A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

CHAPTER 1 RESEARCH DESIGN

1.1 INTRODUCTION
The stock market refers to the collection of markets and exchanges where regular activities of buying,
selling, and issuance of shares of publicly-held companies take place. Such financial activities are conducted
through institutionalized formal exchanges or over-thecounter (OTC) marketplaces which operate under a
defined set of regulations. There can be multiple stock trading venues in a country or a region which allow
transactions in stocks and other forms of securities. The stock market or equity market and is primarily
known for trading stocks/equities, other financial securities - like exchange traded funds (ETF), corporate
bonds and derivatives based on stocks, commodities, currencies, and bonds - are also traded in the stock
markets. While both terms - stock market and stock exchange - are used interchangeably, the latter term is
generally a subset of the former. If one says that she trades in the stock market, it means that she buys and
sells shares/equities on one (or more) of the stock exchange(s) that are part of the overall stock market. The
leading stock exchanges in the U.S. include the New York Stock Exchange (NYSE), Nasdaq, and the
Chicago Board Options Exchange (CBOE). These leading national exchanges, along with several other
exchanges operating in the country, form the stock market of the U.S.

Stock market is a place where people buy/sell shares of publicly listed companies. It offers a platform to
facilitate seamless exchange of shares. In simple terms, if A wants to sell shares of Reliance Industries, the
stock market will help him to meet the seller who is willing to buy Reliance Industries. However, it is
important to note that a person can trade in the stock market only through a registered intermediary known
as a stock broker. The buying and selling of shares take place through electronic medium. We will discuss
more about the stock brokers at a later point.
There are two main stock exchanges in India where majority of the trades take place - Bombay Stock
Exchange (BSE) and the National Stock Exchange (NSE). Apart from these two exchanges, there are some
other regional stock exchanges like Bangalore Stock Exchange, Madras Stock Exchange etc but these
exchanges do not play a meaningful role anymore.
National Stock Exchange (NSE)
NSE is the leading stock exchange in India where one can buy/sell shares of publicly listed companies. It
was established in the year 1992 and is located in Mumbai. NSE has a flagship index named as NIFTY50.
The index comprises of the top 50 companies based on its trading volume and market capitalisation. This
index is widely used by investors in India as well as globally as the barometer of the Indian capital oil
markets.
Bombay Stock Exchange (BSE)
BSE is Asia’s first as well as the oldest stock exchange in India. It was established in 1875 and is located
in Mumbai. It has a total of ~5,295 companies listed out of which ~3,972 are available for trading as on
August 21, 2017. BSE Sensex is the flagship index of BSE. It measures the performance of the 30 largest,
most liquid and financially stable companies across key sectors.

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Historically, stock trades likely took place in a physical marketplace. With the invent of new technologies
and due to the covid-19 pandemic, the stock market works electronically, through the internet and online
stockbrokers. Each trade happens on a stock-by-stock basis, but overall stock prices often move in tandem
because of news, political events, economic reports and other factors.

1.2 SIGNIFICANCE OF THE STUDY

Stock market is the best indicator of how well the economy is doing. Stock markets cover all industries
across all sectors of the economy. This means they serve as a barometer of what cycle the economy is in
and the hopes and fears of the population who generate growth and wealth. Stock market have been the
regulated where people can buy and sell shares of different companies. Stock markets today are emerging
as a very popular and a better financial market instrument for a large number of investors. A large variety
of stocks or shares are available in Indian stock market to cater the needs and expectations of all types of
investors. The rapid growth in the number of intermediaries and stock market applications indicate the
increasing importance of stock market investments. Still large section of Indian investors has little
information to take prudent investment decisions. Such information drought is the breeding grounds for
misguidance, leading the investors to opt for a particular stock or share without an in-depth analysis,
resulting in the dissatisfaction over the return. Stock market enable companies to be traded publicly and
raise capital. The transfer of capital and ownership is traded in a regulated, secure environment. Stock
markets promote investment. The raising capital allows companies to grow their businesses, expand
operations and create jobs in the economy. The present study analyses the important Indian stock market
(NSE and BSE) with respect to their market capitalisation, year effect, risk and return from 2000 to
2020.The study also includes the much more data regarding the history and functioning of BSE and NSE.

1.3 OBJECTIVES
1. To study about the emerging stock markets in india such as NSE and BSE.
2. To study about the year effect of the Indian stock market (BSE and NSE) from 2000 to 2020.
3. To examine the market capitalisation of Indian stock market (NSE and BSE) from 2000 to 2020.
4. To examine the trend of risk and return of Indian stock market (NSE and BSE) from 2000 to 2020.
5. To study about the type of trading preferred by the investors in stock market.

1.4 METHODOLOGY
The purpose of this study is to analyse the market capitalisation, year effect and the risk and returns of the
important stock market (NSE and BSE) of about 20 years from 2000 to 2020 and to analyse the investment
pattern of traders in stock market. In order to assess the objective both primary data and secondary data
were used. The primary data was collected from 30 respondents from Thrichur district by using google
form. The secondary data was collected from various journals, articles, publications and online websites.

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1.5 THEORETICAL BACKGROND

Kian –Pinhg Lim & Robert Brooks(2011) provides a systematic review of the weak‐form market efficiency
literature that examines return predictability from past price changes, with an exclusive focus on the stock
markets. Our survey shows that the bulk of the empirical studies examine whether the stock market under
study is or is not weak‐form efficient in the absolute sense, assuming that the level of market efficiency
remains unchanged throughout the estimation period. However, the possibility of time‐varying week‐form
market efficiency has received increasing attention in recent years. We categorize these emerging studies
based on the research framework adopted, namely nonoverlapping sub‐period analysis, time‐varying
parameter model and rolling estimation window.
Anju Bala(2013) evaluated that stock market is one of the most vibrant sectors in the financial system,
marketing an important contribution to economic development. Stock market is a place where buyers and
sellers of securities can enter into transaction to purchase and sell shares, bonds, debentures etc. In other
words, stock market is a platform for trading various securities and derivatives. Further, it preforms an
important role of enabling corporate, entrepreneurs to raise resource for their companies and business
venture through public issues. Today long-term investors are interested to invest in the stock market rather
than invest anywhere.
Ross Levine & Sara Zervos empirically evaluate the relationship between stock market development and
long-term growth. The data suggest that stock market development is positively associated with economic
growth. Moreover, instrumental variables procedures indicate a strong connection between the
predetermined component of stock market development and economic growth in the long run. While cross-
country regressions imply a strong link between stock market development and economic growth, the results
should be viewed as suggestive partial correlations that stimulate additional research rather than as
conclusive findings. Much work remains to be done to shed light on the relationship between stock market
development and economic growth. Careful case studies might help identify causal relationships and further
research could be done on the time-series property of such relationships. Research should also be done to
identify policies that facilitate the development of sound securities markets.
Samveg Patelis an Assistant Professor in S. K. Patel Institute of Management and Computer Studies,
Gandhinagar. His areas of interest include Financial Econometrics and
Financial Management. His most recent publication was in IUP Journal of Applied Finance. The study
investigates the effect of macroeconomic determinants on the performance of the Indian Stock Market using
monthly data over the period January 1991 to December 2011 for eight macroeconomic variables, namely,
Interest Rate, Inflation,
Exchange Rate, Index of Industrial Production, Money Supply, Gold Price, Silver Price & Oil Price, and
two stock market indices namely Sensex and S&P CNX Nifty.
Aman Srivastava (2010) evaluated that Stock market is an important segment of the financial system of any
country as it plays an important role in channelizing savings from deficit sector to surplus sector. These
stock markets have always been an area of serious concern for policy makers, economists and researchers.
They are often defined as the barometer of any economy because they reflect the change and direction of
pressure on the economy. The movement and volatility in stock markets often reflect the direction of any
economy. The available literature suggests that since the inception of stock markets researchers are making
attempts to establish relationship between change in macroeconomic factors and stock market returns.
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Charles K.D, Adjasi, Nicholas B. Biekpe (2006) studies the effect of stock market development on
economic growth in 14 African countries in a dynamic panel data modelling setting. Results largely show
a positive relationship between stock market development and economic growth. Further analyses, based
on the level of economic development and stock market capitalization, are also conducted. The results reveal
that the positive influence of stock market development on economic growth is significant for countries
classified as upper middle-income economies. On the basis of market capitalization groupings, stock market
developments play a significant role in growth only for moderately capitalized markets. The general trend
in results shows that low-income African countries and less developed stock markets need to grow more
and develop their markets to elicit economic gains from stock markets.

L.M.C.S. (2006) study investigates the effects of macroeconomic variables on stock prices in emerging Sri
Lankan stock market using monthly data for the period from September 1991 to December 2002. The
multivariate regression was run using eight macroeconomic variables for each individual stock. The null
hypothesis which states that money supply, exchange rate, inflation rate and interest rate variables
collectively do not accord any impact on equity prices is rejected at 0.05 level of significance in all stocks.
The results indicate that most of the companies report a higher R2 which justifies higher explanatory power
of macroeconomic variables in explaining stock prices.
Roman Horvath& Dargan Petrovski (2012) examine the international stock market commovements between
Western Europe vis-à-vis Central (Czech Republic, Hungary and Poland) and South Eastern Europe
(Croatia, Macedonia and Serbia) using multivariate GARCH models in the period 2006–2011. Comparing
these two groups, we find that the degree of comovements is much higher for Central Europe. The
correlation of South Eastern European stock markets with developed markets is essentially zero. An
exemption to this regularity is Croatia, with its stock market displaying a greater degree of integration
toward Western Europe recently, but still below the levels typical for Central Europe.
Najeb M.H. Masoud (2013) tries to explore the causal link between stock market performance and economic
growth in terms of a simple theoretical and empirical literature framework. Researchers hold diverse
opinions regarding the importance of stock markets playing a significant role in economic growth processes
by performing the following functions: improving liquidity, aggregating and mobilising capital, observing
managers and exerting corporate control, providing risk-pooling and sharing services including investment
levels. The growing theoretical literature argues that stock markets are crucially linked to economic growth.
The findings suggest a positive relationship between efficient stock markets and economic growth, both in
short run and long run and there is evidence of an indirect transmission mechanism through the effect of
stock market development on investment. They are seen as providing a service that boosts economic growth
Rafaqet Ali and Muhammad Afzal (2012) devastating global financial crisis started from United States,
spread all over the world and adversely affected real and financial sectors of developed as well as developing
countries. This crisis is called the first largest crisis after the recession of 1930s. The prime aim of this study
is to envisage the impact of recent global financial crisis on stock markets of Pakistan and India. For this
purpose, daily data from 1st January 2003 to 31st August 2010 of KSE-100 and BSE-100 indices,
representing stock markets’ indices of Pakistan and India respectively, are used.
Avijan Dutta, Gautam Bandopadhyay & Suchismita Sengupta (2012) use logistic regression (LR) and
various financial ratios as independent variables to investigate indicators that significantly affect the

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performance of stocks actively traded on the Indian stock market. The study sample consists of the ratios
of 30 large market capitalization companies over a four-year period. The study identifies and examines eight
financial ratios that can classify the companies up to a 74.6% level of accuracy into two categories – “good”
or “poor” – based on their rate of return.
Gagan Deep Sharma & B.S Bodla (2010) states that financial markets of the world for foreign capital has
led to the increased financial integration among different countries. This paper reviews and summarizes the
research on the subject of integration and dynamic linkages between stock markets in different parts of the
world. Majority of the studies suggested that market integration has increased significantly over the years,
within an international context. We find that not many studies have concentrated on the interaction of Indian
markets with the foreign markets, and most of the studies concerning Indian have concentrated at the inter-
relationship of Indian stock market with those of the Developed nations. Therefore, there is a scope to study
the inter-linkages between Indian stock markets and those of the other SAARC nations.
Peter Sellin (2002) gives a comprehensive view on the interaction between real stock returns, inflation, and
money growth, with a special emphasis on the role of monetary policy. This is an area of research that has
interested monetary and financial economists for a long time. Monetary economists have been interested in
the question whether money has any effect on real stock prices, while financial economists have investigated
whether equity is a good hedge against inflation. Empirical studies show that money can be helpful in
predicting future stock returns. Empirical evidence also suggest that equity is not a good hedge against
inflation in the short run but may be so in the long run.
Alok Kumar Mishra (2004) attempts to examine whether stock market and foreign exchange markets are
related to each other or not. The study uses Granger’s Causality test and Vector Auto Regression technique
on monthly stock return, exchange rate, interest rate and demand for money for the period April 1992 to
March 2002. The major findings of the study are (a) there exists a unidirectional causality between the
exchange rate and interest rate and between the exchange rate return and demand for money; (b) there is no
Granger’s causality between the exchange rate return and stock return.
Mara Madaleno & Carlos Pinho (2011) accounts for the time‐varying pattern of price shock transmission,
exploring stock market linkages using continuous time wavelet methodology. In order to sustain and
improve previous results regarding correlation analysis between stock market indices, namely FTSE100,
DJIA30, Nikkei225 and Bovespa, we extend here such analysis using the Coherence Morlet Wavelet,
considering financial crisis episodes. Results indicate that the relation among indices was strong but not
homogeneous across scales, that local phenomena are more felt than others in these markets and that there
seems to be no quick transmission through markets around the world, but yes, a significant time delay.
Vivek Rajput & Sarika Bobde (2016) study different techniques to predict stock price movement using the
sentiment analysis from social media, data mining. In this paper we will find efficient method which can
predict stock movement more accurately. Social media offers a powerful outlet for people’s thoughts and
feelings it is an enormous evergrowing source of texts ranging from everyday observations to involved
discussions. This paper contributes to the field of sentiment analysis, which aims to extract emotions and
opinions from text. A basic goal is to classify text as expressing either positive or negative emotion.
Sentiment classifiers have been built for social media text such as product reviews, blog posts, and even
twitter messages. With increasing complexity of text sources and topics, it is time to re-examine the standard
sentiment extraction approaches, and possibly to redefine and enrich the definition of sentiment.

