Project Report on Capital Market

7/25/2019 Project Report on Capital Market

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PROJECT REPORT

ON

CAPITAL

MARKET

SUBMITTED TO:

SUBMITTED BY:

POOJA M. KOHLI

NEZAMUDDIN

EXECUTIVE DIRECTOR

MBA(IC) 2nYEAR

LUDHIANA STOCK EXCHAN!EROLL NO: "2#

(S$%%&'n 2 * 2")


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Un&+$,%&- S/0''1 ' B3%&n$%%

S-3&$%

P3n456& Un&+$,%&-7 P5-&515

T5185n& S56'7 B5-0&n5

ACKNO9LED!EMENT

I take this opportunity to express my deep sense of gratitude to all our

friends and seniors who helped and guide me to complete this projectsuccessfully. I am highly grateful and indebted to my project guide Mr. Sadhu

Ram (guide & cocoordinator! and for their excellent and expert guidance in

helping us in completion of project report.

N$5;3&n


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"R#$%#

'he successful completion of this project was a uniue experience for me

because by )isiting many place and interacting )arious person* I achie)ed a

better knowledge about this project. 'he experience which I gained by doingthis project was essential at this turning point of my carrier this project is

being submitted which content detailed analyst of the research under taken

by me.

'he research pro)ides an opportunity to the student to de)ote her skills

knowledge and competencies reuired during the technical session.

'he research is on the topic +capital market,


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ontents

Introduction to -udhiana stock exchange

rgani/ation of -S# Management of -S# Strengths of -S# In)estors related ser)ices #ducational initiati)es of exchange

-isting of securities of companies at -S#

%"I'%- M%R0#'

Introduction and de1nition %d)antages of capital market 2isad)antages of capital market $unction of capital market Role of capital market in an economy 'he importance of .M for the economic de)elopment of India Signi1cance of capital market

'he importance of .M in economy .M3 omponents and functions

apital market instruments "rimary market Secondary market

%cti)ities in the primary market 4ow does "rimary Market works5 'ypes of issues Secondary market %cti)ities in the secondary market

Major entities in)ol)ed in the .M Secondary market & it6s operations S'0 #74%89#

4istory and function of stock exchange 'he stock exchanges Member of the stock exchange Settlement cycle

-#9%- $R%M#:R0


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S#;I(intermediaries! Regulation* S#;I Regulations* ?@@thcentury when

trading shares of #ast India commenced. 'he real story of India6s apital

Markets started in Buly ?>AF with the formation of Stock #xchange in

Mumbai by the brokers. India6s apital Market in terms of 92" raised fromAF percent in ?@@F to ?G= percent of 92" in


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from buyers and sellers.

=3n/-&'n% ' -0$ /5F&-51 ;5,G$-

'he major objecti)es of capital market are3P 'o mobili/e resources for in)estments.P 'o facilitate buying and selling of securities.P 'o facilitate the process of eHcient price disco)ery.P 'o facilitate settlement of transactions in accordance with thepredetermined time Schedules.

905- &% -0$ ,'1$ ' /5F&-51 ;5,G$-% &n 5n $/'n';

"ro)ides an important alternati)e source of longterm 1nance for

longterm producti)e in)estments. 'his helps in diCusing stresses on the

banking system by matching longterm in)estments with longterm capital.

"ro)ides euity capital and infrastructure de)elopment capital that has

strong socioeconomic bene1ts roads* water and sewer systems* housing*energy* telecommunications* public transport* etc. ideal for 1nancing

through capital markets )ia long dated bonds and asset backed securities.

"ro)ides a)enues for in)estment opportunities that encourage a

thrift culture critical in increasing domestic sa)ings and in)estment ratios


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that are essential for rapid industriali/ation. 'he Sa)ings and in)estment

ratios are too low* below ?=Q of 92".

#ncourages broader ownership of producti)e assets by small sa)ers

to enable them bene1t from 0enya6s economic growth and wealth

distribution. #uitable distribution of wealth is a key indicator of po)ertyreduction.

"romotes publicpri)ate sector partnerships to encourage

participation of pri)ate sector in producti)e in)estments. "ursuit of economic

eHciency shifting dri)ing force of economic de)elopment from public to

pri)ate sector to enhance economic producti)ity has become ine)itable as

resources continue to diminish.

%ssists the 9o)ernment to close resource gap* and complement its eCort in

1nancing essential socioeconomic de)elopment* through raising longterm

project based capital.

Impro)es the eHciency of capital allocation through competiti)e

pricing mechanism for better utili/ation of scarce resources for increased

economic growth.

"ro)ides a gateway to 0enya for global and foreign portfolio in)estors* which

is critical in supplementing the low domestic sa)ing ratio.

T0$ I;F',-5n/$ ' C5F&-51 M5,G$- ', -0$ E/'n';&/

D$+$1'F;$n- ' In&5apital Market is a channel through which the wealth of sa)ers are put into

longterm producti)e use. ;oth the #uity and ;ond markets are parts of

apital Markets. 9o)ernments and ompanies use apital Markets to raise

money for their longterm in)estments. 'he capital is raised through debt

and euity instruments. apital Markets are of two types3 "rimary market is a

market for new shares and secondary market is a market for trading existing

securities.

