kee( his :her cash safe in a ank has to o(en an

account 8ith the ank as a first ste( and maintain cash in ook entr' form

Simi+ar+'7 an in!estor has to o(en an demat account 8ith an' 9P of C9S% as a

first ste( to ho+d securities in 9emat form in the 9e(ositor' s'stem The

in!estor can o(en an account 8ith na' 9P of C9S% C9S% s'stem faci+ities

o(enin) of 9emat accounts for different cate)ories of in!estors

9emat accounts o(ened 8ith C9S% are referred as Q$eneficia+ O8ner

Accounts< or Q$O< account


60/100

A++ $O accounts are o(erated at 9P +e!e+ ho8e!er7 data is maintained at

C9S% +e!e+ A $O does not ha!e direct access to C9S% s'stem and must act

throu)h 5is:her 9P =hi+e o(enin) an account7 the $O can )i!e a standin)

instruction *confirmation 8ai!er of (urchase 8ai!er, to a++o8 credits

automatica++' to the account 8ithout se(arate instructions

A??o9n: openin= pro?ed9re

There is a (re2decided account o(enin) (rocedure7 this (rocedure is (resented

e+o81 2

/ The (erson 8ho 8ants to o(en a demat account is re>uired to sumit du+'

fi++ed account o(enin) form a+on) 8ith necessar' documents

- 9P 8i++ !erif' si)natures and a++ the documents (resented

3. The 9P 8i++ ca(ture detai+s from the account o(enin) form fi++ed ' the $O

in the front2end s'stem (ro!ided ' C9S% =hi+e (uttin) the detai+s into

the s'stem it is re>uired to e !er' carefu+ at +east at the time of enterin)

name of $O ecause a++ other detai+s can e modif' further ut the $O

name 8i++ enter once7 8i++ remain fore!er ti++ the account is o(eratin) The

9P 8i++ scan the si)natures of the $O as 8e++ as the (o8er of attorne'

si)natures7 if a((+ica+e Once7 the 9P commits the transaction7 the data is

ca(tured and stored at C9S%

4. A uni>ue $O account numer is )enerated ' the s'stem and this can e

seen at the 9P front2end s'stem This 8i++ e done on2+ine and theinformation )ets transmitted to C9S% instantaneous+' The 9P 8i++ record

the $O I9 on the ori)ina+ a((+ication form and on the 9P2$O a)reement for

cross2reference

5. On committin) the $O detai+s in the front2end7 s'stem 8i++ )enerate a

confirmation +etter7 8hich inc+udes a++ the necessar' information re)ardin)

$O This +etter is ca++ed c+ient master"6. Then 9P 8i++ send this +etter to the concerned c+ient


61/100

7. 9P 8i++ issue a de+i!er' instruction ook for account ho+der

Do?9@en:s re89ired

There are the documents7 8hich are re>uired to sumit 8ith the account

o(enin) form.

Individ9a> inves:or

1. PAN card as identit' (roof

2. Address (roof *Ration card7 $ank (ass ook7 e+ectricit' i++s7 +and+ine i++s

+atest of - months7 !oter I9 card7 dri!in) +icense7 etc,

3. $ank (roof 8ith a++ the re>uired ank detai+s +ike name of ank7 MICR

code7 account numer7 account t'(e and ranch name* (ass ook7 cance+ed

che>ue 8ith (rinted name7 ank statement of +atest @ months7 etc,

4. Stam( (a(er

5. One (ass(ort siJe (hoto)ra(h7 it shou+d e si)ned

Addi:iona> do?9@en:s or %U$

1. 5U# dec+aration certificate7

2. PAN card of 5U#

Addi:iona> do?9@en:s or MINOR

1. Certificate of )uardian dec+aration if the )uardian is not one from the

natura+ )uardian

Do?9@en:s or ?orpora:e inves:ors

/ Certified true co(' of oard reso+ution for (ersons authoriJed ' the oard

to act as authoriJed si)natories

- Name of the authoriJed si)natories7 desi)nation7 and their s(ecimen

si)natures


62/100

0 POA )i!en to the authoriJed si)natories

B Memorandum and artic+e of association

One (ass(ort siJe (hoto)ra(h of each authoriJed si)natories 8ith their

si)natures across the face of the (hoto)ra(h

Addi:iona> inor@a:ion

1 At most three ho+ders can o(en a 4oint account

2 One time standin) instruction for credits to 9P

3 5U# account ho+der cannot nominate an' od'

