Sip Report

A
Summer internship report

ON
“CHANGING TRENDS IN SHARE MARKET”
Submitted to- Submitted by-

Project guide: - Ishwar Chandra
Tiwari
Prof. Dr. mannu johari MBA III Sem
HOD MBA SITM
SESSION-2009-11
ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

Saraswati Institute of Technology and
Management
Unnao
ACKNOWLEDGEMENT
I would like to thank my project guide mannu mam for

guiding me through my summer internship report. His
encouragement, time and effort are greatly appreciated.
I would like to thank Mr.manish agarwal, for supporting

me during this Report and providing me an opportunity
to learn outside the class room. It was a truly wonderful
learning experience.
I would like to dedicate this report to my parents.

Without their help and constant support this report
would not have been possible.
Lastly I would like to thank all the respondents who

offered their opinions and suggestions through the
survey that was conducted by me in Allahabad

Once again my gratitude to the Brokers, Sub-Brokers
and Investors of share market. For their kind co-
operation.
PREFACE
In this study behavior of the share market has been

analyzed, and changing trends which comes in last ten
years. For which I surveyed the market and interviewed
registered brokers, sub- brokers and investors through
which I analyze the customer behavior, how the share
market affect. The study is all about capital market .The
capital market is the market for securities, where
companies and governments can raise long term funds. It
is a market in which money is lent for periods longer than
a year. The capital market includes the stock market and
the bond market. Financial regulators, such as the U.S.
Securities and Exchange Commission (SEC), oversee the
capital markets in their designated countries to ensure
that investors are protected against fraud.
The capital markets consist of the primary market and the

secondary market. The primary markets are where new
stock and bonds issues are sold (underwriting) to

investors. The secondary markets are where existing
securities are sold and bought from one investor or
speculator to another, usually on an exchange (e.g. the
New York Stock Exchange).
Share market is the part of secondary market. Here are

a lot of changes in today’s share market in comparison
to last ten years. With the perception in mind that
initially, before ten years back investors were only from
big cities but now the scenario has been changed with
the retailing in this industry. Today small investors
concept is in trend that show now cities like, Allahabad,
where financial market is not enough smart but a good
number of customer’s and investors have started
investing this study is all about this changing scenario

CONTENTS
Certificate____________________________________2
Acknowledgement______________________________3
Preface 4
Executive Summary 7
Objective Of the study 8
The Indian Capital Market_______________________9
• An Overview
• Other leading cities in stock market operation
• Growth of Indian Stock Exchanges
• Sensex and Nifty
• History
• Key Milestones
• Myths of Stock Market
• How Stock Market Works
Initial Public Offering__________________________30
• Introduction
• How to apply Public issue
• How to make Payment for IPOs
• Role of SEBI in process of IPO
DEMAT account______________________________34
• Introduction
• How to open Demat account

• Document required
SEBI (Securities and Exchange Board of India)_____36
• Introduction
• The Board Comprises
• Functions and Responsibilities
BSE (Bombay Stock Exchange) Introduction_______43
NSE (National Stock Exchange)_________________46

• Introduction
• NSE group
SENSEX____________________________________49
• Introduction
• SENSEX calculation Methodology
• Concept of Free Float
• Definition of Free Float
• Function and Purpose of Stock Market
Depository__________________________________55
• CDSL
• NSDL
• CSD
FII(Foreign Institutional Investor)________________61
• Introduction
• FII mean
• Regulations
Participatory Notes___________________________71
Scams of Share Market________________________75
• Harshad Mehta Scam
• Ketan Parekhs Scam

• Satyam Scam
Research Methodology_______________________90
Result analysis &Interpretation________________97
Suggestions_______________________________104
Conclusion_________________________________105
Questions for interview_______________________108
Biblography________________________________109
Executive Summary
In this study behavior of the share market has been
analyzed, and changing trends which comes in last ten
years. For which I surveyed the market and interviewed
registered brokers, sub- brokers and investors through
which I analyze the customer behavior, how the share
market affect. The study is all about capital market .The
capital market is the market for securities, where
companies and governments can raise long term funds. It
is a market in which money is lent for periods longer than
a year. The capital market includes the stock market and
the bond market. Financial regulators, such as the U.S.
Securities and Exchange Commission (SEC), oversee the

capital markets in their designated countries to ensure
that investors are protected against fraud.
OBJECTIVES OF THE STUDY
• Analysis of changing trends in Indian stock

market in last ten years.
• To determine reasons for so many ups and down.
• To determine the procedures of investors to
opting companies for share.
• To determine the reasons of increasing the
number of investors.
• To determine the effect of all scams in the share
market.

• To determine the use of Internet for valuable
information and decision-making process.
• To determine that how the Indian economy
affected through the changing trends in share
market.
• To determine that how the changing trends affect
investor’s behaviour.
• To study of milestones came across the journey.
• To determine the reasons for affect Sensex
AN OVERVIEW
THE INDIAN CAPITAL MARKET

The Indian capital market is more than a century old. Its
history goes back to 1875, when 22 brokers formed the
Bombay Stock Exchange (BSE). Over the period, the
Indian securities market has evolved continuously to
become one of the most dynamic, modern, and efficient
securities markets in Asia. Today,
Indian market confirms to best international practices and

standards both in terms of structure and in terms of
operating efficiency .Indian securities markets are mainly

governed by a) The Company’s Act1956, b) the Securities
Contracts (Regulation) Act 1956 (SCRA Act), and c) the
Securities and Exchange Board of India (SEBI) Act, 1992.
A brief background of these above regulations are given
below
a) The Companies Act 1956 deals with issue, allotment

and transfer of securities and various aspects relating to
company management. It provides norms for disclosures
in the public issues, regulations for underwriting, and the
issues pertaining to use of premium and discount on
various issues.
b) SCRA provides regulations for direct and indirect

control of stock exchanges with an aim to prevent
undesirable transactions in securities. It provides
regulatory jurisdiction to Central Government over stock
exchanges, contracts in securities and listing of securities
on stock exchanges.
c) The SEBI Act empowers SEBI to protect the interest of

investors in the securities market, to promote the
development of securities market and to regulate the
security market.
The Indian securities market consists of primary (new

issues) as well as secondary (stock) market in both equity
and debt. The primary market provides the channel for

sale of new securities, while the secondary market deals
in trading of securities previously issued. The issuers of
securities issue (create and sell) new securities in the
primary market to raise funds for investment. They do so
either through public issues or private placement. There
are two major types of issuers who issue securities. The
corporate entities issue mainly debt and equity
instruments (shares, debentures, etc.), while the
governments (central and state governments) issue debt
securities (dated securities, treasury bills). The secondary
market enables participants who hold securities to adjust
their holdings in response to changes in their assessment
of risk and return. A variant of secondary market is the
forward market, where securities are traded for future
delivery and payment in the form of futures and options.
The futures and options can be on individual stocks or
basket of stocks like index. Two exchanges, namely
National Stock Exchange (NSE) and the Stock Exchange,
Mumbai (BSE) provide trading of derivatives in single
stock futures, index futures, single stock options and
index options. Derivatives trading commenced in India in
June 2000
Other leading cities in stock market operations

Ahmedabad gained importance next to Bombay with
respect to cotton textile industry. After 1880, many mills
originated from Ahmedabad and rapidly forged ahead. As
new mills were floated, the need for a Stock Exchange at
Ahmedabad was realized and in 1894 the brokers formed
"The Ahmedabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and

Ahmedabad, the jute industry was to Calcutta. Also tea
and coal industries were the other major industrial groups
in Calcutta. After the Share Mania in 1861-65, in the
1870's there was a sharp boom in jute shares, which was
followed by a boom in tea shares in the 1880's and
1890's; and a coal boom between 1904 and 1908. On
June 1908, some leading brokers formed "The Calcutta
Stock Exchange Association".
In the beginning of the twentieth century, the industrial

revolution was on the way in India with the Swadeshi
Movement; and with the inauguration of the Tata Iron and
Steel Company Limited in 1907, an important stage in
industrial advancement under Indian enterprise was
reached.
Indian cotton and jute textiles, steel, sugar, paper and

flour mills and all companies generally enjoyed
phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden
thrill of a stock exchange functioning in its midst, under
the name and style of "The Madras Stock Exchange" with
100 members. However, when boom faded, the number
of members stood reduced from 100 to 3, by 1923, and
so it went out of existence.
In 1935, the stock market activity improved, especially in

South India where there was a rapid increase in the
number of textile mills and many plantation companies
were floated. In 1937, a stock exchange was once again
organized in Madras - Madras Stock Exchange Association
(Pvt) Limited. (In 1957 the name was changed to Madras
Stock Exchange Limited).
Lahore Stock Exchange was formed in 1934 and it had a

brief life. It was merged with the Punjab Stock Exchange
Limited, which was incorporated in 1936.
Indian Stock Exchanges - An Umbrella Growth
The Second World War broke out in 1939. It gave a sharp

boom which was followed by a slump. But, in 1943, the
situation changed radically, when India was fully mobilized
as a supply base.
On account of the restrictive controls on cotton, bullion,

seeds and other commodities, those dealing in them found
in the stock market as the only outlet for their activities.
They were anxious to join the trade and their number was
swelled by numerous others. Many new associations were
constituted for the purpose and Stock Exchanges in all
parts of the country were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur

Stock Exchange Limited (1940) and Hyderabad Stock
Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges - Delhi Stock and Share

Brokers' Association Limited and the Delhi Stocks and
Shares Exchange Limited - were floated and later in June
1947, amalgamated into the Delhi Stock Exchange
Association Limited.
There are two major indicators of Indian capital

market- SENSEX & NIFTY:
What are the Sensex & the Nifty?
The Sensex is an "index". What is an index? An index is

basically an indicator. It gives you a general idea about
whether most of the stocks have gone up or most of the
stocks have gone down. The Sensex is an indicator of all
the major companies of the BSE. The Nifty is an indicator

of all the major companies of the NSE. If the Sensex goes
up, it means that the prices of the stocks of most of the
major companies on the BSE have gone up. If the Sensex
goes down, this tells you that the stock price of most of
the major stocks on the BSE have gone down. Just like
the Sensex represents the top stocks of the BSE, the Nifty
represents the top stocks of the NSE. Just in case you are
confused, the BSE, is the Bombay Stock Exchange and the
NSE is the National Stock Exchange. The BSE is situated
at Bombay and the NSE is situated at Delhi. These are the
major stock exchanges in the country. There are other
stock exchanges like the Calcutta Stock Exchange etc. but
they are not as popular as the BSE and the NSE. Most of
the stock trading in the country is done though the BSE &
the NSE . Besides Sensex and the Nifty there are many
other indexes. There is an index that gives you an idea
about whether the mid-cap stocks go up and down. This is
called the “BSE Mid-cap Index”. There are many other
types of index. Unless stock markets provide
professionalized service, small investors and foreign
investors will not be interested in capital market
operations. And capital market being one of the major
source of long-term finance for industrial projects, India
cannot afford to damage the capital market path. In this
regard NSE gains vital importance in the Indian capital

market but if we see the sensex & nifty graph there is a
great variation
HISTORICAL PERSPECTIVE
The history of Indian stock market is about 200 years old.
Prior to this the hundis and bills of exchange were in use,
specially in the medieval period, which can be considered
as a form of virtual stock trading but it was certainly not
an organized stock trading. The recorded stock trading
can be traced only after the arrival of East India
Company. The first organized stock market that was
governed by the rules and regulations came into the
existence in the form of ‘The Native Share and Stock
Brokers' Association in 1875. After gone through
numerous changes this association is today better as
Bombay Stock Exchange, which remains the premier stock
exchange since its inception. During this period several
other exchanges were launched and some of which were
closed also. Presently, there are 19 recognized stock
exchanges out of which four are national level exchanges
and the remaining are regional exchanges. National Stock
Exchange, established in 1992, was the last exchange.
Although the regional level exchanges are in existence the
volume of trading in these exchanges is negligible.