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Vanita Tripathi & Shruthi Sethi (2010) evaluated the Financial integration is one of the buzz words in
financial world. The co movement of share prices across the stock markets in the world is a frequently
experienced phenomenon. Especially during the times of crisis, it is observed that the stock markets crash
together. The oil crisis of 1973, the October 1987 crash, the South East Asian crisis of 1997 and the present
financial crisis evidence the same.
Marxia Oli Sigao (2007) investigated the effect of weather (temperature) factor, on the returns and volatility
of the Indian stock indices (BSE Sensex and S&P CNX Nifty). This study examined how weather
(temperature) affected the volatility of top stock market indices in India. The study used the monthly data
of weather in five sample cities (Chennai, Mumbai, Delhi, Kolkata and Hyderabad) in India. This study
applied statistical tools like Descriptive Statistics, ADF Test and GARCH (1, 1) model and found that the
returns of sample stock market indices were influenced by weather (temperature) factor in Chennai,
Mumbai, Kolkata and Hyderabad in India. But the returns of stock indices were not influenced by the
temperature in Delhi City.
Juhi Ahuja (2012) presents a review of Indian Capital Market & its structure. In last decade or so, it has
been observed that there has been a paradigm shift in Indian capital market. The application of many reforms
& developments in Indian capital market has made the Indian capital market comparable with the
international capital markets. Now, the market features a developed regulatory mechanism and a modern
market infrastructure with growing market capitalization, market liquidity, and mobilization of resources.
The emergence of Private Corporate Debt market is also a good innovation replacing the banking mode of
corporate Nance.
Suresh G Lalwani (1999) emphasized the need for risk management in the securities market with particular
emphasis on the price risk. He commented that the securities market is a 'vicious animal' and there is more
than a fair chance that far from improving, the situation could deteriorate
Debjit Chakraborty (1997) in his study attempts to establish a relationship between major economic
indicators and stock market behaviour. It also analyses the stock market reactions to changes in the
economic climate. The factors considered are inaction, money supply, and growth in GDP, scal debit and
credit deposit ratio. To nd the trend in the stock markets, the BSE National Index of Equity Prices (Natex)
which comprises 100 companies was taken
as the index. The study shows that stock market movements are largely inuenced by, broad money supply,
ination, C/D ratio and scal decit apart from political stability.
Bhanwar Singh, Sahil Narang, (2020) in hisstudy examines the impact of the COVID19 outbreak on the
stock markets of G-20 countries. We find statistically significant negative ARs in the four sub-event
windows during the 58 days. Negative ARs are significant for developing as well as developed countries.
The findings of this study reveal that cumulative average abnormal return (CAAR) from day 0 to day 43,
ranging from – 0.70 per cent to –42.69 per cent, is a consequence of increased panic in the stock markets
resulting from an increased number of COVID-19 positive cases in the G-20 countries.
Rosy Call (2020) examines the herding behaviour at the industry level from national stock exchange (NSE).
Using daily stock closing prices of 191 firms, which constitute the 12 industry indices for the period from
1 January 2015 to 1 June 2020, the results for the full sample period (1 January 2015 to 1 June 2020) and
before COVID-19 outbreak period (1 January 2015 to 29 January 2020) indicate the non-existence of
herding formation at the industry level, but they do suggest a strong evidence of anti-herding behaviour.
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Further, the findings suggest that COVID-19 pandemic caused the formation of herding behaviour at the
industry level. The study facilitates investors to devise their trading strategies in the regime of the COVID-
19 pandemic.
Krishna Reddy Chittedi examined the stock market integration between India and developed countries such
as USA, UK, Japan, France and Australia. The objective is to examine the stock indices of the above-
mentioned developed countries with relation to India for a period of 10 years (1 October 1997-1 October,
2007) out the integration between them. For this purpose, Unit Roots, Granger Causality, cointegration and
Error correction Mechanism are used. To examine the short-run and long-run relationships between India
and the developing counties. The study found that co integration existing between India and developed
countries. (USA, UK, Japan, France and Australia
T. P Madhusoodan in his study applies the variance ratio tests under the null hypotheses of homoscedasticity
as well as heteroscedasticity, to the Indian stock market. The tests are conducted at the aggregate level of
market indices and disaggregate level of individual
stocks. The results indicate that random walk hypothesis cannot be accepted in the Indian market. Both the
market indices the author tested showed persistent behaviour, while most of the individual stocks also
showed evidence on persistence. The variance ratios were significant under heteroscedasticity in most of
the cases where it was significant under homoscedasticity assumption. This implies that heteroscedasticity
does not play a major role in the Indian market.

1.6 LIMITATION
1.Business risk : The most frequent risk facing investors who buy individual equities is a company-specific
risk.Investors risk losing their money if the form they invested in is unable to generate sufficient sales or
profits.
2.Headline danger : A part of company risk that is frequently evaluated is headline risk.This is the danger
posed by media reports that could harm a company's reputation and bottom line.
3.Market danger : A prime illustration of increased market risk is stock market crashes.Although it cannot
be totally eradicated, market risk can be protected.
4.Liquidity risk : A sufficient and obvious risk involved in stock market investing is liquidity risk. Even
though most shares and ETFs have significant liquidity, they are not all created equal. Investors may
experience difficulties while buying and selling these products at their fair price.
5.Time- consuming: The act of trading stocks has gotten easier and faster thanks to the development of
online trading. Still , the registration process, such as registering a Demat account, takes a little longer. The
data and analysis needed before making a valid investment, however, still require diligent work because it
is a one time activity.

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1.7 CHAPTER SCHEME

The first chapter shows the introduction, significance of the study, objective of the study, review of
literature, methodology, limitation and chapter scheme. The second chapter
includes stock market, How stock market works, functions of stock market, stock market participants, Types
of stock market, Overview of stock market. The third chapter includes Indian stock market: Nse and Bse,
Year effect of Nse and Bse, Market capitalization of Nse and Bse, Risk and Return of Nse and Bse, Analysis
of trading pattern among stockholders. The fourth chapter includes Findings of the study, Bibliography,
Websites, Conclusion.

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CHAPTER 2
STOCK MARKET AN OVER VIEW

2.1 STOCK MARKET

A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also
called shares), which represent ownership claims on businesses; these may include securities listed on a
public stock exchange, as well as stock that is only traded privately, such as shares of private companies
which are sold to investors through equity crowdfunding platforms. Investment in the stock market is most
often done via stockbrokerages and electronic trading platforms. Investment is usually made with an
investment strategy in mind.

22 Stocks can be categorized by the country where the company is domiciled. For example, Nestlé and
Novartis are domiciled in Switzerland and traded on the SIX Swiss Exchange, so they may be considered
as part of the Swiss stock market, although the stocks may also be traded on exchanges in other countries,
for example, as American depositary receipts (ADRs) on U.S. stock markets.

2.2 HOW THE STOCK MARKET WORKS

Stock markets provide a secure and regulated environment where market participants can transact in shares
and other eligible financial instruments with confidence with zero- to low-operational risk. Operating under
the defined rules as stated by the regulator, the stock markets act as primary market and as secondary
markets.

As a primary market, the stock market allows companies to issue and sell their shares to the common public
for the first time through the process of initial public offerings (IPO). This activity helps companies raise
necessary capital from investors. It essentially means that a company divides itself into a number of shares
(say, 20 million shares) and sells a part of those shares (say, 5 million shares) to common public at a price
(say, $10 per share).

To facilitate this process, a company needs a marketplace where these shares can be sold. This marketplace
is provided by the stock market. If everything goes as per the plans, the company will successfully sell the
5 million shares at a price of $10 per share and collect $50 million worth of funds. Investors will get the
company shares which they can expect

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to hold for their preferred duration, in anticipation of rising in share price and any potential income in the
form of dividend payments. The stock exchange acts as a facilitator for this capital raising process and
receives a fee for its services from the company and its financial partners.

Following the first-time share issuance IPO exercise called the listing process, the stock exchange also
serves as the trading platform that facilitates regular buying and selling of the listed shares. This constitutes
the secondary market. The stock exchange earns a fee for every trade that occurs on its platform during the
secondary market activity.

The stock exchange shoulders the responsibility of ensuring price transparency, liquidity, price discovery
and fair dealings in such trading activities. As almost all major stock markets across the globe now operate
electronically, the exchange maintains trading systems that efficiently manage the buy and sell orders from
various market participants. They perform the price matching function to facilitate trade execution at a price
fair to both buyers and sellers.

A listed company may also offer new, additional shares through other offerings at a later stage, like through
rights issue or through follow-on offers. They may even buyback or delist their shares. The stock exchange
facilitates such transactions.

The stock exchange often creates and maintains various market-level and sector-specific indicators, like
the S&P 500 index or Nasal 100 index, which provide a measure to track the movement of the overall
market. Other methods include the Stochastic Oscillator and Stochastic Momentum Index.

The stock exchanges also maintain all company news, announcements, and financial reporting, which can
be usually accessed on their official websites. A stock exchange also supports various other corporate-level,
transaction-related activities. For instance, profitable companies may reward investors by paying dividends
which usually comes from a part of the company’s earnings. The exchange maintains all such information
and may support its processing to a certain extent. (For related reading, see "How Does the Stock Market
Work?")

2.3 FUNCTIONS OF A STOCK MARKET

A stock market primarily serves the following functions:

Fair Dealing in Securities Transactions: Depending on the standard rules of demand and supply, the stock
exchange needs to ensure that all interested market participants have instant access to data for all buy and
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sell orders thereby helping in the fair and transparent pricing of securities. Additionally, it should also
perform efficient matching of appropriate buy and sell orders.

For example, there may be three buyers who have placed orders for buying Microsoft shares at $100, $105
and $110, and there may be four sellers who are willing to sell Microsoft shares at $110, $112, $115 and
$120. The exchange (through their computer operated automated trading systems) needs to ensure that the
best buy and best sell are matched, which in this case is at $110 for the given quantity of trade.

Efficient Price Discovery: Stock markets need to support an efficient mechanism for price discovery, which
refers to the act of deciding the proper price of a security and is usually performed by assessing market
supply and demand and other factors associated with the transactions.

Say, a U.S.-based software company is trading at a price of $100 and has a market capitalization of $5
billion. A news item comes in that the EU regulator has imposed a fine of $2 billion on the company which
essentially means that 40 percent of the company’s value may be wiped out. While the stock market may
have imposed a trading price range of $90 and $110 on the company’s share price, it should efficiently
change the permissible trading price limit to accommodate for the possible changes in the share price, else
shareholders may struggle to trade at a fair price.

Liquidity Maintenance: While getting the number of buyers and sellers for a particular financial security
are out of control for the stock market, it needs to ensure that whosoever is qualified and willing to trade
gets instant access to place orders which should get executed at the fair price.

Security and Validity of Transactions: While more participants are important for efficient working of a
market, the same market needs to ensure that all participants are verified and remain compliant with the
necessary rules and regulations, leaving no room for default by any of the parties.

Support All Eligible Types of Participants: A marketplace is made by a variety of participants, which
include market makers, investors, traders, speculators, and hedgers. All these participants operate in the
stock market with different roles and functions. For instance, an investor may buy stocks and hold them for
long-term spanning many years, while a trader may enter and exit a position within seconds. A market
maker provides necessary liquidity in the market, while a hedger may like to trade in derivatives for
mitigating the risk involved in investments. The stock market should ensure that all such participants are
able to operate seamlessly fulfilling their desired roles to ensure the market continues to operate efficiently.

Investor Protection: Along with wealthy and institutional investors, a very large number of small investors
are also served by the stock market for their small number of investments. These investors may have limited
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financial knowledge, and may not be fully aware of the pitfalls of investing in stocks and other listed
instruments. The stock exchange must implement necessary measures to offer the necessary protection to
such investors to shield them from financial loss and ensure customer trust.

For instance, a stock exchange may categorize stocks in various segments depending on their risk profiles
and allow limited or no trading by common investors in high-risk stocks. Exchanges often impose
restrictions to prevent individuals with limited income and knowledge from getting into risky bets of
derivatives.

Balanced Regulation: Listed companies are largely regulated and their dealings are monitored by market
regulators, like the Securities and Exchange Commission (SEC) of the U.S. Additionally, exchanges also
mandate certain requirements – like, timely filing of quarterly financial reports and instant reporting of any
relevant developments - to ensure all market participants become aware of corporate happenings. Failure to
adhere to the regulations can lead to suspension of trading by the exchanges and other disciplinary measures.

Regulating the Stock Market

A local financial regulator or competent monetary authority or institute is assigned the task of regulating
the stock market of a country. The Securities and Exchange Commission (SEC) is the regulatory body
charged with overseeing the U.S. stock markets. The SEC is a federal agency that works independently of
the government and political pressure. The mission of the SEC is stated as: "to protect investors, maintain
fair, orderly, and efficient markets, and facilitate capital formation."

2.4 STOCK MARKET PARTICIPANTS

Along with long-term investors and short-term traders, there are many different types of players associated
with the stock market. Each has a unique role, but many of the roles are intertwined and depend on each
other to make the market run effectively.

• Stockbrokers, also known as registered representatives in the U.S., are the licensed professionals who buy
and sell securities on behalf of investors. The brokers act as intermediaries between the stock exchanges
and the investors by buying and selling stocks on the investors' behalf. An account with a retail broker is
needed to gain access to the markets.
• Portfolio managers are professionals who invest portfolios, or collections of securities, for clients. These
managers get recommendations from analysts and make the buy or sell decisions for the portfolio. Mutual

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fund companies, hedge funds, and pension plans use portfolio managers to make decisions and set the
investment strategies for the money they hold.
• Investment bankers represent companies in various capacities, such as private companies that want to go
public via an IPO or companies that are involved in pending mergers and acquisitions. They take care of
the listing process in compliance with the regulatory requirements of the stock market.

2.5 TYPES OF STOCK MARKET

2 Classification based on stock classes

There are some stocks that do not give the shareholders the power to vote at the annual meetings where the
decisions regarding the management of the company and such issues
take place. Unlike these stocks, there are some other stocks that allow shareholders to participate in the
decision making in the company matters, by casting their votes. Another kind of stocks offer shareholders
the opportunity to cast multiple votes in matters pertaining to different aspects of the company.