4On+' indi!idua+ can a((oint nominee and nominee can e an indi!idua+on+'

5 Account cannot e o(en in the name of (artnershi( firm

#enei:s o havin= a de@a: a??o9n:

#or ho+din) securities in demateria+iJed form it is mandator' to ha!e a demat

account 8ith an' 9P of an' 9e(ositor' 5a!in) a demat account is eneficia+

in man' terms 5ere are some of the enefits or ad!anta)es of demat account

(resented e+o81 2

6 SE$I had made it com(u+sor' for most of the scri( to e traded on+' in

demat se)ment There are man' com(anies7 8hose scri(s can e traded on+'

in demat se)ment7 so to trade in those securities it is re>uired to ha!e demataccount

7 9emat account ho+der ma' en4o' reduced cost in term of transaction as

transaction in demat mode of securities is e6em(ted from the stam( dut'

that is .H in case of transaction in (h'sica+ mode of shares

8 A demat account ho+der 8i++ e free from a++ the risks associated 8ith

(h'sica+ form of securities +ike de+a's7 theft7 muti+ation7 ad de+i!eries etc

9 A demat account ha!e an o(tion a+so to ha!e its securities in froJen mode


63/100

his demat account

10A demat account ho+der is free from the (ro+em of odd +ot of securities7

that e6ist in (h'sica+ mode of securities7 in demat mode of securities7

market +ot is reduced to one

11 It is eneficia+ to ha!e demat account ecause demateria+iJed securities are

most (referred ' anks and other financiers for (ro!idin) credit faci+it'

a)ainst securities Genera++'7 demat securities attract +o8er mar)in and

+o8er rates of interest com(ared to (h'sica+ securities

12 After the sett+ement7 (a' in and (a' out are there on the same da' for scri(s

+ess tradin) 8hich means c+ients )et their securities as 8e++ as cash

immediate+'

13Shares ou)ht or so+d are transferred in the name of c+ient on the !er' ne6t

da' of (a' out In case of (h'sica+ shares7 transfer of o8nershi( takes 0.

da's or sometimes e!en more than that

14 There is no courier and (osta+ char)es for sendin) share certificates and

transfer deed

15 There is faci+it' for freeJin) or +ockin) of in!estoruired

to ha!e a demat account

/L In!estors (refer to u' shares7 8hich are a+read' in demateria+iJed form


64/100

). Co@@odi:;

%is:or; o Co@@odi:; Deriva:ives Marke:s

Ear+' for8ard contracts in the US addressed merchants concerns aout

ensurin) that there8ere u'ers and se++ers for commodities 5o8e!er7 credit

risk remained a serious (ro+emTo dea+ 8ith this (ro+em7 a )rou( of Chica)o

usinessmen formed the Chica)o $oard ofTrade *C$OT, in /LBL The (rimar'

intention of the C$OT 8as to (ro!ide a centra+iJed+ocation kno8n in ad!ance

for u'ers and se++ers to ne)otiate for8ard contracts In /L@7 the C$OT 8ent

one ste( further and +isted the first e6chan)e traded deri!ati!es contract in the