National Stock Exchange and Bombay Stock Exchange are
the leaders of Indian Securities Market in terms of listing,
trading and volumes. The last 15 years of the Indian
securities market can be considered as the most
important part of the history where the market gone
through the post liberalization era of Indian economy and
witnessed the formation of Securities and Exchange Board
of India (SEBI) which brought substantial transparency in
share market practices and thus managed to bring in trust
of not only domestic investors but also the international
ones.
The Big Picture of share market
As investors, most of us tend to forget about all of the

good years and only focus on the bad. The broad markets
have been heading up for about four years, so the
thoughts of what happened in 1999-2002 are well behind
us. But now that the markets are volatile, there is a lot of
talk about the subprime mortgage industry, a weak dollar,
and everyone begins to completely forget about how well
the past four years have been and only focus on the last
few months or weeks complaining how bad it is. Things
can certainly continue to get worse, but you have to look
at things in context.

Remember, what goes up, must come down. Not only
does the stock market cycle, but there is a business cycle
as well. We will always have various times that are great,
and those that aren’t as great, but you can’t lose sight of
the big picture.
Take a look at the following 12 years in a colorized
format. Green identifies periods of strong growth. Yellow
indicates a period of volatility or no real direction, and red
shows a period of a downward trend. Based on this, is it
any surprise that markets are becoming volatile and
possibly trending downward?
For even more similarities, scroll back up and look at the

first chart from 1996-1999. Now, scroll down and look at
the 2005-Present image. Notice how similar they are? The

markets went up for completely different reasons, yet are
behaving almost the same. All you have to do is look at
the following few years to see what might be in store for
us over the coming year or two. Will history repeat itself?
There is no way to tell, and anything could happen to
make all of this information worthless, but you do have to
at least consider the past trends and understand that
there is a chance the market will behave similarly and
we’ll enter a period of significant decline.
Keep Doing What You’re Doing
Sure, the market may be a bit unstable right now, and we

may certainly be headed for a time where the market falls
further, but that shouldn’t be of much concern to you if
you’re investing for the next 10, 20, 30 or more years. If
you want to try and time the market or predict what the
next hot sector is, that’s fine, but the best thing most
people can do is to just continuously invest in
a diversified portfolio. If you keep buying even as the
market falls, you’re just adding more shares at a lower
price.
Could you make more money if you only invested at the
low points and sold at the high points compared to dollar
cost averaging? Sure, but the likelihood of succeeding on
a regular basis is low. For most people, the best thing to
do is to just continue investing bi-weekly, monthly, or

quarterly into the same diversified portfolio regardless of
market conditions. When markets are choppy or headed
down, you’re just buying stocks or funds on sale. All you
have to do is look back a few years to see that even
though the market might go down, it will eventually come
back up again.
KEY MILESTONES
Following is the timeline on the rise and rise of the Sensex

through Indian stock market history.
1830's Business on corporate stocks and shares in Bank

and Cotton presses started in Bombay.
1860-1865 Cotton price bubble as a result of the

American Civil War
1870 - 90's Sharp increase in share prices of jute

industries followed by a boom in tea stocks and coal
1900s
1978-79 Base year of Sensex, defined to be 100.
1986 Sensex first compiled. Using a market Capitalization

Weighted methodology for 30 component stocks

representing well-established companies across key
sectors.
Since 1990
1000, July 25, 1990 On July 25, 1990, the Sensex

touched the magical four-digit figure for the first time and
closed at 1,001 in the wake of a good monsoon season
and excellent corporate results.
July 1991 Rupee devalued by 18-19 %
2000, January 15, 1992 On January 15, 1992, the

Sensex crossed the 2,000-mark and closed at 2,020
followed by the liberal economic policy initiatives
undertaken by the then prime minister P.V.Narasimha
rao.
3000, February 29, 1992 On February 29, 1992, the

Sensex surged past the 3000 mark in the wake of the
market-friendly Budget announced by the then Finance
Minister, Dr Manmohan Singh.
4000, March 30, 1992 On March 30, 1992, the Sensex

crossed the 4,000-mark and closed at 4,091 on the
expectations of a liberal export-import policy. It was then
that the Harshad Mehta scam hit the markets and Sensex
witnessed unabated selling.

5000, October 8, 1999 On October 8, 1999, the Sensex
crossed the 5,000-mark as the BJP-led coalition won the
majority in the 13th Lok Sabha election.
6000, February 11, 2000 On February 11, 2000, the

infotech boom helped the Sensex to cross the 6,000-mark
and hit and all time high of 6,006.
6151, Feb 14, 2000 Tops. Index declines until Sept

2001 and loses half the value. Coincides with dot-com
bubble burst.
2595, Sept 21, 2001 Bottoms.
7000, June 20, 2005 On June 20, 2005, the news of the
settlement between the Ambani brothers boosted investor
sentiments and the scrips of RIL, Reliance Energy,
Reliance Capital, and IPCL made huge gains. This helped
the Sensex crossed 7,000 points for the first time.
8000, September 8, 2005 On September 8, 2005, the

Bombay Stock Exchange's benchmark 30-share index --
the Sensex -- crossed the 8000 level following brisk
buying by foreign and domestic funds in early trading.
9000, November 28, 2005 The Sensex on November

28, 2005 crossed the magical figure of 9000 to touch
9000.32 points during mid-session at the Bombay Stock
Exchange on the back of frantic buying spree by foreign
institutional investors and well supported by local
operators as well as retail investors.
10,000, February 6, 2006 The Sensex on February 6,
2006 touched 10,003 points during mid-session. The
Sensex finally closed above the 10K-mark on February 7,
2006.
11,000, March 21, 2006 The Sensex on March 21, 2006

crossed the magical figure of 11,000 and touched a life-
time peak of 11,001 points during mid-session at the
Bombay Stock Exchange for the first time. However, it
was on March 27, 2006 that the Sensex first closed at
over 11,000 points.
12,000, April 20, 2006 The Sensex on April 20, 2006

crossed the 12,000-mark and closed at a peak of 12,040
points for the first time.
13,000, October 30, 2006 The Sensex on October 30,

2006 crossed the magical figure of 13,000 and closed at
13,024.26 points, up 117.45 points or 0.9%. It took 135
days for the Sensex to move from 12,000 to 13,000 and
123 days to move from 12,500 to 13,000.
14,000, December 5, 2006 The Sensex on December 5,

2006 crossed the 14,000-mark to touch 14,028 points. It
took 36 days for the Sensex to move from 13,000 to the
14,000 mark.
15,000, July 6, 2007 The Sensex on July 6, 2007

crossed the magical figure of 15,000 to touch 15,005

points in afternoon trade. It took seven months for the
Sensex to move from 14,000 to 15,000 points.
16,000, September 19, 2007 The Sensex scaled yet

another milestone during early morning trade on
September 19, 2007. Within minutes after trading began,
the Sensex crossed 16,000, rising by 450 points from the
previous close. The 30-share Bombay Stock Exchange's
sensitive index took 53 days to reach 16,000 from
15,000. Nifty also touched a new high at 4659, up 113
points.
The Sensex finally ended with a gain of 654 points at

16,323. The NSE Nifty gained 186 points to close at
4,732.
17,000, September 26, 2007 The Sensex scaled yet

another height during early morning trade on September
26, 2007. Within minutes after trading began, the Sensex
crossed the 17,000-mark. Some profit taking towards the
end, saw the index slip into red to 16,887 - down 187
points from the day's high. The Sensex ended with a gain
of 22 points at 16,921.
18,000, October 09, 2007 The BSE Sensex crossed the

18,000-mark on October 09, 2007. It took just 8 days to
cross 18,000 points from the 17,000 mark. The index
zoomed to a new all-time intra-day high of 18,327. It
finally gained 789 points to close at an all-time high of

18,280. The market set several new records including the
biggest single day gain of 789 points at close, as well as
the largest intra-day gains of 993 points in absolute term
backed by frenzied buying after the news of the UPA and
Left meeting on October 22 put an end to the worries of
an impending election.
19,000, October 15, 2007 The Sensex crossed the

19,000-mark backed by revival of funds-based buying in
blue chip stocks in metal, capital goods and refinery
sectors. The index gained the last 1,000 points in just four
trading days. The index touched a fresh all-time intra-day
high of 19,096, and finally ended with a smart gain of 640
points at 19,059.The Nifty gained 242 points to close at
5,670.
20,000, October 29, 2007 The Sensex crossed the

20,000 mark on the back of aggressive buying by funds
ahead of the US Federal Reserve meeting. The index took
only 10 trading days to gain 1,000 points after the index
crossed the 19,000-mark on October 15. The major
drivers of today's rally were index heavyweights Larsen
and Toubro, Reliance Industries, ICICI Bank, HDFC Bank
and SBI among others. The 30-share index spurted in the
last five minutes of trade to fly-past the crucial level and
scaled a new intra-day peak at 20,024.87 points before
ending at its fresh closing high of 19,977.67, a gain of

734.50 points. The NSE Nifty rose to a record high
5,922.50 points before ending at 5,905.90, showing a
hefty gain of 203.60 points.
21,000, January 8, 2008 The sensex peaks. It crossed

the 21,000 mark in intra-day trading after 49 trading
sessions. This was backed by high market confidence of
increased FII investment and strong corporate results for
the third quarter. However, it later fell back due to profit
booking.
15,200, June 13, 2008 The sensex closed below 15,200

mark, Indian market suffer with major downfall from
January 21,2008
14,220, June 25, 2008 The sensex touched an intra day

low of 13,731 during the early trades, then pulled back
and ended up at 14,220 amidst a negative sentiment
generated on the Reserve Bank of India hiking CRR by 50
bps. FII outflow continued in this week.
12,822, July 2, 2008 The sensex hit an intra day low of

12,822.70 on July 2nd, 2008. This is the lowest that it has
ever been in the past year. Six months ago, on January
10th, 2008, the market had hit an all time high of
21206.70. This is a bad time for the Indian markets,
although Reliance and Infosys continue to lead the way
with mostly positive results. Bloomberg lists them as the

top two gainers for the Sensex, closely followed by ICICI
Bank and ITC Ltd.
11801.70, Oct 6, 2008 The sensex closed at 11801.70

hitting the lowest in the past 2 years.
10527, Oct 10, 2008 The Sensex today closed at

10527,800.51 points down from the previous day having
seen an intraday fall of as large as 1063 points. Thus,this
week turned out to be the week with largest percentage
fall in the Sensex.
14284.21, May 18, 2009 After the result of 15th indian

general election Sensex gained 2110.79 points form the
previous close of 12173.42 these creates a new histroy in
Indian Market. In the Opening Trade itself sensex gain
15% from the previous day close this leads to the
suspension of 2 hours trade. After 2 hours sensex again
surged this leads to the suspension of full day trading.
Myths of stock market
1. You can tell if a Stock is cheap or expensive by the

Price to Earnings Ratio.