2.Classification based on market capitalization

Stocks can be classified on the basis of the market capitalization of the company, which is the total
shareholding of a company. This is calculated by multiplying the current price of
the company stock with the total number of shares outstanding in the market. Listed below are the types of
stocks based on market capitalization.

i. Large Cap Stocks

These are often of Blue-chip companies which are established enterprises with large reserves of cash at their
disposal. It is interesting to note that the larger size of the large cap companies does not mean that they grow
more rapidly. In fact, it is the small stock companies that tend to outperform them over the longer time
frame. But large cap stocks do come with the benefit of allowing the investors to reap higher dividends in
comparison to the smaller and mid cap companies’ stocks, ensuring that the capital is preserved over the
long-term period.

ii. Mid Cap Stocks

These are the stocks of medium sized companies that have a market capitalization of INR 250 Crore to
about INR 4000 crore. These companies have a well recognize name in the market which brings along the
benefit of potential for growth, as well as the stability that is usually accompanied with being a seasoned
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player in the market. Mid cap companies have a good track record of steady growth and are very similar to
blue chip stocks barring their size. In the long term these stocks do and grow well.

iii. Small Cap Stocks

As is suggestive of the name, small cap stocks have the smallest value in the market as compared to its
counterparts. These are small sized companies that have a market capitalization of up to INR 250 and have
the potential to grow at a good pace in the future. Investors who are willing to commit to a long term and
are not very particular about the current dividends, and are willing to stand their ground during price
volatility, can make significant gains in the future. As an investor you can buy these stocks when they are
available at a cheap price during the initial stage of the company. There is no surety about
the how the company will perform in the market since they are relatively new. Because these small cap
companies are new, they are highly volatile and their growth impacts the value and revenue of the company
to a huge extent.

3. Classification based on ownership

Based on wonder ship, there are three types of stocks that investors can own which offer them different
rights and growth potential.

i. Preferred & common stock

Preferred stock offer investors a fixed amount of dividend every year unlike common stocks. The price of
preferred stocks is not as volatile as a common stock but it is common stock that gets the benefit of priority
when the company has surplus money to distribute. At the time of company liquidation, it is the company’s
creditors, its bond holders, debenture holders who get priority over the preferred shareholders. Common
stockholders have voting rights, a privilege preferred shareholder do not enjoy.

ii. Hybrid Stocks

There are companies that offer preferred shares with the option of converting them to common shares, with
conditions, at a certain point in time. These are known as hybrid stocks or convertible preferred shares and
may or may not have voting rights.

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iii. Stocks with embedded derivative options

Stocks that come with the embedded derivative option means that they can be ‘callable’ or ‘potable’ and
are not as commonly available. A ‘callable’ stock has the option of being bought back by the company for
a certain price at a certain point in time. Similarly, a ‘potable’ stock offers its holder to sell it to the company
at a certain price and time.

4. Classification based on dividend payment

I. Growth Stocks
These stocks do not pay high dividends as the company prefers to reinvest the earnings to enable it to grow
faster, hence, the name growth stocks. The value of the shares of the company rises with the fast growth
rate which in turn allows investors to profit through higher returns. It is best suited for those investors who
seek long term growth potential and not an immediate second source of income. Growth stocks carry higher
risk than their counterpart.

ii. Income Stocks

In comparison to growth stocks, income stocks hand out a higher dividend in relation to the price of the
share. Higher dividends translate to higher income; hence, the name Income Stocks. Income stocks are
indicative of a stable company that can afford consistent dividends but these are also companies that do not
promise very high growth. This means that the stock price of such companies may not rise much. Income
stocks also includes
preferred stocks. IT is a good investment for those investors who seek a secondary source of income through
relatively low risk stocks. The dividend income in income stocks is not taxed and thus is great for investors
of low risk profile who want long term investment. You may want to use the dividend yield measure to find
such stocks that offer high dividends.

5. Classification based on fundamentals

Investors who believe that a share price must equal the intrinsic value of the company’s share, the value
investing investors, compare the share prices with components like per share earnings, profits etc. to reach
at an intrinsic value per share.

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I. Overvalued Shares
These are shares with prices that exceed the intrinsic value and are considered overvalued.

ii. Undervalued Shares

These types of shares are popular amongst the value investors as they believe that the price of the share
would rise in the future.

6 Classification based on Risk

The risk level of stocks differs depending on the share price fluctuations. Stocks with higher risk reward the
investor with higher returns, while low risk stocks generate low returns.

i.Beta Stocks

The beta or the measure of risk is derived by calculating the price volatility of the stock. Beta can be positive
or negative which denotes whether it moves in sync with the market or against it. The higher the beta, higher
is the risk quotient of the stock. If the beta value is more than 1 it means that the stock is more volatile than
the market. A lot of investors with knowledge of this measure use it to make their investment decisions.

ii. Blue Chip Stocks

Blue chip stocks are stocks of those companies that have lower liabilities and stable earnings and which
pay regular dividends. These very large and well-recognised companies that have a long history of sound
financial performance are a good bet for Investors who seek safer avenues of investment.

7 Classification based on price trends

This classification is based on the movement of stock prices in tandem with or against the company earnings.

I. Defensive Stocks
These are stocks that are somewhat unfazed by economic conditions and are preferred when the market
conditions are poor. Food and beverage companies are a common example.

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ii. Cyclical Stocks

of companies that are greatly affected by economic conditions and see high price fluctuations with market
changes are cyclical stocks. These types of stocks grow rapidly during the boom cycle but the growth is
slowed down in the slow economy. Automobile stocks fall in this category.

OVERVIEW OF STOCK MARKET

2.6.1 STOCK MARKET AT GLOBAL LEVEL

Stock markets are some of the most important parts of today’s global economy. Countries around the world
depend on stock markets for economic growth. However, stock markets are a relatively new phenomenon.
They haven’t always played an important role in global economics.

The first genuine stock markets didn’t arrive until the 1500s. However, there were plenty of early examples
of markets which were similar to stock markets. In the 1100s, for example, France had a system where
courtiers de change managed agricultural debts throughout the country on behalf of banks. This can be seen
as the first major example of brokerage because the men effectively traded debts. Later on, the merchants
of Venice were credited with trading government securities as earl y as the 13th century. Soon after, bankers
in the nearby Italian cities of Pisa, Verona, Genoa, and Florence also began trading government securities.
The world’s first stock markets are generally linked back to 32 Belgium. Bruges, Flanders, Ghent, and
Rotterdam in the Netherlands all hosted their own “stock” market systems in the 1400s and 1500s.However,
it’s generally accepted that Antwerp had the world’s first stock market system. Antwerp was the commercial
centre of Belgium and it was home to the influential Van der Buerse family. As a result, early stock markets
were typically called Beursen.All of these early stock markets had one thing missing: stocks. Although the
infrastructure and institutions resembled today’s stock markets, nobody was actually trading shares of a
company. Instead, the markets dealt with the affairs of government, businesses, and individual debt. The
system and organization
were similar, although the actual properties being traded were different.

The top 10 biggest stock exchanges in the world

1) New York Stock Exchange

The New York Stock Exchange (NYSE) is additionally referred to as ‘The Big Board’. The NYSE is the
first on the list of the largest stock exchanges in the world and is a highly esteemed stock exchange in the
USA. The NYSE has remained the largest stock exchange in the world by market capitalisation ever since
the end of World War. It is located at 11, Wall Street, Lower Manhattan, New York City. It consists of
2,400 listed companies which span sectors such as finance, healthcare, consumer goods and energy. The

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blue-chip companies which are listed under NYSE are Berkshire Hathaway Inc, Coca-Cola, Walt Disney
Company, Mc Donald’s Corporation, etc. Date of establishment: May 17, 1792. Valuation: $19.3 Trillion

2) NASDAQ
Second on the list of the largest stock exchange in the world is NASDAQ, an abbreviation of National
Association of Securities Dealers Automated Quotations. Nasdaq, an American stock exchange is
headquartered at 151 W, 42nd Street, New York City. Nasdaq never operated on a usual open outcry system,
instead, it has always used a computer and telephone-based system of trading, which has made the
NASDAQ the world’s first electronically traded stock market. The enlistment of the world’s humongous
tech giants such as Apple, Microsoft, Google, Facebook, Amazon, Tesla, and Intel make NASDAQ

‘The Mecca of Technology Companies’. Date of establishment: February 4, 1971. Valuation: $13.8 Trillion

3) Tokyo Stock Exchange

The Tokyo Stock Exchange (TSE) which is also known as TYO and Tōshōis located in Tokyo, Japan. It is
listed as the third-largest stock exchange in the world. TSE has around 3,575 listed companies which has
taken its market capitalization to a whooping US$ 5.67 trillion. The TSE’s benchmark index is Nikkei 225
and it is home to Japanese giants with international exposure, including Toyota, Suzuki, Honda, and
Mitsubishi and Sony. Date of establishment: January 1, 2003. Valuation: $5.7 Trillion.

4) Shanghai Stock Exchange

The Shanghai Stock Exchange (SSE) is a Chinese stock exchange situated in the city of Shanghai, China.
It is one of the three stock exchanges plying autonomously in the People’s

Republic of China. Date of establishment: November 26, 1990. Valuation: $4.9 Trillion

5) Hong Kong Stock Exchange

The Hong Kong Stock Exchange (SEHK) is located in Hong Kong and is the world’s fifth-largest and Asia’s
third-largest stock exchange on the basis of market capitalization. It is one of the three stock exchanges in
China. SEHK consists of 2,315 listed companies with a wholesome market capitalization of HK$29.9
trillion. It is reported as the fastest-growing stock exchange in Asia. Date of establishment: February 3,
1891. Valuation: $4.4 Trillion

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6) EURONEXT
EURONEXT stands for European New Exchange Technology. With it’s registered office in Amsterdam
and corporate address at La Défense in Greater Paris, EURONEXT was established in 2000 to represent
Europe’s economy which is also the reason why it operates in euros. It is the sixth-largest stock exchange
in the world with a market capitalization worth €4.1 trillion. Date of establishment: September 22, 2000.
Valuation: $3.9 Trillion.

7) Shenzen Stock Exchange

The Shenzhen Stock Exchange (SZSE) is one of the three independently working stock exchanges in China.
Although it was founded in 1987, it wasn’t established until 1990. It is the 7th largest stock exchange in the
world and has approximately 1,300 listed companies

with a combined market capitalization of $3.92 trillion. Date of establishment: December 1, 1990.
Valuation: $3.5 Trillion .

8) London Stock Exchange

The London stock exchange (LSE) is based in London and is the sixth-largest stock market within the world.
It was established in 1571 and is the oldest stock exchange in the world. It has more than 3,000 listed
companies with a combined market capitalization of $4.59 trillion. Date of establishment: January 23, 1571.
Valuation: $3.2 Trillion

9) Toronto Stock Exchange

The Toronto Stock Exchange (TSX) is situated in Toronto, Canada. It was introduced in 1852 and is held
and wielded as a subsidiary of the TMX Group. Enlistment of 2,207 companies with a combined market
capitalization of $2.3 trillion. Date of establishment: October 25, 1861. Valuation: $2.1 Trillion.

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CHAPTER - 3
COMPANY PROFILE

3.1 INTRODUCTION

NATIONAL STOCK EXCHANGE (NSE)

NSE (National Stock Exchange) is an institution of national importance with international stature. We are
a trusted market infrastructure institution with high standards of corporate governance.

A homegrown brand with a global vision, NSE is counted as one of the world’s largest exchanges and a
catalyst for driving India’s economic growth. NSE was the first exchange in India to implement electronic
or screen-based trading which began its operations in 1994; a pioneer in technology which ensures the
reliability and performance of its systems through a culture of innovation and investment in technology.
NSE operates a market ecosystem to bring in transparency & efficiency.

Our robust state-of-the-art technology platform offers high levels of robustness, safety and resilience for
trading and investment opportunities across all asset classes and for all categories of investors. NSE is
focused on investor protection and disciplined development of the Indian capital market landscape.

The Economic Times estimates that as of April 2018, 6 crore (60 million) retail investors had invested their
savings in stocks in India, either through direct purchases of equities or through mutual funds.[6] Earlier,
the Bimal Jalan Committee report estimated that barely 3% of India's population invested in the stock
market, as compared to 27% in the United States and 10% in China

BOMBAY STOCK EXCHANGE(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.

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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 capitalisation 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, S&P BSE 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 S&P BSE SENSEX is
constructed on a 'free-float' methodology, and is sensitive to market sentiments and market realities. Apart
from the S&P BSE SENSEX, BSE offers 21 indices, including 12 sectoral indices. BSE has entered into an
index cooperation agreement with Deutsche Börse. This agreement has made S&P BSE SENSEX and other
BSE indices available to investors in Europe and America. Moreover, Barclays Global Investors (BGI), the
global leader in ETFs through its iShares brand, has created the 'iShares S&P BSE SENSEX India Tracker'
which tracks the S&P BSE SENSEX. The ETF enables investors in Hong Kong to take an exposure to the
Indian equity market.

3.2 HISTORY OF THE COMPANY

NATIONAL STOCK EXCHANGE (NSE)

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NSE's sustained leadership positions across asset classes in the Indian and global exchange sectors
demonstrates the robustness and liquidity of our exchange.
NSE was incorporated in 1992. It was recognised as a stock exchange by SEBI in April 1993 and
commenced operations in 1994 with the launch of the wholesale debt market, followed shortly after by the
launch of the cash market segment.
Between 1994 and 2016, we expanded our lines of business and product offerings through the following
key milestones:
• NSE launches cloud-based research facility NSE Data Room (NDR)
• NSE Indices launches Nifty Midcap Select Index
• NSE introduces trading of weekly futures on US Dollar - Indian Rupees currency pair
• NSE registered investor base surpasses 5 crore unique investors
• NSE Indices launches Nifty India Digital Index
• India celebrates Silver Jubilee of NIFTY 50 Index and 20 Years of Derivatives in Indian Capital
Market

BOMBAY STOCK EXCHANGE(BSE)

Bombay Stock Exchange was founded by PremchandRoychandin 1875. While BSE Limited is now
synonymous with Dalal Street, it was not always so. In the 1850s, five stock brokers gathered together under
a Banyan tree in front of Mumbai Town Hall, where Horniman Circle is now situated.] A decade later, the
brokers moved their location to under the banyan trees at the junction of Meadows Street and what was then
called Esplanade Road, now Mahatma Gandhi Road. With a rapid increase in the number of brokers, they
had to shift places repeatedly. At last, in 1874, the brokers found a permanent location, the one that they
could call their own. The brokers group became an official organization known as "The Native Share &
Stock Brokers Association" in 1875.