US7 these contracts 8ere ca++ed futures contracts In //7 Chica)o $utter and

E)) $oard7 a s(in2off of C$OT7 8as reor)aniJed to a++o8 futures tradin) Its

name 8as chan)ed to Chica)o Mercanti+e E6chan)e *CME, The C$OT and

CME remain the t8o +ar)est or)aniJed futures e6chan)es7 indeed the t8o

+ar)est financia+ e6chan)es of an' kind in the 8or+d

toda' The first stock inde6 futures contract 8as traded at ansas Cit' $oard of

Trade Current+'7 the most (o(u+ar stock inde6 futures in the 8or+d is ased on

S&P .. inde67 traded on Chica)o Mercanti+e E6chan)e 9urin) the mid

ei)htees7 financia+ futures ecame the most acti!e deri!ati!e instruments

)eneratin) !o+umes man' times more than the commodit' futures Inde6

futures7 futures on T2i++s and Euro29o++ar futures are the three most (o(u+ar

futures contracts traded toda' Other (o(u+ar internationa+ e6chan)es that trade

deri!ati!es are %I##E in Euro(e7 9T$ in German'7 SGF in Sin)a(ore7 TI##E

in ?a(an7 MATI# in #rance7 Eure6 etc

%is:or; o Co@@odi:; Deriva:ives Marke:s

Ear+' for8ard contracts in the US addressed merchants concerns aout

ensurin) that there 8ere u'ers and se++ers for commodities 5o8e!er7 credit

risk remained a serious (ro+em To dea+ 8ith this (ro+em7 a )rou( of

Chica)o usinessmen formed the Chica)o $oard of Trade *C$OT, in /LBL


65/100

The (rimar' intention of the C$OT 8as to (ro!ide a centra+iJed +ocation

kno8n in ad!ance for u'ers and se++ers to ne)otiate for8ard contracts In

/L@7 the C$OT 8ent one ste( further and +isted the first e6chan)e traded

deri!ati!es contract in the US7 these contracts 8ere ca++ed futures contracts In

//7 Chica)o $utter and E)) $oard7 a s(in2off of C$OT7 8as reor)aniJed to

a++o8 futures tradin) Its name 8as chan)edto Chica)o Mercanti+e E6chan)e

*CME, The C$OT and CME remain the t8o +ar)est or)aniJed futures

e6chan)es7 indeed the t8o +ar)est financia+ e6chan)es of an' kind in the 8or+d

toda' The first stock inde6 futures contract 8as traded at ansas Cit' $oard of

Trade Current+'7 the most (o(u+ar stock inde6 futures in the 8or+d is ased on

S&P .. inde67 traded on Chica)o Mercanti+e E6chan)e 9urin) the mid

ei)htees7 financia+ futures ecame the most acti!e deri!ati!e instruments

)eneratin) !o+umes man' times more than the commodit' futures Inde6

futures7 futures on T2i++s and Euro29o++ar futures are the three most (o(u+ar

futures contracts traded toda' Other (o(u+ar internationa+ e6chan)es that trade

deri!ati!es are %I##E in Euro(e7 9T$ in German'7 SGF in Sin)a(ore7 TI##E

in ?a(an7 MATI# in #rance7 Eure6 etc

Co@@odi:; Deriva:ives

9eri!ati!es as a too+ for mana)in) risk first ori)inated in the commodities

markets The' 8ere then found usefu+ as a hed)in) too+ in financia+ markets as

8e++ In India7 tradin) in commodit' futures has een in e6istence from thenineteenth centur' 8ith or)anised tradin) in cotton throu)h the esta+ishment

of Cotton Trade Association in /LD O!er a (eriod of time7 other commodities

8ere (ermitted to e traded in futures e6chan)es Re)u+ator' constraints in

/@.s resu+ted in !irtua+ dismant+in) of the commodit' futures market It is

on+' in the +ast decade that commodit' futures e6chan)es ha!e een acti!e+'

encoura)ed In the commodit' futures market7 the >uin>uennium after the set

u( of nationa+ +e!e+ e6chan)es 8itnessed e6(onentia+ )ro8th in tradin) 8ith


66/100

the turno!er increasin) from D/ +akh crores in -..B2. to -BL +akh crores in

-..L2. 5o8e!er7 the markets ha!e not )ro8n to si)nificant +e!e+s as

com(ared to de!e+o(ed countries In this cha(ter7 8e take a rief +ook at the

)+oa+ commodit'