False: PE ratios are easy to calculate, that is why they
are listed in newspapers etc. But you cannot compare PE’s
on companies from different industries, as the variables
those companies and industries have are different. Even
comparing within an industry, PE’s don’t tell you about
many financial fundamentals and nothing about a stock’s
value.
2. To make Money in the Stock Market, you must

assume High Risks.
• False: Tips to Lower your Risk:
• Do not put more than 10% of your money into any

one stock
• Do not own more than 2-3 stocks in any industry
• Buy your stocks over time, not all at once
• Buy stocks with consistent and predictable

earnings growth
• Buy stocks with growth rates greater than the

total of inflation and interest rates
• Use stop-loss orders to limit your risk
3. Buy Stocks on the Way Down and Sell on the Way

Up.
False: People believe that a falling stock is cheap and a

rising stock is too expensive. But on the way down, you
have no idea how much further it may fall. If a stock is

rising, especially if it has broken previous highs, there are
no unhappy owners who want to dump it. If the stock is
fairly valued, it should continue to rise.
4. You can Hedge Inflation with Stocks.
False: When interest rates rise, people start to pull money

out of the market and into bonds, so that pushes prices
down. Plus the cost of business goes up, so corporate
earnings go down, along with the stock prices.
5. Young People can afford to take High Risk.
False: The only thing true about this is that young people
have time on their side if they lose all their money. But
young people have little disposable income to risk losing.
If they follow the tips above, they can make money over
many years. Young people have the time to be patient.
How stock market works

In order to understand what stocks are and how stock
markets work, we need to dive into history--specifically,
the history of what has come to be known as the

corporation, or sometimes the limited liability company
(LLC). Corporations in one form or another have been
around ever since one guy convinced a few others to pool
their resources for mutual benefit.
The first corporate charters were created in Britain as

early as the sixteenth century, but these were generally
what we might think of today as a public corporation
owned by the government, like the postal service.
Privately owned corporations came into being

gradually during the early 19th century in the United
States , United Kingdom and western Europe as the
governments of those countries started allowing anyone
to create corporations.
In order for a corporation to do business, it needs to get

money from somewhere. Typically, one or more people
contribute an initial investment to get the company off the
ground. These entrepreneurs may commit some of their
own money, but if they don't have enough, they will need
to persuade other people, such as venture capital
investors or banks, to invest in their business.
IPO – Initial Public Offering
Public issues can be classified into Initial Public offerings

and further public offerings. In a public offering, the issuer

makes an offer for new investors to enter its shareholding
family. The issuer company makes detailed disclosures as
per the DIP guidelines in its offer document and offers it
for subscription. Initial Public Offering (IPO ) is when
an unlisted company makes either a fresh issue of
securities or an offer for sale of its existing securities or
both for the first time to the public. This paves way for
listing and trading of the issuer’s securities.
IPO is New shares Offered to the public in the Primary

Market .The first time the company is traded on the stock
exchange. A prospectus is issued to read about its risk
before investing. IPO is a company's first sale of stock to
the public. Securities offered in an IPO are often, but not
always, those of young, small companies seeking outside
equity capital and a public market for their stock.
Investors purchasing stock in IPOs generally must be
prepared to accept very large risks for the possibility of
large gains. Sometimes, Just before the IPO is launched,
Existing share Holders get a very liberal bonus issues as a
reward for their faith in risking money when the project
was new
How to apply to a public issue ?
When a company floats a public issue or IPO, it prints

forms for application to be filled by the investors. Public
issues are open for a few days only. As per law, any public

issue should be kept open for a minimum of 3days and a
maximum of 21 days. For issues, which are underwritten
by financial institutions, the offer should be kept open for
a minimum of 3 days and a maximum of 21 days. For
issues, which are underwritten by all India financial
institutions, the offer should be kept open for a maximum
of 10 days. Generally, issues are kept open for only 3 to 4
days. The duly complete application from, accompanied
by cash, cheque, DD or stock invest should be deposited
before the closing date as per the instruction on the from.
IPO's by investment companies (closed end funds)
usually contain underwriting fees which represent a load
to buyers.
Before applying for any IPO , analyse the following

factors:
1. Who are the Promoters ? What is their credibility and

track record ?
2. What is the company manufacturing or providing

services - Product, its potential
3. Does the Company have any Technology tie-up ? if

yes , What is the reputation of the collaborators
4. What has been the past performance of the Company

offering the IPO?
5. What is the Project cost, What are the means of

financing and profitability projections?
6. What are the Risk factors involved ?
7. Who has appraised the Project ? In India Projects

apprised by IDBI and ICICI have more credibility than
small Merchant Bankers
How to make payments for IPOs:
The payment terms of any IPO or Public issue is fixed by

the company keeping in view its fund requirements and
the statutory regulations. In general, companies stipulate
that either the entire money should be paid along with the
application or 50 percent of the entire amount be paid
along with the application and rest on allotment. However,
if the funds requirements is staggered, the company may
ask for the money in calls, that is, the company demands
for the money after allotment as and when the cash flow
demands. As per the statutory requirements, for public
issue large than Rs. 250 crore, the money is to be
collected as under:
• 25 per cent on application
• 25 per cent on allotment
• 50 per cent in two or more calls
The role of SEBI in the process of IPO

SEBI regulates the IPO process and issued detailed
Guidelines under section 11 of the SEBI Act, 1992 in the
name of SEBI (Disclosure and Investors Protection)
Guidelines, 2002 generally known as DIP Guidelines. It is
also noted that under the provisions sections 55 of the
Companies Act, 1956. the matters pertaining to issue and
transfer of securities and non payment of dividend in case
of listed companies, the companies intend to get listed are
being administered by SEBI.
DEMAT ACCOUNT
Demat refers to a dematerialised account.
Though the company is under obligation to offer the

securities in both physical and demat mode, you have
the choice to receive the securities in either mode.
If you wish to have securities in demat mode, you need

to indicate the depository and also of the depository

participant with whom you have depository account in
your application.
It is, however desirable that you hold securities in

demat form as physical securities carry the risk of being
fake, forged or stolen.
Just as you have to open an account with a bank if you

want to save your money, make cheque payments etc,
Nowadays, you need to open a demat account if you
want to buy or sell stocks.
So it is just like a bank account where actual money is

replaced by shares. You have to approach the DPs
(remember, they are like bank branches), to open your
demat account. Let's say your portfolio of shares looks
like this: 150 of Infosys, 50 of Wipro, 200 of HLL and 100
of ACC. All these will show in your demat account. So
you don't have to possess any physical certificates
showing that you own these shares. They are all held
electronically in your account. As you buy and sell
the shares, they are adjusted in your account. Just like a
bank passbook or statement, the DP will provide you
with periodic statements of holdings and transactions.
The most important thing required to trade in share

market is Demat account. Demat or Dematerialized
account is to store stocks in electronics form. It is just like
opening a bank account to store your money. Now nobody

is interested to keep shares in physical forms and going
for electronic based filing of shares. This has changed the
style of operation in main Indian stock markets like BSE
Sensex ( Bombay Stock Exchange Sensitive Index) and
Nifty (National Stock Exchange of India) and its brokers.
How to Open a Demat Account
It is like opening a bank account. You have to approach a

depository participants to open an online trading or demat
account. Most of the banks are DPs too.
Documents Required
You will have to submit few documents with the

application form to open a demat account. As per latest
Govt of India rule PAN (Personal Account Number) card is
must for opening a demat account. These are the
documents required to open a demat account
1. Photo Copy of PAN Card (Mandatory)
2. Four Passport size photos
3. Address Proof – Ration Card/Passport/Driving

License/Voter’s ID Card/BSNL Telephone/LIC Policy

4. Latest Bank Statement and photocopy of Bank
Passbook
SEBI – Introduction
In 1988 the Securities and Exchange Board of India

(SEBI) was established by the Government of India
through an executive resolution, and was subsequently
upgraded as a fully autonomous body (a statutory Board)
in the year 1992 with the passing of the Securities and
Exchange Board of India Act (SEBI Act) on 30th January
1992. In place of Government Control, a statutory and
autonomous regulatory board with defined responsibilities,
to cover both development & regulation of the market,
and independent powers have been set up. Paradoxically
this is a positive outcome of the Securities Scam of 1990-
91.
The basic objectives of the Board were identified as:

• to protect the interests of investors in securities;
• to promote the development of Securities Market;
• to regulate the securities market and
• for matters connected therewith or incidental thereto.
Since its inception SEBI has been working targetting the

securities and is attending to the fulfillment of its

objectives with commendable zeal and dexterity. The
improvements in the securities markets like capitalization
requirements, margining, establishment of clearing
corporations etc. reduced the risk of credit and also
reduced the market.
SEBI has introduced the comprehensive regulatory

measures, prescribed registration norms, the eligibility
criteria, the code of obligations and the code of conduct
for different intermediaries like, bankers to issue,
merchant bankers, brokers and sub-brokers, registrars,
portfolio managers, credit rating agencies, underwriters
and others. It has framed bye-laws, risk identification and
risk management systems for Clearing houses of stock
exchanges, surveillance system etc. which has made
dealing in securities both safe and transparent to the end
investor.
Another significant event is the approval of trading

in stock indices (like S&P CNX Nifty & Sensex) in 2000. A
market Index is a convenient and effective product
because of the following reasons:
• It acts as a barometer for market behavior;
• It is used to benchmark portfolio performance;
• It is used in derivative instruments like index futures
and index options;

• It can be used for passive fund management as in case
of Index Funds.
Two broad approaches of SEBI is to integrate the

securities market at the national level, and also to
diversify the trading products, so that there is an increase
in number of traders including banks, financial
institutions,insurance companies, mutual funds, primary
dealers etc. to transact through the Exchanges. In this
context the introduction of derivatives trading through
Indian Stock Exchanges permitted by SEBI in 2000 AD is
a real landmark.
SEBI appointed the L. C. Gupta Committee in 1998 to

recommend the regulatory framework for derivatives
trading and suggest bye-laws for Regulation and Control
of Trading and Settlement of Derivatives Contracts. The
Board of SEBI in its meeting held on May 11, 1998
accepted the recommendations of the committee and
approved the phased introduction of derivatives trading in
India beginning with Stock Index Futures. The Board also
approved the "Suggestive Bye-laws" as recommended by
the Dr LC Gupta Committee for Regulation and Control of
Trading and Settlement of Derivatives Contracts.
SEBI then appointed the J. R. Verma Committee to

recommend Risk Containment Measures (RCM) in the
Indian Stock Index Futures Market. The report was
submitted in November 1998.
However the Securities Contracts (Regulation) Act, 1956

(SCRA) required amendment to include "derivatives" in
the definition of securities to enable SEBI to introduce
trading in derivatives. The necessary amendment was
then carried out by the Government in 1999. The
Securities Laws (Amendment) Bill, 1999 was introduced.
In December 1999 the new framework was approved.
Derivatives have been accorded the status of `Securities'.

The ban imposed on trading in derivatives in 1969 under a
notification issued by the Central Government was
revoked. Thereafter SEBI formulated the necessary
regulations/bye-laws and intimated the Stock Exchanges
in the year 2000. The derivative trading started in India at
NSE in 2000 and BSE started trading in the year 2001.
SEBI is the Regulator for the Securities Market in India.

