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Summer training Project

Report
On
“ANALYSIS OF SHARE MARKET OF
NSE/BSE ”

For Submitted for Partial Fulfillment Of

“Masters of Business Administration”

(MBA -2009-2010)
Under The Guidance of:- Under The
Supervision of:-

Dr. K.G.CHOBEY B.K.Nathani


( Executive Director, UPSE)

Submitted By:-

Neelesh Pachauri
Roll No. 0944070029

Naraina Vidya Peeth Management Institute


Panki, Kanpur-208020
STUDENT DECLARATION

I, Neelesh Pachauri student of M.B.A at Naraina Vidya Peeth Management


Institute, Kanpur of hereby declare that the Project work entitled “Analysis of
Share Market of NSE/BSE” is compiled and submitted under the guidance of
Swati Singh This is my original work.

Whatever information furnished in this project report is true to the


best of my knowledge.

Neelesh Pachauri

MBA IInd Year

Roll No: - 0944070029


Naraina Vidya Peeth Management Institute
Gangaganj,Panki, Kanpur-208020
DATE. . . . . . .

To Whom It may Concern

This is to certify that Mr./Ms. Neelesh Pachauri student of


M.B.A Course (2008-10) at Naraina Vidya Peeth Management Institute with dual
Specialization in Marketing & Finance has satisfactorily completed the
summer research project on ANALYSIS OF SHARE MARKET OF
NSE/BSE .

study is done under the guidance of the undersigned by partil fulfillment for the
award of M.B.A .I wish him /her all the best for bright future ahead.

Suervisor Head of Department Director


ACKNOWLEDGEMENT

I would like to express my Acknowledgement to those people, without whose


contribution, Support and guidance this Report would not have seen the light of the
day. Notable among them are Mr. B.K.Nathani who was my Project Guide and
who helped me in a lot.

I am also thankful to all other employees of Religare who guide me during my


Project.

I am also thankful and would like to express my Gratitude to the Honorable Head
of Department Dr. K.G. Chobey and the entire Institute for giving me a Platform
to have this wonderful opportunity and being able to get a glimpse of the Corporate
World
PREFACE

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

The capital markets consist of the primary market and the secondary market. The
primary markets are where new stock and bonds issues are sold (underwriting) to
investors. The secondary markets are where existing securities are sold and bought
from one investor or speculator to another, usually on an exchange (e.g. the New
York Stock Exchange).

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

Certificate____________________________________6

Declaration___________________________________7

Acknowledgement______________________________8

The Indian Capital Market_______________________9-31

• An Overview
• Other leading cities in stock market operation
• Growth of Indian Stock Exchanges
• Sensex and Nifty
• History
• Key Milestones
• Myths of Stock Market
• How Stock Market Works
Initial Public Offering__________________________32-35

• Introduction
• How to apply Public issue
• How to make Payment for IPOs
• Role of SEBI in process of IPO
DEMAT account______________________________36-38

• Introduction
• How to open Demat account
• Document required

SEBI (Securities and Exchange Board of India)_____39-45

• Introduction
• The Board Comprises
• Functions and Responsibilities
BSE (Bombay Stock Exchange) Introduction_______46-49

NSE (National Stock Exchange)_________________50-52

• Introduction
• NSE group

SENSEX____________________________________53-58

• Introduction
• SENSEX calculation Methodology
• Concept of Free Float
• Definition of Free Float
• Function and Purpose of Stock Market
Depository__________________________________59-64

• CDSL
• NSDL
• CSD
FII(Foreign Institutional Investor)________________65-72

• Introduction
• FII mean
• Regulations
Participatory Notes___________________________73-77

Scams of Share Market________________________78-94

• Harshad Mehta Scam


• Ketan Parekhs Scam
• Satyam Scam
• Karvy IPO scam
List of registered Share Brokers and Sub- Brokers__95-109

Research Methodology_______________________

Result analysis &Interpretation________________

Suggestions_______________________________

Conclusion_________________________________

Questions for interview_______________________

Biblography________________________________
ACKNOWLEDGEMENT

I would like to thank my project guide Dr. K.G.Chaubey for guiding me through
my summer internship and research project. His encouragement, time and effort
are greatly appreciated.

I would like to thank Ms. B.K.Nathani, for supporting me during this project and
providing me an opportunity to learn outside the class room. It was a truly
wonderful learning experience.

I would like to dedicate this project to my parents. Without their help and constant
support this project would not have been possible.

Lastly I would like to thank all the respondents who offered their opinions and
suggestions through the survey that was conducted by me in Bhopal.