S&


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by the price change encourages or discourages capital inEow to an

industryOcompany.

A11'/5-&'n ' R&%G: 'he other major economic bene1t generated by

de)elopment of the apital Markets is impro)ed allocation of Risk. apital

Markets facilitates in)estors to earn returns based on their risk taking ability.In)estors in)est in highrisk instruments either because they are less risk

a)erse or because the new risk is unaCected or negati)ely correlated with

other in)estments in the portfolio.

M'6&1&5-&'n ' S5+&n

M&/,'7 S;511 5n M$&3; En-$,F,&%$% (MSME):'raditionally MSM# are

the ones that faced diHculty in obtaining capital at low interest rate* but

MSM# sector contributes >Q of the countrys 92"* JFQ of the manufactured


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output and J=Q of our exports. It pro)ides employment to about crore

people and are the largest generator of employment in Indian #conomy.

%part from the facts mentioned abo)e* about the signi1cance of apital

Markets* there is a )ast amount of empirical data that supports the

importance of apital Markets facilitating economic growth. 'he )iew thatapital Markets is associated with superior economic performance can be

)eri1ed by looking the correlation between Real 92" LS performance of

apital Markets in de)eloped economies. ;elow is the list of superior

economic performance in 1)e major respects in countries with good apital

Market en)ironment.

4igher producti)ity growth

4igher realwage growth

9reater employment opportunities

9reater macroeconomic stability

9reater homeownership

C'n/13%&'n

If one looks into history and traces back the reasons for Eourishing of

economies such as 2utch and Dnited 0ingdom the reasons for the success of

these economies lies in piping the public sa)ing in to longterm in)estments.

'he 2utch were the 1rst to procure funds from public they raised capital to

trade and maintain battle ships in order to protect their ships from the

pirates. ;ritish had replicated the 2utch 1nancial system and became an

#mpire and e)entually the countries that replicated good apital Market

practices* like Dnited States* also Eourished.

'he apital Markets play a signi1cant role in any economy from allocation of

apital and Risk to "olicy Making. If there is any single factor that makes a

huge impact in impro)ing the 92" of a country* it is the eCecti)e allocation


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of capital to the Industry and 9o)ernment. apital Market is the best channel

to route the sa)ings into longterm producti)e use. If we look in to the

economy and 1nd the enterprises that were hit by high cost of capital* one

can obser)e that MSM# that pro)ides highest number of employment

opportunities were worst hit by it. If a country de)elops and adopts best

apital Market practices they create multiple eCects and helps in re)i)ing

the economy. 'he SM# #xchange is a welcome mo)e for the Small and

Medium Scale #nterprises* but it is alone not enough to re)i)e MSM#.

apital market is the heart of any economy through which the sa)ings are

channeli/ed into eCecti)e longterm in)estments. % de)eloped and )ibrant

apital Market will immensely contribute towards speedy economic growth

and de)elopment.

THE IMPORTANCE O= CAPITAL MARKET IN ECONOMY

. INTRODUCTIONIt is )ery diHcult today to imagine oursel)es the times when there were nobanks* stock markets* money markets* public debts* times when the fortuneof a person was only measured by the surface of land owned* by the numberof animals one possessed as well as by the number of work hands one coulduse in the working the 1eld. #conomies presented themsel)es in the form ofgold or sil)er goblets or jewels* and usury T the practice consisting of thecharging of interest on money T was prohibited both by law and by thehurch.

'he capital market today is a reality met in any modern economy. It is amarket thenecessity of which is unchallengeable* an extremely dynamic andinno)ati)e structure* permanently adapting to the economic en)ironmentand at the same time an inEuential factor of it* generating opportunities andto the same extent risk for all categories of participants to the economicacti)ity* being a replica of a national economy to a small scale* butne)ertheless especially representati)e.'ributary to the conditions in which it was formed and de)eloped* the capitalmarket brings together under this syntagma diCerent conceptions. 'hecontinental#uropean conception attributes to this market a more comprisingstructure* containing the monetary market* the mortgage market and the

1nancial market. In the %ngloSaxon conception* which the economicpractice has also adopted in our country* the capital market is a componentof the 1nancial market together with the monetary market and the insurancemarket.

2. CAPITAL MARKETS COMPONENTS AND =UNCTION


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'he speci1city of this market deri)es from numerous aspects* but de1ningand at the same time delimitati)e in relation to other components of the1nancial market are the following traits3It is a market speciali/ed in transactions with medium and long term1nancial assets* unlike the monetary market which oCers solutions for

re1nancing through short and medium term capitalsIt is a public* open and transparent market* in the sense that anyone canbe a participant on this market* without there being notable entry or exitbarriers* the transactions ha)ing a public character'he dissemination of information on this market* through its )olume or*uickness and with the possibility of eual reception by all participants* isprobably the best one from the ones existing in the structures of a marketeconomy'he capital circulation )ehicle is represented by securities* characteri/edthrough negotiability of the price and immediate transferability with )ery lowtransaction costs