Originally set up by the Government of India in 1988, it
acquired statutory form in 1992 with SEBI Act 1992 being
passed by the Indian Parliament.Chaired by C B Bhave,
SEBI is headquartered in the popular business district
of Bandra-Kurla complex in Mumbai, and has Northern,

Eastern, Southern and Western regional offices in New
Delhi, Kolkata, Chennai and Ahmedabad.
Organisation Structure
Chandrasekhar Bhaskar Bhave is the sixth chairman of the

Securities Market Regulator. Prior to taking charge as
Chairman SEBI, he had been the chairman of NSDL
(National Securities Depository Limited) ushering in
paperless securities. Prior to his stint at NSDL, he had
served SEBI as a Senior Executive Director. He is a
former Indian Administrative Service officer of the 1975
batch.
The Board comprises
Name Designation As per
CHAIRMAN (S.4(1)
Mr CB Bhave Chairman SEBI (a) of the SEBI Act,
1992)

Joint Secretary, Member (S.4(1)(b)
Mr KP Krishnan Ministry of of the SEBI Act,
Finance 1992)
Secretary, Member (S.4(1)(b)

Mr Anurag Goel Ministry of of the SEBI Act,
Corporate Affairs 1992)
Director, National Member (S.4(1)(d)

Dr G Mohan Gopal Judicial Academy, of the SEBI Act,
Allahabad 1992)
Member (S.4(1)(d)
Whole Time
Mr MS Sahoo of the SEBI Act,
Member, SEBI
1992)
Member (S.4(1)(d)
Whole Time
Dr KM Abraham of the SEBI Act,
Member, SEBI
1992)
Member (S.4(1)(d)
Mr Mohandas Pai Director, Infosys of the SEBI Act,
1992)
Functions and Responsibilities
SEBI has to be responsive to the needs of three groups,

which constitute the market:
 the issuers of securities
 the investors

 the market intermediaries.
SEBI has three functions rolled into one body quasi-

legislative, quasi-judicial and quasi-executive. It drafts
regulations in its legislative capacity, it conducts
investigation and enforcement action in its executive
function and it passes rulings and orders in its judicial
capacity. Though this makes it very powerful, there is an
appeals process to create accountability. There is a
Securities Appellate Tribunal which is a three member
tribunal and is presently headed by a former Chief Justice
of a High court - Mr. Justice NK Sodhi. A second appeal
lies directly to the Supreme Court.
SEBI has enjoyed success as a regulator by pushing

systemic reforms aggressively and successively (e.g. the
quick movement towards making the markets electronic
and paperless rolling settlement on T+2 basis). SEBI has
been active in setting up the regulations as required under
law. It is regulating body.
INTRODUCTION –BSE
Bombay Stock Exchange is the oldest stock exchange in

Asia with a rich heritage, now spanning three centuries in
its 133 years of existence. What is now popularly known
as BSE was established as "The Native Share & Stock
Brokers' Association" in 1875.
BSE is the first stock exchange in the country which

obtained permanent recognition (in 1956) from the
Government of India under the Securities Contracts
(Regulation) Act 1956. BSE's pivotal and pre-eminent role
in the development of the Indian capital market is widely
recognized. It migrated from the open outcry system to
an online screen-based order driven trading system in
1995. Earlier an Association Of Persons (AOP), BSE is now
a corporatised and demutualised entity incorporated
under the provisions of the Companies Act, 1956,
pursuant to the BSE (Corporatisation and
Demutualisation) Scheme, 2005 notified by the Securities
and Exchange Board of India (SEBI). With
demutualisation, BSE has two of world's best exchanges,
Deutsche Börse and Singapore Exchange, as its strategic
partners.
Over the past 133 years, BSE has facilitated the growth of
the Indian corporate sector by providing it with an
efficient access to resources. There is perhaps no major
corporate in India which has not sourced BSE's services in
raising resources from the capital market.

Today, BSE is the world's number 1 exchange in terms of
the number of listed companies and the world's 5th in
transaction numbers. The market capitalization as on
December 31, 2007 stood at USD 1.79 trillion . An
investor can choose from more than 4,700 listed
companies, which for easy reference, are classified into A,
B, S, T and Z groups.
The BSE Index, SENSEX, is India's first stock market

index that enjoys an iconic stature , and is tracked
worldwide. It is an index of 30 stocks representing 12
major sectors. The SENSEX is constructed on a 'free-float'
methodology, and is sensitive to market sentiments and
market realities. Apart from the SENSEX, BSE offers 21
indices, including 12 sectoral indices. BSE has entered
into an index cooperation agreement with Deutsche Börse.
This agreement has made SENSEX and other BSE indices
available to investors in Europe and America. Moreover,
Barclays Global Investors (BGI), the global leader in ETFs
through its iSharesÂ® brand, has created the 'iSharesÂ®
BSE SENSEX India Tracker' which tracks the SENSEX. The
ETF enables investors in Hong Kong to take an exposure
to the Indian equity market.
The first Exchange Traded Fund (ETF) on SENSEX, called

"SPIcE" is listed on BSE. It brings to the investors a
trading tool that can be easily used for the purposes of

investment, trading, hedging and arbitrage. SPIcE allows
small investors to take a long-term view of the market.
BSE provides an efficient and transparent market for

trading in equity, debt instruments and derivatives. It has
a nation-wide reach with a presence in more than 359
cities and towns of India. BSE has always been at par with
the international standards. The systems and processes
are designed to safeguard market integrity and enhance
transparency in operations. BSE is the first exchange in
India and the second in the world to obtain an ISO
9001:2000 certification. It is also the first exchange in the
country and second in the world to receive Information
Security Management System Standard BS 7799-2-2002
certification for its BSE On-line Trading System (BOLT).
BSE continues to innovate. In recent times, it has become

the first national level stock exchange to launch its
website in Gujarati and Hindi to reach out to a larger
number of investors. It has successfully launched a
reporting platform for corporate bonds in India christened
the ICDM or Indian Corporate Debt Market and a unique
ticker-cum-screen aptly named 'BSE Broadcast' which
enables information dissemination to the common man on
the street.

INTRODUCTION – NATIONAL STOCK EXCHANGE
The National Stock Exchange (NSE), located in Bombay, is

India's first debt market. It was set up in 1993 to
encouragestock exchange reform through system
modernization and competition. It opened for trading in
mid-1994. It was recently accorded recognition as a stock
exchange by the Department of Company Affairs. The
instruments traded are, treasury bills, government
security and bonds issued by public sector companies.
The Organisation
The National Stock Exchange of India Limited has genesis

in the report of the High Powered Study Group on
Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by
financial institutions (FIs) to provide access to investors
from all across the country on an equal footing. Based on
the recommendations, NSE was promoted by leading
Financial Institutions at the behest of the Government of
India and was incorporated in November 1992 as a tax-

paying company unlike other stock exchanges in the
country.
On its recognition as a stock exchange under the
Securities Contracts (Regulation) Act, 1956 in April 1993,
NSE commenced operations in the Wholesale Debt Market
(WDM) segment in June 1994. The Capital Market
(Equities) segment commenced operations in November
1994 and operations in Derivatives segment commenced
in June 2000.
Our Group
NSCCL NCCL NSETECH
IISL NSE NSE.IT

DotExIntl. Ltd.
NSDL
Listing
NSE plays an important role in helping an Indian

companies access equity capital, by providing a liquid and
well-regulated market. NSE has about 1319 companies
listed representing the length, breadth and diversity of the
Indian economy which includes from hi-tech to heavy
industry, software, refinery, public sector units,
infrastructure, and financial services. Listing on NSE raises
a company’s profile among investors in India and abroad.
Trade data is distributed worldwide through various news-
vending agencies. More importantly, each and every NSE
listed company is required to satisfy stringent financial,
public distribution and management requirements. High
listing standards foster investor confidence and also bring
credibility into the markets.
NSE lists securities in its Capital Market (Equities)

segment and its Wholesale Debt Market segment

Introduction of SENSEX
SENSEX, first compiled in 1986, was calculated on a

"Market Capitalization-Weighted" methodology of 30
component stocks representing large, well-established
and financially sound companies across key sectors. The
base year of SENSEX was taken as 1978-79. SENSEX
today is widely reported in both domestic and
international markets through print as well as electronic
media. It is scientifically designed and is based on globally
accepted construction and review methodology. Since
September 1, 2003, SENSEX is being calculated on a free-
float market capitalization methodology. The "free-float
market capitalization-weighted" methodology is a widely
followed index construction methodology on which
majority of global equity indices are based; all major
index providers like MSCI, FTSE, STOXX, S&P and Dow
Jones use the free-float methodology.
The growth of the equity market in India has been

phenomenal in the present decade. Right from early
nineties, the stock market witnessed heightened activity
in terms of various bull and bear runs. In the late nineties,
the Indian market witnessed a huge frenzy in the 'TMT'
sectors. More recently, real estate caught the fancy of the
investors. SENSEX has captured all these happenings in
the most judicious manner. One can identify the booms
and busts of the Indian equity market through SENSEX.
As the oldest index in the country, it provides the time
series data over a fairly long period of time (from 1979
onwards). Small wonder, the SENSEX has become one of
the most prominent brands in the country.
SENSEX Calculation Methodology
SENSEX is calculated using the "Free-float Market

Capitalization" methodology, wherein, the level of index at
any point of time reflects the free-float market value of 30
component stocks relative to a base period. The market
capitalization of a company is determined by multiplying
the price of its stock by the number of shares issued by
the company. This market capitalization is further
multiplied by the free-float factor to determine the free-
float market capitalization.
The base period of SENSEX is 1978-79 and the base value

is 100 index points. This is often indicated by the notation
1978-79=100. The calculation of SENSEX involves
dividing the free-float market capitalization of 30

companies in the Index by a number called the Index
Divisor. The Divisor is the only link to the original base
period value of the SENSEX. It keeps the Index
comparable over time and is the adjustment point for all
Index adjustments arising out of corporate actions,
replacement of scrips etc. During market hours, prices of
the index scrips, at which latest trades are executed, are
used by the trading system to calculate SENSEX every 15
seconds. The value of SENSEX is disseminated in real
time.
Concept of FREE FLOAT
Free-float methodology refers to an index construction

methodology that takes into consideration only the free-
float market capitalization of a company for the purpose
of index calculation and assigning weight to stocks in the
index. Free-float market capitalization takes into
consideration only those shares issued by the company
that are readily available for trading in the market. It
generally excludes promoters' holding, government
holding, strategic holding and other locked-in shares that
will not come to the market for trading in the normal
course. In other words, the market capitalization of each

company in a free-float index is reduced to the extent of
its readily available shares in the market.
Definition of Free-float
Shareholding of investors that would not, in the normal

course come into the open market for trading are treated
as 'Controlling/ Strategic Holdings' and hence not included
in free-float. Specifically, the following categories of
holding are generally excluded from the definition of Free-
float:
• Shares held by founders/directors/ acquirers which

has control element
• Shares held by persons/ bodies with "Controlling

Interest"
• Shares held by Government as promoter/acquirer
• Holdings through the FDI Route
• Strategic stakes by private corporate bodies/

individuals
• Equity held by associate/group companies (cross-

holdings)
• Equity held by Employee Welfare Trusts
• Locked-in shares and shares which would not be sold

in the open market in normal course.

Maintenance of SENSEX
One of the important aspects of maintaining continuity

with the past is to update the base year average. The
base year value adjustment ensures that replacement of
stocks in Index, additional issue of capital and other
corporate announcements like 'rights issue' etc. do not
destroy the historical value of the index. The beauty of
maintenance lies in the fact that adjustments for
corporate actions in the Index should not per se affect the
index values.
The BSE Index Cell does the day-to-day maintenance of

the index within the broad index policy framework set by
the BSE Index Committee. The BSE Index Cell ensures
that SENSEX and all the other BSE indices maintain their
benchmark properties by striking a delicate balance
between frequent replacements in index and maintaining
its historical continuity. The BSE Index Committee
comprises of capital market expert, fund managers,
market participants and members of the BSE Governing
Board.
Function and purpose of stock market
The stock market is one of the most important sources

for companies to raise money. This allows businesses to

be publicly traded, or raise additional capital for expansion
by selling shares of ownership of the company in a public
market. The liquidity that an exchange provides affords
investors the ability to quickly and easily sell securities.
This is an attractive feature of investing in stocks,
compared to other less liquid investments such as real
estate.
History has shown that the price of shares and other

assets is an important part of the dynamics of economic
activity, and can influence or be an indicator of social
mood. An economy where the stock market is on the rise
is considered to be an up and coming economy. In fact,
the stock market is often considered the primary indicator
of a country's economic strength and development. Rising
share prices, for instance, tend to be associated with
increased business investment and vice versa. Share
prices also affect the wealth of households and their
consumption. Therefore, central banks tend to keep an
eye on the control and behavior of the stock market and,
in general, on the smooth operation of financial system
functions. Financial stability is the raison d'être of central
banks.
Exchanges also act as the clearinghouse for each

transaction, meaning that they collect and deliver the
shares, and guarantee payment to the seller of a security.