Once again my gratitude to the Brokers, Sub-Brokers and Investors of share


market. For their kind co-operation.
THE INDIAN CAPITAL MARKET

AN OVERVIEW

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

Indian market confirms to best international practices and standards both in terms
of structure and in terms of operating efficiency .Indian securities markets are
mainly governed by a) The Company’s Act1956, b) the Securities Contracts
(Regulation) Act 1956 (SCRA Act), and c) the Securities and Exchange Board of
India (SEBI) Act, 1992. A brief background of these above regulations are given
below

a) The Companies Act 1956 deals with issue, allotment and transfer of securities
and various aspects relating to company management. It provides norms for
disclosures in the public issues, regulations for underwriting, and the issues
pertaining to use of premium and discount on various issues.

b) SCRA provides regulations for direct and indirect control of stock exchanges
with an aim to prevent undesirable transactions in securities. It provides regulatory
jurisdiction to Central Government over stock exchanges, contracts in securities
and listing of securities on stock exchanges.
c) The SEBI Act empowers SEBI to protect the interest of investors in the
securities market, to promote the development of securities market and to regulate
the security market.

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

Other leading cities in stock market operations

Ahmedabad gained importance next to Bombay with respect to cotton textile


industry. After 1880, many mills originated from Ahmedabad and rapidly forged
ahead. As new mills were floated, the need for a Stock Exchange at Ahmedabad
was realized and in 1894 the brokers formed "The Ahmedabad Share and Stock
Brokers' Association".

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

In the beginning of the twentieth century, the industrial revolution was on the way
in India with the Swadeshi Movement; and with the inauguration of the Tata Iron
and Steel Company Limited in 1907, an important stage in industrial advancement
under Indian enterprise was reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.

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

In 1935, the stock market activity improved, especially in South India where there
was a rapid increase in the number of textile mills and many plantation companies
were floated. In 1937, a stock exchange was once again organized in Madras -
Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was
changed to Madras Stock Exchange Limited).
Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged
with the Punjab Stock Exchange Limited, which was incorporated in 1936.

Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was
followed by a slump. But, in 1943, the situation changed radically, when India was
fully mobilized as a supply base.

On account of the restrictive controls on cotton, bullion, seeds and other


commodities, those dealing in them found in the stock market as the only outlet for
their activities. They were anxious to join the trade and their number was swelled
by numerous others. Many new associations were constituted for the purpose and
Stock Exchanges in all parts of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange
Limited (1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association
Limited and the Delhi Stocks and Shares Exchange Limited - were floated and
later in June 1947, amalgamated into the Delhi Stock Exchange Association
Limited.

There are two major indicators of Indian capital market- SENSEX & NIFTY:

What are the Sensex & the Nifty?

The Sensex is an "index". What is an index? An index is basically an indicator. It


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

The history of Indian stock market is about 200 years old. Prior to this the hundis
and bills of exchange were in use, specially in the medieval period, which can be
considered as a form of virtual stock trading but it was certainly not an organized
stock trading. The recorded stock trading can be traced only after the arrival of
East India Company. The first organized stock market that was governed by the
rules and regulations came into the existence in the form of ‘The Native Share and
Stock Brokers' Association in 1875. After gone through numerous changes this
association is today better as Bombay Stock Exchange, which remains the premier
stock exchange since its inception. During this period several other exchanges
were launched and some of which were closed also. Presently, there are 19
recognized stock exchanges out of which four are national level exchanges and the
remaining are regional exchanges. National Stock Exchange, established in 1992,
was the last exchange. Although the regional level exchanges are in existence the
volume of trading in these exchanges is negligible. National Stock Exchange and
Bombay Stock Exchange are the leaders of Indian Securities Market in terms of
listing, trading and volumes. The last 15 years of the Indian securities market can
be considered as the most important part of the history where the market gone
through the post liberalization era of Indian economy and witnessed the formation
of Securities and Exchange Board of India (SEBI) which brought substantial
transparency in share market practices and thus managed to bring in trust of not
only domestic investors but also the international ones.
The Big Picture of share market