On 12 March 1993, a car bomb exploded in the basement of the building during the 1993 Bombay bombings.
The BSE is also a Partner Exchange of the United Nations Sustainable Stock Exchange initiative, joining
in September 2012. Commodity derivatives contract in gold and silver in October 2018.

3.3 VISION AND MISSION

NATIONAL STOCK EXCHANGE (NSE)

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NSE's identity crafted in the nineties has for the last 25 years, stood for reliability, expertise, innovation and
trust. In the last 25 years, the Indian economy and technology landscape has changed dramatically. So has
NSE.
NSE's new identity reflect its multi-dimensional nature: multiple asset classes, multiple customer segments,
and its multiple roles including, exchange, regulator, index provider, data and analytics, IT services,
educator and market developer.
The new identity depicts growth with a modern representation of a blooming flower. The multiple colours
capture the multi-faceted nature of the business. The red denotes NSE's strong foundation, the yellow and
orange are inspired by the flower for prosperity and auspicious ventures the marigold, and the blue triangle
is a compass, always future-oriented and helping us find our true North.
The sharp edges indicate technology, precision and efficiency. The shape also amplifies NSE's tradition of
collaboration. The internal vectors depict NSE's DNA of continuously pushing boundaries.

BOBMAY STOCK EXCHANGE (BSE)

We are committed to providing world class, quality education providing institute that would put on track
the careers of students in the fields of Accounts, Law & Finance by providing thorough knowledge and
extending pre and post examination support to them. We envision the institute network to go beyond the
boundaries of the home state to reach out to deserving students in small towns through Satellite Learning
Program.

Our Mission is to be among top quadrille coaching institute across nation by 2020. Our aim to be most
preferred coaching institute of India and to create an educational platform for the students to help them
prepare for entrance exams for all the streams. This would be done by providing specialized coaching,
guidance and motivation to excel in their performance.

3.4 COMPANY GROWTH AND DEVELOPMENT

Each theoretical model in the literature focuses on one characteristic of the functioning of stock markets,
such as size, liquidity, or integration. Consequently, one research strategy is to evaluate empirically,
characteristic by characteristic, the predictions from each individual theoretical model. Although useful,
this strategy is model-specific and focuses narrowly on individual characteristics. We take a different
approach here, as do Demirgiic Kunt and Levine (1996) and Demirgiic -Kunt and Maksimovic (1996). We
use a multifaceted measure of overall stock market development that combines the different individual
characteristics of the functioning of stock markets. Thus, we provide an empirical assessment of whether
overall stock market development is strongly connected with long-run economic growth.

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Individual Stock Market Development Indicators We use individual indicators of size, liquidity, and risk
diversification. We measure the size of the stock market using the ratio of market capitalization divided by
GDP. Market capitalization equals the total value of all listed shares. The assumption underlying the use of
this variable as an indicator of stock market development is that the size of the stock market is positively
correlated with the ability to mobilize capital and diversify risk. We measure the liquidity of the stock
market in two ways. First, we compute the ratio of total value of trades on the major stock exchanges to
GDP. This ratio measures the value of equity transactions relative to the size of the economy.

This liquidity measure complements the measure of stock market size because markets may be large but
inactive. Second, we compute the ratio of the total value of trades on the major stock exchanges divided by
market capitalization. This ratio, frequently called the turnover ratio, measures the value of equity
transactions relative to the size of the equity market. The turnover ratio also complements the measure of
stock market size as well as the total value of equity transactions divided by GDP, because markets may be
small (compared with the whole economy) but liquid.

3.5 ORGANIZATION STRUCTURE

NATIONAL STOCK EXCHANGE (NSE)

National Stock Exchange of India (NSEI) commenced operations in Whole- sale Debt Market (WDM) in
June 1994 and trading in equities has been started in the Capital Market Segment (CM) in November 1994.
A large number of members are successfully trading from their respective offices through NSEI’s Very
Small Aperture Terminal (VSAT) based satellite network. The exchange has opened membership to 13
cities including Mumbai and operations from other cities are expected to commence shortly.
As a national exchange it has set fairly stringent criteria for membership in terms of net worth, education
and experience, to ensure that trading members are well capitalised and can provide other professional
services to investors.

BOMBAY STOCK EXCHANGE (BSE)

The day to day was working, and operations of BSE is managed by the Board of Directors consisting of a
Chairman, a Managing Director, Public Interest Directors and Shareholder Directors. The Board jointly
formulated the policies of BSE and takes a decision relating to the trading of securities, i.e., equity,
derivatives, etc. affecting the trading of capital markets in India via BSE. Mr Sudhakar Rao is currently
serving as the Chairman of the Board of Directors, BSE.

The board members are elected or appointed members who conferred with the powers, duties and
responsibilities. Further, the management of BSE which oversee the working consists of a Managing
Director and Chief Executive Officer, a Chief Business Officer, a Chief Regulatory Officer, a Chief
Financial Officer, a Chief Information Officer and a Chief of Business Operations.The managing director
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of the management of BSE acts as the administrative head who oversee the working of all departments of
BSE and all the requisite officers appointed are accountable to him. Further, the managing director being in
the hierarchical head in the management is also responsible for delegation of work to other officers and is
one of the key managerial personnel responsible for taking major and important decisions affecting the
working of BSE.

3.6 PRODUCT AND SERVICES

NATIONAL STOCK EXCHANGE (NSE)

Our Products
NSE offers a comprehensive and innovative product and service offerings delivered through a vertically-
integrated business model supported by a robust risk management system framework. NSE is driven its
committment of a more inclusive and transparent market, in its search for newer products and processes. It
recognises that technology forms the core of financial markets in driving greater transparency and is ever
evolving. Though we launched the Capital Market segment on November 3, 1994 we continue to expand
the range of products and services that we offer.
The products on the Exchange are organized into 3 asset classes for trading: Capital market for the listing
and trading of equities, fixed income securities and the derivatives market.
Equity and equity-linked products available for trading in the cash market include stocks, IDRs, ETFs
(including those benchmarked the NIFTY indices) and units of closed-ended mutual fund schemes, as well
as a segment devoted to the growth of the SME's listed on EMERGE.

BOMBAY STOCK EXCHANGE (BSE)

BSE provides a host of other services to capital market participants including risk management, clearing,
settlement, market data services and education. It has a global reach with customers around the world and
a nation-wide presence. BSE systems and processes are designed to safeguard market integrity, drive the
growth of the Indian capital market and stimulate innovation and competition across all market segments.
BSE is the first exchange in India and 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 On-Line trading System (BOLT). It operates one of
the most respected capital market educational institutes in the country (the BSE Institute Ltd.). BSE also
provides Depository services through its central depository Services Ltd. (CDSL) arm.

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3.7. Company competitors.

New York Stock Exchange's competitors and similar companies include Morgan Stanley,
Bloomberg, Intercontinental Exchange, CME Group, Euronext, London Stock Exchange Group and
Nasdaq. New York Stock Exchange operates a liquid cash equities exchange. SIX, Trading Volatility, New
York Stock Exchange, and Nasdaq Market Data Feeds are the top competitors and alternatives to National
Stock Exchange India (NSE) Bombay Stock Exchange (BSE).

National Stock Exchange India (NSE) Competitors:

Find reviews for National Stock Exchange India (NSE) left by Datarade users, and compare
National Stock Exchange India (NSE)’s data products and performance to the most popular competitors
and alternatives. SIX, Trading Volatility, New York Stock Exchange, and Nasdaq Market Data Feeds are
the top competitors and alternatives to National Stock Exchange India (NSE). We process complex options
data to provide profound insight into flows that influence movements of stocks.

SIX is a data provider offering Stock Market Data, Financial Data, Proprietary Market Data, Corporate
Actions Data, and 3 others. They are headquartered in Switzerland. We process complex options data to
provide profound insight into flows that influence movements of stocks. New York Stock Exchange is a
data provider offering Stock Market Data, ETF Data, Forex Data, Dividend Data, and 6 others. They are
headquartered in United States of America.

Bombay Stock Exchange (BSE) Competitors:

Nasdaq Market Data Feeds is a data provider offering Stock Market Data, Alternative Data, ETF Data,
Dividend Data, and 12 others. They are headquartered in United States of America. B3 Brasil is a data
provider offering Proprietary Market Data. They are headquartered in Brazil. Taiwan Stock Exchange
(TWSE) is a data provider offering Proprietary Market Data. They are headquartered in Taiwan.
Korea Exchange (Koscom) is a data provider offering Proprietary Market Data. They are
headquartered in Korea (Democratic People's Republic of). Deutche Börse is a data provider offering
Proprietary Market Data and Fixed Income Data. They are headquartered in Germany. Australian Securities
Exchange (ASX) is a data provider offering Proprietary Market Data. They are headquartered in Australia.

3.8. Prospects and challenges

A bear market for stocks, in which prices drop by at least 20%, may be necessary to address six major
challenges facing Wall Street right now, according to

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Jim Paulsen, the widely followed chief investment strategist of Leuthold Group. "The issues confronting
stocks are numerous and most will likely remain periodically problematic for the balance of this expansion.
Consequently, resolving 'problems aplenty' will not be easy. And, ultimately, it will be resolved by a bear
market and a recession," says Paulsen per Business Insider. He says the six big problems include stretched
valuations, a full-employment economy that's boosting wage costs and inflation, Fed rate hikes, the lowest
intra-market correlation since the 1950s, historically low volatility despite recent spikes, and falling profit
expectations.

Stock Market Challenges Investors Could Face:

• Investing in the stock market means ups and downs happen.
• Lower prices can present an opportunity.
• Taking emotion out of investment decisions is critical.

There are several challenges faced by the Bombay Stock Exchange (BSE) and the National Stock Exchange
(NSE) in India, some of which include:
1. Market volatility : The Indian stock market is known to be volatile, which can lead to sudden price
fluctuations and make it challenging for investors to predict and manage their investments.

2. Regulatory compliance : Both BSE and NSE are heavily regulated by the Securities and Exchange
Board of India (SEBI), and any non-compliance with regulations can result in fines and penalties.

3. Cybersecurity risks : As more trading moves online, cybersecurity risks have become a significant
concern for both BSE and NSE, with the potential for hacking, data breaches, and other security threats.

4. Competition from otherexchanges : BSE and NSE face competition from other domestic and
international exchanges, which can impact their market share and revenue.

5. Liquidity concerns : The liquidity of some stocks traded on the BSE and NSE can be low, making
it challenging to execute trades quickly and efficiently.

6. Limited access for retail investors : Retail investors in India face limited access to the stock market
due to high transaction costs, limited availability of financial instruments, and a lack of financial education
and awareness.

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7. Infrastructure and technological limitations : The Indian stock market is still developing, and there
are infrastructure and technological limitations that can impact the speed and efficiency of trading.

3.9Conclusion:
A stock exchange is precisely a platform that conducts the trading of financial instruments like stocks
and derivatives. The activities on this platform are regulated by the Securities and Exchange Board of
India.The participants have to register with SEBI and the stock exchange in order to conduct trades. Trading
activities include brokering, issuing of shares by companies, etc. b. Listing of the Company in the Primary
Market A new company is listed in the primary market through the process of an Initial Public Offering,
where the company lists details about itself, the stocks it is issuing, etc.
The allotment of stocks take place during the process of listing and investors who bid for the stocks get their
share. Trading in the Secondary Market Once the company has been listed and issued stocks, these can be
traded in the secondary market by the investors. This is the marketplace for the buyers and sellers to transact
and make profits or incur losses.
Stock Brokers Because of the magnitude of investors who number in thousands, it is difficult to have
them assemble in one location. Therefore, to conduct trade, stock brokers and brokerage firms come in the
picture. These are entities that are registered with the Stock Exchange and act as intermediaries between the
investors and the exchange it self. When you place an order to buy any share at a given rate, the broker
processes it at the exchange where there are multiple parties involved. e. Passing of your order Your buy
order is passed on to the exchange by the broker, where it is matched for a sell order for the same. The
exchange takes place when the seller and the buyer agree upon a price and finalize it; the order is then
considered confirmed. Settlement Once you finalize on a price, the exchange confirms the details to ensure
that there is no default in the transaction. The exchange then facilitates the transfer of ownership of the
shares which is known as Settlement. You receive a message once this takes place. This communication of
this message involves multiple parties like the brokerage order department, the exchange floor traders, etc.