'he transaction is made through intermediaries* who ha)e an essentialrole in connecting the owners or issuers of securities with the owners ofcapitalsIt entails risks both for the issuer and for the in)estor* speci1c for each1nancial instrument in uestion* but at the same time it also oCers complexsolutions for minimi/ing and dispersing it* both the 1nancial and theoperational oneIt is an organi/ed market* in the sense that the transactions areperformed according to certain principles* norms and rules known andaccepted by participants. 'his does not mean the administration of themarket* but its regulation with the purpose of creating or preser)ing the

conditions for the unfolding of free competition* so a system forguaranteeing the free and open character of all transactions.In a market economy* the role of the capital market is of 1rst rate. 'he wellfunctioning of the capital market is )ital in the contemporary economy inorder to be able to perform an eHcient transfer of money resources fromthose who sa)e towards those who need capital and those who succeed tooCer it a higher capitali/ation the capital market can signi1cantly inEuencethe uality of the in)estment decisions.2epending on the moment when the transaction is performed* the capitalmarket is di)ided into two temporal dependant segments3 primary andsecondary.

The primary market has the role of placing the issuing of securities* to attractthe a)ailable 1nancial capitals on medium and long term* both on theinternal capital markets* and on the international one appealing to the publiceconomies.The secondary market once the securities are set into circulation* throughthe issuance on the primary market* they are the object of transactions onthe secondary market. 'he existence of this type of market oCers to theowners of shares and bonds the possibility to capitali/e them before they


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bring a pro1t (di)idends or interests!. 'he secondary market represents* atthe same time* the way to concentrate in the same place pri)ate orinstitutional in)estors who can sell or buy securities* ha)ing the guaranteethat they are )aluable and can be reinserted into the circuit at any time.'he secondary market is also the almost perfect expression of the free

adjustment between the oCer and demand of securities* being a barometer*in the 1rst place for the need for capital* but also for the economic* socialand political state of a country. $rom this point of )iew* the secondary capitalmarket can be considered a perfect market* where the law of demand andoCer 1nds the perfect terrain for its unfenced action. #nsuring the mobility ofcapitals* of liuidities on long and medium term* of the negotiability of anysecurity that passes the primary market* the secondary market attracts* atthe same time* professional in)estors* but also amateur in)estors* in thehope of a maximum pro1t in record time.The stock exchange is an important institution of the capital market* speci1cto the market economy* which concentrates in the same geographical and

economic space the demand and oCer of securities* openly* freely andpermanently negotiated* based on known regulations. 'he stock exchangesalways represent an extremely sensiti)e and accurate barometer of thestatus uo in the economic* geopolitical and foreign currency 1eld. 'he pricea security is negotiated for accurately reEects the economic1nancial state ofthe company that issued it* in a positi)e or negati)e sense.Most times* because of the interdependencies in a national economy* butalso at world le)el* the modi1cation of the rate of a certain security canattract with it chain modi1cations* with repercussions on other securities. It istrue that* sometimes* the stock exchange can register false signals(incidental or directed!* disturbing the real situation. 'he psychological and

emotional factors ha)e always had and will continue to ha)e a notable role.% uestion the enterprisers and the smaller or larger companies always askthemsel)es is3:hich is the optimum way for 1nancing in)estments5 'he answers are notmany and along time they were the same3 either using the own fortune*either reuesting a subsidy from the state or from another institution or fromanywhere else* or obtaining a bank loan or turning to the stock market.'he 1rst option is only possible for those who own the necessary capital. 'hesecond option is determined by exceptional situations. In regard to the bankloan* although it is a more realistic option than the other two* it is maybe notthe most wanted one* 1rst because it is expensi)e (the interests are* in

general* uite high! and* second* the banks set a series of hard and strictconditions* often diHcult to meet by the applicant.

% possibility* for an enterpriser or for a company* toobtain money (capital!* a)oiding the problems raised by the options abo)e* isrepresented by the public sale of shares or bonds with the help of the stockexchange. 'he stock exchange ensures the shortest and most eHcient circuitbetween the economies or temporary surplus of capital of those who want to


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in)est on medium or long term (be it companies* funds* banks* insurancecompanies or plain pri)ate indi)iduals! and the needs for 1nancing of theenterprisers or of the commercial companies. 'he stock exchange becomesthus a strong competitor for the banks* representing a serious alternati)e tothe bank loan* often times more expensi)e and diHcult to obtain.

$rom the abo)e it is clearly noted that the main role of the stock markets isthat of 1nancing the economy (especially the economic agents!* bymobili/ing capitals on medium and long term. %lso* another important role ofthe stock exchange is that it facilitates the circulation of capitals* thesecurities being easily transformed into liuidities or exchanged into othersecurities* by selling or reselling them on this market.

'he most important function of the stock exchange is that the transactionswith the securities issued and initially placed on the primary capital marketare performed here. %fter the securities ha)e been issued and placed withthe in)estors* they can be freely transacted on the stock exchange because

of their negotiable character* thus guaranteeing the in)estor that he canrecuperate the placed money funds* of course for the )alue they ha)e onthat date on the market.%lso* the stock exchange is the place and instrument for some importantsector reorgani/ing and restructurings. n the stock markets a redistributingof the 1nancings within the economy takes place3 the 1nancial funds areoriented towards more lucrati)e or perspecti)e 1elds* because an in)estorcan )ery easily sell here the securities he no longer considers to be a )erygood placement and in)est in a sector he considers more attracti)e.%nother interesting aspect is that of the acuiring of companies and ofmergers on the stock market* which are increasingly freuent. 'he stock

exchange facilitates these operations and the main instrument throughwhich the tender oCer is performed. 'he tender oCer is the operationperformed through a intermediation company through which an in)estorannounces that he is willing to buy partially or all the shares on the market ofa commercial company he is interested on* for a 1rm price and within a wellde1ned period of time. 'his is how most takeo)ers* transfers and mergerstake place on the stock market.