As investors, most of us tend to forget about all of the good years and only focus
on the bad. The broad markets have been heading up for about four years, so the
thoughts of what happened in 1999-2002 are well behind us. But now that the
markets are volatile, there is a lot of talk about the subprime mortgage industry, a
weak dollar, and everyone begins to completely forget about how well the past
four years have been and only focus on the last few months or weeks complaining
how bad it is. Things can certainly continue to get worse, but you have to look at
things in context.
Remember, what goes up, must come down. Not only does the stock market cycle,
but there is a business cycle as well. We will always have various times that are
great, and those that aren’t as great, but you can’t lose sight of the big picture.
Take a look at the following 12 years in a colorized format. Green identifies
periods of strong growth. Yellow indicates a period of volatility or no real
direction, and red shows a period of a downward trend. Based on this, is it any
surprise that markets are becoming volatile and possibly trending downward?
For even more similarities, scroll back up and look at the first chart from 1996-
1999. Now, scroll down and look at the 2005-Present image. Notice how similar
they are? The markets went up for completely different reasons, yet are behaving
almost the same. All you have to do is look at the following few years to see what
might be in store for us over the coming year or two. Will history repeat itself?
There is no way to tell, and anything could happen to make all of this information
worthless, but you do have to at least consider the past trends and understand that
there is a chance the market will behave similarly and we’ll enter a period of
significant decline.

Keep Doing What You’re Doing


Sure, the market may be a bit unstable right now, and we may certainly be headed
for a time where the market falls further, but that shouldn’t be of much concern to
you if you’re investing for the next 10, 20, 30 or more years. If you want to try and
time the market or predict what the next hot sector is, that’s fine, but the best thing
most people can do is to just continuously invest in a diversified portfolio. If you
keep buying even as the market falls, you’re just adding more shares at a lower
price.
Could you make more money if you only invested at the low points and sold at the
high points compared to dollar cost averaging? Sure, but the likelihood of
succeeding on a regular basis is low. For most people, the best thing to do is to just
continue investing bi-weekly, monthly, or quarterly into the same diversified
portfolio regardless of market conditions. When markets are choppy or headed
down, you’re just buying stocks or funds on sale. All you have to do is look back a
few years to see that even though the market might go down, it will eventually
come back up again.

KEY MILESTONES

Following is the timeline on the rise and rise of the Sensex through Indian stock
market history.

1830's Business on corporate stocks and shares in Bank and Cotton presses started
in Bombay.

1860-1865 Cotton price bubble as a result of the American Civil War

1870 - 90's Sharp increase in share prices of jute industries followed by a boom in
tea stocks and coal

1900s

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


1986 Sensex first compiled. Using a market Capitalization Weighted methodology
for 30 component stocks representing well-established companies across key
sectors.

Since 1990

1000, July 25, 1990 On July 25, 1990, the Sensex touched the magical four-digit
figure for the first time and closed at 1,001 in the wake of a good monsoon season
and excellent corporate results.

July 1991 Rupee devalued by 18-19 %

2000, January 15, 1992 On January 15, 1992, the Sensex crossed the 2,000-mark
and closed at 2,020 followed by the liberal economic policy initiatives undertaken
by the then prime minister P.V.Narasimha rao.

3000, February 29, 1992 On February 29, 1992, the Sensex surged past the 3000
mark in the wake of the market-friendly Budget announced by the then Finance
Minister, Dr Manmohan Singh.

4000, March 30, 1992 On March 30, 1992, the Sensex crossed the 4,000-mark and
closed at 4,091 on the expectations of a liberal export-import policy. It was then
that the Harshad Mehta scam hit the markets and Sensex witnessed unabated
selling.

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

6000, February 11, 2000 On February 11, 2000, the infotech boom helped the
Sensex to cross the 6,000-mark and hit and all time high of 6,006.
6151, Feb 14, 2000 Tops. Index declines until Sept 2001 and loses half the value.
Coincides with dot-com bubble burst.

2595, Sept 21, 2001 Bottoms.

7000, June 20, 2005 On June 20, 2005, the news of the settlement between the
Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance
Energy, Reliance Capital, and IPCL made huge gains. This helped the Sensex
crossed 7,000 points for the first time.

8000, September 8, 2005 On September 8, 2005, the Bombay Stock Exchange's


benchmark 30-share index -- the Sensex -- crossed the 8000 level following brisk
buying by foreign and domestic funds in early trading.

9000, November 28, 2005 The Sensex on November 28, 2005 crossed the magical
figure of 9000 to touch 9000.32 points during mid-session at the Bombay Stock
Exchange on the back of frantic buying spree by foreign institutional investors and
well supported by local operators as well as retail investors.

10,000, February 6, 2006 The Sensex on February 6, 2006 touched 10,003 points
during mid-session. The Sensex finally closed above the 10K-mark on February 7,
2006.

