STOCK EXCHANGE PRACTICES ByMEGALATHA.S

DEFINITION OF STOCK EXCHANGE According to securities contract act, 1956, “Stock exchange means anybody or individuals whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling in securities”.

MARKETS PRIMARY MARKET New shares issues to raise capital SECONDARY MARKET Subsequent trading takes place

MARKET INDICES Sensex is the oldest market index for equities; it includes shares of 30 firms listed on the BSE, which represent about 45% of the index's free-float market capitalizationmarket capitalization Another index is the S&P CNX Nifty; it includes 50 shares listed on the NSE, which represent about 62% of its free-float market capitalization.S&P CNX Nifty

MAJOR STOCK EXCHANGES IN INDIA BSE NSE

MARKET REGULATIONS The overall responsibility of development, regulation and supervision of the stock market rests with the Securities & Exchange Board of India (SEBI), which was formed in 1992 as an independent authority.Securities & Exchange Board of India

SECURITIES & EXCHANGE BOARD OF INDIA The Securities and Exchange Board of India (frequently abbreviated SEBI) is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act, 1992SEBI Act, 1992

WHO CAN INVEST IN INDIA FDI (Foreign direct investment) FII (Foreign institutional investors) FPI( Foreign portfolio investment)

SETTLEMENT CYCLE AND TRADING HOURS T+2 Rolling settlement Working hrs-9.55am &3.30pm Monday through friday

LISTING listing The admission of the security of a public limited company on a recognized stock exchange for trading are called as listing

BULL MARKET Expectation of a rise in their prices Optimistic Sell at higher prices Also called Tejiwals

BEAR MARKET Also called Mandiwals Pessimist Buy and Sell shares due to fall in the prices

LAME DUCK Cannot fulfill his commitments Not able to deliver the securities on fixed date

STAG Sell the shares at a premium and makes a profit.

STOCK BROKERS Kinds of brokers 1.Commission brokers 2.Taraniwallas 3.Jobbers 4.Arbitrageur 5.Budliwalla

DIFFERENCE BETWEEN JOBBERS & BROKERS JOBBERS Specialize in certain types of the securities. Motto is profit Buys for him and sell it to the brokers if the share prices are high BROKERS Specialize in all types the securities. commission Buys and sell on behalf of the investors

QUALIFICATION OF BROKERS Complete 12 th Not a defaulter Not engaged in any other business Completed 21 yrs of age Neither bankrupt not compounded with creditors

TYPES OF ORDERS  ODD LOT ORDERS Less than 100 stock of shares  ROUND LOT ORDERS Orders for 100 or multiples thereof  MARKET ORDERS Buys and sells at market current prices

TYPES OF ORDERS  LIMIT ORDERS Limit price is specified by the investors  STOP ORDERS Investor must specify a stop price  STOP LIMIT ORDERS Stop prices and Limit prices

CODE OF CONDUCT Not discriminate Issue a contract notes without any delay Maintain a secrecy Not purchase or sales Misleading information Possess adequate infra structures Not adopt Unfair trade practices Care, diligence, integrity and honesty Maintain proper books

BADLA TRANSACTIONS Suppose A has to buy 100 shares of a company at Rs 50 each. But he doesn't have enough money now. But the value of shares is very less now, so in order to buy the shares at current prices, A can do a badla transaction. Now there is a badla financier B who has enough money to purchase the shares, so on A's request, B purchases the shares and gives the money to his broker. The broker gives the money to exchange and the shares are transferred to B. But the exchange keeps the shares with itself on behalf of B. Now, say one month later, when A has enough money, he gives this money to B and takes the shares. The money that A gives to B is slightly higher than the total value of the shares. This difference between the two values is the interest as badla finance is treated as a loan from B to A. The rate of interest is decided by the exchange and it changes from time to time.

DEMAT MEANING Converting the Physical share certificates into electronic form. PARTICIPANTS  National securities depositories limited(NSDL).  Central depository services ltd (CDSL)

CREDIT RATING Credit rating is an opinion on the credit quality of debt instruments offered by a credit rating company. It is symbolic indicator of the current opinion of the rating agency regarding the capability of an issuer of debt to service the debt obligations in future as per the terms of the contract.

CREDIT RATING OBJECTIVES To provide superior information to the I 1.To provide superior information to the investors at a low cost. 2.To provide a sound basis for proper risk return structure. 3.To subject borrowers to a healthy discipline and 4.To assist in the framing of public policy guidelines on institutional investment

RATING RELATED PRODUCTS Bonds / Debenture Commercial paper Structured finance products Bank loans Fixed deposits and Bank certificate of deposits Mutual fund debt scheme Initial public offer

CREDIT RATING AGENCIES CRISIL (Credit rating Information service India Limited) CARE (Credit analysis and research limited) ICRA (Investment Information and credit rating agency of India) FITCH INDIA BRICK WORKS

COMPARATIVE RATING SYMBOLS FOR LONG TERM INSTRUMENTSCREDIT RATING AGENCIES RATINGSCRISILICRACAREFITCHBRICKWORKS HIGHEST SAFETYAAALAAA CARE AAAAAA(IND)BWR AAA HIGH SAFETYAALAACARE AAAA(IND)BWR AA ADEQUATE SAFETY ALACARE AA(IND)BWR A MODERATE SAFETY BBBLBBBCARE BBBBBB(IND)BWR BBB INADEQUATE SAFETY BBLBBCARE BBBB(IND)BWR BB RISK PRONEBLBCARE BB(IND)BWR B SUBSTANTIAL RISK CLCCARE C CCC(IND), CC(IND), C(IND) BWR C DEFAULTDLDCARE DDDD(IND), DD(IND), D(IND) BWR D

RULE OF THUMB Stay the course. Long-run returns reflect fundamental business prospects. Dumb money ceases to be dumb when it realizes its limitations. Don’t confuse luck with brains

RULE OF THUMB Bulls make money, bears can make money, hogs get slaughtered. Be skeptical of buy/sell recommendations. Market professionals tend to be articulate, bright, well- trained, and make a very good living for themselves. If everyone were right, everyone would be rich. Significant capital accumulation requires time and money.

BEHAVIOUR OF INVESTORS IN STOCK MARKET

THANK YOU