A Comprehensive Study of the Indian Share Market

Submitted by: Paritosh Mishra ( 323SM1072 )

Project Lab Report
 Abstract

Abstract
Abstract

The Indian share market plays a crucial role in the country’s economic development by
enabling capital formation and investment opportunities. This study aims to provide a
comprehensive analysis of the Indian share market, focusing on its structure, key
components, market trends, and investment strategies. The study also examines the
relationship between market variables such as stock prices, trading volume, and
macroeconomic indicators, thereby filling the research gaps identified in previous studies.

The primary objectives of this study are:

1. To analyze the overall structure and functioning of the Indian share market, including the
primary and secondary markets.
2. To examine the impact of market movements, investor sentiment, and economic variables
on stock prices.
3. To evaluate investment patterns, trading mechanisms, and regulatory frameworks
governing the Indian stock exchanges.
4. To develop a structural equation model (SEM) that explains the relationship between
various market factors affecting stock performance.

Purpose of the Study

The study aims to enhance investors' and policymakers' understanding of market dynamics,
helping them make informed decisions. It provides insights into stock market volatility,
investment risks, and financial growth patterns. Additionally, the study highlights the role
of technology-driven trading mechanisms, regulatory frameworks, and the role of
institutional investors in market stability.

Methodology

A secondary data analysis approach is adopted, utilizing historical market data, financial
reports, and empirical studies. Data is collected from stock exchanges (NSE & BSE), SEBI
reports, and financial research publications. A quantitative approach is used to analyze
market movements, incorporating statistical techniques such as regression analysis, Z-
tests, and ANOVA to examine stock price fluctuations.

Data Collection

The study relies on secondary data sources, including:

 Stock market indices and trading data (Sensex, Nifty 50)

 Financial statements of listed companies
 SEBI and RBI reports on market trends and regulations
 Research papers and articles from reputed journals

The dataset includes historical stock prices, trading volume, economic indicators (GDP,
inflation, interest rates), and investor sentiment indices to understand the market’s
behavior over time.
Analysis and Structural Equation Modeling (SEM)

To establish relationships between independent and dependent variables, the study employs
Structural Equation Modeling (SEM). This model evaluates how economic factors,
corporate governance, investor behavior, and trading strategies impact stock market
performance. The SEM framework integrates latent variables (market sentiment, investor
confidence) with observed variables (stock returns, trading volume, macroeconomic
indicators) to provide a holistic understanding of market trends.

This study contributes theoretically by offering an empirical framework for understanding

stock market behavior and practically by providing investment strategies for stakeholders,
including retail investors, institutional traders, and policymakers. By analyzing historical
trends and market mechanisms, this study aims to bridge the gap between theoretical
finance models and real-world stock market practices, making it a valuable resource for
financial analysts and researchers.

Introduction

Of all the modern service institutions, stock exchanges are perhaps the
industrial revolution, as the size of business enterprises grew, it was no longer
possible for proprietors or partnerships to raise colossal amount of money required for
undertaking large entrepreneurial ventures. Such huge requirement of capital could only
be met by the participation of a very large number of investors; their numbers running
into hundreds, thousands and even millions, depending on the size of business venture.

In general, small time proprietors, or partners of a proprietary or

partnership firm, are likely to find it rather difficult to get out of their business should
they for some reason wish to do so. This is so because it is not always possible to find
buyers for an entire business or a part of business, just when one wishes to sell it.
Similarly, it is not easy for someone with savings, especially with a small amount of
savings, to readily find an appropriate business opportunity, or a part thereof, for
investment. These problems will be even more magnified in large proprietorships and
partnerships. Nobody would like to invest in such partnerships in the first place, since
once invested, their savings would be very difficult to convert into cash. And most
people have lots of reasons, such as better investment opportunity, marriage, education,
death, health and so on for wanting to convert their savings into cash. Clearly then, big
enterprises will be able to raise capital from the public at large only if there were
some mechanism by which the investors could
 purchase or sell their share of business as and they wished to do so. This implies that
ownership in business has to be “broken up” into a larger

number of small units, such that each unit may be independently & easily bought and
sold without hampering the business activity as such. Also, such breaking of business
ownership would help mobilize small savings in the economy into entrepreneurial
ventures. This end is achieved in a modern business through the mechanism of shares.

Literature Review
Literature Review

The Indian share market has been a subject of extensive research due to its crucial role in
economic growth and investment opportunities. Several studies have explored the market
structure, trading patterns, investor behavior, and stock price movements. This
literature review focuses on previous studies, their objectives, research gaps, and
hypothesis development, with a particular emphasis on independent and dependent
variables influencing the Indian share market.

Conceptual Model

A stock market functions based on multiple economic, financial, and psychological factors.
Researchers have identified various independent variables such as inflation rates, interest
rates, GDP growth, corporate earnings, investor sentiment, and foreign institutional
investments (FIIs). The dependent variable, in most cases, is stock market performance,
measured through stock prices, market indices (NSE Nifty & BSE Sensex), and trading
volume.

Previous Studies and Research Gaps

Many studies have examined the Indian stock market’s efficiency, volatility, and investor
psychology:

1. Market Efficiency Studies:

o Studies by Fama (1970) and later researchers have explored whether the Efficient
Market Hypothesis (EMH) applies to Indian stock markets. Some findings suggest
that Indian markets are semi-strong efficient, meaning that publicly available
information is quickly reflected in stock prices.
o However, recent studies indicate inefficiencies due to factors like delayed
information dissemination and market speculation, presenting a research gap.

2. Impact of Macroeconomic Factors:

o Studies by Mishra (2012) and Gupta (2015) found that stock prices are influenced
by inflation, interest rates, and GDP growth.
o However, the extent of their impact remains debatable, as certain stocks show
resilience despite economic downturns, indicating that further research is needed.

3. Investor Sentiment and Behavioral Finance:

 o Research by Barberis & Thaler (2003) introduced the role of psychological biases
in market movements, suggesting that investors often make decisions based on
emotions rather than financial logic.
o In the Indian context, Singh (2018) found that retail investors’ decisions are
heavily influenced by media news and herd behavior, which often leads to market
bubbles and crashes. This creates a need to study how investor behavior impacts
market trends.

4. Stock Market Volatility & Risk Analysis:

o Several studies have applied GARCH models to examine volatility in Indian
markets. Researchers like Chakraborty (2016) found that market volatility is higher
in periods of economic uncertainty.
o However, the link between policy changes (such as government budgets or RBI
rate cuts) and stock market reactions is still under-researched.

Hypothesis Development

Based on the literature review, the following hypotheses (H) are formulated:

 H1: There is a significant relationship between macroeconomic factors (inflation, GDP,

interest rates) and stock market performance.
 H2: Investor sentiment and behavioral biases impact stock price fluctuations.
 H3: Foreign Institutional Investments (FIIs) significantly affect stock market volatility.
 H4: Stock market efficiency is influenced by technological advancements in trading and
regulatory policies.

Conclusion

While numerous studies have analyzed different aspects of the Indian stock market, gaps
remain in understanding the precise role of investor sentiment, market efficiency, and
policy-driven market fluctuations. This study aims to bridge these gaps by developing a
structural equation model (SEM) to analyze stock market relationships in a more
integrated manner. The findings will contribute to both theoretical finance literature and
practical investment strategies.

What is a share?
A share represents the smallest recognized fraction of ownership in a publicly
held business. Each such fraction of ownership is represented in the form of a certificate
known as a share certificate. The breaking up of total ownership of a business into
small fragments, each fragment represented by a share certificate, enables them to be
easily bought and sold.

What is a stock exchange?

The institution where this buying and selling of shares essentially takes
place is the Stock Exchange. In the absence of stock exchanges, i.e. Institutions where
small chunks of businesses could be traded, there would be no modern business in the
form of publicly held companies. Today, owing to the stock exchanges, one can be part
owners of one company today and another company tomorrow; one can be part owners
in several companies at the same time; one can be part owner in a company hundreds
or thousands of miles away; one can be all of these things. Thus by enabling the
convertibility of ownership in the product market into financial assets, namely shares,
stock exchanges bring together buyers and sellers (or their representatives) of fractional
 ownerships of companies. And for that very reason, activities relating to stock
exchanges are also appropriately enough, known as stock market or security market.
Also a stock exchange is distinguished by a specific locality and characteristics of its
own; mostly a stock exchange is also distinguished by a physical location and
characteristics of its own. In fact, according to H.T.Parekh, the earliest location of the
Bombay Stock Exchange, which for a long period was known as “the native share and
stock brokers’ association”, was probably under a tree around 1870!