11,000, March 21, 2006 The Sensex on March 21, 2006 crossed the magical figure
of 11,000 and touched a life-time peak of 11,001 points during mid-session at the
Bombay Stock Exchange for the first time. However, it was on March 27, 2006
that the Sensex first closed at over 11,000 points.

12,000, April 20, 2006 The Sensex on April 20, 2006 crossed the 12,000-mark and
closed at a peak of 12,040 points for the first time.
13,000, October 30, 2006 The Sensex on October 30, 2006 crossed the magical
figure of 13,000 and closed at 13,024.26 points, up 117.45 points or 0.9%. It took
135 days for the Sensex to move from 12,000 to 13,000 and 123 days to move
from 12,500 to 13,000.

14,000, December 5, 2006 The Sensex on December 5, 2006 crossed the 14,000-
mark to touch 14,028 points. It took 36 days for the Sensex to move from 13,000 to
the 14,000 mark.

15,000, July 6, 2007 The Sensex on July 6, 2007 crossed the magical figure of
15,000 to touch 15,005 points in afternoon trade. It took seven months for the
Sensex to move from 14,000 to 15,000 points.

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

The Sensex finally ended with a gain of 654 points at 16,323. The NSE Nifty
gained 186 points to close at 4,732.

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

18,000, October 09, 2007 The BSE Sensex crossed the 18,000-mark on October
09, 2007. It took just 8 days to cross 18,000 points from the 17,000 mark. The
index zoomed to a new all-time intra-day high of 18,327. It finally gained 789
points to close at an all-time high of 18,280. The market set several new records
including the biggest single day gain of 789 points at close, as well as the largest
intra-day gains of 993 points in absolute term backed by frenzied buying after the
news of the UPA and Left meeting on October 22 put an end to the worries of an
impending election.

19,000, October 15, 2007 The Sensex crossed the 19,000-mark backed by revival
of funds-based buying in blue chip stocks in metal, capital goods and refinery
sectors. The index gained the last 1,000 points in just four trading days. The index
touched a fresh all-time intra-day high of 19,096, and finally ended with a smart
gain of 640 points at 19,059.The Nifty gained 242 points to close at 5,670.

20,000, October 29, 2007 The Sensex crossed the 20,000 mark on the back of
aggressive buying by funds ahead of the US Federal Reserve meeting. The index
took only 10 trading days to gain 1,000 points after the index crossed the 19,000-
mark on October 15. The major drivers of today's rally were index heavyweights
Larsen and Toubro, Reliance Industries, ICICI Bank, HDFC Bank and SBI among
others. The 30-share index spurted in the last five minutes of trade to fly-past the
crucial level and scaled a new intra-day peak at 20,024.87 points before ending at
its fresh closing high of 19,977.67, a gain of 734.50 points. The NSE Nifty rose to
a record high 5,922.50 points before ending at 5,905.90, showing a hefty gain of
203.60 points.

21,000, January 8, 2008 The sensex peaks. It crossed the 21,000 mark in intra-day
trading after 49 trading sessions. This was backed by high market confidence of
increased FII investment and strong corporate results for the third quarter.
However, it later fell back due to profit booking.
15,200, June 13, 2008 The sensex closed below 15,200 mark, Indian market suffer
with major downfall from January 21,2008

14,220, June 25, 2008 The sensex touched an intra day low of 13,731 during the
early trades, then pulled back and ended up at 14,220 amidst a negative sentiment
generated on the Reserve Bank of India hiking CRR by 50 bps. FII outflow
continued in this week.

12,822, July 2, 2008 The sensex hit an intra day low of 12,822.70 on July 2nd,
2008. This is the lowest that it has ever been in the past year. Six months ago, on
January 10th, 2008, the market had hit an all time high of 21206.70. This is a bad
time for the Indian markets, although Reliance and Infosys continue to lead the
way with mostly positive results. Bloomberg lists them as the top two gainers for
the Sensex, closely followed by ICICI Bank and ITC Ltd.

11801.70, Oct 6, 2008 The sensex closed at 11801.70 hitting the lowest in the past
2 years.

10527, Oct 10, 2008 The Sensex today closed at 10527,800.51 points down from
the previous day having seen an intraday fall of as large as 1063 points. Thus,this
week turned out to be the week with largest percentage fall in the Sensex.