n the stock exchange the sellbuy price for the uotedsecurities is permanently established and displayed. 'he stock market oCerssystematic information concerning the rate of the uoted securities and*

implicitly* information on the listed companies and e)en on the respecti)eeconomy on the whole. In this sense an important indicator is the stockexchange capitali/ation of a listed company* which shows the market )alueof that company3 it is calculated by multiplying the total number of shares ofthat company with their market rate. In order to e)aluate the dimensions of astock market the total stock exchange capitali/ation can also be calculatedby adding all the stock exchange )alues (stock exchange capitali/ations! ofthe companies listed on those markets.


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$inally* the stock exchange reEects especially accurately theo)erall situation of an economy* as well as its trends and perspecti)es.#specially useful for this purpose is the studying of the stock exchangeindexes* calculated as an a)erage of the e)olutions and of the )olume of

transactions for a representati)e sample of shares or for their totality* oneach stock exchange in part.'he collection of the temporary a)ailable capitals in the economy* thereallocation of those insuHcient of ineHciently capitali/ed at a certain pointand e)en the fa)oring of some sector restructurings* are meant to outline theplace presently occupied by the capital market in the economy of manycountries* not only the most de)eloped ones.'he obser)ation that in the de)eloping countries the same attention must begranted to the starting and de)eloping of an eHcient 1nancial market is wellfounded* just as much as the preoccupations for de)eloping the

infrastructure of telecommunications. 'his is more important in the transitioncountries* considering the necessity to reorient resources from the ineHcientsectors towards to eHcient ones* thus ensuring the increase of eHciency ineconomy* supporting the economic reform process and e)en thepri)ati/ation actions.

>. CONCLUSIONS'he importance of the 1nancial market is gi)en by the signi1cant role itplays in the 1nances (1nancing! of the enterprises and of the state* by the

percentage the direct 1nancing has among the methods for 1nancing.;eyond what is apparently important the high )olume of transactions onthe stock market what really counts is the place the (primary! market holdsin the de)elopment 1rst of the stock companies (direct 1nancing!* and this issometimes forgotten* or appears secondary. 'he well functioning of the1nancial market is a strong fundament for ensuring a lasting growth* on thelong term* of the national economy the 1nancial market and 1rstly thecapital market represent in many countries T and could also represent inRomania T the engine for economic de)elopment. If to a certain extent they can bereplaced as 1nancing sources* it must not be understood that 1nancing

through the banking system and 1nancing through the capital market areperfectly replaceable* but rather complementary. In most cases* the issuingof shares or bonds tend to sooner supplement* than replace the bank loans*especially when the allocation of some important resources is wanted forsustaining some large in)estment plans* when a farther hori/on for thematurity of the loan is sought* or e)en obtaining nonrefundable funds forthe price of dilution of capital and future di)idends.


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More and more issuers turn to 1nancing instruments whichnot until long ago seemed too sophisticated* and the +theoretical,ad)antages of the listing on the stock exchange start to be the put intopractice. 'he ability of the capital market to mobili/e important 1nancialresources now is no longer doubted and any company listed on the stock

exchange will also consider from now on the issuing of bonds or sharesamong its 1nancing options.

'he Romanian capital market is ready both for the 1nancingof companies and for the use of some sophisticated methods for forming thesubscription price* and through the beha)ior of in)estors recently* it seemskeen for new securities. 'his does not mean it can absorb the entirenecessary of 1nancing of the Romanian economy or that it can handledebt/equity 1nancing ratios such as those from the de)eloped capitalmarkets* but nor can it be said that it does not oCer suHcient liuidity or thatthe risk of the )olatility of prices in the case of some public oCers is

alarming. Moreo)er* the current moment is an especially fa)orable one forthe unfolding of this 1nancing process for businesses* process also propelledby an o)erall economic conjuncture fa)orable for in)estments* through astock market found under the sign of the bull* through a penetration inRomania of important foreign capital funds that seek placements aspro1table as possible.

C5F&-51 M5,G$- In%-,3;$n-% T some of the capital marketinstruments are3P #uityP "reference shares

P 2ebentureO ;ondsP %2RsO 92RsP 2eri)ati)es

C',F',5-$ %$/3,&-&$%

S05,$%'he total capital of a company may be di)ided into small units called shares.$or example* if the reuired capital of a company is DS UF*==*=== and isdi)ided into F=*=== units of DS U?= each* each unit is called a share of face)alue DS U?=. % share may be of any face )alue depending upon the capitalreuired and the number of shares into which it is di)ided. 'he holders of theshares are called share holders. 'he shares can be purchased or sold only inintegral multiples.#uity shares signify ownership in a corporation and represent claim o)er the1nancial assets and earnings of the corporation. Shareholders enjoy )oting


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rights and the right to recei)e di)idends howe)er in case of liuidation theywill recei)e residuals* after all the creditors of the company are settled in full.% company may in)ite in)estors to subscribe for the shares by the way of3P "ublic issue through prospectusP 'enderO book building process

P Cer for saleP "lacement methodP Rights issue

S-'/G%'he word stock refers to the old #nglish law tradition where a share in thecapital of the company was not di)ided into +shares, of 1xed denominationbut was issued as one chunk. 'his concept is no more pre)alent* but theword +stock, continues. 'he word +joint stock companies, also refers to thistradition.