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CHAPTER 4
DATA COLLECTION AND INTERPRETATION

4.1.Data analysis and interpretation

(2000-2020)

NSE EMERGE is NSE’s new initiative for Small and medium-sized enterprises (SME) & Start-up
companies in India. These companies can get listed on NSE without an Initial public offering (IPO). This
platform will help SME’s & Start-ups connect with investors and help them with the raising of funds. On
8 July 2015, Sucheta Dalal wrote an article on Money life alleging that some NSE employees were
leaking sensitive data related to high- frequency trading or co-location servers to a select set of market
participants so that they could trade faster than their competitors. NSE alleged defamation in the article by
Money life. On 22 July 2015, NSE filed a ₹1 billion (US$14 million) suit against Money life. However,
on 9 September 2015, the Bombay High Court dismissed the case and fined NSE
₹5 million (US$70,000) in this defamation case against Money life (The High Court asked NSE to pay
₹150,000 (US$2,100) to each journalist Debashis Basu and Sucheta Dalal and the remaining ₹4.7 million
(US$66,000) to two hospitals.
The Bombay High Court has stayed the order on costs for a period of two weeks, pending the hearing of
the appeal filed by NSE. In May 2019 SEBI has debarred NSE from accessing the markets for a period of
6 months. While NSE confirmed this will not impact their functioning, they won’t be able to list their IPO
or introduce any new trading products for that period. Additionally, the watchdog also ordered NSE to
disgorge Rs 624.9 crores (along with accrued interest for the period), an amount equivalent to the profits it
made from the unfair trade practice of co-location servers they provided during the period from 2010–11
to 2013–14. The board also passed orders against 16 individuals including former managing directors and
CEOs Ravi Narain and Chitra Ramakrishna ordering them to
paid into the Investor protection and education fund. These individuals have also been debarred from
the markets or holding any position in a listed company for a period of five years. Crash of 1991After
economic liberalisation in India in 1991, the stock market saw a number of cycles of booms and busts,
some related to scams such as those engineered by players such as Harshad Mehta and Ketan Parekh,
some due to global events and a few due to circular trading, rigging of prices and the irrational exuberance
of investors leading to bubbles that finally burst.
Crashes of 2020

On 1 February 2020, as the FY 2020-21 Union budget was presented in the lower house of the Indian
parliament, Nifty fell by over 3% (373.95 points) while Sensex fell by more than 2% (987.96 points). The
fall was also weighed by the global breakdown amid coronavirus pandemic cantered in China. On 28
February 2020, Sensex lost 1448 points and Nifty fell by 432 points due to growing global tension caused
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by coronavirus, which W.H.O said has a pandemic potential. Both BSE and NSE fell for the entire five
days of the week ending with the worst weekly fall since 2009.
On March 4 and 6, markets fell by around 1000 points and several crores of wealth was wiped out. On 6
March 2020, Yes Bank was taken over by RBI under its management for reconstruction and will be
merged with SBI. This was done to ensure smooth functioning of the bank as it was struggling for couple
of years to cope up with heavy pressure due to cleaning of bad loans. On 9 March 2020, the Sensex fell by
1,941.67 points, while Nifty- 50 broke down by 538 points. The fear of COVID-19 outbreak has created
havoc all over the globe and India is no exception. Further, the recent Yes, Bank crisis also made the
markets fell. The markets ended in red with Sensex closing on 35,634.95 and Nifty-50 on 10,451.45.
On 12 March 2020, the Sensex fell by 2919.26 points (-8.18%), the worst continuation of the week in the
history while Nifty-50 broke down by 868.25 points (-8.30%) amid World Health Organisation (WHO)
declaring Coronavirus outbreak as “pandemic”. Sensex ended to 33-month low of 32778.14.On 16 March
2020, Sensex plunged by 2,713.41 points (around 8%), the second worst fall in its history. On the other
hand, Nifty en9200–mark at 9,197.40 due to global economic recession. However, the Sensex continued
to fall straight for 4–continuous days till 19 March 2020, losing 5815 points during the period. On 23
March 2020, Sensex lost 3,934.72 points (13.15%) and Nifty plunges 1,135 points (12.98%) at 7610.25 as
coronavirus-led lockdowns across the world triggered fears of a recession. These are now the lowest
levels since 2016. It’s witnessing the biggest weekly loss since October 2008, as the increasing number of
coronavirus cases in India as well as globally.

BOMBAY STOCK EXCHANGE (BSE)

BSE Limited, formerly known as the Bombay Stock Exchange is an Indian government owned stock
exchange located on Dalal Street in Mumbai. Established in 1875, it is Asia's oldest stock exchange. The
BSE is the world's 7th largest stock exchange with an overall market capitalization of more than US$2.8
trillion on as of February 2021. While Bombay Stock Exchange Limited is now synonymous with Dalal
Street, it was not always so. In the 1850s, five stock brokers gathered together under Banyan tree in front
of Mumbai Town Hall, where Horniman Circle is now situated. A decade later, the brokers moved their
location to another leafy setting, this time under banyan trees at the junction of Meadows Street and what
was then called Esplanade Road, now Mahatma Gandhi Road. With a rapid increase in the number of
brokers, they had to shift places repeatedly. At last, in 1874, the brokers found a permanent location, the
one that they could call their own. The brokers group became an official organization known as "The
Native Share & Stock Brokers Association" in 1875. The Bombay Stock Exchange continued to operate
out of a building near the Town Hall until 1928. The present site near Horniman Circle was acquired by
the exchange in 1928, and a building was constructed and occupied in 1930. The street on which the site
is located came to be called Dalal Street in Hindi (meaning "Broker Street") due to the location of the
exchange.
On 31 August 1957, the BSE became the first stock exchange to be recognized by the Indian Government
under the Securities Contracts Regulation Act. Construction of the present building, the Phiroze
Jeejeebhoy Towers at Dalal Street, Fort area, began in the late 1970s and was completed and occupied by
the BSE in 1980. Initially named the BSE
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Towers, the name of the building was changed soon after occupation, in memory of Sir Phiroze Jamshedji
Jeejeebhoy, chairman of the BSE since 1966, following his death.
BSE established India INX on 30 December 2016. India INX is the first international exchange of India.
Mr. Ashish Kumar Chauhan. Shri Ashish Kumar Chauhan is the MD & CEO of BSE (Bombay Stock
Exchange), the first stock exchange of Asia. He is one of the founders of India's National Stock Exchange
("NSE") where he worked from 1992 to 2000. Based in Mumbai, India, the BSE lists close to 6,000
companies and is one of the largest exchanges in the world, along with the New York Stock Exchange
(NYSE), Nasdaq, London Stock Exchange Group, Japan Exchange Group, and Shanghai Stock Exchange.
The BSE has helped develop India's capital markets, including the retail debt market, and has helped grow
the Indian corporate sector. The BSE is Asia's first stock exchange and also includes an equities trading
platform for small-and-medium enterprises (SME). BSE has diversified into providing other capital
market services including clearing, settlement, and risk management. The BSE has been instrumental in
developing India's capital markets by providing an efficient platform for the Indian corporate sector to
raise investment capital. In the 1850s, stockbrokers would conduct business under a banyan tree in front
of the Mumbai town hall. After a few decades of various meeting locations, Dalal Street was formally
selected in 1874 as the location for the Native Share and Stock Brokers' Association, the forerunner
organization that would eventually become the BSE. Mumbai is now a major financial center in India and
Dalal Street is home to a large number of banks, investment firms, and related financial service
companies. The importance of Dalal Street to India is simisimiz.
In the third week of January 2008, the SENSEX experienced huge falls along with other markets around
the world. On 21 January 2008, the SENSEX saw its highest ever loss of 1,408 points at the end of the
session. The SENSEX recovered to close at 17,605.40 after it tumbled to the day's low of 16,963.96, on
high volatility as investors panicked following weak global cues amid fears of a recession in the US.

The next day, the BSE SENSEX index went into a free fall. The index hit the lower circuit breaker in
barely a minute after the markets opened at 10 am. Trading was suspended for an hour. On reopening at
10.55 am, the market saw its biggest intra-day fall when it hit a

low of 15,332, down 2,273 points. However, after reassurance from the market bounced back to close at
16,730 with a loss of 875 points. Over the course of two days, the BSE SENSEX in India dropped from
19,013 on Monday morning to 16,730 by Tuesday evening or a two-day fall of 13.9%. Less than a month
later, on 11 February 2008, the SENSEX lost 833.98 points, when Reliance Power fell below its IPO price
in its debut trade after a high-profile public offer. On 2015, The index crossed the historical mark of
30,000 after repo rate cut announcement by RBI. The index plummeted by over 1,624.51 points on 24
August 2015, the then worst one-day point plunge in the index's history. On 9 March 2020, Sensex
tumbled down by 1941.67 points amid the fears of and crisis. This was the second worst single-day fall in
the history, where the investors lost ₹ 6.50 lakh crores.
While on 12 March 2020, the index plunged down by 2919.26 points, the second–worst fall in the history,
ending in red to a 33-month low at 32,778.14. The fall wiped off ₹ 11.2 lakh crores wealth. On March,
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trading was halted for 45 minutes for the first time in 12 years since January 2008 due to lower circuit.
Sensex touched a low of 29,687.52 down by 3090.62 points (or 9.43%). However, after the 45-minute
halt, the index saw biggest intra-day recovery by 5,380 points to end up by 1325 points. Continuing the
losing streak, wealth worth ₹14.22 lakh crore was erased on 23 March 2020 as BSE SENSEX lost
3,934.72 points to end at 25,981.24. As on 21 January 2021, Sensex has recovered to 50,167.71

4.2 YEAR EFFECT OF STOCK MARKETS

YEAR EFFECT OF NSE

Indian benchmark indices posted their biggest daily percentage decline in 10 months on Friday, as a North
Korean threat to carry out a hydrogen bomb test in the Pacific Ocean rattled global markets. The Indian
government’s stimulus spending plan and jitters that it

would widen the fiscal deficit also contributed to the decline, which was led by bank stocks. The National
Stock Exchange’s 50-share Nifty index dipped 1.56% to close below the psychological 10,000-point mark
at 9,964.40 points. The BSE Sensex tumbled 1.38% to end at 31,922.44 points. North Korea struck back
at US President Donald Trump’s threats to destroy it, with Kim Jong Un warning of the “highest level of
hard-line countermeasure in history" and his foreign minister suggesting that could include testing a
hydrogen bomb in the Pacific Ocean.
Indian stocks are the most expensive among peers, prompting concerns about valuations overshooting
fundamentals amid slow economic growth and an elusive corporate earnings recovery. “Impact of good
and services tax (GST) could be more prolonged and earnings recovery could be delayed by a quarter or
two. As a result, a market correction at this juncture should not come as a surprise," said Ravi Gopala
Krishnan, head of equities at Canara Robeco Mutual Fund. The price-to-earnings ratio for FY19 is 18.48
and 18.18 for the Sensex and Nifty respectively, whereas that for MSCI Emerging Markets is 12.76 and
MSCI World 16.50. Analysts described the correction in the Indian markets as healthy and long overdue.
Most stocks in the capital goods, healthcare and metals sectors were under pressure on Friday. Among
sectoral indices, the BSE Metal index fell 3.9%, reacting to China’s credit downgrade by S&P Global
Ratings, triggering concerns that demand from the world’s second-biggest economy may decline. So far
this year, FIIs have bought a net $6.4 billion worth of stocks, but sold $761.55 million worth of Indian
equities in September.
Even as the Nifty surged to fresh record high on April 3 2019, it’s intriguing to note that the index has
grown by a whopping 11.70 times in the last 25 years. Notably, the Nifty surged past its earlier high of
11,760.20 in the morning trade on Tuesday, on the back of sustained FII flows ahead of the general
elections due to fresh optimism that PM Narendra Modi will return to power in 2019, say experts.

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Investors are convinced that Modi will retain power in the upcoming election 2019, veteran investor
Raamdeo Agrawal said in an interview to ET Now.

Journey to 10,000: After the Narendra Modi-led government rose to power, the Nifty scaled the 7,000-
mark on 12 May 2014. On the back of a euphoria, it soon surged past the 8000- mark on 01 September
2014. The next 1,000 took a while, as the Nifty breached 9,000 on 14 March 2017. “In 2017, Nifty
spurred too the 9,000-mark backed by strong buying from foreign investors,” noted a Kotak report. The
Nifty finally crossed the much awaited 5- figure mark of 10,000 on 25th July 2017, amid good monsoons,
strong corporate earnings and the rollout of Goods and Services Tax (GST).

Gain to 11,000: Nifty crossed the 11,000-mark on January 23rd 2018, on the back of fall in US crude oil
prices and the World Bank’s positive update on Indian economy. The move was significant. as it came
ahead of Union Budget 2018 presented on February 1 later that year. Record high of 11,761, the Nifty hit
a fresh record high of 11,761 on Monday. The index gained nearly 17% from record lows hit on October
26, 2018. In the near-term, the Nifty could top the crucial 12,000-mark. “We remain positive on markets
in long-term, but one can expect some profit booking from 12,000 levels, and near-term volatility from
events like credit policy, election results etc. cannot be ruled out. Any decline to around the 11,200 levels
would be a good opportunity to create long positions,” B Gopkumar, ED & CEO, Reliance Securities said
as it came ahead of Union Budget 2018 presented on February 1 later that year.
Record high of 11,761

This morning, the Nifty hit a fresh record high of 11,761 on Monday. The index gained nearly 17% from
record lows hit on October 26, 2018. In the near-term, the Nifty could top the crucial 12,000-mark. “We
remain positive on markets in long-term, but one can expect some profit booking from 12,000 levels, and
near-term volatility from events like credit policy, election results etc. cannot be ruled out. Any decline to
around the 11,200 levels would be a good opportunity to create long positions,” B Gopkumar, ED &
CEO, Reliance Securities said. The S&P BSE Sensex and NSE Nifty 50 indices ended on a flat note on
last session of 2020 as losses in FMCG, IT and state-run banking offset gains in metal, pharma and media
shares. Both benchmarks traded on a choppy note for the most part of the day, as derivatives (futures and
options) contracts for the month of December expiredat the end of the session. The Nifty touched a record
high of 14,024.85 during the session and the Sensex touched an all-time high of 47,896.97.