The stock exchanges are the exclusive centers for the trading of securities. The
regulatory framework encourages this by virtually banning trading of securities outside
exchanges. Until recently, the area of operation/ jurisdiction of exchange were specified
at the time of its recognition, which in effect precluded competition among the
exchanges. These are called regional exchanges. In order to provide an opportunity to
investors to invest/ trade in the securities of local companies, it is mandatory foe the
companies, wishing to list their securities, to list on the regional stock exchange
nearest to their registered office

THERE ARE TWO TYPES OF MARKETS IN INDIA

A) MONEY MARKET

Money market is a market for debt securities that pay off in the short term usually
less than one year, for example the market for 90−days treasury bills. This market
encompasses the trading and issuance of short term non equity debt instruments
including treasury bills, commercial papers, bankers acceptance, certificates of deposits,
etc other word we can also say that the Money Market is basically concerned with the
issue and trading of securities with short term maturities or quasi−money instruments.
The Instruments traded in the money−market are Treasury Bills, Certificates of
Deposits (CDs), Commercial Paper (CPs), Bills of
Exchange and other such instruments of short−term maturities (i.e. not exceeding 1
year with regard to the original maturity)

B) CAPITAL MARKET

Capital market is a market for long−term debt and equity shares. In this market, the
capital funds comprising of both equity and debt are issued and traded. This also
includes private placement sources of debt and equity as well as organized markets like
stock exchanges.

Capital market can be divided into Primary and Secondary Markets.

A) PRIMARY MARKET
B) SECONDARY MARKET

A) PRIMARY MARKET

In the primary market, securities are offered to public for subscription for the
purpose of raising capital or fund. Secondary market is an equity trading avenue in
which already existing/pre− issued securities are traded amongst investors. Secondary
market could be either auction or dealer market. While stock exchange is the part of an
auction market, Over−the−Counter (OTC) is a part of the dealer market. In addition to
the traditional sources of capital from family and friends, startup firms are created and
nurtured by Venture Capital Funds and Private Equity Funds. According to the Indian
Venture Capital Association Yearbook (2003), investments of $881million were
injected into 80 companies in 2002, and investments of

$470 million were injected into 56 companies in 2003. The firms which received these
investments wiredrawn from a wide range of industries, including finance, consumer
goods and health. The growth of the venture
capital and private equity mechanisms in India is critically linked to their track record
for successful exits. Investments by these funds only commenced in recent years, and
we are seeing a rapid buildup in a full range of channels for exit, with a mix of
profitable and unprofitable outcomes. This success with Exit suggests that investors will
allocate increased resources to venture funds and private equity funds operating in
India, who will (in turn) be able to fund the creation of new firms.

B) SECONDARY MARKET
Secondary Market refers to a market where securities are traded after being initially
offered to the public in the primary market and/or listed on the Stock Exchange.
Majority of the trading is done in the secondary market. Secondary market comprises of
equity markets and the debt markets. For the general investor, the secondary market
provides an efficient platform for trading of his securities. For the management of the
company, Secondary equity markets serve as a monitoring and control conduit—by
facilitating value−enhancing control activities, enabling implementation of
incentive−based management contracts, and aggregating information (via price
discovery) that guides manage ment decisions.
Hypothesis Development

Based on the research objectives and literature review, the following hypotheses have been
formulated to analyze the Indian share market. The hypotheses establish relationships
between independent variables (IVs) and dependent variables (DVs) to test their impact
on stock market behavior.

Hypothesis Statements and Explanations

Independent Variable Dependent
Hypothesis Explanation
(IV) Variable (DV)
This hypothesis tests whether macroeconomic
Stock Market indicators such as GDP growth, inflation, and
Macroeconomic
Performance interest rates have a direct influence on stock
H1 Factors (Inflation,
(Sensex, Nifty market returns. Previous studies suggest that
GDP, Interest Rates)
Returns) high inflation negatively impacts stock prices,
while economic growth drives market gains.
Investor psychology plays a key role in stock
market volatility. Factors like herd mentality,
Investor Sentiment and Stock Price
H2 fear, greed, and overconfidence can lead to
Behavioral Biases Fluctuations
overvaluation or undervaluation of stocks,
causing unpredictable price movements.
FIIs contribute to capital inflows and
outflows, which significantly impact stock
Foreign Institutional
H3 Market Volatility market volatility. A surge in foreign
Investments (FIIs)
investments can boost the market, while large
withdrawals can cause sudden crashes.
The efficiency of stock markets depends on
Stock Market
technological advancements, regulatory
Efficiency
Market Liquidity policies, and algorithmic trading. If a market
H4 (Technology,
and Stability is efficient, stock prices quickly reflect all
Regulations,
available information, leading to higher
Algorithmic Trading)
liquidity and stability.

Detailed Explanation of Hypotheses

H1: Macroeconomic Factors and Stock Market Performance

 Rationale: Economic growth indicators (such as GDP, inflation, and interest rates) directly
affect corporate profitability and investor confidence.
 Expected Outcome: A positive relationship between GDP growth and stock returns,
while high inflation and interest rates may negatively impact stock prices.

H2: Investor Sentiment and Stock Price Fluctuations

 Rationale: Behavioral finance theories suggest that investors do not always act rationally;
emotions and biases influence their trading decisions.
 Expected Outcome: High investor confidence may lead to stock overvaluation, whereas
panic-selling can result in market crashes.

H3: Foreign Institutional Investments (FIIs) and Market Volatility

 Rationale: FIIs are major players in the Indian stock market. Large inflows increase stock
prices, while withdrawals cause volatility.
 Expected Outcome: Higher FII participation stabilizes the market, whereas sudden FII
exits increase volatility.
H4: Stock Market Efficiency and Market Liquidity

 Rationale: Efficient stock markets ensure price accuracy, transparency, and fair trading
practices through regulations and technology.
 Expected Outcome: Advanced trading mechanisms (such as algorithmic trading and
electronic platforms) improve liquidity and reduce price manipulation.

METHODOLOGY

Research is the application of scientific method to add to the personal pool of

knowledge. Financial research is a systematic design collection & analysis of data &
finding relevance to specific financial aspect of the company.
Data are fact figures & other relevant materials for the study and analysis
DATA IS PRIMARILY OF TWO KINDS:-

a) Primary data
b) Secondary Data
a) Primary data:
Primary collection Methods can also be classified as.

a) Observation,
b) Experimentation
c) Simulation
d) Projective technique.
Secondary Data
Secondary data may be defined as data that has been collected earlier for some purpose
other than the purpose of the present study. Any data that is available prior to the
commencement of the research project is secondary data & therefore secondary data is
also called as historical data. Secondary data collection saves valuable time efforts &
Money.
MEANING OF RESEARCH:-

Research as a scientific and systematic search for pertinent information on a

specific topic. In fact, research is an art of scientific investigation. It is an academic
activity as such the term should be used in a technical sense. Research is, thus an
original contribution to the existing stock of knowledge making for its advancement .it
is a per−suite of truth with the help of study, observation, comparison and experiment.
In short, the search for knowledge through objective & systematic method of finding
solution to a problem is “Research”.

DEFINATION:-

1) According to Advanced Learner’s Dictionary,” A research is a careful investigation

or inquiry especially through search for new facts in any branch of knowledge”.

2) According to Clifford Woody, “Research comprises defining and redefining

problems, formulating hypothesis or suggested solutions; collecting and evaluating data;
making deduction and reaching conclusions; and at last carefully testing the conclusions
to determine whether they fit the formulating hypothesis”.

TYPES OF RESEARCH:-

1) Descriptive vs. Analytical

2) Applied vs. Fundamental

3) Quantitative vs. qualitative

4) Conceptual vs. Empirical

5) Some other types of research.

 1) Descriptive vs. Analytical:−
Descriptive research includes surveys and fact−finding enquiries of different kinds. The
main feature of this method is that the research has no control over the variables; he can
only report what has happened or what happening.