markets and the commodit' markets that e6ist in India

Evo>9:ion O Co@@odi:; E?han=es

Most of the commodit' e6chan)es7 8hich e6ist toda'7 ha!e their ori)in in the

+ate /th and ear+ier -.th centur' The first centra+ e6chan)e 8as esta+ished in

/LBL in Chica)o under the name Chica)o $oard of Trade The emer)ence of

the deri!ati!es markets as the effecti!e risk mana)ement too+s in /D.s and

/L.s has resu+ted in the ra(id creation of ne8 commodit' e6chan)es and

e6(ansion of the e6istin) ones At (resent7 there are ma4or commodit'

e6chan)es a++ o!er the 8or+d dea+in) in different t'(es of commodities

Co@@odi:; E?han=e

Commodit' e6chan)es are defined as centers 8here futures trade is or)aniJed

in a 8ider sense it is taken to inc+ude an' or)aniJed market (+ace 8here trade

is routed throu)h one mechanism7 a++o8in) effecti!e com(etition amon)

u'ers and amon) se++ers This 8ou+d inc+ude auction2t'(e e6chan)es7 ut not

8ho+esa+e markets7 8here trade is +oca+iJed7 ut effecti!e+' takes (+ace throu)h

man' non2re+ated indi!idua+ transactions et8een different (ermutations of

u'ers and se++ers

Ro>e o Co@@odi:; E?han=esCommodit' e6chan)es (ro!ide (+atforms to suit the !aried re>uirements of

customers #irst+'7 the' he+( in (rice disco!er' as (+a'ers )et to set future

(rices 8hich are a+so made a!ai+a+e to a++ (artici(ants 5ence7 a farmer in the

southern (art of India 8ou+d e a+e to kno8 the est (rice (re!ai+in) in the

countr' 8hich 8ou+d ena+e him to take informed decisions #or this to

ha((en7 the conce(t of commodit' e6chan)es must (erco+ate do8n to the

!i++a)es Toda' the farmers ase their choice for ne6t 'ears cro( on current


67/100

'ears (rice Idea++' this decision ou)ht to e ased on ne6t 'ears e6(ected

(rice #utures (rices on the (+atforms of commodit' e6chan)es 8i++ ho(efu++'

mo!e farmers of our countr' from the current co8e effect 8here additiona+

acrea)e comes under cu+ti!ation in the 'ear suse>uent to one 8hen a

commodit' had )ood (rices conse>uent+' the ne6t 'ear the commodit' (rice

actua++' fa++s due to o!ersu((+' Second+'7 these e6chan)es ena+e actua+ users

*farmers7 a)ro (rocessors7 industr' 8here the (redominant cost is commodit'

in(ut:out(ut cost, to hed)e their (rice risk )i!en the uncertaint'

of the future 2 es(ecia++' in a)ricu+ture 8here there is uncertaint' re)ardin) the

monsoon and hence (rices This ho+ds )ood a+so for non2a)ro (roducts +ike

meta+s or ener)' (roducts as 8e++ 8here )+oa+ forces cou+d e6ert considera+e

inf+uence Purchasers are a+so assured of a fi6ed (rice 8hich is determined in

ad!ance7 there' a!oidin) sur(rises to them It must e orne in mind that

commodit' (rices in India ha!e a+8a's een 8o!en firm+' into the

internationa+ faric Toda'7 (rice f+uctuations in a++ ma4or commodities in the

countr' mirror oth nationa+ and internationa+ factors and not mere+' nationa+

factors Third+'7 ' in!o+!in) the )rou( of in!estors and s(ecu+ators7

commodit' e6chan)es (ro!ide

+i>uidit' and uo'anc' to the s'stem %ast+'7 the aritra)eurs (+a' an im(ortant

ro+e in a+ancin) the market as aritra)e conditions7 8here the' e6ist7 are

ironed out as aritra)eurs trade 8ith o((osite (ositions on different (+atforms

and hence )enerate o((osin) demand and su((+' forces 8hich u+timate+'narro8s do8n the )a(s in (rices It must e (ointed out that 8hi+e the monsoon

conditions affect the (rices of a)ro2ased commodities7 the (henomenon of

)+oa+iJation has made (rices of other (roducts such as meta+s7 ener)'