14284.21, May 18, 2009 After the result of 15th indian general election Sensex
gained 2110.79 points form the previous close of 12173.42 these creates a new
histroy in Indian Market. In the Opening Trade itself sensex gain 15% from the
previous day close this leads to the suspension of 2 hours trade. After 2 hours
sensex again surged this leads to the suspension of full day trading. 14200
Myths of stock market

1. You can tell if a Stock is cheap or expensive by the Price to Earnings Ratio.

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

2. To make Money in the Stock Market, you must assume High Risks.

• False: Tips to Lower your Risk:


• Do not put more than 10% of your money into any one stock
• Do not own more than 2-3 stocks in any industry
• Buy your stocks over time, not all at once
• Buy stocks with consistent and predictable earnings growth
• Buy stocks with growth rates greater than the total of inflation and
interest rates
• Use stop-loss orders to limit your risk
3. Buy Stocks on the Way Down and Sell on the Way Up.

False: People believe that a falling stock is cheap and a rising stock is too
expensive. But on the way down, you have no idea how much further it may fall. If
a stock is rising, especially if it has broken previous highs, there are no unhappy
owners who want to dump it. If the stock is fairly valued, it should continue to rise.

4. You can Hedge Inflation with Stocks.

False: When interest rates rise, people start to pull money out of the market and
into bonds, so that pushes prices down. Plus the cost of business goes up, so
corporate earnings go down, along with the stock prices.

5. Young People can afford to take High Risk.

False: The only thing true about this is that young people have time on their side if
they lose all their money. But young people have little disposable income to risk
losing. If they follow the tips above, they can make money over many years.
Young people have the time to be patient.

How stock market works

In order to understand what stocks are and how stock markets work, we need to
dive into history--specifically, the history of what has come to be known as the
corporation, or sometimes the limited liability company (LLC). Corporations in
one form or another have been around ever since one guy convinced a few others
to pool their resources for mutual benefit.
The first corporate charters were created in Britain as early as the sixteenth
century, but these were generally what we might think of today as a public
corporation owned by the government, like the postal service.

Privately owned corporations came into being gradually during the early 19th
century in the United States , United Kingdom and western Europe as the
governments of those countries started allowing anyone to create corporations.

In order for a corporation to do business, it needs to get money from somewhere.


Typically, one or more people contribute an initial investment to get the company
off the ground. These entrepreneurs may commit some of their own money, but if
they don't have enough, they will need to persuade other people, such as venture
capital investors or banks, to invest in their business.

They can do this in two ways: by issuing bonds, which are basically a way of
selling debt (or taking out a loan, depending on your perspective), or by issuing
stock, that is, shares in the ownership of the company.

Long ago stock owners realized that it would be convenient if there were a central
place they could go to trade stock with one another, and the public stock exchange
was born. Eventually, today's stock markets grew out of these public places.

IPO – Initial Public Offering

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

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

How to apply to a public issue ?

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

1. Who are the Promoters ? What is their credibility and track record ?

2. What is the company manufacturing or providing services - Product, its potential

3. Does the Company have any Technology tie-up ? if yes , What is the reputation
of the collaborators

4. What has been the past performance of the Company offering the IPO?

5. What is the Project cost, What are the means of financing and profitability
projections?

6. What are the Risk factors involved ?

7. Who has appraised the Project ? In India Projects apprised by IDBI and ICICI
have more credibility than small Merchant Bankers

How to make payments for IPOs:

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

The role of SEBI in the process of IPO

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

DEMAT ACCOUNT

Demat refers to a dematerialised account.

Though the company is under obligation to offer the securities in both physical and
demat mode, you have the choice to receive the securities in either mode.

If you wish to have securities in demat mode, you need to indicate the depository
and also of the depository participant with whom you have depository account in
your application.
It is, however desirable that you hold securities in demat form as physical
securities carry the risk of being fake, forged or stolen.

Just as you have to open an account with a bank if you want to save your money,
make cheque payments etc, Nowadays, you need to open a demat account if you
want to buy or sell stocks.

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

The most important thing required to trade in share market is Demat account.
Demat or Dematerialized account is to store stocks in electronics form. It is just
like opening a bank account to store your money. Now nobody is interested to keep
shares in physical forms and going for electronic based filing of shares. This has
changed the style of operation in main Indian stock markets like BSE Sensex
( Bombay Stock Exchange Sensitive Index) and Nifty (National Stock Exchange of
India) and its brokers.