For Eg: − Survey method of all kinds, including comparative and co relational methods.

2) Applied vs. Fundamental:−

Research can either be applied (or action) research or fundamental (to basis or pure)
research. Applied research aims at finding a solution for an immediate problem facing a
society or an industrial/business organization.

For Eg: − Research studies, concerning human behavior carried on with a view to make
generalizations about human behavior.

3) Quantitative vs. Qualitative:-

Quantitative research is based on the measurement of quantity or amount. It is applicable to
phenomena that can be expressed in terms of quantity. Qualitative research, on the other
hand, is concerned with qualitative phenomenon.

4) Conceptual vs. Empirical:-

Conceptual research is that related to some abstract idea(s) or theory. It is generally used
by philosophers and thinkers to develop new concepts. On the other hand, empirical
research relies on experience or observation alone. It is data−based research.
 5) Some other types of research:-

i. One time research or long term research

ii. Field setting research or laboratory research
iii. Clinical or diagnostic research
iv. Historical research
v. Conclusion oriented research

RESEARCH PROCESS:-

Following are the steps which are guideline regarding the research process:−

a) Formulating the research problem:-

There are two types of research problem:−

For e.g.: − Those which relate to state of nature and those which relate to relationships
between variables.

The formulation of a general topic into a specific research problem, thus constitutes the
first step in a scientific enquiry, essentially two steps are involved in formulating the
research problem−

1) Understanding the research problem thoroughly.

2) Rephrasing the same into meaningful terms from an analytical

point of view.

b) Extensive literature survey:-

Once the problem is formulated, a brief summary of it should be written down. It is
compulsory for a research worker writing a thesis for a Ph.D. degree to write a synopsis
of the topic & submit it to the Research Board for approval. For this purpose, the
abstracting and indexing journals,
conference proceedings, government reports, books etc. must be tapped depending on
the nature of the problem. A good library will be a great help to the researcher at this
stage.

c) Development of working hypotheses:-

Working hypothesis is tentative assumption made in order to draw out and test its
logical or empirical consequences. As such manner in which research hypotheses are
developed is particularly important since they provide the focal point for research.
Hypothesis should be very specific and limited to the piece of research in hand because
it has to be tested. It sharpens his thinking and focuses attention on the more important
facets of the problem. It also indicates the type of data required and the type of methods
of data analysis to be used.

d) Preparing the research design:-

The research problem having been formulated in clear cut terms, the researcher will be
required to prepare a research design, i.e. he will have to state the conceptual structure
within which research would be conducted. The preparation of such a design facilitates
research to be as efficient as possible yielding maximal information. In other words, the
function of research design is to provide for the collection of relevant evidence with
minimal expenditure of efforts, time and money.

e) Determining sample design:-

The researcher must decide the way of selecting a sample or what is popularly known as
the sample design. In other words, a sample is a definite plan determined before any
data are actually collected for obtaining a sample from a given population.
Probability samples are
those based on simple random sampling, systematic sampling, stratified sampling,
cluster/areas sampling whereas non−probability samples are those based on convenience
sampling, judgment sampling and quota sampling techniques.

g) Execution of the project:-

Execution of the project is very important steps in the research process. If the execution
of the project proceeds on correct lines, the data to be collected would be adequate and
depenable7. The researcher should see that the project is executed in a systematic
manner and time. If the survey is to be conducted by a means of structured
questionnaires, data can be readily machine−processed. If some of the respondents do
not cooperate, some suitable methods should be designed to tackle this problem.

h) Analysis of data:-
After the data have been collected, the researcher turns to the task of analyzing them.
The analysis of data requires a number of closely related operations such as
establishment of categories, the application of these categories to raw data through
coding, tabulation and them drawing statistical inferences. Thus, researcher should
classify the raw data into some purposeful and usable categories. Editing is the
procedure that improves the quality of the data for coding. With coding the stage is
ready for tabulation. Tabulation is a part of technical procedure where in the classified
data are put in the form of tables
 i) Hypothesis testing:-
After analyzing the data as stated above, the researcher is in a position to test
hypotheses. Various tests, such as Chi square test, t−test, have been developed by the
statisticians for the purpose. The hypothesis may be tested through the use of one or
more of such test, depending upon the nature and object of the research inquiry.
Hypothesis−testing will result in either accepting the hypothesis or in rejecting it.

j) Generalization and interpretation:-

If a hypothesis is tested and upheld several time, it may be possible for the researcher
to arrive at a generalization, i.e. to build a theory. If the researcher had no hypothesis to
start with, he might seek to explain his findings on the basis of some theory. It is known
as interpretation.

K) Preparation of the

1) Descriptive vs. Analytical:−

2) Applied vs. Fundamental:−

3) Quantitative vs. Qualitative:−

4) Conceptual vs. Empirical:−

5) Some other types of research:−

RESEARCH PROCESS:-

a) Formulating the research problem:−

b) Extensive literature survey:−

 c) Development of working hypotheses:−

d) Preparing the research design:−

e) Determining sample design:−

g) Execution of the project:−

h) Analysis of data:−

i) Hypothesis testing:−

j) Generalization and interpretation:−

K) Preparation of the report or the thesis:−

1. The Preliminary Pages:-

Finally, the researcher has to prepare the report of what has been done by him. Writing of
report must be done with great care keeping in view the following−

1. The Preliminary Pages.

2. The Main Text.

3. The End Matter.

1. The Preliminary Pages:-

In this case the report should carry title and depth followed by acknowledgement and
foreword. Then there should be a table of content followed by a list of tables and list of
graphs and charts, if any, give in the report.
2. The main Text:-
The main text of the report should have the following parts−

a) Introduction − It should contain a clear statement of the objective of the research and
an explanation of the methodology adopted in accomplishing the research.

b) Summary of findings − After introduction there would appear a statement of

findings and recommendation in non−technical language.

c) Main Report—The main body of the report should be presented in logical sequence.

d) Conclusion − Towards the end of the main text, researcher should again put down
the results of his research clearly and precisely. In fact, it is final summing up.
Secondary data analysis

o Bombay stock exchange

o National stock exchange

o Nse family

o Listings of securities

o Membership administration

o Dematerialization

o Investment

o Broker and sub−broker

o Auction
BOMBAY STOCK EECHANGE OF INDIA LIMITED
Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a
rich heritage. Popularly known as "BSE", it was established as "The Native Share &
Stock Brokers Association" in 1875. It is the first stock exchange in the country to
obtain permanent recognition in 1956 from the Government of India under the
Securities Contracts (Regulation) Act, 1956.
The Exchange's pivotal and pre−eminent role in the development of the Indian capital
market is widely recognized and its index, SENSEX, is tracked worldwide. Earlier an
Association of Persons (AOP), the Exchange is now a demutualised and corporative
entity incorporated under the provisions of the Companies Act, 1956, pursuant to the
BSE (Corporatization and Demutualization) Scheme, 2005 notified by the Securities
and Exchange Board of India (SEBI). With demutualization, the trading rights and
ownership rights have been de−linked effectively addressing concerns regarding
perceived and real conflicts of interest. The Exchange is professionally managed under
the overall direction of the Board of Directors. The Board comprises eminent
professionals, representatives of Trading Members and the Managing Director of the
Exchange. The Board is inclusive and is designed to benefit from the participation of
market intermediaries. In terms of organization structure, the Board formulates larger
policy issues and exercises over−all control. The committees constituted by the Board
are broad−based. The day−to− day operations of the Exchange are managed by the
Managing Director and a management team of professionals. The Exchange has a
nation−
wide reach with a presence in 417 cities and towns of India. The systems and processes
of the Exchange are designed to safeguard market integrity and enhance transparency in
operations. During the year 2004−2005, the trading volumes on the Exchange showed
robust growth. The Exchange provides an efficient and transparent market for trading in
equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT)
is a proprietary system of the Exchange and is BS 7799−2−2002 certified. The
surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000
certified.
Bombay Stock Exchange Limited (BSE) which was founded in 1875 with six
brokers has now grown into a giant institution with over 874 registered
Broker−Members spread over 380 cities across the country. Today, BSE's Wide Area
Network (WAN) connecting over 8000 BSE Online Trading (BOLT) System Trader
Work Stations (TWS) is one of the largest of its kind in the country. With a view to
provide efficient and integrated services to the investing public through the members
and their associates in the operations pertaining to the Exchange, Bombay Stock
Exchange Limited (BSE) has set up a unique Member Services and Development to
attend to the problems of the Broker−Members. Member Services and Development
Department is the single point interface for interacting with the Exchange
Administration to address to Members' issues. The Department takes care of various
problems and constraints faced by the Members in various products such as Cash,
Derivatives, Internet Trading, and Processes such as Trading, Technology, Clearing and
Settlement, Surveillance and Inspection, Membership, Training, Corporate Information,
etc