This eliminates the risk to an individual buyer or seller
that the counterparty could default on the transaction.
The smooth functioning of all these activities facilitates

economic growth in that lower costs and enterprise risks
promote the production of goods and services as well as
employment. In this way the financial system contributes
to increased prosperity.
Depository
What is a Depository?
A depository holds shares and other securities of investors
in electronic form. Through Depository Participants (DPs),
it also provides services related to transactions in
securities. Its structure and functioning are similar to the
Bank. Presently in India, there are two depository viz.
National Securities Depository Limited (NSDL) and Central
Depository Services (I) Limited (CDSL). Both of them are
registered with SEBI.
What is a DP?
DP is a member of a Depository who offers its services to
hold securities of Investors (Beneficial Owners) in
dematerialized form. DP is like a Bank branch. It is an
agent of the depository. DP works as an interface between
Depository and Investors. DPs are required to be
registered with SEBI. If an investor wants to avail the
services offered by Depository, he has to open a Demat
account with DP similar to opening of a bank account with
a branch of the bank.
Depository is responsible for keeping stocks of investors in

electronics form. There are two depositories in India,
NSDL (National Securities Depository Ltd) and CDSL
(Central Depository Services Ltd).
CDSL (Central Depository Services Ltd.)
CDSL was promoted by Bombay Stock Exchange Limited

(BSE) jointly with leading banks such as State Bank of
India, Bank of India, Bank of Baroda, HDFC Bank,
Standard Chartered Bank, Union Bank of India and
Centurion Bank.
CDSL was set up with the objective of providing

convenient, dependable and secure depository services at
affordable cost to all market participants. Some of the
important milestones of CDSL system are:
CDSL received the certificate of commencement of

business from SEBI in February, 1999.
Honourable Union Finance Minister, Shri Yashwant Sinha

flagged off the operations of CDSL on July 15, 1999.
Settlement of trades in the demat mode through BOI
Shareholding Limited, the clearing house of BSE, started
in July 1999.
All leading stock exchanges like the National Stock

Exchange, Calcutta Stock Exchange, Delhi Stock
Exchange, The Stock Exchange, Ahmedabad, etc have
established connectivity with CDSL.
As at the end of Dec 2007, over 5000 issuers have

admitted their securities (equities, bonds, debentures,
commercial papers), units of mutual funds, certificate of
deposits etc. into the CDSL system.
About NSDL
Although India had a vibrant capital market which is more

than a century old, the paper-based settlement of trades
caused substantial problems like bad delivery and delayed
transfer of title till recently. The enactment of Depositories
Act in August 1996 paved the way for establishment of
National Securities Depository Limited (NSDL), the
first depository in India. This depository promoted by
institutions of national stature responsible for economic
development of the country has since established a
national infrastructure of international standards that
handles most of the securities held and settled in
dematerialised form in the Indian capital market.
Using innovative and flexible technology systems, NSDL
works to support the investors and brokers in the capital
market of the country. NSDL aims at ensuring the safety
and soundness of Indian marketplaces by developing
settlement solutions that increase efficiency, minimise risk
and reduce costs. At NSDL, we play a quiet but central
role in developing products and services that will continue
to nurture the growing needs of the financial services
industry.
In the depository system, securities are held in depository

accounts, which is more or less similar to holding funds in
bank accounts. Transfer of ownership of securities is done
through simple account transfers. This method does away
with all the risks and hassles normally associated with
paperwork. Consequently, the cost of transacting in a
depository environment is considerably lower as compared
to transacting in certificates Promoters / Shareholders
NSDL is promoted by Industrial Development Bank of

India Limited (IDBI) - the largest development bank of
India, Unit Trust of India (UTI) - the largest mutual fund
in India and National Stock Exchange of India Limited
(NSE) - the largest stock exchange in India. Some of the
prominent banks in the country have taken a stake in
NSDL.

NSDL Facts & Figures
As on December 31, 2008
• Number of certificates eliminated (Approx.) : 550

Crore
• Number of companies in which more than 75%

shares are dematted : 2282
• Average number of accounts opened per day since

November 1996 : 3636
• Presence of demat account holders in the country :

78% of all pincodes in the country.
Central Securities Depository (CSD)

A Central Securities Depository (CSD) is an
organization holding securities either in certificated or
uncertificated (dematerialized) form, to enable book entry
transfer of securities. In some cases these organizations
also carry out centralized comparison, and transaction
processing such as clearing and settlement of securities.
The physical securities may be immobilised by the
depository, or securities may be dematerialised (so that
they exist only as electronic records).
International Central Securities Depository (ICSD) is

a central securities depository that settles trades in
international securities and in various domestic securities,
usually through direct or indirect (through local agents)

links to local CSDs. ClearStream International (earlier
Cedel), Euro clear and SIX SIS are considered ICSDs.
While some view The Depository Trust Company (DTC) as
a national CSD rather than an ICSD, in fact DTC -- the
largest depository in the world -- holds over $2 trillion in
non-US securities and in American Depository Receipts
from over 100 nations.
Functions
• Safekeeping Securities may be in dematerialized

form, book-entry only form (with one or more
"global" certificates), or in physical form immobilized
within the CSD.
• Deposit and Withdrawal Supporting deposits and

withdrawals involves the relationship between the
transfer agent and/or issuers and the CSD. It also
covers the CSD's role within the underwriting process
or listing of new issues in a market.
• Dividend, interest, and principal processing, as

well as corporate actions including proxy voting
Paying and transfer agents, as well as issuers are
involved in these processes, depending on the level
of services provided by the CSD and its relationship
with these entities.
• Other services CSDs offer additional services aside

from those considered core services. These services
include Securities Lending and Borrowing, Matching,
and Repo Settlement
• Pledge - Central depositories provide pledging of

share and securities. Every country require to
provide legal framework to protect the interest of the
pledgor and pledgee.
However, there are risks and responsibilities regarding

these services that must be taken into consideration in
analyzing and evaluating each market on a case-by-case
basis.
FII (Foreign Institutional Investors) in

Indian Stock Market
Foreign Institutional Investor (FII) is used to denote

an investor - mostly of the form of an institution or entity,
which invests money in the financial markets of a country
different from the one where in the institution or entity
was originally incorporated.
FII investment is frequently referred to as hot money for

the reason that it can leave the country at the same
speed at which it comes in.
In countries like India, statutory agencies like SEBI have

prescribed norms to register FIIs and also to regulate

such investments flowing in through FIIs. In 2008, FIIs
represented the largest institution investment category,
with an estimated US$ 751.14 billion.
Since 1990-91, the Government of India embarked on

liberalisation and economic reforms with a view of
bringing about rapid and substantial economic growth and
move towards globalisation of the economy. As a part of
the reforms process, the Government under its New
Industrial Policy, revamped its foreign investment policy
recognising the growing importance of foreign direct
investment as an instrument of technology transfer,
augmentation of foreign exchange reserves and
globalisation of the Indian economy. Simultaneously, the
Government, for the first time, permitted portfolio
investments from abroad by foreign institutional investors
in the Indian capital market. The entry of FIIs seems to be
a follow up of the recommendation of the Narsimhan
Committee Report on Financial System. While
recommending their entry, the Committee, however did
not elaborate on the objectives of the suggested policy.
The committee only suggested that the capital market
should be gradually opened up to foreign portfolio
investments.
From September 14, 1992 with suitable restrictions,
FIIs were permitted to invest in all the securities traded
on the primary and secondary markets, including shares,
debentures and warrants issued by companies which were
listed or were to be listed on the Stock Exchanges in
India.
While presenting the Budget for 1992-93, the then
Finance Minister Dr. Manmohan Singh had announced a
proposal to allow reputed foreign investors, such as
Pension Funds etc., to invest in Indian capital market. To
operationalise this policy announcement, it had become
necessary to evolve guidelines for such investments by
Foreign Institutional Investors (FIIs). The policy
framework for permitting FII investment was provided
under the Government of India guidelines vide Press Note
date September 14, 1992. The guidelines formulated in
this regard were as follows:
1. Foreign Institutional Investors (FIIs) including
institutions such as Pension Funds, Mutual Funds,
Investment Trusts, Asset Management Companies,
Nominee Companies and Incorporated/Institutional
Portfolio Managers or their power of attorney
holders (providing discretionary and non-
discretionary portfolio management services) would
be welcome to make investments under these
guidelines.
2. FIIs would be welcome to invest in all the securities
traded on the Primary and Secondary markets,

including the equity and other
securities/instruments of companies which are
listed/to be listed on the Stock Exchanges in India
including the OTC Exchange of India. These would
include shares, debentures, warrants, and the
schemes floated by domestic Mutual Funds.
Government would even like to add further
categories of securities later from time to time.
3. FIIs would be required to obtain an initial

registration with Securities and Exchange Board of
India (SEBI), the nodal regulatory agency for
securities markets, before any investment is made
by them in the Securities of companies listed on the
Stock Exchanges in India, in accordance with these
guidelines. Nominee companies, affiliates and
subsidiary companies of a FII would be treated as
separate FIIs for registration, and may seek
separate registration with SEBI.
4. Since there were foreign exchange controls in force,
for various permissions under exchange control,

along with their application for initial registration,
FIIs were also supposed to file with SEBI another
application addressed to RBI for seeking various
permissions under FERA, in a format that would be

specified by RBI for the purpose. RBI's general
permission would be obtained by SEBI before
granting initial registration and RBI's FERA
permission together by SEBI, under a single window
approach.
5. For granting registration to the FII, SEBI should
take into account the track record of the FII, its

professional competence, financial soundness,
experience and such other criteria that may be
considered by SEBI to be relevant. Besides, FII
seeking initial registration with SEBI were be
required to hold a registration from the Securities
Commission, or the regulatory organisation for the
stock market in the country of
domicile/incorporation of the FII.
6. SEBI's initial registration would be valid for five
years. RBI's general permission under FERA to the

FII would also hold good for five years. Both would
be renewable for similar five year periods later on.
7. RBI's general permission under FERA would enable
the registered FII to buy, sell and realize capital

gains on investments made through initial corpus
remitted to India, subscribe/renounce rights

offerings of shares, invest on all recognized stock
exchanges through a designated bank branch, and
to appoint a domestic Custodian for custody of
investments held.
8. This General Permission from RBI would also enable

the FII to:
• Open foreign currency denominated accounts in
a designated bank. (There could even be more
than one account in the same bank branch each
designated in different foreign currencies, if it is
so required by FII for its operational purposes);
• Open a special non-resident rupee account to
which could be credited all receipts from the
capital inflows, sale proceeds of shares,
dividends and interests;
• Transfer sums from the foreign currency
accounts to the rupee account and vice versa, at
the market rate of exchange;
• Make investments in the securities in India out
of the balances in the rupee account;
• Transfer repatriable (after tax) proceeds from
the rupee account to the foreign currency
account(s);

• f. Repatriate the capital, capital gains, dividends,
incomes received by way of interest, etc. and
any compensation received towards
sale/renouncement of rights offerings of shares
subject to the designated branch of a bank/the
custodian being authorized to deduct with
holding tax on capital gains and arranging to pay
such tax and remitting the net proceeds at
market rates of exchange;
• Register FII's holdings without any further
clearance under FERA.
What

Does Foreign Institutional Investor - FII Mean?
An investor or investment fund that is from or registered
in a country outside of the one in which it is
currently investing. Institutional investors include hedge
funds, insurance companies, pension funds and mutual
funds.
Regulation imposed by SEBI on FII
(a)"Act" means the Securities and Exchange Board of

India Act, 1992 (15 of 1992);
(b) "certificate" means a certificate of registration

granted by the Board under these regulations;
(c) "designated bank" means any bank in India, which

has been authorised by the Reserve Bank of India to
act as a banker to Foreign Institutional Investors;
(d) "domestic custodian" includes any person carrying

on the activity of providing custodial services in respect
of securities;
(e) "Enquiry officer" means any officer of the Board, or

any other person appointed by the Board under Chapter
V of these regulations;

(f) "Foreign Institutional Investor" means an institution
established or incorporated outside India which
proposes to make investment in India in securities;
(g) "Form" means a form specified in the First Schedule

to these regulations;
(h) "Government of India Guidelines" means the

guidelines dated September 14, 1992 issued by the
Government of India for Foreign Institutional Investors,
as amended from time to time;
(i) "institution" includes every artificial juridical person;
(j) "schedule" means a schedule to these regulations;
(k) "sub-account" includes those institutions,

established or incorporated outside India and those
funds, or portfolios, established outside India, whether
incorporated or not, on whose behalf investments are
proposed to be made in India by a Foreign Institutional
Investor.

