INTRODUCTION

A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by governments, finance institutions, corporate houses etc., meet and where trading of these corporate securities take place. This is a market of speculation. If speculation of investors become wrong than the investors loss. Nobody knows what will happen even after a second. A Stock Exchange refers to the segments of the capital market where the securities issued by corporate are trade. It is open auction market where buyers and sellers meet and involve competitive prices of the securities. It reflects hopes aspiration fair of people regarding the performance of the economy. I t provides necessary mobility to capital and direct flow of the capital into possible and successful enterprise. Since buying and selling of the different of securities take place on stock exchange. The prices of particular securities reflect their demand and supply. In fact, stock exchange is said to be a barometer of economy and financial health. The stock market in India, Securities and Exchange Board of India (SEBI) is on the issue of acceptance of hedge funds into Indian financial market. At the sometime worldwide trade shows that hedge funds are important force to the reckoned with us. The impact of hedge funds activity is new to the Indian financial investors (FII) flows volatility of the stock market. This is so because hedge funds activity in Indian primary through participatory notes (PN) and the some is reflected under FII inflows. Large stock operators and investment arms certain large corporate in India in the period consideration used to use oversees body (OCB) as a mechanism to take exposure to the India n market. OCB activity in the Indian context is pretty similar to funds trading historically OCB flows also used to appear under the head of FII flows traditionally a large chunck of the PN and OCB activity in India use to happen through the Mauritius route due to taxation benefits. With the latest budget presented by the Indian government .(will become effective from 1st September 2004 ) reducing long term capital gains to zero and short term capital gains to 10 % the taxation to Mauritious to exist .
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STOCK EXCHANGE

A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by governments, finance institutions, corporate houses etc., meet and where trading of These corporate securities take place. This is a market of speculation. If speculation of investors become wrong than the investors loss. Nobody knows what will happen even after a second. A Stock Exchange refers to the segments of the capital market where the securities issued by corporate are trade. It is open auction market where buyers and sellers meet and involve competitive prices of the securities. It reflects hopes aspiration fair of people regarding the performance of the economy. I t provides necessary mobility to capital and direct flow of the capital into possible and successful enterprise. Since buying and selling of the different of securities take place ion stock exchange. The prices of particularly securities reflect there demand and supply. In fact, stock exchange is said to be a barometer of economy and financial health.

The stock exchange is the nerve center of capital market. The stock exchange discharges three essential functions in the process of capital formation not in raising resources for the corporate sector. It provides places for sale and purchase of securities i.e. share, bonds etc. . . . It [provides linkage between the saving of household sector and investment in corporate sector of economy. It provides market quotation for shares debenture and bonds and serves as a role of barometer, not only of the state of health of individual companies but also of the economy as a whole. Therefore, by providing market place quotation of the prices of shares and bonds or sort of collective judgment. Simultaneously reached by many buyers and sellers in the market stock exchange serve the role of barometer, not only of the state of health of individual companies but also of the nations economy as a whole.

FEATURES OF STOCK EXCHANGE

It is the place where listed securities are bought and sold.

It is an association of persons known as members.

Trading in securities is allowed under rules and regulations of stock exchange.

Membership is must for transacting business.

Investors and speculators, who want to buy and sell securities, can do so through members of stock exchange i.e. brokers

OPERATIONAL DEFINITIONS
STOCK MARKET:A STOCK EXCHANGE is a platform where buyers and sellers of securities issued by governments, finance institutions, corporate houses etc., meet and where trading of these corporate securities take place. MUTUAL FUNDS: - A Mutual fund is a trust that pools the saving of a number of investors who share a common financial goal. FOREIGN DIRECT MARKET (FDI): - This category refers to international investment in which the investor obtains a lasting interest in an enterprise in another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants or equipment. FOREIGN INSTITUTIONAL INVESTOR (FII):- An investor or investment fund that is from of or registered in a country outside of the one in which it is currently investing. Foreign institutional investors have made a sizable investment in Indian financial markets. There are currently about 1324 FIIs registered in India. FOREIGN PORTFOLIO INVESTMENT (FPI):- FPI is a category of investment instruments that are more easily traded, may be less permanent, and do not represent a controlling stake in an enterprise. These include investments via equity instruments (stocks) or debt (bonds) of a foreign enterprise that does not necessarily represent a long-term interest. BULL MARKET: - A Bull market is a market that is consistently going up. It is a market where there is optimism of further rise batter, business results and other positive factors. Bull Market can sometimes continue for years, for investors this is the preferred market trend. However no bull market can continue for very long. BEAR MARKET: - Bear Market is a market that is showing a persistent downtrend. A 15-20% downward movement of the market generally termed as a bear market. DIVERSIFICATION: - diversification is the technique of investing in unrelated business sectors simultaneous so that risk that affects a particular sector does not affect your overall investment. For