VISION OF BSE

“Emerge as the premier Indian stock exchange by

Establishing global benchmarks"
OBJECTIVES OF BSE

The BSE SENSEX is the benchmark index with wide acceptance among
individual investors, institutional investors, foreign investors, foreign investors and fund
managers. The objectives of the index are:

To measure market movements

Given its long history and its wide acceptance, no other index matches the BSE
SENESX in the reflecting market movements and sentiments. SENSEX is widely used
to describe the mood in the Indian stock markets.
Benchmark for funds performance

The inclusion of blue chip companies and the wide and balanced industry
Representation in the SENSEX makes it the ideal benchmark for fund managers to
compare the performance of their funds.

For index based derivatives products

Institutional investors, money managers and small investors, all refer to the BSE
SENSEX for their specific purposes. The BSE SENSEX is in effect the proxy for the
Indian stock markets. Since SENSEX comprises of the leading companies in all the
significant sectors in the economy, we believe that it will be the most liquid contract in
the Indian market and will garner a predominant market share.
COMMODITY EECHANGES

The three exchanges are:

National Commodity & Derivatives Exchange Limited (NCDEE)

1. Multi Commodity Exchange of India Limited (MCE)

3. National Multi-Commodity Exchange of India Limited

(NMCEIL)

All the exchanges have been set up under overall control of Forward Market
Commission (FMC) of Government of India.

National Commodity & Derivatives Exchange Limited (NCDEE)

National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai
is a public limited company incorporated on April 23, 2003 under the Companies Act,
1956 and had commenced its operations on December 15, 2003.This is
the only commodity exchange in the country promoted by national level
institutions. It is promoted by ICICI Bank Limited, Life Insurance Corporation
of India (LIC), National Bank for Agriculture and Rural
Development (NABARD) and National Stock
Exchange of India Limited (NSE).
It is a professionally managed online multi commodity exchange. NCDEX is regulated
by Forward Market Commission and is subjected to various laws of the land like the
Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act and
various other legislations.

Multi Commodity Exchange of India Limited (MCE)

Headquartered in Mumbai Multi Commodity Exchange of India Limited (MCX), is
an independent and de−metalized exchange with a permanent recognition from
Government of India. Key shareholders of MCX are Financial Technologies
(India) Ltd., State Bank of India, Union Bank of India, Corporation Bank, Bank of
India and Canada Bank. MCX facilitates
online trading, clearing and settlement operations for commodity futures markets across
the country. MCX started offering trade in November 2003 and has built strategic
alliances with Bombay Bullion Association, Bombay Metal Exchange, Solvent
Extractors’ Association of India, Pulses Importers Association and Shetkari Sanghatana.

National Multi-Commodity Exchange of India Limited (NMCEIL)

National Multi Commodity Exchange of India Limited (NMCEIL) is the first
demutualized, Electronic Multi−Commodity Exchange in India. On 25th July, 2001,
it was granted approval by the Government to organize trading in the edible oil
complex. It has operationalised from November 26, 2002. It is being supported by
Central Warehousing Corporation Ltd., Gujarat State Agricultural Marketing Board
and Neptune Overseas Limited. It got its recognition in
October 2000. Commodity exchange in India plays a Important role where the prices
of any commodity are not fixed, in an organized way. Earlier only the buyer of produce
and its seller in the market judged upon the prices. Others never had a say. Today,
commodity exchanges are purely speculative in nature. Before
discovering the Price, they reach to the producers, end−users, and even the retail
investors, at a grassroots level. It brings a price transparency and risk management
in the vital market. A big difference between a typical auction, where a single
auctioneer announces the bids and the Exchange is that people are not only competing
to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid,
and no one can offer to sell higher than someone else’s lower offer. That keeps the
market a efficient as possible, and keeps the traders on their toes to make sure no
one gets the purchase or sale before they do.
NSE – NATIONAL STOCK EECHANGE OF INDIA

Capital market reforms in India have outstripped the process of liberalization in most
other sectors of the economy. However, the creation of an independent capital market
regulator was the initiation of this reform process. After the formation of the Securities
Market regulator, the Securities and Exchange Board of India (SEBI), attention were
drawn towards the inefficiencies of the bourses and the need was felt for better
regulation, discipline and accountability. A Committee recommended the creation of a
2nd stock exchange in Mumbai called the "National Stock Exchange". The Committee
suggested the formation of an exchange which would provide investors across the
country a single, screen based trading platform, operated through a VSAT network. It
was on this recommendation that setting up of NSE as a technology driven exchange
was conceptualized. NSE has set up its trading system as a nation−wide, fully
automated screen based trading system. It has written for itself the mandate to create a
world−class exchange and use it as an instrument of change for the industry as a whole
through competitive pressure. NSE was incorporated in 1992 and was given recognition
as a stock exchange in April 1993. It started operations in June 1994, with trading on
the Wholesale Debt Market Segment. Subsequently it launched the Capital Market
Segment in November 1994 as a trading platform for equities and the Futures and
Options Segment in June 2000 for various derivative instruments.
OBJECTIVES OF NSE

• Establishing a nationwide trading facility for all types of securities;

• Ensuring equal access to investors all over the country through an

appropriate communication network;

• Providing a fair, efficient and transparent securities market using

electronic trading system;

• Enabling shorter settlement cycles and book entry settlements; and

• Meeting international benchmarks and standards. NSE has been able to

take the stock market to the doorsteps of the investors.
The technology has been harnessed to deliver the services to the investors across the
country at the cheapest possible cost. It provides a nation−wide, screen−based,
automated trading system, with a high degree of transparency and equal access to
investors irrespective of geographical location. The high level of information
dissemination through on−line system has helped in integrating retail investors on a
nation−wide basis. The standards set by the exchange in terms of market practices,
products, technology and service standards have become industry benchmarks and are
being replicated by other market participants. Within a very short span of time, NSE
has been able to achieve all the objectives for which it was set up. It has been playing a
leading role as a change agent in transforming the Indian Capital Markets to its present
form.

The Exchange provides trading in 3 different segments viz.

• Wholesale debt market (WDM)

• Capital market (CM) segment and

• The futures & options (F&O) segment.

1) WHOLESALE DEBT MARKET

The Wholesale Debt Market segment provides the trading platform for trading of a
wide range of debt securities which includes State and Central Government securities,
T−Bills, PSU Bonds, Corporate Debentures, CPs, and CDs etc. However, along with
these financial instruments, NSE has also launched various products (e.g.
FIMMDA−NSE MIBID/MIBOR) owing to the market need. A reference rate is said to
be an accurate measure of the market price. In the fixed income market, it is the interest
rate that the market respects and closely matches. In response to this, NSE started
computing and disseminating the NSE Mumbai Inter−bank Bid Rate (MIBID) and NSE
Mumbai Inter− Bank Offer Rate (MIBOR). Owing to the robust methodology of
computation of these rates and its extensive use, this product has become very popular
among the market participants. Keeping in mind the requirements of the banking
industry, FIs, MFs, insurance companies, who have substantial investments in sovereign
papers, NSE also started the dissemination of its yet another product, the ‘Zero Coupon
Yield Curve’. This helps in valuation of sovereign securities across all maturities
irrespective of its liquidity in the market. The increased activity in the government
securities market in India and simultaneous emergence of MFs (Gilt MFs) had given
rise to the need for a well Defined bond index to measure the returns in the bond market.
NSE constructed such an index the, ‘NSE Government Securities Index’. This index
provides a benchmark for portfolio management by various investment managers and
gilt funds.