Participatory notes (P- Notes)
Participatory notes (PNs / P-Notes) are instruments

used by investors or hedge funds that are not registered
with the SEBI (Securities & Exchange Board of India) to
invest in Indian securities. Participatory notes are
instruments that derive their value from an underlying
financial instrument such as an equity share and, hence,
the word, 'derivative instruments'. SEBI permitted FIIs to
register and participate in the indian stock market in
1992.
Indian based brokerages buy Indian-based securities and

then issue PNs to foreign investors.
Any dividends or capital gains collected from the

underlying securities go back to the investors.
Participatory notes are instruments used for making

investments in the stock markets. However, they are not
used within the country. They are used outside India for
making investments in shares listed in that country. That
is why they are also called offshore derivative
instruments.
In the Indian context, foreign institutional investors (FIIs)

and their sub-accounts mostly use these instruments for

facilitating the participation of their overseas clients, who
are not interested in participating directly in the Indian
stock market. For example, Indian-based brokerages buy
India-based securities and then issue participatory notes
to foreign investors. Any dividends or capital gains
collected from the underlying securities go back to the
investors. According to an expert group constituted by the
finance ministry in India, in August 2004, participatory
notes constituted about 46 per cent of the cumulative net
investments in equities by FIIs.
Any entity investing in participatory notes is not required

to register with SEBI (Securities and Exchange Board of
India), whereas all FIIs have to compulsorily get
registered. Trading through participatory notes is easy
because participatory notes are like contract notes
transferable by endorsement and delivery. Secondly,
some of the entities route their investment through
participatory notes to take advantage of the tax laws of
certain preferred countries. Thirdly, participatory notes
are popular because they provide a high degree of
anonymity, which enables large hedge funds to carry out
their operations without disclosing their identity.
Participatory notes in brief is as follows :
What are participatory notes or PNs? Participatory notes

are instruments used by foreign funds which are not

registered to trade in domestic Indian Capital Markets.
PNs are derivative instruments issued against an
underlying security permitting holders to get a share in
the income from the security.
How does it work? Investors who buy PNs deposit their

funds in US or European operations of Foreign
Institutional Investors (FII) operating in India . The FII
uses its proprietary account to buy stocks.
Why do investors use PNs? Reason for using PNs is to

keep investor name anonymous, some investors have
used them to save transaction and overhead costs.
Tax officials fear that PNs are becoming a favourite with a

host of Indian money launderers who use them to first
take funds out of country through hawala and then get it
back using PNs.
Participatory Notes Crisis of 2007
On the 16th of October, 2007, SEBI (Securities &

Exchange Board of India) proposed curbs on participatory
notes which accounted for roughly 50% of FII investment
in 2007. SEBI was not happy with P-Notes because it is
not possible to know who owns the underlying securities
and hedge funds acting through PNs might therefore
cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led
to a knee-jerk crash when the markets opened on the
following day (October 17, 2007). Within a minute of
opening trade, the Sensex crashed by 1744 points or
about 9% of its value - the biggest intra-day fall in Indian
stock-markets in absolute terms. This led to automatic
suspension of trade for 1 hour. Finance Minister
P.Chidambaram issued clarifications, in the meantime,
that the government was not against FIIs and was not
immediately banning PNs. After the markets opened at
10:55 am, they staged a remarkable comeback and ended
the day at 18715.82, down just 336.04 from Tuesday’s
close after tumbling to a day’s low of 17307.90.
This was, however not the end of the volatility. The next
day (October 18, 2007), the Sensex tumbled by 717.43
points — 3.83 per cent — to 17998.39, its second biggest
fall. The slide continued the next day when the Sensex fell
438.41 points to settle at 17559.98 at the end of the
week, after touching the lowest level of that week at
17226.18 during the day.
The SEBI chief, M.Damodaran held an hour long

conference on the 22nd of October to clear the air on the
proposals to curb PNs where he announced that funds
investing through PNs were most welcome to register as
FIIs, whose registration process would be made faster and

more steamlined. The markets welcomed the clarifications
with an 879-point gain — its biggest single-day surge —
on October23, thus signalling the end of the PN crisis.
SEBI issued the fresh rules regarding PNs on the 25th of
October, 2007 which said that FIIs cannot issue fresh P-
Notes and existing exposures were to be wound up within
18 months.
SCAMS OF SHARE MARKET
HARSHAD MEHTA SCAM
Harshad Mehta was an Indian stockbroker and is alleged

to have engineered the rise in the BSE stock exchange in
the year 1992. Exploiting several loopholes in the banking
system, Mehta and his associates siphoned off funds from
inter-bank transactions and bought shares heavily at a
premium across many segments, triggering a rise in the
Sensex. When the scheme was exposed, the banks
started demanding the money back, causing the collapse.
He was later charged with 72 criminal offenses and more
than 600 civil action suits were filed against him. He died
in 2002 with many litigations still pending against him.
Early Life
Harshad Shantilal Mehta was born in a Gujarati Jain family

of modest means. His early childhood was spent in
Mumbai where his father was a small-time businessman.
Later, the family moved to Raipur in Madhya Pradesh after
doctors advised his father to move to a drier place on
account of his indifferent health. But Raipur could not hold
back Mehta for long and he was back in the city after
completing his schooling,
Mehta gradually rose to become a stock broker on the

Bombay Stock Exchange and lived almost like a movie
star in a 15,000 square feet apartment, which had a
swimming pool as well as a golf patch. He also had a taste
for flashy cars, which ultimately led to his downfall. “The
year was 1990. Years had gone by and the driving
ambitions of a young man in the faceless crowd had been
realised. Harshad Mehta was making waves in the stock
market. He had been buying shares heavily since the
beginning of 1990. The shares which attracted attention
were those of Associated Cement Company (ACC),”. The
price of ACC was bid up to Rs 10,000. For those who
asked, Mehta had the replacement cost theory as an
explanation. The theory basically argues that old
companies should be valued on the basis of the amount of
money which would be required to create another such
company.

Through the second half of 1991, Mehta was the darling of
the business media and earned the sobriquet of the ‘Big
Bull’, who was said to have started the bull run. But,
where was Mehta getting his endless supply of money
from? Nobody had a clue.
On April 23, 1992, journalist Sucheta Dalal in a column in

The Times of India, exposed the dubious ways of Harshad
Metha. The broker was dipping illegally into the banking
system to finance his buying.
“In 1992, when I broke the story about the Rs 600 crore
that he had swiped from the State Bank of India, it was
his visits to the bank’s headquarters in a flashy Toyota
Lexus that was the tip-off. Those days, the Lexus had just
been launched in the international market and importing it
cost a neat package,” Dalal wrote in one of her columns
later.
The authors explain: “The crucial mechanism through

which the scam was effected was the ready forward (RF)
deal. The RF is in essence a secured short-term (typically
15-day) loan from one bank to another. Crudely put, the
bank lends against government securities just as a
pawnbroker lends against jewellery. The borrowing bank
actually sells the securities to the lending bank and buys
them back at the end of the period of the loan, typically at
a slightly higher price.”

It was this ready forward deal that Harshad Mehta and his
cronies used with great success to channel money from
the banking system.
A typical ready forward deal involved two banks brought

together by a broker in lieu of a commission. The broker
handles neither the cash nor the securities, though that
wasn’t the case in the lead-up to the scam.
“In this settlement process, deliveries of securities and

payments were made through the broker. That is, the
seller handed over the securities to the broker, who
passed them to the buyer, while the buyer gave the
cheque to the broker, who then made the payment to the
seller.
In this settlement process, the buyer and the seller might

not even know whom they had traded with, either being
know only to the broker.”
This the brokers could manage primarily because by now

they had become market makers and had started trading
on their account. To keep up a semblance of legality, they
pretended to be undertaking the transactions on behalf of
a bank.
Another instrument used in a big way was the bank

receipt (BR). In a ready forward deal, securities were not
moved back and forth in actuality. Instead, the borrower,

i.e. the seller of securities, gave the buyer of the
securities a BR.
As the authors write, a BR “confirms the sale of securities.

It acts as a receipt for the money received by the selling
bank. Hence the name - bank receipt. It promises to
deliver the securities to the buyer. It also states that in
the mean time, the seller holds the securities in trust of
the buyer.”
Having figured this out, Mehta needed banks, which could

issue fake BRs, or BRs not backed by any government
securities. “Two small and little known banks - the Bank of
Karad (BOK) and the Metorpolitan Co-operative Bank
(MCB) - came in handy for this purpose. These banks
were willing to issue BRs as and when required, for a fee,”
the authors point out.
Once these fake BRs were issued, they were passed on to

other banks and the banks in turn gave money to Mehta,
obviously assuming that they were lending against
government securities when this was not really the case.
This money was used to drive up the prices of stocks in
the stock market. When time came to return the money,
the shares were sold for a profit and the BR was retired.
The money due to the bank was returned.
The game went on as long as the stock prices kept going

up, and no one had a clue about Mehta’s modus operandi.