The Sensex ended 5 points higher at 47,751 and Nifty 50 index closed unchanged at 13,982. In the
calendar year 2020, the Sensex rallied 15.75 per cent and the Nifty climbed 14.90 per cent, making it the
best year for the indices since 2017, news agency Reuters reported. For the decade ended 2020, the
Sensex has gained a whopping 173 per cent and Nifty surged 169 per cent. A gush of liquidity by foreign
investors has lifted the benchmarks to new highs, according to analysts. On Wednesday, foreign
institutional investors (FIIs) had net bought Indian shares worth ₹ 1,824 crore. So far this calendar year,
FIIs have net purchased domestic equities worth $22.44 billion but net sold assets worth $14 billion in the
debt markets, NSDL data showed.
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Six of 11 sector gauges compiled by the National Stock Exchange ended higher, led by the Nifty Metal
and Pharma indices, which rose 0.7 per cent each. Auto, financial services, media and realty shares also
witnessed buying interest. On the other hand, PSU banking, FMCG, IT and private banking shares
witnessed mild selling pressure. Mid- and small-cap shares witnessed buying interest, with the Nifty
Midcap 100 index rising 0.5 per cent and the Nifty Small cap 100 index gaining 0.3 per cent. HDFC was
the top Nifty gainer, rising 1 per cent to close at ₹ 2,550 apiece on the BSE. Sun Pharma, Divi's Labs,
ICICI Bank, Asian Paints, Dr Reddy's Labs, Hindalco and HCL Technologies were also among the
gainers. NSE believes that Small and Medium Enterprises (SME) are crucial not only for economic
growth, but also critical for employment and inclusive growth. As of March 31, 2019, there are 189 SME
companies listed on NSE Emerge (SME Platform), of which 62 were listed during 2018-19 raising more
than H1,048 crores. During fiscal 2019, the aggregate value of Initial Public Offerings (IPOs) and Offer
for Sale (OFS) was around H208.33 billion. During FY2019, the number of listed companies available for
trading on NSE was 1,884 compared to 1,758 at the end of March 31, 2018. The market capitalisation of
securities available for trading on the Capital Market segment has increased by 6.34% during 2018-19.

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Table 4.1 YEAR EFFECT OF NSE

Year Year effect

2000 1264

2001 1059

2002 1094

2003 1880

2004 2081
2005 2837

2006 3966

2007 6139

2008 2959

2009 5201

2010 6185

2011 4624

2012 5905

2013 6304

2014 8283

2015 7946

2016 8786

2017 10531

2018 10863

2019 12168

2020 13982

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Fig: 4.1

TREND OF YEAR EFFECT OF NSE

16000

14000

12000

10000

8000

6000

Out of the total market capitalisation of H1,49,34,227 crores as on March 29, 2019, H1,05,921
crores were contributed by newly listed companies. Introduction of an electronicplatform for the
IPO process has resulted in paperless filing and significantly easing the process for the issuers.
Intermediaries and issuers no longer need to be present at Exchangepremises for completing
the activity of allotment. NSE has taken proactive measures by
sending email alerts to shareholders of listed companies alerting them on non-compliancesand
impending suspension of the listed company in which they hold shares which shareholders
have found to be very valuable. NSE has accorded high priority for resolution of investor
complaints and the Investor Services Cell facilitates resolution of complaints ofinvestors against
the listed corporate entities and NSE members.

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YEAR EFFECT OF BSE

Ariel (1987) found that, on an average, rates of return were significantly lower during the
second half of the month as compared to the first half. This research found that month of the
year effect occurred in USA as well as few other developed countries. The research revealed
that the return was higher in January month and in December was generally lowerin comparison
to returns in other months. Similar results were found by Jeffrey Jaffe and Randolph Westfield
(1988) in their investigation of stock markets of Australia, UK, Japan,and Canada. This research
found that returns over the second half of the month were lowerthan the returns over the first
half for Australia, UK and Canada. Wachtel (1942) was the first researcher to investigate the
January Effect. Haugen and Lakonishok (1988) studied the January Effect in detail and has
authored a book on this well-known calendar effect. Kok Kim Lian (2002) studied the Year of
Month Effect and Half Month Effect in the AsiaPacific stock markets.

The government had proposed to increase the surcharge levied on top of the applicable income
tax rate from 15 per cent to 25 per cent for those with taxable incomes between Rs2 crore and
Rs 5 crore, and to 37 per cent for those earning over Rs 5 crore, taking the effective tax rate for
them to 39 per cent and 42.74 per cent, respectively. The Sensex rallied 1,922 points, or 5.3
per cent, to end at 38,015, while the Nifty surged 569 points, or
5.3 per cent, to close at 11,274.2.That apart, the government announced a slew of policy
reforms, which included strategic sales of select public sector enterprises (PSEs) merger of
select public sector banks (PSBs), and an alternative investment fund of Rs 25,000 crore for
the realty sector among others. US-China trade talks: At the global level, flip-flop by the United
States (US) on trade related issues, especially with China, kept market participants on
tenterhooks throughout the year.

In November, market scaled fresh peaks one after another on the optimism around trade talks
between the two largest economies. In the latest development, both the countries haveagreed on
the terms of a “phase one” trade deal that reduces some US tariffs on Chinese goods while
boosting Chinese purchases of American farm, energy and manufactured goods. Pre COVID-
19, market capitalisation on each major exchange in India was aboutfeatured blue-chip
companies such as HDFC Bank, HDFC, TCS, Infosys, Reliance,Hindustan Unilever, ICICI

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Bank and Kotak Bank, without which Sensex returns would have been negative? However, in
the start of 2020, there was overall recovery which led toboth NSE and BSE traded at their
highest levels ever, hitting peaks of 12,362 and 42,273 respectively. At the beginning of the
year, there were close to 30 companies that were expected to file IPO’s. The market conditions
were generally favourable as they witnessedrecord highs in mid-January.

Ever since COVID 19 strike, markets loom under fear as uncertainty prevails. lt has sent
markets around the world crashing to levels not witnessed since the Global Financial Crisisof
2008. Following the strong correlation with the trends and indices of the global market as BSE
Sensex and Nifty 50 fell by 38 per cent. The total market cap lost a staggering 27.31% from
the start of the year. The stock market has reflected the sentiments this pandemic unleashed
upon investors, foreign and domestic alike. Companies have scaled back; layoffs have
multiplied and employee compensations have been affected resulting innegligible growth in the
last couple of months. Certain sector such as hospitality, tourism and entertainment have been
impacted adversely and stocks of such companies have plummeted by more than 40%. While
the world has witnessed many financial crises in thepast, the last one being the global recession
of 2008, the current coronavirus crisis is different from the past fallouts. In response to current
turmoil, RBI and the Government of India has come up with a slew of reforms such as
reductions of repo rate, regulatory relaxation by extending moratorium and several measures
to boost liquidity in the system howsoever the pandemic has impacted the premise of the
corporate sector. Payment’s deferrals, subdued loan growth, rising cases of bad loans and
sluggish business conditions have impaired the growth and the health of the economic activity.
Deceleration of GDP growth, demand-supply chain, cut in discretionary expenses and CAPEX
has been the observed during the lockdown, which has led to falling in household incomes,
marketing spends, reduced travel cost and hiring freeze. Companies with innovative products,
increasing distribution reach, technology-driven processes and healthy balance sheet would
revive the growth momentum post lockdown.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Table 4.2 YEAR EFFECT OF BSE

Year Year effect

2000 5006

2001 3972

2002 3262

2003 3377

2004 5839

2005 6603

2006 7378

2007 13787

2008 20187

2009 9647

2010 17465

2011 20509

2012 15455

2013 19427

2014 21171

2015 27499

2016 26118

2017 26626

2018 34057

2019 36054

2020 41306

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Fig :4.2

TREND OF YEAR EFFECT OF BSE

50000

40000

30000

20000

MARKET CAPITALISATION OF STOCK MARKETS (2000-2020)

Market capitalisation Market capitalization is one of the most effective ways of evaluating the
value of a company. The evaluation of a company’s value is done based on a company’s
stocks. Essentially, this is defined by the total market value of the outstanding shares of
a company. This simple fact also means that publicly owned companies are the only ones
which can be evaluated by this method of evaluation. Fluctuating market conditions and stock
prices also impact the evaluation of a company when this method of evaluation is being used.

Large-cap: These are some of the most stable groups of companies in the market.
Consequently, investing in these companies is the least risky option.

Mid-cap: Companies which have had a certain growth and are somewhat stable; and yet have
immense potential of growth, come under this group of evaluation by market capitalization.
Small-cap: Constituting companies which have the least market cap are the riskiest of all
stocks.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Table: 4.3 Top 10 Indian companies based on market cap

Company name Market capitalization (in crore)

Reliance Industries Limited Rs.8,49,234

Tata Consultancy Services Limited Rs.7,91,772

HDFC Bank Limited Rs.6,22,521

ITC Limited Rs.3,73,950

Hindustan Unilever Limited Rs.3,72,708

Development Finance Corporation Rs.3,46,629

Infosys Limited Rs.3,16,410

State Bank of India Rs.2,81,705

Kotak Mahindra Bank Limited Rs.2,61,730

ICICI Bank Limited Rs.2,53,192

India's stock market is now the seventh biggest, up three spots, in the world as total market
capitalisation increased to $2.7 trillion. The BSE Sensex crossed the 51,000, while the NSE
benchmark Nifty crossed the 15,000 level for the first time on February 2021. The benchmark
Nifty has gained 6.9% so far in 2021. India's stock market is now bigger than Canada, Germany
and Saudi Arabia. India's stock market is the second-best performer among the top 15 countries
in 2021 and soon it may overtake France to become the sixth biggest in the world.
MARKET CAPITALISATION OF NSE (NIFTY)
NIFTY 50 is NSE's diversified index comprising stocks from top 50 Indian companies across
14 sectors. It tracks the market performance of the largest cap companies & hence, broadly
reflects the Indian economy. The NIFTY 50 index is India’s premier stock index. Launched on
April 1, 1996, it's computed using the free float market capitalization method.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Table 4.4 Nifty 50 companies as on 18-Mar-2021

Compan P/ EV
y Name CMP Price Market 52W 52W R P/E B /
(M. Cap) Change Cap High Low O V EBI
% (Cr) E T
DA
Shree
Cement( 26,659 -0.59 96,759 29,09 15,50 13.60 45.38 6.99 26.31
8 0
L)
55.3
Nestle(L) 16,203 -1.55 1,58,682 18,82 12,58 70.26 76.20 7 54.62
1 9
Bajaj
Finserv( 9,460 -0.89 1,51,894 10,58 3,986 21.78 41.21 4.51 -
6
L)
Maruti
Suzuki( 7,114 0.72 2,13,364 8,400 4,002 7.13 47.72 4.36 28.86
L)
Ultratech
Cement( 6,514 -0.09 1,88,167 6,946 2,913 15.64 27.43 4.62 22.22
L)
Bajaj
Finance( 5,372 0.24 3,22,908 5,922 1,783 19.13 87.60 9.61 -
L)
Dr.
Reddys 4,211 -3.34 72,455 5,515 2,498 13.41 33.31 4.35 29.10
Lab(L)
Bajaj 3,663 2.46 1,03,462 4,361 1,793 23.05 22.20 4.36 19.67
Auto(L)
Britanni 31.2
a 3,439 -0.84 83,525 4,015 2,101 31.13 44.56 3 45.54
Inds(L
)
10.7
Divis 3,270 -3.19 89,682 3,913 1,633 17.94 47.95 8 48.52
Lab(L)
Hero
MotoCorp( 3,108 -2.62 63,770 3,629 1,475 21.32 23.45 4.36 14.83
L)

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

12.3
TCS(L) 3,037 -2.44 11,68,00 3,345 1,547 36.47 37.40 8 26.89
5

Eicher
Motors( 2,664 0.67 72,342 3,036 1,246 19.49 64.30 7.01 30.45
L)
HDFC(L) 2,517 0.11 4,53,378 2,895 1,473 22.02 40.92 4.52 -

Asian 21.0
Paints( 2,404 -0.76 2,32,380 2,871 1,432 27.51 84.53 7 55.57
L)
Hindusta 11.1
n 2,215 -0.63 5,23,765 2,614 1,756 84.35 71.51 9 52.50
Unilever(
L)
Reliance
Industries( 2,010 -2.22 13,89,70 2,369 867.5 9.85 32.89 2.26 18.28
7
L)
Kotak
Mahindr 1,831 -1.96 3,70,157 2,049 1,000 13.08 56.52 6.22 -
a
Bank(L)
HDFC 1,490 -0.35 8,24,226 1,650 738.9 16.54 26.87 4.29 -
Bank(L)
185.5 19.9
Titan Co(L) 1,468 -0.33 1,30,740 1,621 720.0 23.00 0 3 54.78

Larsen
& 1,428 -0.68 2,01,993 1,593 661.0 11.32 86.56 3.45 29.33
Toubro(
L)
Grasim
Industries( 1,394 1.79 90,106 1,409 380.0 7.49 22.25 1.50 8.93
L)
Infosys(L) 1,336 -3.67 5,91,039 1,406 511.1 24.90 31.78 8.32 25.50

Indusin
d 1,003 -0.63 78,037 1,119 235.6 14.71 34.49 1.98 -
Bank(
L)

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Tech
Mahindra( 996.1 -2.36 98,772 1,081 470.2 16.70 23.80 4.16 16.15
L)
HCL 948.3 -3.97 2,67,974 1,074 375.5 23.73 20.28 4.73 15.07
Tech.(L)
SBI
Life 890.1 0.15 88,886 984.0 520.0 0.00 61.13 9.20 -
Insuran(
L)

Mahindra
& 845.4 1.03 1,04,024 952.1 245.8 1.08 0.00 3.02 17.36
Mahindra(
L)
Cipla(L) 754.9 -2.32 62,327 878.5 363.9 13.05 23.44 3.31 22.68

Axis 717.9 -1.37 2,22,968 800.0 285.0 2.15 88.35 2.28 -

Bank(L)
Tata 705.0 0.08 84,818 782.0 250.9 9.40 12.90 1.07 8.17
Steel(L)
HDFC 102.8 17.8
Life 680.5 -1.26 1,39,265 746.0 339.1 0.00 6 0 -
Insurance(
L)
Adani
Ports 679.9 -1.31 1,39,967 768.4 203.4 19.74 34.64 5.04 22.78
&Special(
L)
UPL(L) 602.4 -0.85 46,419 639.2 240.3 12.48 19.14 2.44 10.04

ICICI 578.4 -1.85 4,07,463 679.3 269.0 7.25 31.32 3.02 -

Bank(L)
Sun
Pharma 574.5 -1.83 1,40,409 653.7 315.2 8.93 58.27 3.12 19.67
Inds.(L)
Bharti
Airtel( 526.0 0.60 2,85,244 623.0 381.1 -7.33 0.00 3.44 17.66
L)
BPCL(L) 426.9 -1.16 93,690 482.4 252.0 13.24 16.32 2.47 16.32

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

JSW 423.1 0.04 1,02,248 435.0 132.5 18.29 22.15 2.57 11.10
Steel(L)
Wipro(L) 410.8 -2.09 2,29,876 467.2 159.6 16.76 22.65 3.94 16.55

SBI(L) 366.6 -0.39 3,28,470 426.4 149.6 7.16 18.73 1.48 -

Hindalco(L) 331.2 1.47 73,343 361.2 85.05 6.19 32.98 1.23 7.93

Tata -
Motors( 306.9 0.34 1,01,552 357.0 63.60 16.6 0.00 1.87 8.74
L) 9
Power
Grid 221.1 0.23 1,15,409 239.0 129.8 15.80 11.70 2.22 8.15
Corpn.(L
)

ITC(L) 217.4 3.25 2,59,142 239.2 139.0 25.01 19.88 4.50 13.08

Coal 137.1 -2.04 86,217 162.9 109.5 57.06 6.76 2.32 2.92
India(L)
GAIL 135.2 -2.31 62,398 157.9 65.70 14.13 10.40 1.37 8.22
India(L)
ONGC(L) 110.0 0.55 1,37,628 122.3 57.55 9.11 83.22 0.70 5.21

NTPC(L) 104.3 -1.97 1,03,221 114.8 74.00 9.79 15.60 0.92 9.52

Indian
oil 97.30 -0.92 92,447 105.0 71.15 12.77 11.75 0.90 8.30
Corp.
Source: www.nseindia.com

Benefits of investing in NIFTY50 Index Funds:

Diversification – It deploys the investment in multiple companies and sectors thereby

reducing risk compared to investing in a single or small set of companies. Over time Nifty50
replaces the underperforming companies at a market level with performing one.
Wide market presence – Nifty 50 Index funds are quite popular in India and have a
substantial market presence.
Low cost - These funds have lower operating expenses as fund managers simply need to

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

replicate the index.