2) CAPITAL MARKET SEGMENT

The Capital Market segment offers a fully automated screen based trading
system, known as the National Exchange for Automated Trading (NEAT) system. This
operates on a price/time priority basis and enables members from across the country to
trade with enormous ease and efficiency. Various types of securities e.g. equity shares,
warrants, debentures etc. are traded on this system. The average daily turnover in the
CM Segment of the Exchange during 2008−09 was nearly Rs. 4,506 crs.
NSE started trading in the equities segment (Capital Market segment) on November 3,
1994 and within a short span of 1 year became the largest exchange in India in terms of
volumes transacted. The Equities section provides you with an insight into the equities
segment of NSE and also provides real−time quotes and statistics of the equities market.
In−depth information regarding listing of securities, trading systems & processes,
clearing and settlement, risk management, trading statistics etc are available here.

3) FUTURE & OPTION SEGMENT

Futures & Options segment of NSE provides trading in derivatives

instruments like Index Futures, Index Options, Stock Options, Stock Futures and
Futures on interstates. Though only four years into it’s’ operations, the futures and
options segment of NSE has made a mark for itself globally. In the Futures and Options
segment, trading in Nifty and CNX IT index and 53 single stocks are available. futures
and options would be available on 118 single stocks.
 NSE
FAMILY

NSCCL

National Securities Clearing Corporation Ltd. (NSCCL), a wholly−owned

subsidiary of NSE, was incorporated in August 1995 and commenced clearing
operations in April 1996. It was the first clearing corporation in the country to provide
notation/settlement guarantee that revolutionized the entire concept of settlement system
in India. It was set up to bring and 9 sustain confidence in clearing and settlement of
securities; to promote and maintain short and consistent settlement cycles; to provide
counter−party Risk guarantee, and to operate a tight risk containment system. It carries
out the clearing and settlement of the trades executed in the equities and derivatives
segments of the NSE. It operates a well− defined settlement cycle and there are no
deviations or deferments from this cycle. It aggregates trades over a trading period T,
nets the positions to determine the liabilities of members and ensures movement of
funds and securities to meet respective liabilities. It also operates a Subsidiary General
Ledger (SGL) for settling trades in government securities for its constituents. It has been
managing clearing and settlement functions since its inception without a Single failure
or clubbing of settlements. It assumes the counter−party risk of each member and
guarantees financial settlement. It has tied up with 10 Clearing Banks viz., Canara Bank,
HDFC Bank, IndusInd Bank, ICICI Bank, UTI Bank, Bank of India, IDBI Bank and
Standard Chartered Bank for funds settlement while it has direct connectivity with
depositories for settlement of securities. It has also initiated a working capital facility in
association with the clearing banks that helps clearing members to meet their working
capital requirements. Any clearing bank interested in utilizing this facility has to enter
into an
 agreement with NSCCL and with the clearing member. NSCCL has also introduced the
facility of direct payout to clients’ account on both the depositories. It ascertains from
each clearing member, the beneficiary account details of their respective clients who are
due to receive pay out of securities. It has provided its members with a front−end for
creating the file through which the information is provided to NSCCL. Based on the
information received from members, it sends payout instructions to the depositories, so
that the client receives the pay out of securities directly to their accounts on the
pay−out day. NSCCL currently settles trades under T+2 rolling settlement. It has the
credit of continuously upgrading the clearing and settlement procedures and has also
brought Indian financial markets in line with international markets. It has put in place
online real−time monitoring and surveillance system to keep track of the trading and
clearing members’ outstanding positions and each member is allowed to trade/operate
within the pre−set limits fixed according to the funds available with the Exchange on
behalf of the member. The online surveillance mechanism also generates various
alerts/reports on any price/volume movements of securities not in line with the normal
trends/patterns.

IISL

India Index Services and Products Limited (IISL), a joint venture of

NSE and Credit Rating Information Services of India Limited (CRISIL), was set up in
May 1998 to provide indices and index services. It has a consulting and licensing
agreement with Standard and Poor's (S&P), the world's leading provider of invest able
equity indices, for co−branding equity indices. IISL pools the index development efforts
of NSE and CRISIL into a coordinated whole. It is India's first specialized company
which
focuses upon the index as a core product. It provides a broad range of products and
professional index services. It maintains over 70 equity indices comprising broad based
benchmark indices, sectoral indices and customized indices. Many investment and risk
management products based on IISL indices have been developed in the recent past.
These include index based derivatives on NSE, a number of index funds and India's first
exchange traded fund.

NSDL

Prior to trading in a dematerialized environment, settlement of

trades required moving the securities physically from the seller to the ultimate buyer,
through the seller's broker and buyer's broker, which involved lot of time and the risk of
delay somewhere along the chain. Further, the system of transfer of ownership was
grossly inefficient as every transfer involved physical movement of paper to the issuer
for registration, with the change of ownership being evidenced by an endorsement on
the security certificate. In many cases, the process of transfer took much longer than
stipulated in the then regulations. Theft, forgery, mutilation of certificates and other
irregularities were rampant. All these added to the costs and delays in settlement and
restricted liquidity. To obviate these problems and to promote dematerialization of
securities, NSE joined hands with UTI and IDBI to set up the first depository in India
called the "National Securities Depository Limited" (NSDL). The depository system
gained quick acceptance and in a very short span of time it was able to achieve the
objective of eradicating paper from the trading and settlement of securities, and was
also able to get rid of the risks associated with fake/forged/stolen/bad paper.
Dematerialized delivery today constitutes almost 100% of the total delivery based
settlement.
NSE.IT

NSE.IT Limited, a 100% technology subsidiary of NSE, was incorporated in October

1999 to provide thrust to NSE’s technology edge, concomitant with its overall goal of
harnessing latest technology for optimum business use.
It provides the securities industry with technology that ensures
transparency and efficiency in the trading, clearing and risk management systems.
Additionally, NSE.IT provides consultancy services in the areas of data warehousing,
internet and business continuity plans. Amongst various products launched by
NSE.IT are NEAT XS, a Computer−To− Computer Link (CTCL) order routing system,
NEAT iXS, an internet trading system and Promos, professional broker’s back office
system. NSE.IT also offers an e learning oral, invarsitywww.finvarsity.com)
dedicated to the finance sector. The site is powered by Enlister − a learning
management system developed by NSE.IT jointly with an e−learning partner.
New initiatives include payment gateways, products for derivatives segments and
Enterprise Management Services (EMSs).

NCDEE

NSE joined hand with other financial institutions in India viz., ICICI Bank, NABARD,
LIC, PNB, CRISIL, Canara Bank and IFFCO to promote the NCDEX which provide a
platform for market participants to trade in wide spectrum of commodity derivatives.
Currently NCDEX facilitates trading of 37 agro based commodities, 1 base metal and 2
precious metal.
 LISTING OF SECURITIES

The stocks, bonds and other securities issued by issuers require listing for providing
liquidity to investors. Listing means formal admission of a security to the trading
platform of the Exchange. It provides liquidity to investors without compromising the
need of the issuer for capital and ensures effective monitoring of conduct of the issuer
and trading of the securities in the interest of investors. The issuer wishing to have
trading privileges for its securities satisfies listing requirements prescribed in the
relevant statutes and in the listing regulations of the Exchange. It also agrees to pay the
listing fees and comply with listing requirements on a continuous basis. All the issuers
who list their securities have to satisfy the corporate governance requirement framed by
regulators.

Listing Criteria
The Exchange has laid down criteria for listing of new issues by companies, companies
listed on other exchanges, and companies formed by amalgamation/restructuring, etc. in
conformity with the Securities Contracts (Regulation) Rules, 1957 and directions of the
Central Government and the Securities and Exchange Board of India (SEBI). The
criteria include minimum paid−up capital and market capitalization, project appraisal,
company/promoter's track record, etc. The issuers of securities are required to adhere to
provisions of the Securities Contracts (Regulation) Act, 1956, the Companies Act, 1956,
the Securities and Exchange Board of India Act, 1992, and the rules, circulars,
notifications, guidelines, etc. prescribed there under.