(roducts7 etc7 !u+nera+e to chan)es in )+oa+ (o+itics7 (o+icies7 )ro8th

(aradi)ms7 etc This 8ou+d e stren)thened as the 8or+d mo!es c+oser to the

reso+ution of the =TO im(asse7 8hich 8ou+d ecome a rea+it' short+'


68/100

Commodit' e6chan)es 8ou+d (ro!ide a !a+ua+e hed)e throu)h the (rice

disco!er' (rocess 8hi+e caterin) to the different kind of players in the market.

Co@@odi:; Deriva:ive Marke:s in India

Commodit' futures markets ha!e a +on) histor' in India Cotton 8as the first

commodit' toattract futures tradin) in the countr' +eadin) to the settin) u( of

the $oma' Cotton Trade Association %td in /LD The $oma' Cotton

E6chan)e %td 8as esta+ished in /L0 fo++o8in) the 8ides(read discontent

amon)st +eadin) cotton mi++ o8ners and merchants o!er the functionin) of

$oma' Cotton Trade Association

Suse>uent+'7 man' e6chan)es came u( in different (arts of the countr' for

futures tradin) in !arious commodities #utures tradin) in oi+seeds started in

/.. 8ith the esta+ishment of the Gu4arati 'a(ari Manda+i7 8hich carried on

futures trade in )roundnut7 castor seed and cotton $efore the Second =or+d

=ar roke out in /07 se!era+ futures markets in oi+seeds 8ere functionin) in

Gu4arat and Pun4a #utures tradin) in 8heat e6isted at se!era+ (+aces in Pun4a

and Uttar Pradesh7 the most nota+e of 8hich 8as the Chamer of Commerce

at 5a(ur7 8hich e)an futures tradin) in 8heat in //0 and ser!ed as the (rice

setter in that commodit' ti++ the outreak of the Second =or+d =ar in /0

#utures tradin) in u++ion e)an in Mumai in /-. and suse>uent+' markets

came u( in other centres +ike Ra4kot7 ?ai(ur7 ?amna)ar7 an(ur7 9e+hi and

o+kata Ca+cutta 5essian E6chan)e %td 8as esta+ished in // for futures

tradin) in ra8 4ute and 4ute )oods&h;si?a> !e::>e@en:

Ph'sica+ sett+ement in!o+!es the (h'sica+ de+i!er' of the under+'in)

commodit'7 t'(ica++' at an accredited 8arehouse The se++er intendin) to make

de+i!er' 8ou+d ha!e to take the commodities to the desi)nated 8arehouse and

the u'er intendin) to take de+i!er' 8ou+d ha!e to )o to the desi)nated

8arehouse and (ick u( the commodit' This ma' sound sim(+e7 ut the

(h'sica+ sett+ement of commodities is a com(+e6 (rocess The issues faced in


69/100


70/100

house efore introduction of the contract The most acti!e s(ot market is

norma++' taken as the enchmark for decidin) s(ot (rices

Wareho9sin=

One of the main differences et8een financia+ and commodit' deri!ati!e is the

need for 8arehousin) In case of most e6chan)e2traded financia+ deri!ati!es7

a++ the (ositions are cash sett+ed Cash sett+ement in!o+!es (a'in) u( the

difference in (rices et8een the time the contract 8as entered into and the time

the contract 8as c+osed #or instance7 if a trader u's futures on a stock at

Rs/.. and on the da' of e6(iration7 the futures on that stock c+ose at

Rs/-.7 he does not rea++' ha!e to u' the under+'in) stock A++ he does is take

the difference of Rs-. in cash Simi+ar+'7 the (erson 8ho so+d this futures

contract at Rs/.. does not ha!e to de+i!er the under+'in) stock A++ he has to

do is (a' u( the +oss of Rs-. in cash In case of commodit' deri!ati!es

ho8e!er7 there is a (ossii+it' of (h'sica+ sett+ement It means that if the se++er