D$6- In%-,3;$n-%% contractual arrangement in which the issuer agrees to pay interest andrepay the borrowed amount after a speci1ed period of time is a debtinstrument. ertain features common to all debt instruments are3P Maturity T the number of years o)er which the issuer agrees to meet thecontractual obligations is the term to maturity. 2ebt instruments areclassi1ed on the basis of the time remaining to maturityP "ar )alue T the face )alue or principal )alue of the debt instrument is called

the par )alue.P oupon rate T agreed rate of interest that is paid periodically to thein)estor and is calculated as a percentage of the face )alue. Some of thedebt instruments may not ha)e an explicit coupon rate* for instance /erocoupon bonds. 'hese bonds are issued on discount and redeemed at par.'hus the diCerence between the in)estor6s in)estment and return is theinterest earned. oupon rates may be 1xed for the term or may be )ariable.P all option T option a)ailable to the issuer* speci1ed in the trust indenture*to Vcall in6 the bonds and repay them at pre determined price beforematurity. all feature acts like a ceiling f or payments. 'he issuer may callthe bonds before the stated maturity as it may recogni/e that the interest

rates may fall below the coupon rate and redeeming the bonds and replacingthem with securities of lower coupon rates will be economically bene1cial. Itis the same as the prepayment option* where the borrower prepays beforescheduled payments or slated maturity

Some bonds are issued with Vcall protection feature* i.e they wouldnot be called for a speci1ed period of time


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Similar to the call option of the issuer there is a put option for thein)estor* to sell the securities back to the issuer at a predeterminedprice and date.

'he in)estor may do so anticipating rise in the interest rates wherein thein)estor would liuidate the funds and alternati)ely in)est in place of higher

interestP Refunding pro)isions T in case where the issuer may not ha)e cash toredeem the debt instruments the issuer may issue new debt instrument anduse the proceeds to repay the securities or to exercise the call option.2ebt instruments may be of )arious kinds depending on the repayment3P ;ullet payment T instruments where the issuer agrees to repay the entireamount at the maturity date* i.e lumpsum payment is called bullet paymentP Sinking fund payment T instruments where the issuer agrees to retire aspeci1ed portion of the debt each year is called sinking fund reuirementP %morti/ation T instruments where there are scheduled principalrepayments before maturity date are called amorti/ing instruments

D$6$n-3,$% B'n%'he term 2ebenture is deri)ed from the -atin word Vdebere6 which means Vtoowe a debt6. % debenture is an acknowledgment of debt* taken either fromthe public or a particular source. % debenture may be )iewed as a loan*represented as marketable security. 'he word +bond, may be usedinterchangeably with debentures.2ebt instruments with maturity more than F years are called Vbonds6

Y&$1%

Most common method of calculating the yields on debt instrument is theVyield to maturity6 method* the formula is as under3W'M X coupon rate Y prorated discount O (face )alue Y purchase price!O digit 2" I2 and > digit lient I2!. %ll purchase Oin)estment in securities will be added (credited! to this account. Dpon sale of

securities* the demat account will be reduced (debited!.b. !$--&n< -0$ '$, '/3;$n-'he oCer documents of public issues are a)ailable on the websites ofmerchant banker and stock exchange. It is also a)ailable in the website ofS#;I under VCer 2ocuments6 section 'he in)estor can obtain hard copy ofthe oCer document from S#;I upon payment of [ ?== through 2emand 2raftmade in fa)or of Securities & #xchange ;oard of India or obtain it from theissuer company at its registered oHce or from the merchant banker. 'he56,&


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(ii! ASBA application form3Wou can a)ail %S;% facility e)en if you do not hold account with SS;. $orthis your %S;% application has to be signed by the account holder.(iii! If you ha)e bank account with SS;* you can apply online if the bankoCers internet banking facility.

!,'3n% ', ,$4$/-&'n%: ($+$n 5-$, 11&n< 511 -0$ 56'+$ $1%)%pplications made by partnership 1rms* minors"ayment made by postal order O money order O cash O stock in)est;ids made below minimum lot or not in multiples of lot prescribed in theoCer documentwhen there is a diCerence in the 8ames of the holder(s!* 2" I2* lient I2 pro)ided in the application and details a)ailable with 2epositoryMultiple applications8ames of the joint holders are not in the same order as details a)ailablewith 2epositoryInacti)e demat account

%pplications* which do not bear stamp of the syndicate member(In case of normal application!Inadeuate funds in the bank accountutstation heues O 2rafts drawn on the banks not participating in theclearing processe. S36;&--&n< -0$ 5FF1&/5-&'n ',;'he application form and -0$ '$, '/3;$n- ha)e the full contact detailsof where you can submit the 1lled up forms.#nsure that you submit the application well within the closing date and timespeci1ed.(i! Submit the %S;% application forms to the designate branch of the SS;O