Once the scam was exposed, though, a lot of banks were
left holding BRs which did not have any value - the
banking system had been swindled of a whopping Rs
4,000 crore.
Mehta made a brief comeback as a stock market guru,

giving tips on his own website as well as a weekly
newspaper column. This time around, he was in cahoots
with owners of a few companies and recommended only
those shares. This game, too, did not last long.
Interestingly, by the time he died, Mehta had been

convicted in only one of the many cases filed against him.
Till now, it is still unknown what was the real story behind
the entire scam. The recent Hindi movie 'Gafla' showed
this scam in a different perspective. and is 45 years old.
KETAN PAREKH SCAM
Ketan Parekh was a Mumbai-based stock broker. He

hails from a well-to-do Gujarati family involved in share
trading, and Ketan was involved in the shares scam of
2000-2001 on the Indian Stock Market.
Shares scam
Companies, when raising money from the stock market,

rope in brokers to back them in raising the share price.
Ketan formed a network of brokers from smaller

exchanges like the Allahabad Stock Exchange and the
Calcutta Stock Exchange, and used benami, or share
purchases, in the name of poor people living in the shanty
towns of Mumbai. Ketan rose to fame at the same time as
the worldwide dot-com boom (1999-2000) and he relied
primarily on the shares of ten companies for his dealings
(now known infamously as the K-10 scrips).
Ketan had large borrowings from Global Trust Bank,

whose shares he was ramping up so that he could get a
good deal at the time of its merger with UTI Bank. He got
a Rs 250 crore loan from Global Trust Bank, although
Global Trust’s chairman Ramesh Gelli, who was later
asked to resign, repeatedly asserted that the amount was
less than Rs 100 crore, which was in keeping with the
Reserve Bank of India's normal amount. Ketan and his
associates obtained another Rs 1,000 crore from the
Madhavpura Mercantile Co-operative Bank despite the fact
that RBI regulations ruled that the maximum loan a
broker could obtain was Rs 15 crore. In addition, Mr
Mehta's was involved with Ketan's Business in 1996.
Ketan's modus operandi was to ramp up the shares of

select firms in collusion with promoters. Interestingly,
around the time when Ketan started taking long positions
in his favorite K-10 scrips, the Securities and Exchange
Board of India (SEBI) concluded a 3-year old case against

Harshad Mehta, who had colluded with the managements
of BPL, Sterlite and Videocon to ramp up their shares.
In Ketan's case, SEBI found prima facie evidence of price

rigging in the scrips of Global Trust Bank, Zee Telefilms,
HFCL, Lupin Laboratories, Aftek Infosys and Padmini
Polymer.
Discovery and arrest
With the prices of selective shares constantly going up

due to his rigging, innocent investors who had bought the
shares at high prices, thinking the market as genuine, lost
heavily. Soon after the discovery of the scam, the prices
of these stocks came down to a fraction of the values at
which they were bought, causing even banks to lose large
sums of money.
At the time, a group of traders known as the "Bear Cartel"

(Shankar Sharma, Anand Rathi, Nirmal Bang) were
making money from falling stock prices. Bears sell stocks
at high prices and buy back at low prices. Around
February end in 2000, this cartel placed sell orders on the
K-10 stocks and crushed their inflated prices. All of
Ketan's borrowings could not rescue his scrips. The Global
Trust Bank and the Madhavpura Cooperative went bust
when the money they had lent to Ketan sunk with his K-
10 stocks.

The information furnished by the Reserve Bank of India to
the Joint Parliamentary Committee (JPC) during the
investigation of the scam revealed that financial
institutions like Industrial Development Bank of India
(IDBI Bank) and Industrial Finance Corporation of India
(IFCI) had extended loans of Rs 1,400-odd crore to
companies known to be close to Ketan Parekh.
Ketan Parekh was arrested on December 2, 2002 in

Kolkata.
SATYAM SCAMS
Byrraju Ramalinga Raju (born September 16, 1954) is
the founder of Satyam Computers and was its Chairman
until January 7, 2009 when he resigned from the Satyam
board after admitting to corporate fraud. Satyam was
created by Ramalinga Raju and others and was until
recently perceived to be amongst the top Indian IT
vendors. Raju has allegedly admitted overstating its cash
reserves by USD$ 1.5 billion. Later, allegations have been
made that the company's assets were not inflated, but
instead siphoned off by Ramalinga Raju. Raju is currently
held in Hyderabad's Chanchalguda jail on criminal charges
including fraud, forgery, cheating, embezzlement and
insider trading.

A botched acquisition attempt involving Maytas (a
company owned by his own family) in December 2008 led
to a plunge in the share price of Satyam. In January
2009, Raju indicated that Satyam's accounts had been
falsified over a number of years. He admitted to an
accounting fraud to the tune of 7000 crore rupees or 1.5
Billion US Dollars and resigned from the Satyam board on
January 7, 2009. In his letter of resignation, Raju
described how an initial cover-up for a poor quarterly
performance escalated: "It was like riding a tiger, not
knowing how to get off without being eaten." Raju and his
brother, B Rama Raju, were then arrested by Andhra
Pradesh police on charges of criminal breach of trust,
criminal conspiracy, cheating, falsification of records and
forgery. Raju may face lifetime imprisonment if convicted
of misleading investors. Raju had also opened multiple
benami (dummy) accounts through relatives and friends
and used them to trade in Satyam's shares, violating the
insider trading norm. It has now been alleged that these
accounts may have been the means of siphoning off the
missing funds.

KARVY

"Karvy has over 500 branches and over 15,000 primary
market sub brokers. These accounts were opened by a
handful of sub-brokers in two branches at Ahmedabad and
Mumbai.
"There is a reference in this order with respect to Karvy

RTI. The main allegation in this order is that single refund
orders were issued by Karvy to various institutions that
have financed the IPOs. This is a process that has been
adopted based on the requests received from various
banks/finance companies purely for the sake of
administrative convenience.
"In all such cases, we believe that the methodology

adopted is akin to the ECS/direct credit system proposed
to be encouraged by RBI and SEBI. It is incorrect to allege
that Karvy RTI had any malafide intents because most of
the refunds so issued do not pertain to their associate
companies DP clients or broking clients.

"It is also submitted that the process of issuing a single
cheque upon a request received from the financer, had
also been adopted, till recently by other registrars."
The statement further adds:
"We also wish to state that with over 7,00,000 DP

accounts, Karvy is the largest DP in the country. Our
customers are all retail and on a daily basis we process
over 25,000 delivery instruction slips received from all
parts of the country.
"Karvy Computershare Pvt Ltd is India's largest registrar

and transfer agent servicing over 22 million investors for
the best of the corporates in the country and mutual
funds. We have had an unblemished record so far and
have taken up special assignments at the behest of the
regulator in the past. Our JV partner Computershare is
considered to be the largest registrar in the world with
operations in about 15 countries.
"Karvy is also one of India's largest stock brokers with

approximately 290,000 customers. Over 35,000 individual
customers trade with Karvy on a daily basis. Karvy Stock
Broking Ltd is also among the leading distributors for IPOs
and mutual funds.
"The Karvy group employs over 7,000 people and has

over 500 branches spread across the country. This is a
retail company with focus on servicing individual

investors. There will be approximately about 50,000 to
60,000 investors, who get in touch with Karvy on a daily
basis for servicing their needs.
"Karvy has always believed in the highest standards of

compliance and integrity. This is the hallmark of the
management. The entire incident took place in two
branches of Karvy and with a handful sub-brokers as
against 15,000 primary market sub-brokers, who work
under the Karvy banner.
"We only wish that Sebi had given us an opportunity of

being heard before passing such a harsh order. Our
commitment to the Indian capital market is total and we
will continue to strive to service retail investors to the
best of our abilities. We will appeal to Sebi to consider our
representation favourably.
"We respect the Sebi order and we will certify the position
by filing our objections within the time stipulated from the
date of this order. We believe that the inspection of our
operations undertaken by the depositories or SEBI did not
reveal any serious violation, especially those with a
malafide intent.
"As responsible intermediaries, we have, however,

strengthened our process and systems in the DP area. We
are also thankful to Sebi for allowing us to continue
service to our customers in the secondary market.

"Karvy Group's robust practices protect and service over
10 lakh investors. Its level of automation and
transparency is unparalleled resulting in the Group
enjoying a leadership position in several categories of the
business.
"Karvy's management of the rectification of the

ONGC Issue allotment process in 2004 was appreciated
by the Government of India.
"Subsequent to this Karvy handled the NTPC order which

received over 15 lakh (1.5 million) applications and had
received accolades from various quarters of the capital
market including a few officials of the regulator.
"Karvy Computershare Private Ltd is currently processing

the recent public offer of Reliance Petroleum Ltd which
has received 21 lakh (2.1 million) application forms,
thereby creating a record in the Indian capital markets."

RESEARCH
METHODOLOGY
RESEARCH METHODOLOGY
TITLE:
To analyse the changing trends of the share market, in

last ten years share market faces so many ups and down.
And also anlayse that how the investor invest their money
with what perception.

• TITLE JUSTIFICATION:
The above title is self explanatory. In this study it is

tried to find out that why share market faces so many
changes in last ten years what are the things which
affect the market most. And how the investor decide
their shares to buy or sell.
SIGNIFICANCE OF THE STUDY
SIGNIFICANCE TO THE INDUSTRY:
This is a limited study which takes into consideration the

responses of 30-40 people. This data can be explored to
take in the trends across the industry. The significance for
the industry lies in studying these trends that emerge
from the study. It is a rapidly changing and evolving
sector. People are only beginning to wake up to it’s vast
possibilities. A study like this can attempt to guide the
future of the industry based on current trends.
SIGNIFICANE FOR THE RESEARCHER :
To facilitate and provide all the useful information of the

study, which can be helpful to make decision for investing

money in right shares which is profitable to investors as
well as brokers.
RESEARCH DESIGN :
➢ Source of Data.
➢ Method of Data collection.
➢ Types of research.
➢ Sampling
➢ Tools of analysis
Source of Data:
There are many sources which provide information
regarding the research. The data may be of two types
1) Primary Data.
2) Secondary Data
1) Primary Data:
Primary data is data which is not already available.

Primary data is found in its original form. Primary data are

those which are collected afresh and for the first time, and
thus happen to be original in character.
Methods for collecting primary data are:
• Questionnaires
• Interviews
• Schedules etc.
In this study the interview method have been used
1) Secondary Data:
Secondary data means data that are already available

i.e. they refer to the data which have already been
collected and analyzed by others. Secondary data may
be published or unpublished.
The sources of secondary data are:
• Bulletin, books and magazines organized by
organizations.
• Web Sites, Official records.
• Case studies.
• DISCRIPTIVE AS WELL AS ANALYTICAL

RESEARCH

The research is primarily descriptive as well as analytical
in nature. The sources of information are both primary &
secondary.
Well-structured interviews were conducted to collect the

customer’s perception and buying behavior, through this
interview.
SAMPLING METHODOLOGY
Sampling Technique:
Initially, a rough draft was prepared keeping in mind the

objective of the research. A pilot study was done in order
to know the accuracy of the interview. The final interview
was arrived only after certain important changes were
done. Thus my sampling came out to be judemental and
convinent.
Random Sampling:-
It is also known as random sampling or chance sampling.

Under this every item of the universe has an equal chance
of inclusion in the sample.
In brief, the implications of random sampling are:

➢ It gives each element in the population an equal
probability of getting into the sample and all choice is
independent of one another number.
➢ It gives each possible sample combination an equal

probability of being chosen.
Why random sampling has been chosen:-
 Sampling can save time and money: - Sample

study is usually less expensive than a census
study and produces results faster.
 Sampling may enable more accurate

measurements foe a sample study.
 Sampling usually enables to estimate the sampling

errors and thus assists in obtaining information
concerning some characteristics of the population.
Sampling Unit:
The respondents who were interviewed to analyse the

subject are the sampling units. These comprise of

registered brokers and sub-brokers and the regular
investors.
Sample size:
The sample size was restricted to only 30-40, which

comprised of mainly peoples from different regions of
Allahabad due to time constraints.
Sampling Universe:
The area of the research allahabad, India.
Tool of Analysis:
➢ Qualitative.
i. Observation
ii. Case Study
Qualitative:
It is concerned with the qualitative phenomenon i.e.
phenomenon related to or involves quality. For instance,
when we are interested in investigating the reason for
human behavior i.e. why people think or do certain thing.
We quite often talk of “Motivation Research” an important

type of qualitative research. This type of research aims at
discovering the underlying motives and desires, using the
depth interview for the purpose.
➢ Observation:-
Observation includes minute observation of activities take

place in the field of research. For observation in this study
secondary data has been used.
➢ Case Study:
It includes the systematic study of cases related to

research as well as it includes the in-depth study of the
literature which is already available.
In this study qualitative technique of analysis has

been chosen.
LIMITATIONS OF THE RESEARCH
1. The research is confined to a certain parts of

allahabad and does not necessarily shows a pattern
applicable to all of Country.
2. Some respondents were reluctant to divulge personal

information which can affect the validity of all
responses.
3. In a rapidly changing industry, analysis on one day

or in one segment can change very quickly. The
environmental changes are vital to be considered in
order to assimilate the findings.
RESULT ANALYSIS &
INTERPRETATION
Analysis of changing trends in Indian stock market

in last ten years.
The trend in last ten years in share market has been
changed like the way selling and buying initially, bidding
form was there to sell or buy. Share price in that time
could change suddenly according to bidding. Investors
had more risk in investing because everything was hidden
even share price also was hidden. So that investors have
to do believe on brokers. The availability of brokers was
also less. Today everything we can watch on screen
investors can know their share price anytime and
investors can buy easily share online through internet by
which investors belief have been increased. SEBI playing
an important role in motivating the investors to invest in
share market. SEBI makes a regulation to protect the
interests of investors in securities, to promote the
development of Securities Market, to regulate the
securities market through which interest of investors is
increased .
To determine reasons for so many ups and down

There are so many reason which affect the share market
for example elections, FII’s sale and purchase, the world
economy, future projects of different companies, scams
are also affect the share market for e.g. the Harshad
Mehta scam affect so much on the market as well as
investors behaviour. And the last downfall’s reason was
recession and FII that downfall broke the belief of
investors because the investors bear huge losses in a that
single day. The day was black Monday.
Black Monday saw bloodbath on Dalal Street as the Indian
stock markets crashed by over 1430 points in afternoon
trade (the market has since then recovered somewhat),
reminding investors.
Why Did the Markets Crash?? I am listing below some of

the reason that I understand
1. Relent less selling by the FII's.