chooses to hand o!er the commodit' instead of the difference in cash7

the u'er must take (h'sica+ de+i!er' of the under+'in) asset This re>uires the

E6chan)e to make an arran)ement 8ith 8arehouses to hand+e the sett+ements

The efficac' of the

commodities sett+ements de(ends on the 8arehousin) s'stem a!ai+a+e Such

8arehousesha!e to (erform the fo++o8in) functions1

K Earmark se(arate stora)e areas as s(ecified ' the E6chan)e for storin)

commodities

K Ensure (ro(er )radin) of commodities efore the' are stored

K Store commodities accordin) to their )rade s(ecifications and !a+idit' (eriod

and


71/100

K Ensure that necessar' ste(s and (recautions are taken to ensure that the

>uantit' and

)rade of commodit'7 as certified in the 8arehouse recei(t7 are maintained

durin) the stora)e (eriod This recei(t can a+so e used as co++atera+ for

financin) In India7 NC9EF has accredited o!er DD de+i!er' centres 8hich

meet the re>uirements for the (h'sica+ ho+din) of )oods that are to e de+i!ered

on the (+atform As future tradin) is de+i!er'

ased7 it is necessar' to create the +o)istics su((ort for the same

59a>i:; o Under>;in= Asse:s

A deri!ati!es contract is 8ritten on a )i!en under+'in) ariance in >ua+it' is

not an issue in case of financia+ deri!ati!es as the (h'sica+ attriute is missin)

=hen the under+'in) asset is a commodit'7 the >ua+it' of the under+'in) asset

is of (rime im(ortance There ma' e >uite some !ariation in the >ua+it' of

8hat is a!ai+a+e in the market(+ace =hen the asset is s(ecified7 it is therefore

im(ortant that the E6chan)e sti(u+ate the )rade or )rades of the commodit'

that are acce(ta+e Commodit' deri!ati!es demand )ood standards and >ua+it'

assurance:

certification (rocedures A )ood )radin) s'stem a++o8s commodities to e

traded ' s(ecification Tradin) in commodit' deri!ati!es a+so re>uires >ua+it'

assurance and certifications from s(ecia+iJed a)encies In India7 for e6am(+e7

the $ureau of Indian Standards *$IS, under the 9e(artment of Consumer

Affairs s(ecifies standards for (rocessed a)ricu+tura+ commodities AGMAR7another certif'in) od' under the 9e(artment of A)ricu+ture and Coo(eration7

s(ecifies standards for asic a)ricu+tura+ commodities


72/100

C%A&TER 6 +

O#0ECTIE! O$ !TUD"

In (resent era the stock market is one of the (o(u+ar markets in India7 the

econom' of an' countr' affects !er' much ' the u++ and ear condition of

the stock market Pre!ious+' a++ trade in the stock e6chan)es 8ere done in the

(h'sica+ form of the share certificates ut (resent+' ecause of the

incon!enience of that (h'sica+ mode a++ the trades in stock e6chan)es are done

in 9emat mode And m' main o4ecti!es to ha!e m' trainin) in Anand Rathi

Share & Stock $rokers %td are1 2

To understand the commodit' market

To kno8 the (rocedure7 ho8 one can in!est in commodit' throu)h

Anand Rathi Share & Stock $rokers %td

To understand cash market and deri!ati!e market as an in!estment

o(tion for an in!estor

To )et the re!ie8 of Retai+ in!estor to8ards o(tion in!estin)