Syndicate member and collect 'ransaction Registration Slip (TRS! Oacknowledgement.(ii! Submit non %S;% application forms to the stock broker (syndicatemember! along with a cheue for the payment and obtain acknowledgement(date stamping on the counterfoil!.(iii! Retain the acknowledgement till allotment O refund is complete as it iscrucial e)idence in case of any complaint.f. C0$/G&n< -0$ $;5n ', -0$ 6''G 63&1- &%%3$ 5- 5n F'&n- ' -&;$'he status of bidding in a book built issue is a)ailable on the website(s! ofstock exchange(s! on a consolidated basis. 'he data is also a)ailable in)estorcategory wise.

g. R$+&%&'n ' 6&%Wou can re)ise both the price and the uantity of your bid(s! within the priceband* till the issue closing date. $or this use the re)ision form a)ailable alongwith the application form and submit it to the same broker O SS;.Remember to collect the re)ised 'RS.h. 9&-0,5851 ' B&%Wou can withdraw your bid till the closure of the issue by approachingsyndicate memberO SS;.


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%fter closure of the issue* you can withdraw your bid till the 1nali/ation of thebasis of allotment by making a written application to the R'I.i. A11'-;$n- ' %05,$%Shares will be allotted to you and credited to your demat account within ?!changes Division of the inistry of 6inance has powers relatedto the application of the provision of the 1&: %ct and licensing of dealers inthe other area. %ccording to1>2" %ct, the inistry of 6inance has the appellate and supervisory powersover the 1>2". "t has power to grant recognition to the stock >!changes andregulation of their operations. inistry of 6inance has the power to approvethe appointments of e!ecutive chiefs and nominations of the public


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representatives in the Governing 2oards of the stock e!changes. "t has theresponsibility of preventing undesirable speculation.The 1ecurities and >!change 2oard of "ndia the 1ecurities and >!change2oard of "ndia even though established in the year #$((, received statutorypowers only on ;*th Can #$$2" %ct, a wide variety of powers

is vested in the hands of 1>2". 1>2" has the powers to regulate the businessof stock e!changes, other security markets and mutual funds. :egistrationand regulation of market intermediaries are also carried out by 1>2". "t hasthe responsibility to prohibit the fraudulent unfair trade practices andinsider dealings. Take over-s also monitored by the 1>2". 1tock >!changeshave to submit periodic and annual returns to 1>2". 1>2" has themultipronged duty to promote the healthy growth of the capital market andprotect the investors.

Th *o$rning +oar!

The Governing 2oard of the stock e!change consists of elected member

directors, government nominees and public representatives.:ules, byelaws and regulations of the stock e!change provide substantialpowers to the >!ecutive Director for maintaining e7icient and smooth dayto day functioning of the stock e!change. The governing 2oard has theresponsibility to maintain and orderly and well regulated market.The governing body of the stock e!change consists of #; members of which'a* ) members of the stock e!change are elected by the members of thestock e!change 'b central government nominates not more than threemembers. 'c The board nominates three public representatives 'd 1>2"nominates persons not e!ceeding three and 'e the stock e!change appointsone >!ecutive Director.

One third of the elected members retire at annual general meeting. Theretired member can o7er himself for election if he is not elected for twoconsecutive years. "f a member serves in the governing body for two yearsconsecutively, he should refrain from o7ering himself for another two year.The members of the governing body elect the Aresident and vice+president."t needs no approval from the &entral Government or the 2oard. The o7icetenure for the Aresident and @ice+Aresident is one year. They can o7erthemselves for reelection, if they have not held o7ice for two consecutiveyears. "n that case they can o7er themselves for re+election after a gap ofone+year period.

Th Stock ExchangsThe names of the stock e!changes are given below

%hmadabad 1tock >!change

2angalore 1tock >!change

2hubaneswar 1tock >!change

2ombay 1tock >!change

&alcutta 1tock >!change


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&ochin 1tock >!change

&oimbatore 1tock >!change

Delhi 1tock >!change

Guwahati 1tock >!change

9yderabad 1tock >!change

"ndore 1tock >!change

Caipur 1tock >!change

8anpur 1tock >!change

?udhiana 1tock >!change

adras 1tock >!change

agadh 1tock >!change

angalore 1tock >!change

Aune 1tock >!change

1aurashtra 1tock >!change

@adodhara 1tock >!change 0 1 >

OT&>"

"nter &onnected 1tock >!change1tock e!changes normally function between #*** a.m. and ;E5 p.m. on theworking days. 2adla sessions are held on 1aturdays.

M,r of th Stock ExchangThe 1ecurities &ontract :egulation %ct of #$5) has provided uniformregulation for the admission of members in the stock e!changes. ThequaliFcations for becoming a member of a recognised stock e!change aregiven below.The minimum age prescribed for the members is


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Th +rokr

% memberbroker registered with the recogniHed stock e!change has toapply to the 1>2" for registration. ?ikewise a sub+broker even though he isregistered with the stock e!change should apply to 1>2" for registration.Bsually the agreement between the broker and the sub broker is carried out

on a non Iudicial stamp paper of :s #*. The agreement generally speciFesthe authority and responsibility of the broker and sub broker.The broker has to abide by the code of conduct laid down by the 1>2". Thecode of conduct prevents the malpractice, manipulation and gives otherstatutory requirements. "f% broker is involved in manipulation or price rigging or gives falseinformation, his registration is likely to be suspended. "f the rules andregulations regarding insiders- trading and take over codes are not adheredto, the registration may even be cancelled.+rokr an! th In$stor

#. The broker should provide adequate information regarding the stocks.