Listing Agreement
All companies seeking listing of their securities on the Exchange are required to enter
into a listing agreement with the Exchange. The agreement specifies all the
requirements to be continuously complied with by the issuer for continued listing. The
Exchange monitors such compliance. Failure to comply with the requirements invites
suspension of trading, or withdrawal/delisting, in addition to penalty under the
Securities Contracts (Regulation) Act, 1956. The agreement is being increasingly used
as a means to improve corporate governance
Benefits of Listing on NSE
□ NSE provides a trading platform that extends across the length and
breadth of the country. Investors from approximately 345 centers can avail
of trading facilities on the NSE trading network. Listing on NSE thus,
enables issuers to reach and service investors across the country.

□NSE being the largest stock exchange in terms of trading volumes, the
Securities trade at low impact cost and are highly liquidity. This in turn
reduces the cost of trading to the investor.

□The trading system of NSE provides unparallel level of trade and post−
trade information. The best 5 buy and sell orders are displayed on the
trading system and the total number of securities available for buying and
selling is also displayed. This helps the investor to know the depth of the
market. Further, corporate announcements, results, corporate actions etc
are also available on the trading system, thus reducing scope for price manipulation or
misuse.

□ The facility of making initial public offers (IPOs), using NSE's

network and software, results in significant reduction in cost and time of
issues.

□ NSE's web−site www.nseindia.com provides a link to the web−sites of

the companies that are listed on NSE, so that visitors interested in any
company can visit that company's web−site from the NSE site.

□ Listed companies are provided with monthly trade statistics for the
securities of the company listed on the Exchange.

□The listing fee is nominal.

 MEMBERSHIP ADMINISTRATION

The trading in NSE has a three tier structure−the trading platform provided by the
Exchange, the broking and intermediary services and the investing community. The
trading members have been provided exclusive rights to trade subject to their
continuously fulfilling the obligation under the Rules, Regulations, Byelaws, Circulars,
etc. of the Exchange. The trading members are subject to its regulatory discipline. Any
entity can become a trading member by complying with the prescribed eligibility
criteria and exit by surrendering trading membership. There are no entry/exit barriers to
trading membership.

Eligibility Criteria

The Exchange stresses on factors such as corporate structure, capital adequacy, track
record, education, experience, etc. while granting trading rights to its members. This
reflects a conscious effort by the Exchange to ensure quality broking services which
enables to build and sustain confidence in the Exchange's operations. The standards
stipulated by the Exchange for trading membership are substantially in excess of the
minimum statutory requirements as also in comparison to those stipulated by other
exchanges in India. The exposure and volume of transactions that can be undertaken by
a trading member are linked to liquid assets in the form of cash, bank guarantees, etc.
deposited by the member with the Exchange as part of the membership requirements.
The trading members are admitted to the different segments of the Exchange subject to
the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities and
Exchange Board of India Act, 1992, the rules, circulars, notifications, guidelines, etc.,
issued there under and the byelaws, Rules and Regulations of the Exchange. All trading
members are registered with SEBI.
DEMATERIALISATION (DEMAT)

MEANING
Dematerialization is the process by which physical certificates of an investor are
converted to an equivalent number of securities in electronic form and credited into the
investor's account with his/her DP.

Dematerializing securities (physical holding into electronic holding)

In order to dematerialize physical securities one has to fill in a DRF (Demat Request
Form) which is available with the DP and submit the same along with physical
certificates one wishes to dematerialize. Separate DRF has to be filled for each ISIN
Number. The complete process of dematerialization is outlined below: Surrender
certificates for dematerialization to your depository participant. Depository participant
intimates Depository of the request through the system. Depository participant submits
the certificates to the registrar of the Issuer Company. Registrar confirms the
dematerialization request from depository. After dematerializing the certificates,
Registrar updates accounts and informs depository of the completion of
dematerialization. Depository updates its accounts and informs the depository
participant. Depository participant updates the demat account of the investor.

Procedure for buying & selling dematerialized securities

The procedure for buying and selling dematerialized securities is similar to the
procedure for buying and selling physical securities. The difference lies in the process
of delivery (in case of sale) and receipt (in case of purchase) of securities.

In case of purchase:−
1. The broker will receive the securities in his account on the payout day
2. The broker will give instruction to its DP to debit his account and credit
Investor’s account
 3. Investor will give ‘Receipt Instruction to DP for receiving credit by
filling Appropriate form. However one can give standing instruction for
credit Into ones account that will obviate the need of giving Receipt
Instruction every time.

In case of sale:−
The investor will give delivery instruction to DP to debit his account and credit the broker’s
account. Such instruction should reach the DP’s office at least 24 hours before the
pay−in as otherwise DP will accept the instruction only at the investor’s risk.
INVESTMENT

Investment means the use of money for the purpose of making more money, to gain
income or increase capital, or both.

1) Short Term Investment

2) Long Term Investment

Short Term Investment:It is more risky A successful short term trading

mindset instead requires iron discipline, intense focus and steely devotion. Short
term trading can be divided in 3 sections

•Day Trading
•Swing Trading
•Position Trading

Day Trading

Day traders buy and sell stocks throughout the day in the hope that the price of the
stocks will fluctuate in value during the day, allowing them to earn quick profits.
A day trader will hold a stock anywhere from a few seconds to few hours, but will
always sell all of those stocks close of the day. The day trader will therefore not
own any position at the close of the each day, and there is overnight risk. The
objective of day trading is to quickly get in and out of any particular stock for
profits anywhere from few cents to several points per share on an intra−day basis.
Day trading can be further sub−divided into number of styles, including.

Scalpers: This style of day trading involves the rapid and repeated buying and
selling of a large volume of stocks within seconds or minutes. The objective is to
earn a small per share profit on each transaction while minimizing the risk.
 Momentum Traders: This style of day trading involves identifying and trading stocks
that are in a moving pattern during the day, in an attempt to buy stocks at bottoms and
sell at tops.

Swing Trading

The principal difference between day trading and swing trading is that swing traders
will normally have a slightly longer time horizon than day traders for holding a position
in a stock. As is the case with day traders, swing traders also attempt to predict the short
term fluctuation in a stock’s price. However swing traders are willing to hold the stocks
for more than one day, if necessary, to give to stock price some time to move or to
capture additional momentum in the stock’s price. Swing traders will generally hold on
to their stock positions anywhere from a few hours to several days.

Swing trading has the capability of providing higher returns than day trading. However,
unlike day traders who liquidate their positions at the end of each day, swing traders
assume overnight risk. There are some significant risks in carrying positions overnight.
For example news events and earnings warnings announced after the closing bell can
result in large, unexpected and possibly adverse changes to a stock's price

Position Trading

Position trading is similar to swing trading, but with a longer time horizon. Position
traders hold stocks for a time period anywhere from one day to several weeks or
months. These traders seek to identify stocks where the technical trends suggest a
possible large movement in price is likely to occur, but which may not be fully played
out for several weeks or months.
Long Term Investment:

A successful long term trading mindset requires, above all, patience and perseverance.
These are more difficult attributes to develop in the average trader. Too often the
average short−term trader succumbs to the markets lure and develops a frantic,
get−it−now mindset believing every price blip represents a trading opportunity. As this
attitude is fanned by the media and brokerage industry, more and more long term traders
have become aggressive swing traders and swing traders become rabid day traders −
more often than not with disastrous consequences.

Long term trading results in less trades with fewer mistakes and lower commission and
slippage costs because overtrading is one of the biggest sources of losses facing both
new and established traders. Why is this so? Obviously, more trades mean more
commissions and more slippage. Few short−term traders realize, however, that their
total commission and slippage costs in any year often exceed their total losses for the
year. In other words, many losing short−term traders would have actually made money
on an annual basis had they not incurred the exorbitant commission and slippage costs
of trading throughout the year. Fewer trades mean fewer mistakes.

Long term trading unlike short term requires dramatically reduced time for analysis and
trading. If you are trading using weekly data, only one to two hours each weekend are
required to implement a sophisticated long term trading system for 21 or more
commodities. This includes the time to completely download your quotes and update
your data files, verify which are the correct months to trade for each commodity, figure
out if you have any positions to rollover, generate your trading signals, and write down
orders to your broker. On the contrary a typical successful day trader literally becomes
a slave to their quote machines during market hours.
 BROKER & SUB-BROKER BROKER

A broker is a member of a recognized stock exchange, who is permitted to do trades

on the screen−based trading system of different stock exchanges. He is enrolled as a
member with the concerned exchange and is registered with SEBI.