73/100

C%A&TER 6

RE!EARC% MET%ADOLOG"

Resear?h Desi=n

Research desi)n is the o!era++ descri(tion of a++ the ste(s thou)h 8hich the

(ro4ects ha!e (receded from the settin) of o4ecti!es to the 8ritin) of the

(ro4ect re(ort The success of the (ro4ect de(ends on the soundness of the

research desi)n7 8hich inc+udes (ro+em definition7 s(ecific method of data

co++ection and ana+'sis and time re>uired for the (ro4ect

The research took 8as 9escri(ti!e Research" in nature as it dea+t 8ith

descriin) the in!estment eha!ior of in!estor

The research 8as desi)n to kno8 aout the (erce(tion of the in!estor to8ards

!arious in!estment o(tion a!ai+a+e es(ecia++' in share market 7 the

(s'cho+o)ica+ factor associated 8ith the (roduct7 the enefit the' are +ookin)

forth from the (roduct and ho8 do the' rank it on terms of risk and return

associated 8ith it

!o9r?e o da:a ?o>>e?:ion

There are t8o t'(es of data secondar' and (rimar' data

The secondar' data refers to those data7 8hich 8ere )athered for some other

(ur(ose and a+read' a!ai+a+e in the firm


74/100

On the other hand7 (rimar' data do not e6ists a+read' in records and

(u+ication One has to )ather to (rimar' data a fresh from the s(ecific stud'

undertaken ' him

Main source of the data 8as (rimar' source of data co++ection for determinin)

the a8areness +e!e+ amon) the (eo(+e and to stud' the terms and the factor

re+ated to the share market secondar' source of data 8ere used

&ri@ar; so9r?es

#irst hand co++ection of data 8ith the he+( of sur!e's7 >uestionnaires7

inter!ie8s

!e?ondar; so9r?es o da:a

The main of the secondar' data 8as ne8s(a(er +ike in!estor )uide The

economics times7 usiness times and e+ectronic media ie internet *sites re+ated

to the share market ie mone'contro+com7 mundracom etc,

Me:hod o Da:a Co>>e?:ion6

As our research 8as descri(ti!e and data re>uired 8as (rimar' Primar' data

can e co++ected ' three methods

a O


75/100

to co++ect data in short time from the sam(+e se+ected and it 8as the most

a((roacha+e

!a@p>in= pro?ed9re

9efinin) the (o(u+ation

E+ement2(eo(+e from the midd+e c+ass and hi)h income )rou( of ?ai(ur cit'

!a@p>in= @e:hod

A mi6ture of random sam(+in) and the stratified random sam(+in) 8as chosen7

the 8ho+e +ist of the (otentia+ in!estor and the (art in!estor 8as di!ided into

strata ased on their income ca(ai+ities and the occu(ation in 8hich the' 8ere

in!o+!ed

!a@p>e !ie

#or the (ur(ose of com(rehensi!e stud' of share market 8e ha!e taken a

sam(+e of /.. (eo(+e from the ?ai(ur cit' to kno8 their in!estment (attern


76/100

.' ANAL"!I! AND INTER&RETATION

5'6%ow @9?h do ;o9 inves: in propor:ion o ;o9r in?o@eJ

30

38

18

14

less than 5%

5-10%

10-20%

above 20%

$indin= and In:erpre:a:ion6#rom the ao!e ana+'sis it is found that 0LH

in!estor in!est in shares and 0.H in!estor interested in future and o(tion and

other /LH in!estor in!estment in commodit' and /BH in!estor in!estment in

different market +ike currenc' and mutua+ fund commodit' is !er' +ess

com(are to other market +ike share or future and o(tion and securities etc it


77/100

5)6Ti@e span o inves:@en:J

20

38

30

12short term

medim term

long term

intra day

$indin=s2Ao!e chart sho8s that 0LH (eo(+e in!est for medium term0.H

(eo(+e in!est for +

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