Inflation + returns - Index funds have consistently generated inflation beating returns over
the long term. Coupled with low costs it becomes excellent value for investors.

4.4.2 MARKET CAPITALISATION OF BSE (SENSEX)

The sum of the market value of BSE-listed companies crossed Rs 200 trillion for the first time,
on February 2021. The Sensex, ended at 50,614.29, up 358.54 points. In dollar terms,the market
cap figure of BSE-listed firms is $2.75 trillion -- the seventh highest globally. The country’s
market cap-to-GDP ratio is now more than 100 per cent. Its nominal GDP (revised estimate for
FY21) at current prices is around Rs 195 trillion.

The combined market cap of BSE-listed companies had topped the Rs 100 trillion-mark in
December 2014. Back then, the market cap-to-GDP ratio was at 80 per cent. In September2007,
when the market cap crossed Rs 50 trillion, the ratio was similar to the current level.The markets
had come off more than 50 per cent in the following year due to the global financial crisis. In
less the one year, India’s market cap (based on BSE-listed companies) has nearly doubled. At
the peak of the coronavirus-induced sell-off in March 2020, the market cap had plunged to Rs
102 trillion.

BSE MD and CEO, Ashishkumar Chauhan said, "It is heartening to note BSE continues to
remain the primary wealth creator of the nation. It is also good to note that no other developing
country at the stage of India’s development has a thriving capital market as compared to India.
BSE has also become the world's 9th largest exchange in terms of listed companies market
capitalization, as on date." The four recently listed companies which include Antony Waste
Handling, Indian Railway Financing Corporation, Indigo Paints, and Home First Finance
Company, added ₹52562.21 crore in total m-cap. The table below is an important data on BSE
30 Companies Share prices, 52-week High and Low, PE ratio etc.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
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Table 4.5 BSE 30 companies as on Mar-2021

Compan Marke
CM Price 52W 52W RO P/E P/B EV/
y Name t Cap
P Chang Hig Low E V EBIT
(M. Cap) (Cr)
e h DA
Power
Grid 227.5 2.89% 1,15,670 239.0 129.8 15.80 11.73 2.22 8.16
Corpn.(L)
NTPC(L) 105.7 1.83% 1,00,603 114.8 74.00 9.79 15.20 0.90 9.43

Hindustan
Unilever( 2,250 1.56% 5,20,464 2,614 1,756 84.35 71.06 11.12 52.17
L)
ITC(L) 220.3 1.36% 2,67,573 239.2 139.0 25.01 20.53 4.65 13.55

HCL 960.5 1.29% 2,57,337 1,074 375.5 23.73 19.47 4.55 14.45
Tech.(L)

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
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Table 4.5 BSE 30 companies as on Mar-2021

Compan Marke
CMP Price 52W 52W RO P/E P/B EV/
y Name t Cap
Chang Hig Low E V EBIT
(M. Cap) (Cr)
e h DA
TCS(L) 3,071 1.14% 11,39,52 3,345 1,547 36.47 36.48 12.08 26.21
4
Nestle(L) 16,368 1.02% 1,56,219 18,82 12,589 70.26 75.02 54.51 53.76
1
Kotak
Mahindr 1,847 0.87% 3,62,904 2,049 1,000 13.08 55.41 6.10 -
a
Bank(L)
Bharti
Airtel( 529.1 0.60% 2,86,962 623.0 381.1 -7.33 0.00 3.46 17.74
L)
Reliance
Industries( 2,020 0.54% 13,58,83 2,369 867.5 9.85 32.16 2.21 17.93
8
L)
Sun
Pharma 577.1 0.45% 1,37,842 653.7 315.2 8.93 57.21 3.06 19.30
Inds.(L)
SBI(L) 367.0 0.11% 3,27,176 426.4 149.6 7.16 18.65 1.47 -

Infosys(L) 1,335 -0.12% 5,69,331 1,406 511.1 24.90 30.62 8.02 24.52

Asian
Paints( 2,400 -0.16% 2,30,615 2,871 1,432 27.51 83.89 20.91 55.14
L)
ICICI
Bank(L) 577.0 -0.23% 3,99,926 679.3 269.0 7.25 30.74 2.97 -

Titan Co(L) 1,464 -0.24% 1,30,314 1,621 720.0 23.00 184.90 19.86 54.60

Axis 716.0 -0.26% 2,19,920 800.0 285.0 2.15 87.14 2.25 -

Bank(L)
HDFC
Bank(L) 1,486 -0.29% 8,21,305 1,650 738.9 16.54 26.77 4.28 -

HDFC(L) 2,505 -0.46% 4,53,865 2,895 1,473 22.02 40.96 4.52 -

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
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Table 4.5 BSE 30 companies as on Mar-2021

Company Marke
C Price 52W 52W RO P/E P/B EV/
Name (M. t Cap
M Chang Hig Low E V EBIT
Cap) (Cr) h
P e DA
Indusind
Bank(L) 997. -0.54% 77,546 1,119 235.6 14.71 34.28 1.97 -
2
Tech
Mahindra(L) 990. -0.59% 96,444 1,081 470.2 16.70 23.24 4.06 15.74
3
Ultratech
Cement(L) 6,47 -0.61% 1,87,999 6,946 2,913 15.64 27.41 4.61 22.20
3
Tata
Steel(L) 700. -0.65% 84,884 782.0 250.9 9.40 12.91 1.07 8.17
4
Bajaj
Finserv(L) 9,36 -0.68% 1,50,059 10,58 3,986 21.78 40.71 4.45 -
5 6
Bajaj
Auto(L) 3,63 -0.72% 1,06,008 4,361 1,793 23.05 22.75 4.47 20.17
7
ONGC(L) 109. -0.91% 1,38,383 122.3 57.55 9.11 83.68 0.70 5.24
0
Mahindra &
Mahindra(L) 835. -1.16% 1,05,093 952.1 245.8 1.08 0.00 3.05 17.55
5
Maruti
Suzuki(L) 7,00 -1.56% 2,14,904 8,400 4,002 7.13 48.06 4.39 29.06
3
Bajaj
Finance(L) 5,27 -1.78% 3,23,686 5,922 1,783 19.13 87.81 9.64 -
6
Larsen &
Toubro(L) 1,39 -2.13% 2,00,617 1,593 661.0 11.32 85.97 3.43 29.14
8

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Benefits of investing in SENSEX top 30 companies include:

• 1. Better returns – A historical back test on the top indices in India viz. the Nifty 50 and
BSE Sensex, reveals that investing in the Sensex can return slightly higher returns than theNifty
50. Keep in mind to choose a Sensex based index fund with high liquidity.
• 2. Diversification – Investing in an index fund automatically extends you the benefit of
portfolio diversification, thereby reducing portfolio risk.
• 3. Less expensive - Being a passively managed fund you are required to pay minimal fees.
This essentially means lesser expenses to eat into your returns.

RISK AND RETURN OF INDIA STOCK MARKETS (2000-2020)

One of the major objectives of investment is to earn and maximize the return. Return on
investment may be because of income, capital appreciation or a positive hedge against
inflation. The expected return may differ from realized return. In security analysis, we are
primarily concerned with returns from the investor perspective. Our main concern is to
compute or estimate the returns for an investor on a particular investment.
According to the dictionary, Risk means existence of volatility in the occurrence of an expected
incident. Higher the unpredictability greater is the risk. According to this definition risk may
or may not involve money. All investments involve risk of one type orthe other. Risk and return
are of two sides of the investment coin. Risk is associated with the possibility of not realizing
return or realizing less return than expected. The degree of risk varies on the basis of features
of the assets, investment instruments, the mode of investment, the issuer of the securities etc.
Thus, risk of an investment is the variance associated with its returns. The chance that an
investment's actual return will be different than expected. Risk includes the possibility of losing
some or all of the original investment. Different versions of risk are usually measured by
calculating the standard deviation of the historical returns or average returns of a specific
investment. A high standard deviation indicates a high degree of risk. We can distinguish
between expected return and realized return from an investment. The expected return is
uncertain future return that an investor expects to get from his investment. The realized return,
on contrary, is the certain return that an investor makes the investment decision based on
expected returns from the investment. The actual return realized from an investment may not

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
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correspond to expected return. This possibility of variation of the actual return from the
expected return is termedas risk. Where realization corresponds to expectations exactly, there
would be no risk.

The empirical evidence against the CAPM by Fama and French (1992) has generated a lotof
debate in the west and has called for major re-examination of the CAPM model. While many
studies have been conducted on CAPM in the capital markets of the western countries, there
are few studies in the Indian context. Studies by Varma (1988), Yalwar (1988), Srinivasan
(1988) have generally supported the CAPM theory. Sudies by Basu (1977), Gupta and Sehgal
(1993), Vaidyanathan (1995), Madhusudhan (1997), Sehgal
(1997), Ansari (2000), Rao (2004), Manjunatha and Mallikarjunappa (2006,2007) have
questioned the validity of CAPM in Indian markets. But Ansari (2000) has opined that the
studies of CAPM on the Indian markets are scanty and no robust conclusions exist on this
model.

4.3 RISK AND RETURN OF NSE

Nifty50 is a broader index compared to Sensex, consisting of 50 large companies listed on

National Stock Exchange of India (NSE). Over the years, Nifty50 has be-come the most widely
used benchmark for exchange traded products in Indian equity market. Growth rateof India’s
GDP is fairly captured in the growth story of Nifty50. Over the years, India has been one of the
fastest growing large economies of the world which is also reflected in therise of Nifty50 Index.

Nifty 50 returns and Nifty 50 total returns index

The dividends of the stocks in the Nifty 50 are assumed to be reinvested in the index after the
close of the ex-date. Such an index is called the Total Returns index. The Nifty 50 hasa TRI
version also available and the same is used as a benchmark for several mutual funds.The total
returns index therefore has a higher return than the Nifty 50 when considered forany period of
time.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
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Table 4.6

Annual returns of Nifty

Year Annual return

2000 -14.65%
2001 -16.18%
2002 3.25%
2003 71.90%
2004 10.68%
2005 36.34%
2006 39.83%
2007 54.77%
2008 -51.79%
2009 75.76%
2010 17.95%
2011 -24.62%
2012 27.70%
2013 6.76%
2014 31.39%
2015 -4.06%
2016 3.01%
2017 28.65%
2018 3.15%
2019 12.02%
2020 14.17%

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
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Fig: 4.6

TREND OF RISK AND RETURN OF NSE

0.8

0.6

0.4

0.2

Nifty has a CAGR of 11.1% in the last 20 years (since 1999) and 8.87% in the last 10 years(since
2009 – this is an aberration as it came on back of monster recovery from the lows ofMarch 2009
to Dec 2009 and thereby depressing the returns from Dec 2009 to Dec 2019 period). s at 1205
on February 27, 2002, just before a lacklustre budget dashed investors’ hope. The annual low
came in late October with Nifty at 920. With an average value of 1056 for Nifty and a standard
deviation of 68 points, this is a very narrow range. But the returns were a lot better than in
calendar year 2001 (minus 20 per cent) and 2000 (minus
23 per cent). That’s too bad years, followed by a marginal recovery. The market pulled above
it.

The annual high of Nifty was own 200 DMA in the last quarter and has stayed above that
benchmark. This is a reliable signal of a new bull market. The moving average signal is
reinforced by the breach of a falling minus 40-degree trend line that connected successivelylower
tops between February and November. The recovery has come on decent volumes, which
suggests that it's based on rising demand and, hence, sustainable.

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"Oil is a big question mark -- there will be volatility here but we don't know the direction.The
Iraq situation will affect global prices and the speed of divestment of public sector units will
affect domestic sentiments. If India's economy does show strong overall recovery, there will
be turnarounds in many other sectors". Devangshu Datta, independentanalyst.

Nifty has shed over 29 per cent since May 11, 2006. The mid-cap and small-cap stocks continue
to be the worst affected in this market. The CNX mid-cap index is lighter by 35 per cent since
May. The market saw the beginning of a bullish formation, an Ascending Triangle, on the
monthly chart at the beginning 2007. This formation took seven years to complete. In 2014,
the Nifty50 achieved a positive breakout. This Ascending Triangle formation was between
3,818 on the lower side and 6,350 on the higher side.

