Indian stock market

What is the stock market?

A stock market is a private or public market for the
trading of company stock and derivatives of company stock
at an agreed price; both of these are securities listed on a
stock exchange as well as those only traded privately.
It is where stocks, bonds, commodities, options, and
derivatives are traded by brokers from around the world on
behalf of investors.

FII (Foreign Institutional Investors) investment in Indian

stocks crosses $18 Billion in 2010
TWO ONLINE STOCK MARKETS In India

BSE NSE
(Bombay Stock Exchange) (National Stock Exchange)
• Founded 1875
• Key people Madhu Kannan
• No. of listings 4,996
• Market Cap US $1.39
trillion (August 2010)
• Volume US $980 billion
• 4th largest stock exchange
•  11th largest in the world.
• SENSEX 30 STOCKS
• Founded 1992
• Key people Mr. Ravi Narain
• No. of listings1,504
• Market Cap US $1.35
trillion (August 2010)
• Second largest stock
exchange in South Asia.
• Second fastest
growing stock exchange in
the world
• NIFTY 50 STOCKS
 30 STOCK OF SENSEX
• BHEL • SUN PHARMA
• L&T • RELIANCE
• HDFC BANK • HINDALCO
• HDFC • NTPC
• MARUTI SUZUKI • REL. INFRA
• TATA MOTORS • STERLITE IND.
• TCS • JAIPRAKASH ASSO.
• ITC • DLF LIMITED
• M&M • ONGC
• ICICI BANK • BHARTI AIRTEL
• WIPRO • SBI
• HIND. UNILEVER • TATA STEEL
• HERO HONDA • ACC LIMITED
• INFOSYS • GRASIM
• TATA POWER • RELIANCE COMM
 50 STOCK OF NIFTY
• ABB Ltd. ACC Ltd.
• Ambuja Cements Ltd.
• Axis Bank Ltd.
• Bharti Airtel Ltd.
• Bharat Heavy Electricals Ltd.
• Bharat Petroleum Corporation
Ltd.
• Cairn India Ltd.
• Cipla Ltd.
• DLF Ltd.
• GAIL (India) Ltd.
• Grasim Industries Ltd.
• HCL Technologies Ltd.
• Housing Development Finance
Corporation Ltd.
• HDFC Bank Ltd.
• Hero Honda Motors Ltd.
• Hindalco Industries Ltd.
• Hindustan Unilever Ltd.
• ICICI Bank Ltd.
• Idea Cellular Ltd.
• Infrastructure Development
Finance Co. Ltd. Infosys
Technologies Ltd.
• I T C Ltd.
• Jindal Steel & Power Ltd.
• Jaiprakash Associates Ltd.
• Larsen & Toubro Ltd.
• Mahindra & Mahindra Ltd.
• Suzuki India Ltd.
 50 STOCK OF NIFTY
• NTPC Ltd.
• Oil & Natural Gas Corporation Ltd.
• Punjab National Bank
• Power Grid Corporation of India
Ltd.
• Ranbaxy Laboratories Ltd.
• Reliance Communications Ltd.
• Reliance Capital Ltd.
• Reliance Industries Ltd.
• Reliance Infrastructure Ltd.
• Reliance Power Ltd.
• Steel Authority of India Ltd
• State Bank of India
• Siemens Ltd.
• Sterlite Industries (India) Ltd.
• Sun Pharmaceutical Industries
Ltd.
• Suzlon Energy Ltd.
• Tata Motors Ltd.
• Tata Power Co. Ltd.
• Tata Steel Ltd.
• Tata Consultancy Services Ltd.
• Unitech Ltd. Wipro Ltd.
 SECTOR INDICATORS
1. BANKING SECTOR
2. CAPITAL GOODS SECTOR
3. CEMENT SECTOR
4. REAL ESTATE SECTOR
5. INFRASTRUCTURE SECTOR
6. POWER SECTOR
7. TELECOM SECTOR
8. AUTOMOBILES SECTOR
9. METAL SECTOR
10. INFORMATION TECHNOLOGY SECTOR
 BLUE CHIP INDIAN
COMPANIES
• Oil and Natural Gas Corporation (ONGC)
• Reliance Industries
• National Thermal Power Corporation (NTPC)
• Indian Oil Corporation (IOC)
• State Bank of India (SBI)
• Bharti Airtel
• Tata Steel
• Tata Consultancy Services (TCS)
• ICICI Bank
• Reliance Communications
 MARKET TRENDS

1.BULL MARKET 2. BEAR MARKET

  Bears and Bulls

• Bears are cautious animals who don't like to move too fast. Bulls are bold
animals who might charge right ahead. An investor is said to be "bearish"
if he or she believes the stock market will go down. A "bearish" investor
will buy stock cautiously. A "bullish" investor believes the market will go
up. He or she will charge ahead and put more money into the market. An
investor can be bearish or bullish about a particular kind of stock.