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Generally the appro!imate price is F!ed. The order stands as this J2uy 2:** shares around :s E*-.Sto- .oss Or!r

The orders are given to limit the loss due to unfavorable price movements inthe market. % particular limit is given for waiting.

"f the price falls below the limit, the broker is authorised to sell the sharesto prevent further loss.+#ying an! S%%ing Shars

To buy and sell shares the investor has to locate a registered broker or subbroker who can render prompt and e7icient service to him. Then orders tobuy or sell the speciFed number of shares of a company of the investor-schoice are placed with the broker. The order may be of any of the abovementioned type. %fter receiving the order, the broker tries to e!ecute theorder in his computer terminal. Once matching order is found, the order ise!ecuted. The broker delivers the contract note to the investors. "t givesdetails regarding the name of the company, number of shares bought,

price, brokerage, and date of delivery of shares. "n the physical tradingform, once the broker gets the share certiFcate through the clearing houseshe delivers the share certiFcate along with transfer deed to the investor.The investor has to Fll the transfer deed and stamp it.1tamp duty is one+half percentage of the purchase considerationK theinvestor should lodge the share certiFcate and transfer deed to the registraror transfer agent of the company. "f it is bought in the demat form, thebroker has to give a matching instruction to his depository participant totransfer the share bought to the investors- account. The investor should bean account holder in any of the depository participant. "n the case of sale ofshares on receiving payment from the purchasing broker, the broker e7ects

the payment to the investor.Shar *ro#-sThe listed shares are divided into three categories Group a shares'speciFed shares 2# shares and 2 shares. The last two groups are referredto cleared securities or no+speciFed shares.The shares that come under speciFed group can avail the carry forwardtransactions. "n J%- group, shares are selected on the basis of equity, marketcapitalisation and public holding.6urther it should have a good track record and a dividend paying company."t should have good growth potential too.The trading volumes and the investor-s base are high in J%- group share. %ny

company when it satisFes these criteria would be shifted from J2- group to/%3 group."n the 2# group actively traded shares are included. &arry forwardtransactions are not allowed in this group. 1ettlement takes place throughthe clearing house along with the /%3 group shares. The settlement cycleand the procedure are identical to /%3 group security. The rest of thecompany shares listed form the 2 group.


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Stt%nt Cyc%% settlement cycle consists of Fve days trading period within which anytransaction buysell must be completed. There are two types of settlementF!ed and rolling. % F!ed cycle starts on a particular day and ends after Fvedays. 6or e!ample, in the

umbai stock e!change the settlement cycle starts on onday and ends of6riday. "n the 01> it starts on Wednesday of one week and ends on theTuesday of the following week. % pay+in day and a pay+out day follow thesettlement cycle. The pay+in day refers to all the buyer brokers depositingthe money for the purchase of shares. The payout day refers to thee!change handing over the proceeds to the seller brokers.% settlement cycle is important for the investors and brokers. "f, an investorpurchases #*** shares of %sian Aaints on onday, to square up the positionby the end of the settlement, the sale will have to take place before 6riday,the same week. "f the sale has not taken place, he has to paya considerationfor the broker at the end of the settlement period. The broker collects the

payments from the clients and deposits it with the e!change on the pay+inday. The e!change allows four days, from the end of the settlement cycle tothe pay+in day to enable the brokers to collect the payments from theclients. %fter found days, on the pay+out day the e!change hands over theproceeds to the seller broker. The same tradingsettlement cycle andprocedure of the speciFed group are followed in the /2#3 non+speciFedgroup.2ut no carry forward '2adla transaction is allowed for /2#3 group shares.The pay+in for 2# group securities can be done with /%3 groupsimultaneously under one balance sheet."n the 2 group shares, clearing house handles the money and part of the

transaction. Ahysical delivery of securities is done by the members. "n thepay+in day the balance sheet is Fled %long with chequesdrafts. Only on thepayout day monetary are made by the clearings house.

LE!AL =RAME9ORK'he exigencies of the market and the Eexibility of the regulators aremaintained through the exercise of delegated legislation to the regulators.Dnder this the regulators issue noti1cations* circulars and guidelines whichare to be complied by the market participants.Larious acti)ities in the securities market in India are regulated in acoordinated manner by four regulators namely 2epartment of #conomic%Cairs (2#%! of the Ministry of $inance* Ministry of ompany %Cairs*Securities and #xchange ;oard of India (S#;I! and the Reser)e ;ank of India(R;I!.'he regulatory and the super)isory framework of the securities market inIndia has been progressi)ely strengthened through )arious legislati)e andadministrati)e measures and is consistent with the best international


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benchmarks* such as* standards prescribed by the International rganisationof Securities ommissions (IS!.

R31$% 5n R$


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'hese regulations apply to all the intermediaries mentioned abo)e* exceptforeign institutional in)estors* foreign )enture capital in)estors* mutualfunds* collecti)e in)estment schemes and )enture capital funds.