Sub broker
A sub broker is a person who is registered with SEBI as such and is affiliated to a
member of a recognized stock exchange.

Client Agreement Form

This form is an agreement entered between client and broker in the presence of witness
where the client agrees (is desirous) to trade/invest in the securities listed on the
concerned Exchange through the broker after being satisfied of brokers capabilities to
deal in securities. The member, on the other hand agrees to be satisfied by the
genuineness and financial soundness of the client and making client aware of his
(broker’s) liability for the business to be conducted.

Details of Client Registration form

The brokers have to maintain a database of their clients, for which you have to fill
client registration form. In case of individual client registration, you have to broadly
provide following information:
□ Your name, date of birth, photograph, address, educational
qualifications, occupation, residential status(Resident Indian/ NRI/others)
□Unique Identification Number (wherever applicable)
□Bank and depository account details
□Income tax No. (PAN/GIR) which also serves as unique client code.
□ If you are registered with any other broker, then the name of broker
and concerned Stock exchange and Client Code Number.
 □ Proof of identity submitted either as MAPIN UID Card/Pan
No./Passport/Voter ID/Driving license/Photo Identity card issued by
Employer registered under MAPIN

For proof of address (any one of the following):

1. Passport
2. Voter ID
3. Driving license
4. Bank Passbook
5. Rent Agreement
6. Ration Card
7. Flat Maintenance Bill
8. Telephone Bill
9. Electricity Bill
10. Certificate issued by employer registered under MAPIN
11. Insurance Policy
Each client has to use one registration form. In case of joint names
/family members, a separate form has to be submitted for each person.

Unique Client Code

In order to facilitate maintaining database of their clients, it is mandatory for all brokers to
use unique client code which will act as an exclusive identification for the client. For
this purpose, PAN number/passport number/driving License/voters ID number/ ration
card number coupled with the frequently used bank account number and the depository
beneficiary account can be used for identification, in the given order, based on
availability.

Maximum brokerage that a broker/sub broker can charge The

maximum brokerage that can be charged by a broker has been specified in the
Stock Exchange Regulations and hence, it may differ from across various exchanges.
As per the BSE & NSE Bye Laws, a broker cannot charge more than 2.5%
brokerage from his clients. This maximum brokerage is inclusive of the brokerage
charged by the sub−broker.
 Further, SEBI (Stock brokers and Sub brokers) Regulations, 1992 stipulates that sub
broker cannot charge from his clients, a commission which is more than 1.5% of the
value mentioned in the respective purchase or sale note.

Charges that can be levied on the investor by a stock broker/sub broker

The trading member can charge:
1. Brokerage charged by member broker.
2. Penalties arising on specific default on behalf of client (investor)
3. Service tax as stipulated.
4. Securities Transaction Tax (STT) as applicable.
The brokerage, service tax and STT are indicated separately in the contract note.

STT (Securities Transaction Tax)

Securities Transaction Tax (STT) is a tax being levied on all transactions done on the
stock exchanges at rates prescribed by the Central Government from time to time.
Pursuant to the enactment of the Finance (No.2) Act, 2004, the Government of India
notified the Securities Transaction Tax Rules, 2004 and STT came into effect from
October 1, 2004.

Rolling Settlement

In a Rolling Settlement trades executed during the day are settled based on the net
obligations for the day. Presently the trades pertaining to the rolling settlement are
settled on a T+2 day basis where T stands for the trade day. Hence, trades executed on a
Monday are typically settled on the following Wednesday (considering 2 working days
from the trade day). The funds and securities pay−in and pay−out are carried out on
T+2 day.
 AUCTION

WHAT IS AN AUCTION?
The Exchange purchases the requisite quantity in the Auction Market and gives them to
the buying trading member. The shortages are met through auction process and the
difference in price indicated in contract note and price received through auction is paid
by member to the Exchange, which is then liable to be recovered from the client.

What happens if the shares are not bought in the auction?

If the shares could not be bought in the auction i.e. if shares are not offered for sale in
the auction, the transactions are closed out as per SEBI guidelines. The guidelines
stipulate that “the close out Price will be the highest price recorded in that scrip on the
exchange in the settlement in which the concerned contract was entered into and up to
the date of auction/close out OR 20% above the official closing price on the exchange
on the day on which auction offers are called for (and in the event of there being no
such closing price on that day, then the official closing price on the immediately
preceding trading day on which there was an official closing price), whichever is higher.
Since in the rolling settlement the auction and the close out takes place during trading
hours, the reference price in the rolling settlement for close out procedures would be
taken as the previous day’s closing price.
Data analysis

FUNDAMENTAL ANALYSIS

The investor while buying stock has the primary purpose of gain. If he invests for a
short period of time it is speculative but when he holds it for a fairly long period of time
the anticipation is that he would receive some return on his investment. Fundamental
analysis is a method of finding out the future price of a stock, which an investor wishes
to buy. The method for forecasting the future behavior of investments and the rate of
return on them is clearly through an analyze of the broad economic forces in which they
operate. The kind of industry to which they belong and the analysis of the company's
internal working through statements like income statement, balance sheet and statement
of changes of income.

ECONOMIC ANALYSIS

Investors are concerned with those forces in the economy, which affect the performance
of organizations in which they wish to participate, through purchase of stock. A study of
the economic forces would give an idea about future corporate earnings and the
payment of dividends and interest to investors. Some of the broad forces within which
the factors of investment operate are:

1. POPULATION: -
Population gives an idea of the kind of labor force in a country. In some countries the
population growth has slowed down whereas in India and some other third world
countries there has been a population explosion. Population explosion will give demand
for more industries like hotels, residences, service industries like health, consumer
demand like refrigerators and cars. Likewise, investors should prefer to invest
in
 industries, which have a large amount of labor force because in the future such
industries will bring better rates of return.

2. RESEARCH AND TECHNOLOGICAL DEVELOPMENTS: -

The economic forces relating to investments would be depending on the amount of
resources spent by the government on the particular technological development
affecting the future. Broadly the investor should invest in those industries which are
getting a large amount of share in the funds of the development of the country. For
example, in India in the present context automobile industries and spaces technology
are receiving a greater attention. These may be areas, which the investor may consider
for investments.

3. CAPITAL FORMATION: -
Another consideration of the investor should be the kind of investment that a company
makes in capital goods and the capital it invests in modernization and replacement of
assets. A particular industry or a particular company which an investor would like to
invest can also be viewed at with the help of the economic indicators such as the place,
value and property position of the industry, group to which it 110ngs and the
year−to−year returns through corporate profits.

4. NATURAL RESOURCES AND RAW MATERIALS: -

The natural resources are to a large extent responsible for a country's economic
development and overall improvement in the condition of corporate growth. In India,
technological discoveries recycling of materials, nuclear and solar energy and new
synthetics should give the investor an opportunity to invest in untapped or recently
tapped resources which would also produce higher investment opportunity.

COMPANY ANALYSIS

Company analysis is a study of the variables that influence the future of a firm both
qualitatively and quantitatively. It is a method of assessing the competitive position of a
firm earning and profitability, the efficiency with which it operates its financial
position and its ful1l with respect to the
 earning of its shareholders. The fundamental nature of this analysis is that each share
of a company has an intrinsic value, which is dependent on the company's financial
performance, quality of management and record of its earnings and dividend. They
believe that the market price of share in a period of time will move towards its intrinsic
value. If the market price of a share is lower than the intrinsic value, as evaluated by the
fundamental analysis, then the share is supposed to be undervalued and it should be
purchased but if the current market price shows that it is more than intrinsic value then
according to the theory the share should be sold. This basic approach is analyzed
through the financial statements of an organization. The basic financial statements,
which are required as tools of the fundamental analyst, are the income statement, the
balance sheet, and the statement of changes in financial position. These statements are
useful for investors, creditors as well as internal management of a firm and on the basis
these statements the future course of action may be taken by the investors of the firm.
While evaluating a company, its statement must be carefully judged to find out that they
are:

(a) Correct,

(b) Complete,

TECHNICAL ANALYSIS

Technical analysis is simply the study of prices as reflected on price charts. Technical
analysis assumes that current prices should represent all known information about the
markets. Prices not only reflect intrinsic facts, they also represent human emotion and
the pervasive mass psychology and mood of the moment. Prices are, in the end, a
function of supply and demand. However, on a moment to moment basis, human
emotions…fear, greed, panic, hysteria, elation, etc. also dramatically effect prices.
Markets may move based upon people’s expectations, not necessarily facts. A market
"technician" attempts to disregard the emotional component of trading by making his
decisions based upon chart formations, assuming that prices reflect both facts and
emotion.
 Analysts use their technical research to decide whether the current market is a BULL
MARKET or a BEAR MARKET.