• Likewise, the term "bear market" describes a time when stock prices have
been falling on the whole. A "bull market" is a period when stock prices
are generally rising.
 WHY TO INVEST IN STOCK
MARKET ?
1. GDP GROWTH RATE
2. ORDER BOOK OF INDIAN COMPANIES
3. Stock MARKET GROWTH
4. INDIA GORWING FASTER
5. FIIS INVESTING IN INDIA
6. BIG FISHS GETTING BIGER
7. NUCLEAR DEAL
8. STRONG FUNDAMENTALS
HOW TO INVEST IN STOCK MARKET
?
• Register with a stockbroker or investment firm with ties to the Indian stock market.
• Examine the BSE 200 index to determine the strength of your investments in India.
• Go out on a limb with a technology stock through the BSE TECk index. The Indian economy
features a rapidly expanding biotechnology and computer-development sector that has
been a boon to investors
• Locate growing companies with small amounts of capital through the BSE Small-Cap Index.
This index features hundreds of young companies with low funding that are looking for
investors to take them to the next level.
• Track the progress of your stocks online with the Bombay Stock Exchange's commitment to
quick updates. The BSE index transmits information to local brokers, international websites
and business-television networks every 15 seconds.
• Spend your investment dollars wisely as you invest in the Bankex index. This index tracks
the progress of India's top 12 banks and allows you to make an investment in their growth.
 HOW TO INVEST IN STOCK
MARKET ?
1. DIRECT INVESTMENT

• BY OPENING TRADING ACCOUNT

• BY OPENING DEMAT ACCOUNT
BROKERS
 HOW TO INVEST IN STOCK
MARKET ?
2. MUTUAL FUNDS

• FUND MANAGERS
• SAFTY OF YOUR MONEY
MUTUAL FUNDS
 The Foreign Exchange Market

• “The Currency Market where money denominated in

one currency is bought and sold with money
denominated in another currency”.
• Exchange rates are important because they enable
us to translate different counties’ prices into
comparable terms.
• Exchange rates are determined in the same way as
other asset prices.
 Structure of the Forex Market
Trading Hours
24 hour market
Sunday 5pm EST through Friday 4pm EST. Rollover at 5pm
EST
Trading begins in New Zealand, followed by Australia, Asia,
the Middle East, Europe, and America
Size
Largest market in the world
$1.9 trillion average daily turnover, equivalent to:
15 times the average daily turnover of global equity markets
Nearly 50 times the average daily turnover of the NYSE
$300 a day for every man, woman, and child on earth
The spot market accounts for about one-third of daily
turnover
 Structure of the Forex Market
Major Markets
 The US & UK account for more than 50% of turnover
 Major markets: London, New York, Tokyo
 Trading activity is heaviest when major markets overlap
 Nearly two-thirds of NY activity occurs in the morning
hours while European markets are open
Trading
 An estimated 95% of transactions are speculative
 More than 40% of trades last less than two days
 About 80% of trades last less than one week
 Brokers research: 90% of traders lose money, 5% break
even, 5% make money

20
Top 10 currency traders
% of overall volume, May 2010
Rank Name Market Share
1   Deutsche Bank 18.06%
2  UBS AG 11.30%

3  Barclays Capital 11.08%

4 Citi 7.69%
5 Royal Bank of Scotland 6.50%
6 JPMorgan 6.35%
7  HSBC 4.55%
8  Credit Suisse 4.44%
9  Goldman Sachs 4.28%
10  Morgan Stanley 2.91%
 Structure of the Forex Market
Country wise turnover
Country Percentage Share
UK 31.3
USA 19.2
Japan 8.3
Singapore 5.2
Germany 4.9
Hong Kong 4.2
Australia 3.4
Others 23.5
Total 100 22
 Structure of the Forex Market
Currency wise turnover
Currency Percentage Share
USD 88.7
EURO 37.2
JPY 20.3
GBP 16.9
CHF 6.1
AUD 5.5
CAD 4.2
Others 21.1
Total 200.0 23
 Structure of the Forex Market
Currency Pair wise turnover
Currency Percentage Share
EURO/USD 28
USD/JPY 17
GBP/USD 14
AUD/USD 5
USD/CHF 4
USD/ CAD 4
EURO/JPY 3
Others 25
Total 100 24
 World FX transactions
$1.9 trillion/day (2004)

spot
33%

FX sw aps
50%

forw ard
gap 11%
6%

25
 Convertibility-Definition
• The ease with which a country's currency can be
converted into gold or another currency.
Convertibility is extremely important for
international commerce. When a currency in
inconvertible, it poses a risk and barrier to trade
with foreigners who have no need for the domestic
currency
• The quality of being exchangeable (especially the
ability to convert a currency into gold or other
currencies without restriction)

26
 Convertibility-Definition
• Government restrictions can often result in a
currency with a low convertibility. For example, a
government with low reserves of hard foreign
currency often restrict currency convertibility
because the government would not be in a position
to intervene in the foreign exchange market (i.e.
revalue, devalue) to support their own currency if
and when necessary

27
 Rupee Convertibility

The Indian Rupee is

1) for all intents and purposes, fully Convertible to
the US$ on the Trade Account and Current
Account. This means Indians can buy US$ for
their Trade, Travel, Fees, Education, Interest,
Dividend payments etc. US Dollars can also be
converted into Rupees
2) largely, NOT convertible to US$ on the Capital
Account, especially when the flow of capital is
from India to outside.

28
 Rupee Convertibility

However, degrees of convertibility have been

brought in. For instance,
- Indian companies can invest in/ set up
subsidiaries abroad. Limits are placed on the
amount of investment
- Indian mutual funds, since last year, have been
allowed to invest in overseas markets, though we
doubt if activity has picked up on this front
- Dividend and Interest payments to investors
abroad are unhindered

29
 Forex Dealing Room Operations

Dealing Process

Dealing
Customer Bank Branch Room
Front Office

Front Office: Actual dealing Mid-Office

Domestic market
Mid-Office: Risk
management,
accounting and MIS Back Office
Back Office: Settlement,
Reconciliation, compliance
and accounting Global Market

30
 Forex Dealing Room Operations
Managing Risks

• Open position • Day light, overnight and cut loss

• Maturity • IGL, Monthly Limits, AGL, etc.
mismatch
• Credit risk • Country/group, currency limits
• Operational • Duty segregation, processes, etc
Risk
• Legal Risk • Responsibility fixation, supports,
• Sovereign etc.
Risks • External data, monitoring, etc.

31