RISK AND RETURN OF BSE

The 2+ decades-long journey has been a volatile one. In the last 20 years, we have had:

• 15 years with positive returns

• 5 years with negative returns

In 2002-2003, the annual index returns after that have been 3.5%, 72.9%, 13.1%, 42.3%,
46.7%, 47.1%. And this is not normal. This was unprecedented and chances are high that such
a sequence of high positive returns, might not get repeated again for many years if notdecades.
So do not have such expectations of multi-year high returns from stock markets. Infact, we
should be ready to face ugly years like 2008-2009 – when index itself f more than 50% and
individual stocks crashed by 80-90%. I have said countless times that one should invest more
in market crashes or when everyone else is giving your reasons to not invest. But that is easier
said than done. When a crisis like the one in 2008-2009 comes,it is not easy to combine your
cash with courage.

Intense selling today brought the BSE Sensex to its lowest closing of 2006. Weak global
markets and worries over inflation and higher interest rates continued to drag stock prices down
to sharply lower levels on the major Indian bourses.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

During the financial crisis of 2007–2008, the stock markets in India fell on several occasions
in 2007 as well as 2008. In 2007, there were five sharp falls in the stock markets.On 2 April
2007, The Sensex fell by 617 points to 12,455 though during the course of the day, it fell
further. As per the analysts at rediff, "The Sensex opened with a huge negative gap of 260
points at 12,812 following the Reserve Bank of India [Get Quote] decision to hike the cash
reserve ratio and repo rate. Unabated selling, mainly in auto and banking stocks, saw the index
drift to lower levels as the day progressed. The index tumbled to a low of 12,426 before finally
settling with a hefty loss of 617 points (4.7%) at 12,455.
On 21 November 2007, trying to explain the fall, rediff recounted that "Mirroring weaknessin
other Asian markets, the Sensex saw relentless selling." The index tumbled to a new lowof
18,515 - down 766 points from the previous day's close. It finally ended with a loss of 678
points at 18,603. " On 21 Jan 2008, the BSE fell by 1408 points to 17,605 leading to one of the
largest erosions in investor wealth. The BSE stopped trading for a while at 2:30 pm due to a
technical snag although its circuit filter allows swings of up to 15% before stopping trading for
an hour. Referred to in the media as "Black Monday", the fall was blamed by analysts at HSBC
mutual fund and JP Morgan on a large variety of reasons including change in the global
investment climate, fears of United States' economy going into a recession, FIIs and foreign
hedge funds selling in order to reallocate their funds fromrisky emerging markets to stable
developed markets, a cut in US interest rates, global bourses (often referred to as event related
volatility), volatility in commodities markets, a combination of global and local factors
("...other emerging markets were down nearly 20%so India is playing catch-up..."), huge build-
ups in derivatives positions leading to margin calls and that many IPOs had sucked out liquidity
from the primary market into the secondary market. HSBC mutual funds analysts predicted
further falls in the stock market,and the analysts at JP Morgan were of the opinion that market
would fall a further 10-15%.
On the next day on 22 January 2008, the Sensex again fell by 875 points to 16,729. Jan 22,
2008: The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down
2,273 points. However, it recovered losses and closed at a loss of 875 points at 16,730. The
Nifty closed at 4,899 at a loss of 310 points. Trading was suspended for onehour at the
Bombay Stock Exchange after the benchmark Sensex crashed to a low of 15,576.30 within
minutes of opening, crossing the circuit limit of 10 per cent.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

On 24 August 2015, the BSE Sensex crashed by 1,624 points. Finally, the indices closed at
25,741 points and the Nifty to 7,809 points. The reason given for this crash was given asa
ripple effect due to fears over a slowdown in China, as the Yuan had been devalued two
weeks ago leading to a fall in the currency rates of other currencies and the rapid selling of
stocks in China and India. The Shanghai stock exchange too fell by 8.5%. A variety of other
reasons too were given for this fall by analysts including disappointing earnings in the first
quarter for many Indian companies, somber commentaries by their management leading to
doubts regarding their recovery and a below average monsoon for that year

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Table 4.7 Annual returns of Sensex

Year Annual return

2000 -20.6%
2001 -17.9%
2002 3.5%
2003 72.9%
2004 13.1%
2005 42.3%
2006 46.7%
2007 47.1%
2008 -52.4%
2009 81.0%
2010 17.4%
2011 -24.6%
2012 25.7%
2013 9.0%
2014 29.6%
2015 -5.0%
2016 1.9%
2017 27.9%
2018 5.9%
2019 14.38%
2020 15.75%

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

Fig : 4.7

Trend of Risk and return of BSE

0.8

0.6

0.4

0.2

The stock markets in India continued to fall in 2016. By 16 February 2016, the BSE had seen a fall
of 26% over the past eleven months, losing 1607 points in four consecutive daysof February. The
reasons given for this included NPAs of Indian banks, "global weaknesses" and "global factors". In
the four months from November 2015 to February 2016, FIIs were reported to have sold equities
worth Rs 17,318 crore as, in the opinion of analysts, concerns grew over growth in China and as
crude oil prices tumbled below $30 per barrel.

On 9 November 2016, crashed by 1689 points, believed by analysts to be due to the crack down on
black money by the Indian government, resulting in franctic selling. The nosedived by 6% to 26,902
and the Nifty dropped by 541 points to 8002. These were saidto be due to the demonetization drive
by the Modi government. The Hindu was of the opinion that the weakening rupee and the US
presidential election too had some bearing onthe behavior of investors. shares sold after 12 months.

On 1 February 2020, as the FY 2020-21 Union budget was presented in the lower house ofthe Indian
parliament, Nifty fell by over 3% (373.95 points) while Sensex fell by more than2% (987.96 points).
The fall was also weighed by the global breakdown amid coronavirus pandemic centered in China.
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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

On 28 February 2020, Sensex lost 1448 points and Nifty fellby 432 points due to growing global
tension caused by coronavirus, which W.H.O said hasa pandemic potential. Both BSE and NSE fell
for the entire five days of the week ending with the worst weekly fall since 2009.On March 4 and 6,
markets fell by around 1000 points and several crores of wealth was wiped out. On 6 March 2020,
Yes Bank was takenover by RBI under its management for reconstruction and will be merged with
SBI. This was done to ensure smooth functioning of the bank as it was struggling for couple of years
to cope up with heavy pressure due to cleaning of bad loans. On 9 March 2020, the Sensexfell by
1,941.67 points, while Nifty-50 broke down by 538 points. The fear of COVID-19outbreak has
created havoc all over the globe and India is no exception. Further, the recentYes Bank crisis also
made the markets fell. The markets ended in red with Sensex closing on 35,634.95 and Nifty-50 on
10,451.45.

On 12 March 2020, the Sensex fell by 2919.26 points (-8.18%), the worst continuation of the week
in the history while Nifty-50 broke down by 868.25 points (-8.30%) amid WorldHealth Organization
(WHO) declaring Coronavirus outbreak as "pandemic”. Sensex endedto 33-month low of 32778.14.
On 16 March 2020, Sensex plunged by 2,713.41 points
(around 8%), the second worst fall in its history. On the other hand, Nifty ended below 9200–mark
at 9,197.40 due to global economic recession. However, the Sensex continued to fall straight for 4–
continuous days till 19 March 2020, losing 5815 points during the period. On 23 March 2020, Sensex
lost 3,934.72 points (13.15%) and Nifty plunges 1,135points (12.98%) at 7610.25 as coronavirus-
led lockdowns across the world triggered fearsof a recession. These are now the lowest levels since
2016. It's witnessing the biggest weekly loss since October 2008, as the increasing number of
coronavirus cases in India aswell as globally.

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

CHAPTER -05
FINDINGS, SUGGESTIONS AND CONCLUSION
Stock market is the physically existing institutionalised set up where instruments of security stock
market like shares, debentures, bonds, securities are traded. Stock market makes a floor available to
the buyers and sellers of stocks and liquidity comes to the stocks.At this scenario the importance of
investing in stock market is getting higher. The numberof investors and the number of stock market
out of which a majority are online markets , are increasing day to day. Currently investing in stock
market and having an intraday trading is considered as the best way to earn money. Considering its
importance the presentstudy concentrate on ‘A Study on Indian Stock Market: NSE and BSE’. The
objectives of the study are to study about the emerging stock markets in India such as NSE and BSE,
to study about the trend of year effect of the Indian stock market (BSE andNSE) from 2000 to 2020,
to examine the market capitalisation of Indian stock market (NSEand BSE) from 2000 to 2020, to
examine the trend of risk and return of Indian stock market(NSE and BSE) from 2000 to 2020 and to
study about the type of trading preferred by the investors in stock market. In order to assess the
objective both primary data and secondarydata were used. The primary data were collected from 30
respondents from Thrichur districtby using google form. The secondary data was collected from
various journals, articles, publications and online websites.

Findings of the study

• Nifty lost 1,135 points (12.98%) to 7610.25.

• The biggest stock market crashes in India were caused mainly due to covid19 pandemic, 2008
financial crisis, Harshad Mehta scam.
• Nifty has less risk and higher liquidity than Sensex. Nifty suffer lower market impact cost
than Sensex.
• Despite a population of over 1.2 billon, there exist only 20 million active trading accounts in
India.
• The banking sector have maximum risk and return of 1.9 and 10 respectively ICICI in
automobile sector Eicher motor have maximum return of 35.9 Ashok Leyland have maximum
risk of 1.9 IT sectors have maximum return of 17.7 and maximum risk of Oracle of 6.6 and
in fast moving consumer goods sector, Godrej have maximum return of 14.8 and highest risk
in ITC of 0.5.
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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

• The stock of bank of India, HDTV bank, Mahindra bank are less volatile in nature.The stock
of federal bank, Indus land bank, Canara bank, ICICI bank, PNB, SEBI are moderately
volatile in nature. The stock of yes bank and axis Bank have high volatile in nature.

• Among all the investment avenues in the stock market banking is considered as themost
sensitive investment avenue the fine stocks of banking sectors shows Arch effect which
means period of high vitality is followed by similar high volatility andlow is followed by low
volatility.
• The S&P 500 experienced it’s fastest ever bear market, clocking in at just 33 days before it’s
third fastest recovery to a break-even level in about 5 months.
• 80% of the stockholders invest/trade in stock market for higher return rather than safety and
liquidity.
• 50% of the stockholders got information regarding stock market from financial advisors or
brokers.
• 63% of the stockholders prefer to have long term trading as it involves less risk. Intraday
trading has higher risk thus only 7% preferred intraday trading.
All the stockholders prefer to have online mode of trading. As the advancement of technology
and the pandemic scenario have made stock market into an online nodeof trading.

Suggestions

• To introduce an automated monitoring system that may control price manipulation, and inside trading.
• To introduce a fully computerized system for settlement of transactions.
• To force the listed companies to publish their annual reports with actual and proper information that
can ensure the interests of investors.
• To control and abolish the kerb market form premises of the stock market.

• To take remedial action against the issues of fake certificates.

• The composite Quotation system ( CQS ) should be introduced and implemented that available the
exchange specialist bid-ask quotes to the subscribers.
• To make arrangement to set-up merchant banks, investment banks and flotation of more mutual
funds particularly in the private sectors.
• Banks, insurance companies and other financial institution should be encouraged to deal in share
business directly.
• The brokers should not be allowed to deal in the Scripps on their own accounts.
• The management of stock market should be vested with professionals and should not in any way be
linked with the ownership of stock exchange and other firms.
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A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

CONCLUSUON

Indian stock market now grown into a great material with a lot of qualitative inputs andemphasis
on investor protection and disclosure norms. The market has become automated, transparent and
self-driven. It has integrated with global markets, with Indian companies seeking listing on
foreign capital markets exchange, off shore investments coming to India and foreign funds
floating their schemes and thus bringing expertise in to our markets. India has achieved the
distinction of possessing the largestpopulation of investors next to the U.K., perhaps ours is the
country to have the largest number of listed companies with around several equity fund
management avenues and National Fund managers most of them automated. India now has world
class regulatorysystem in place. Thus, at the dawn of the new millennium, the equity funds market
hasincreased the wealth of Indian companies and investors. No doubt strong economic recovery,
upturn in demand, improved market structure, and other measures have also been the
contributory driving forces. Even though Covid pandemic has fall in India stock market, it
recovered with huge hikes along with the economic recovery of the nation.

BIBLIOGRAPHY

BOOKS/JOUNALS

• Anju balan (2013), Indian stock market- review of literature, TRANS Asian journal of
marketing and management research
• Avijan Datta, gautham bandopadhyay, prediction of stock performance in the Indian stock
market using logistic regression, international journal of business andinformation.
• Gangan deep sharma &B. S Bodla, Inter linkages among stock market of south Asia, Asia
Pacific journal of business administration
• Peter sellin, monetary policy and stock market: theory and empirical evidence sveriges
riskbank working paper series.
• Alok kumar Mishra, stock market and foreign exchange market in india: are they related?
South Asia economic journal

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SHRI GAVISIDDESHWAR ART’S SCIENCE AND COMMERCE DEGREE COOLEGE KOPPAL-583231
A STUDY ON INDIAN STOCK MARKET: NSE AND BSE

• Mara madalino & carlo pinho, time frequency effects on market indices: world
commovements paris, 2009 finance international meeting AFFI -EUROFIDAI
• Vivek rajput & sarika bobde, stock market predictions using hybrid approach, international
journal of computer science and mobile computing.
• Vanita tripathi & shruthi sethi, integration of Indian stock market with world stockmarkets,
Asian journal of business and accounting.
• Marcia oli sigao, effects of temperature on stock market indices: a study on BSE &NSE in
India, international journal of economic research.

WEBSITES:

• www.nseindia.com
• www.bseindia.com
• www.businessinsider.in
• https://elibrary.worldbank.org/doi/10.1093/wber/10.2.323

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