T0$ %51&$n- $5-3,$% ' -0$ R$


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(%mendment! Regulations


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information which if published is likely to materially aCect the price ofsecurities of a company. 'he following is deemed to be price sensiti)einformation3(a! "eriodical 1nancial results of the company(b! Intended declaration of di)idends (both interim and 1nal!

(c! Issue of securities or buyback of securities(d! %ny major expansion plans or execution of new projects(e! %malgamation* mergers or takeo)ers(f! 2isposal of the whole or substantial part of the undertaking(g! Signi1cant changes in policies* plans or operations of the company.(+&)UnF361&%0$ &n',;5-&'n means information which is not published bythe company or its agents and is not speci1c in nature. 4owe)er* speculati)ereports in print or electronic media are not considered as publishedinformation.

P,'0&6&-&'n 'n D$51&n


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person is reuired to reply to the 1ndings within


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)oting rights held and change in shareholding or )oting rights* if there hasbeen a change in such holdings from the last disclosure made and thechange exceeds Rs. F lakh in )alue or


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(h! % false statement made without reasonable ground for belie)ing to betrue(i! 'he act of an issuer of securities gi)ing out misinformation that aCects themarket price of the security* resulting in in)estors being eCecti)ely mislede)en though they did not rely on the statement itself or anything deri)ed

from it other than the market price.'he term +fraudulent, should be construed accordingly. 8othing contained inthis clause is applicable to any general comments made in good faith inregard to the economic policy of the 9o)ernment the economic situation ofthe country trends in the securities market any other matter of a likenature.(&&) D$51&n< &n S$/3,&-&$% is de1ned to include an act of buying* selling orsubscribing pursuant to any issue of any securities or agreeing to buy* sell orsubscribe to any issue of any securities or otherwise transacting in any wayin any security by any person as principal* agent or intermediary as de1nedunder the S#;I

%ct.P,'0&6&-&'n ' C$,-5&n D$51&n


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(c! %d)ancing or agreeing to ad)ance any money to any person therebyinducing any other person to oCer to buy any security in any issue only withthe intention of securing the minimum subscription to such issue(d! "aying* oCering or agreeing to pay or oCer* directly or indirectly* to anyperson any money or money6s worth for inducing such person for dealing in

any security with the object of inEating* depressing* maintaining or causingEuctuation in the price of such security(e! %ny act or omission amounting to manipulation of the price of a security(f! "ublishing or causing to publish or reporting or causing to report by aperson dealing in securities any information which is not true or which hedoes not belie)e to be true prior to or in the course of dealing in securities.(g! #ntering into a transaction in securities without intention of performing itor without intention of change in ownership of such security.(h! Selling* dealing or pledging of stolen or counterfeit security whether inphysical or demateriali/ed form.(i! %n intermediary promising a certain price in respect of buying or selling of

a security to a client and waiting till a discrepancy arises in the price of suchsecurity and retaining the diCerence in prices as pro1t for himself.(j! %n intermediary pro)iding his clients with such information relating to asecurity as cannot be )eri1ed by the clients before their dealing in suchsecurity.(k! %n ad)ertisement that is misleading or that contains information in adistorted manner and which may inEuence the decision of the in)estors.(l! %n intermediary reporting trading transactions to his clients entered intoon their behalf in an inEated manner in order to increase his commission andbrokerage.(m! %n intermediary not disclosing to his client transactions entered into on

his behalf including taking an option position.(n! ircular transactions in respect of a security entered into betweenintermediaries in order to increase commission to pro)ide a false appearanceof trading in such security or to inEate* depress or cause Euctuations in theprice of such security.(o! #ncouraging the clients by an intermediary to deal in securities solelywith the object of enhancing his brokerage or commission. (p! %n intermediary predating or otherwise falsifying records such ascontract notes.(! %n intermediary buying or selling securities in ad)ance of a substantialclient order or whereby a futures or option position is taken about an

impending transaction in the same or related futures or options contract.(r! "lanting false or misleading news which may induce sale or purchase ofsecurities.


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-#%R8I89 #7"#RI#8#

'he 1rst thing that I ha)e learned is* I ha)e knowledge of +capital market,. I

also come to know the working of -udhiana stock exchange i.e. how the

diCerent departments are performing their jobs successfully. It was a

wonderful experience interacting with diCerent people and simultaneously

enhancing my knowledge and skills about stock market operators. -udhiana

stock exchange also pro)ides practical training under sub brokers. I also

come to know about how on Tli)e trading is done* how shares are bought and

sold. I also learned that how to work under the stock exchange. 'he workingculture of -udhiana stock exchange is uite good. Dnder the training

education department* the higher authorities of -S# conduct the 'raining

#xam and Li)a before pro)iding training certi1cate. It is )ery good

experience in -udhiana stock exchange.


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8-DSI83

Securities market plays an important role. 'he capital market deals with long

term securities which ha)e a maturity period of abo)e one year. % market in

which indi)iduals and institutions trade 1nancial securities. rgani/ation

Oinstitution in the public and pri)ate sectors also often sell securities on

capital markets in order to raise funds. 'hus* type of market is composed of

entering a deri)ati)e market is called hedgers* and those who increase risks

are called speculators.

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