2. Lot of Investors turning into traders and taking long
positions in the futures Market.
3. Overall Change in the Global Investment Climate
4. Fear of the US Economy headed towards a recession.
5. Commodities Market Being Very Volatile.
6. Increasing Presence of Hedge funds across all asset

classes increases chances of volatility.
To determine the procedures of investors to opting

Companies for share.
It is very difficult to determine the good share for
investment but investors can use some ways to play a
safe game. Share market is like speculation but It is most
important thing to analyse the market before investing in
it. It is generally very difficult for new investors because
they are unable to decide or select a good share which will
profitable for them Many investor new to share trading
overcomplicate the whole process. Investors load their
charts with lots of fancy technical indicators and are
constantly testing out new systems in order to try and
find that holy grail trading system that’s going to make
them rich. However it should be pointed out that the most
basic systems are often the most profitable.
If you look at the price patterns of various different

companies you will generally see that when a stock is
trending upwards it will never go up in a straight line.
Even when there is a very long-term upwards trend there
will always be pull-backs along the way.
So therefore if you are looking to trade these long-term

trends then a very simple but effective trading strategy
would be to wait for one of these pull-backs and then
enter a long position as soon as the price moves back up
again.
So you can see that this very simple trading strategy can
produce some excellent results and it’s a lot more
effective than most of the overcomplicated systems that a
lot of traders use. Successful share trading isn’t really that
difficult. You simply need to look for shares that are
trending either upwards or downwards and then find a
way of profiting from this trend.
To determine the reasons of increasing the number

of investors
The lowering of interest rates on all major saving schemes

is forcing small investors to look at the stock markets.
This has resulted in a sharp jump in liquidity in the
market. Investors are growing more enthusiastic about
shares every day highlighted by sharply higher fund
inflows in the market that propelled the benchmark
market index.

There are many factors that have boosted the sentiment
of not only domestic investors but also foreign
institutional investors who had lately adopted an
indifferent approach towards Indian market.
According to analysts, include sharp increase in foreign

fund inflows in the market, a smart pick up in industrial
growth, and a downward trend in the overall interest rate
regime.
To determine the effect of all scams in the share

market.
All the scams affect the share market every scams make
the drastic change in share market. In Harshad Mehta
scams share market raise 1000 points in just 16 days
When his scam was opened share market falls down
suddenly through which investor belief was broken. And
they were avoiding the investment in share market. When
the investors are interested to invest the next scam was
held Ketan Parekh scam. In this the share prices of Zee
telefilm raised from Rs.476 to Rs.1555 and it falls down to
Rs.121 in a year. And Satyam scam plays a major role in
the downfall of Indian market. It is because of only one
member our market has decreased a lot. Lot of
shareholders suffers because of him as the share price

comes down like a rocket. Will the market come up and
when it would happen will be a big question.
To determine that how the Indian economy affected

through the changing trends in share market.
Indian market is presently down due to various reasons.
The effect of recession has just now crossed Indian banks.
The main thing for recession is bank rupturing and it
should be stopped and it should not happen hereafter. But
the effect is increasing day by day and this results in
unemployment. Before Recession the unemployment is
some what controlled but after recession it is a growing
concern. The recession affect most in the Indian Economy.
The sensex climbed at a rapid rate, touching record

heights in 2007 -2008. The average Indian investor who
traditionally has been a very conservative investor
became more confident and started investing heavily in
the stock market. The stock market grew in

leaps and bounds and its growth in the last five years
itself has been a phenomenal twenty five per cent. All the
economists and statisticians of the world started making
predictions about India becoming the next economic
superpower of Asia or perhaps the world. All this sounded
very good to be true and the whole country’s attitude
seemed to be a vibrant one. Against this backdrop the

unthinkable happened, the stock market Of the
United states of America or Wall street stock exchange
crashed due to a crisis in the housing finance sector of its
leading banks, caused due to delinquency and non-
repayment of housing loans. This resulted in a panic in the
world market including India. The sensex dropped more
than nine thousand points in the Bombay Stock
Exchange. The Foreign Investment also came

down heavily due to a liquidity crunch in the major
companies. The banks stopped lending to the bankers and
in effect the market came to a sudden stop. The

Indian investor panicked again and started selling like
crazy. Major companies started making announcements
like job layoffs to minimize their losses.
Large domestic market will keep fuelling growth of the

Indian economy, though at a lower pace, despite financial
crisis leaving the US and Europe reeling under recession,
experts have said.
While the Reserve Bank and stock regulator SEBI have

announced measures to improve liquidity in the system,
the equity market has suffered painful bruises in India in
sync with the global bourses.

SUGGESTIONS
• Brokers should improve their services.

• SEBI should imply some mere regulations. So that
investors can feel more secure
• Small investors cannot afford daily trading so script
call updating facilities should be improved.
• Brokerage slabs should be flexible.
• Compliance department should be more active in
companies.

CONCLUSION
After going through all the analysis regarding the stock

market in last ten years, we can say that stock market
faces so many ups and down during this time it comes
from its lowest point to its peak at 21000 but then
crashed badly. During its skimming point some scams
were held by which it forms its new peak falls down
suddenly and so badly by which investors are afraid to
invest in this market. Now it is revolving around a 15000-
16600 figure. Though the sensex is a barometer and after
seeing such fluctuations one could be afraid of investing.
Still we can say that people can play safe by investing the
blue-chips and undervalued shares.
During year 2006, if we keep aside that brief period of
loss that the market witnessed from may 10 2006 to June
14 2006, investors’ wealth seem to have grown double
fold with the Sensex touching the 10000, 11000, 12000,
13000 and 14000 levels in the same calendar year.
Investor wealth in terms of market capitalization has been
growing in the range of 6.84-12.41%

And talking about year 2007, we can summarize the
happenings of year 2007 as a year which redefined the
resistance levels at sensex. Strong economic data, heavy
inflow of funds from FIIs towards the close of previous
calendar year and decent to highly encouraging surge in
earnings of top notch companies all pointed to a rosy
2007. The rupee's rise against the US dollar the
regulator's decision to restrict investments made through
participatory notes, rising crude oil prices, the sub-prime
mortgage woes in US, concerns over a slowing down US
economy and The Left parties' opposition to the Indo-US
nuclear pact, did halt the market's progress at times. But
the inherent strength of the Indian economy, fairly
buoyant results quarter after quarter, the various chops
and subsidies announced by the government and
sustained efforts made by the market regulator to keep
investor confidence in the system alive kept the
momentum going.
Presently the hike and seek being played by crude prices,
inflation and RBI is affecting our market to a great extent.
And adding to the worries are global slowdown, political
instability, serial bomb blasts, negative public sentiments
etc. It is indeed surprising that though the epicenter of
the sub-prime crisis is the US, the tremors are being felt
in India. The loss of market cap in the US is only 14 per
cent vis-À-vis 38 per cent in India.

But even after analyzing the causes for downturn, we can
say that India story has not ended; else $200 billion with
institutional investors would have fled for safer waters.
Exports being 14 per cent of GDP, India is less vulnerable
to external shocks than many other Asian nations. Political
uncertainties too have narrowed down. Savings in India
have risen at a historic rate of 35 per cent on the growing
GDP base; 17 per cent of this is in gold, commodities and
real-estate while financial savings represent 18 per cent of
GDP. Even this is skewed towards deposits both banking
and non-banking, while the percentage of savings in
shares and debentures is a mere 6.3 per cent. If this
percentage goes to 25 per cent, it would amount to $40
billion of incremental money being diverted to capital
markets. So even after such downturns, we can be
hopeful for a positive market.

QUESTIONS FOR
INTERVIEW
For Investors:-
1. How do you select the share to invest?
2. How do you perceive that share trading is a good

mode of investment?
3. Which kind of brokers do you prefer?
For Brokers & sub brokers.:-
1. How the trends affect your business?

2. What are the reasons for increment of
investors?
3. How much the scams effect investor’s
behaviour?
4. What is the main reason which provoked

investors form small cities?
BIBLIOGRAPHY
1. BOOKS/MAGAZINES REFFERED:
• DALAAL STREET
• INDIA TODAY
• BUSINESS TIMES
2. WEBSITES REFFERED:
• www.bseindia.com
• www.nseindia.com
• www.sebi.gov.in

• www.moneycontrol.com
3. SEARCH ENGINES:
• www.google.co.in
• www.wikipedia.org.in
THANK YOU


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A

Summer internship report

“CHANGING TRENDS IN SHARE MARKET”

Submitted to- Submitted by-

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

I would like to thank my project guide mannu mam for

I would like to thank Mr.manish agarwal, for supporting

I would like to dedicate this report to my parents.

Lastly I would like to thank all the respondents who

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

In this study behavior of the share market has been

The capital markets consist of the primary market and the

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

Share market is the part of secondary market. Here are

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 3

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 4

NSE (National Stock Exchange)_________________46

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

OBJECTIVES OF THE STUDY

• Analysis of changing trends in Indian stock

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

THE INDIAN CAPITAL MARKET

Indian market confirms to best international practices and

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

a) The Companies Act 1956 deals with issue, allotment

b) SCRA provides regulations for direct and indirect

c) The SEBI Act empowers SEBI to protect the interest of

The Indian securities market consists of primary (new

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

Other leading cities in stock market operations

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

What the cotton textile industry was to Bombay and

In the beginning of the twentieth century, the industrial

Indian cotton and jute textiles, steel, sugar, paper and

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

In 1935, the stock market activity improved, especially in

Lahore Stock Exchange was formed in 1934 and it had a

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp

On account of the restrictive controls on cotton, bullion,

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur

In Delhi two stock exchanges - Delhi Stock and Share

There are two major indicators of Indian capital

What are the Sensex & the Nifty?

The Sensex is an "index". What is an index? An index is

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 3

The Big Picture of share market

As investors, most of us tend to forget about all of the

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

For even more similarities, scroll back up and look at the

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 1

Keep Doing What You’re Doing

Sure, the market may be a bit unstable right now, and we

ISHWAR CHANDRA TIWARI ROLL NO-0925770015 Page 2

Following is the timeline on the rise and rise of the Sensex

1830's Business on corporate stocks and shares in Bank

1860-1865 Cotton price bubble as a result of the

1870 - 90's Sharp increase in share prices of jute

1978-79 Base year of Sensex, defined to be 100.

1986 Sensex first compiled. Using a market Capitalization