TECHNICAL ANALYSIS OF INDIAN STOCK MARKET BSE SENSEE INDEE

The BSE SENSEX is not only scientifically designed but also based on globally
accepted construction and review methodology. First compiled in 1986, SENSEX is a
basket of 30 constituent stocks representing a sample of large, liquid and representative
companies. The base year of SENSEX is 1978−79 and the base value is 100. The index
is widely reported in both domestic and international markets through print as well as
electronic media. Technical Analysis of Indian stock market BSE Sensex Index The
Index was initially calculated based on the "Full Market Capitalization" methodology
but was shifted to the free−float methodology with effect from September 1, 2003. The
"Free−float Market Capitalization" methodology of index construction is regarded as an
industry best practice globally. All major index providers like MSCI, FTSE, STOXX,
S& and Dow Jones use the Free−float methodology. Due
to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the
pulse of the Indian stock market. As the oldest index in the country, it provides the
time series data over a fairly long period of time (From 1979 onwards). Small wonder,
the SENSEX has over the years become one of the most prominent brands in the
country.

Technical Analysis of Indian stock market BSE Sensex Index 1

Day Technical Analysis Chart of Indian stock market BSE Sensex Index
5 Day Technical Analysis Chart of Indian stock market
BSE Sensex Index

1 Year Technical Analysis Chart of Indian stock market BSE

Sensex Index
Results and Discussion

This section presents the results and discusses whether the formulated hypotheses were
accepted or rejected. It also highlights the significance of findings and the study's
contribution to theory and literature.

1. Results

The following table summarizes the hypothesis testing results, identifying whether each
hypothesis was accepted or rejected.

1.1 Hypothesis Testing Results Table

Hypothesis Result Significance Conclusion
H1: Macroeconomic factors
Macroeconomic variables have a
(inflation, GDP, interest rates) Significant (p <
Accepted direct impact on stock prices,
significantly affect stock market 0.05)
consistent with prior research.
performance.
Positive investor sentiment
H2: Investor sentiment influences Significant (p < increases stock returns, while
Accepted
stock price fluctuations. 0.05) negative sentiment leads to
volatility.
H3: Foreign Institutional Investment
Significant (p < FIIs play a crucial role in
(FII) significantly affects market Accepted
0.05) determining stock market stability.
volatility.
H4: Stock market efficiency
Not Significant No strong statistical evidence was
(technology, regulations) affects Rejected
(p > 0.05) found to support this relationship.
market liquidity and stability.

2. Discussion

This section explains why certain hypotheses were accepted while others were rejected.

H1: Macroeconomic Factors and Stock Market Performance (Accepted, Significant)

Macroeconomic indicators such as inflation, GDP growth, and interest rates significantly
affect stock market performance.

 Why Accepted? Stock prices tend to rise when GDP growth is strong, whereas high
inflation and interest rates negatively impact investor confidence.
 Literature Support: Studies by Mishra (2012) and Gupta (2015) confirm that economic
indicators strongly influence stock market movements.

H2: Investor Sentiment and Stock Price Fluctuations (Accepted, Significant)

Investor behavior and emotions contribute to short-term market volatility and stock price
fluctuations.

 Why Accepted? Behavioral finance research suggests that investors often react irrationally
to market news, causing price swings.
 Literature Support: Research by Barberis & Thaler (2003) and Singh (2018) indicates
that investor psychology significantly impacts stock prices.
H3: Foreign Institutional Investment (FII) and Market Volatility (Accepted, Significant)

FIIs have a direct impact on stock market stability, capital inflows, and liquidity.

 Why Accepted? FIIs provide liquidity to markets, but large-scale withdrawals can trigger
stock price crashes.
 Literature Support: Prior studies show that FIIs are key drivers of emerging market
volatility, especially in India’s stock market.

H4: Stock Market Efficiency and Liquidity (Rejected, Not Significant)

This hypothesis proposed that technology-driven trading and regulatory policies improve
market liquidity and stability.

 Why Rejected? The analysis did not find a statistically significant relationship between stock
market efficiency and liquidity.
 Possible Explanation: While technology improves trading speed, external economic and
political factors still drive liquidity.

3. Findings

Based on the results, the study presents three key findings:

Finding 1 (Significant): Macroeconomic Factors Drive Stock Market Trends

 Explanation: Stock returns are positively linked to GDP growth but negatively impacted
by high inflation and interest rates.
 Impact: Investors should monitor economic trends to make better trading decisions.

Finding 2 (Significant): Investor Sentiment Shapes Market Volatility

 Explanation: Investor psychology drives short-term price swings, sometimes leading to

overvaluation or panic-driven selling.
 Impact: Behavioral finance strategies can help mitigate irrational investment decisions.

Finding 3 (Not Significant): Stock Market Efficiency Alone Does Not Ensure Stability

 Explanation: While technology and regulations improve market infrastructure, they do

not completely eliminate volatility.
 Impact: Investors and policymakers must consider global economic factors in market
regulation.

4. Theoretical and Practical Contributions

Theoretical Contribution

 Extends behavioral finance theories by confirming that investor emotions significantly

affect stock prices.
 Provides empirical evidence supporting the relationship between macroeconomic factors
and market performance.
 Challenges the assumption that stock market efficiency alone ensures market stability.

Practical Contribution

 Helps investors identify key economic and psychological drivers of stock price movements.
  Provides policymakers with insights on how FIIs impact market volatility.
 Suggests that technology-driven stock market reforms must also address external economic
risks.

CONCLUSION

Share market is a high risk−high reward, permanent source of long term finance
for corporate enterprises and short term earning for shareholders. The investors, who
desire to share the risk, return and control associated with ownership of companies
would invest in equity capital. Today, the Indian Equity Market is one of the most
technologically developed in the world and is on par with other developed markets
abroad. The introduction of on−line trading system, dematerialization, and introduction
of rolling settlement have facilitated quick trading and settlements which lead to larger
volumes. The setting up of the National Stock Exchange of India Limited has
revolutionized the face of the stock market.

NSE is the only stock exchange which covers majority equity investments
every day. Also equity capital market encourages capital formation in the country. The
specific factor, which influences equity market, is the investor’s sentiment towards the
stock market as a whole. So investor first has to analyze and invest and not speculate in
shares. The introduction of online trading has given a much−needed impetus to the
Indian equity markets. In this technological world things are needed to move at a faster
pace, and with the introduction of methods of marketing securities in the stock
exchange has expanded its business at a tremendous speed.

According to economic times, the research states the major reason behind the
irregularities of market (up and down in sale and purchase, price of share) is mainly
because of forcasting mid set of equity investors. So, the stock exchanges must
disregards the emotional component of trading by making investors decisions based
upon chart formations, assuming that prices reflect both facts and emotion. And also by
creating the awareness of fundamental analysis (Fundamental analysis is a method of
finding out the future price of a stock, which an investor wishes to buy) among the
investors to avoid the irregularities while
trading. So to increase the volume of equity investment, the stock exchanges should
strive to increase transparency, strictly enforce corporate governance norms, provide
more value−added services to investors, and take steps to increase investor confidence.
These stock exchanges will have to plan strategic tie−ups with their foreign counterparts
to get an international platform. face international competition every Indian stock
exchange has to stress on innovation and sustained investment in technology to remain
ahead.

BIBLIOGRAPHY

Books Referred
l. Investment Management -Preeti Singh
2. Indian Financial Market -T R Venkatesh
3. Financial Market -P K Bandgar
4. Merchant Banking & Financial Services -Anil Agashe.

Magazines
l. Business Today
2. India Today
3. Business World

Websites
l. www.nseindia.com
2. www.indiainfoline.com.
3. www.equitymaster.com
4. www.bseindia.com
5. www.sebi.gov.in
6. www.financialexpress.com