example your portfolio of share includes sectors like Information Technology, Real estate capital Goods, Autos etc. Exchange rate of a nation's currency- Currency like other commodities rises or falls in "price" with demand. When investors leave, they sell their holdings in a country's currency and as demand falls, the "price" of that currency will also fall

ECONOMIES OF SCALE: - Produces are often able to enjoy considerable production cost savings by buying inputs in bulk, mass-producing or retailing their end product. These lower costs achieved through expanded production are called Economies of Scale.

DEBT/EQUITY RATIO-The debt/equity ratio measures the extent to which a firm's capital is provided by lenders (through debt instruments such as fixed-return bonds) or owners (through variable-return stocks). A greater reliance on financing through debt can mean greater profitability for shareholders, but also greater risk in the event things go sour.

INTERNATIONAL MONETARY FUND-The IMF is an international organization of 186 member countries, established in 1947 to promote international monetary cooperation, exchange stability, and orderly exchange arrangements; to foster economic growth and high levels of employment; and to provide temporary financial assistance to countries to help ease balance of payments adjustment.

INSTITUTIONAL INVESTOR An organization whose primary purpose is to invest its own assets or those held in trust by it for others. Includes pension funds, investment companies, insurance companies, universities and banks. INTEREST RATES-Interest rates have a powerful effect on the volume of a nation's money supply. By raising interest rates, i.e., making the cost of borrowing money more expensive, governments or banks can decrease the money supply. A decrease in the money supply tends to be counter-inflationary, which makes a currency more valuable compared to other currencies.

MOST FAVORED NATION TREATMENT-The phrase "most favored nation" refers to the obligation of the country receiving the investment to give that investment the same treatment as it gives to investments from its "most favored" trading partner.

BALANCE OF PAYMENT-The Balance of Payments (BOP) is a statistical statement that summarizes, for a specific period (typically a year or quarter), the economic transactions of an economy with the rest of the world. It covers: All the goods, services, factor income and current transfers an economy receives from or provides to the rest of the world Capital transfers and changes in an economy's external financial claims and liabilities

PORTFOLIO INVESTMENT covers the acquisition and disposal of equity and debt securities that cannot be classified under direct investment or reserve asset transactions. These securities are tradable in organized financial markets.

FDI FLOWS AND STOCKS Through direct investment flows the investors builds up a direct investment stock (position), making part of the investors balance sheet. The FDI stock (position) normally differs from accumulated flows because of revaluation (changes in prices or exchange rates) and other adjustments like rescheduling or cancellation of loans, debt forgiveness or debt-equity swaps with different values.

MULTINATIONAL COMPANIES (MNCs) are incorporated or unincorporated enterprises comprising parent enterprises and their foreign affiliates.

FOREIGN DIRECT INVESTOR A foreign direct investor is an individual, an incorporated or unincorporated public or private enterprise, a government, a group of related individuals, or a group of related incorporated and/or unincorporated enterprises which have a direct investment enterprise that is a

subsidiary, associate or branch operating in a country other than the country or countries of residence of the direct investor or investors.

HOST ECONOMY is the country that receives FDI or FPI from the foreign investor(s). HOME ECONOMY is the country of origin/residence of the company that invests in the foreign economy/host economy.

SUBSIDIARY is an incorporated enterprise in the host country in which the foreign investor owns more than 50 per cent of the shareholders voting power or has the right to appoint or remove a majority of the members of this enterprises administrative, management or supervisory body.

EQUITY CAPITAL comprises of equity in branches and ordinary shares in subsidiaries and associates. Reinvested earnings consist of the direct investors share of earnings not distributed as dividends by subsidiaries or associates and earnings of branches not remitted to the direct investor.

OTHER CAPITAL covers inter-company debt (including short-term loans such as trade credits) between direct investors and subsidiaries, branches and associates.

WTO World Trade Organization.