How to Open a Demat Account

It is like opening a bank account. You have to approach a depository participants to


open an online trading or demat account. Most of the banks are DPs too.
Documents Required

You will have to submit few documents with the application form to open a demat
account. As per latest Govt of India rule PAN (Personal Account Number) card is
must for opening a demat account. These are the documents required to open a
demat account

1. Photo Copy of PAN Card (Mandatory)

2. Two Passport size photos

3. Address Proof – Ration Card/Passport/Driving License/Voter’s ID


Card/BSNL Telephone/LIC Policy

4. Latest Bank Statement and photocopy of Bank Passbook.

SEBI – Introduction

In 1988 the Securities and Exchange Board of India (SEBI) was established by the
Government of India through an executive resolution, and was subsequently
upgraded as a fully autonomous body (a statutory Board) in the year 1992 with the
passing of the Securities and Exchange Board of India Act (SEBI Act) on 30th
January 1992. In place of Government Control, a statutory and autonomous
regulatory board with defined responsibilities, to cover both development &
regulation of the market, and independent powers have been set up. Paradoxically
this is a positive outcome of the Securities Scam of 1990-91.

The basic objectives of the Board were identified as:


• to protect the interests of investors in securities;
• to promote the development of Securities Market;
• to regulate the securities market and
• for matters connected therewith or incidental thereto.

Since its inception SEBI has been working targetting the securities and is attending
to the fulfillment of its objectives with commendable zeal and dexterity. The
improvements in the securities markets like capitalization requirements, margining,
establishment of clearing corporations etc. reduced the risk of credit and also
reduced the market.

SEBI has introduced the comprehensive regulatory measures, prescribed


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

Another significant event is the approval of trading in stock indices (like S&P
CNX Nifty & Sensex) in 2000. A market Index is a convenient and effective
product because of the following reasons:

• It acts as a barometer for market behavior;


• It is used to benchmark portfolio performance;
• It is used in derivative instruments like index futures and index options;
• It can be used for passive fund management as in case of Index Funds.

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

SEBI appointed the L. C. Gupta Committee in 1998 to recommend the regulatory


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

SEBI then appointed the J. R. Verma Committee to recommend Risk


Containment Measures (RCM) in the Indian Stock Index Futures Market. The
report was submitted in November 1998.

However the Securities Contracts (Regulation) Act, 1956 (SCRA) required


amendment to include "derivatives" in the definition of securities to enable SEBI to
introduce trading in derivatives. The necessary amendment was then carried out by
the Government in 1999. The Securities Laws (Amendment) Bill, 1999 was
introduced. In December 1999 the new framework was approved.
Derivatives have been accorded the status of `Securities'. The ban imposed on
trading in derivatives in 1969 under a notification issued by the Central
Government was revoked. Thereafter SEBI formulated the necessary
regulations/bye-laws and intimated the Stock Exchanges in the year 2000. The
derivative trading started in India at NSE in 2000 and BSE started trading in the
year 2001.

SEBI is the Regulator for the Securities Market in India. Originally set up by
the Government of India in 1988, it acquired statutory form in 1992 with SEBI Act
1992 being passed by the Indian Parliament.Chaired by C B Bhave, SEBI is
headquartered in the popular business district of Bandra-Kurla
complex in Mumbai, and has Northern, Eastern, Southern and Western regional
offices in New Delhi, Kolkata, Chennai and Ahmedabad.

Organisation Structure

Chandrasekhar Bhaskar Bhave is the sixth chairman of the Securities Market


Regulator. Prior to taking charge as Chairman SEBI, he had been the chairman of
NSDL (National Securities Depository Limited) ushering in paperless securities.
Prior to his stint at NSDL, he had served SEBI as a Senior Executive Director. He
is a former Indian Administrative Service officer of the 1975 batch.

The Board comprises

Name Designation As per

Mr CB Bhave Chairman SEBI CHAIRMAN (S.4(1)(a)


of the SEBI Act, 1992)

Joint Secretary, Member (S.4(1)(b) of the


Mr KP Krishnan
Ministry of Finance SEBI Act, 1992)

Secretary, Ministry of Member (S.4(1)(b) of the


Mr Anurag Goel
Corporate Affairs SEBI Act, 1992)

Director, National
Member (S.4(1)(d) of the
Dr G Mohan Gopal Judicial Academy,
SEBI Act, 1992)
Bhopal

Whole Time Member, Member (S.4(1)(d) of the


Mr MS Sahoo
SEBI SEBI Act, 1992)

Whole Time Member, Member (S.4(1)(d) of the


Dr KM Abraham
SEBI SEBI Act, 1992)

Member (S.4(1)(d) of the


Mr Mohandas Pai Director, Infosys
SEBI Act, 1992)

Functions and Responsibilities

SEBI has to be responsive to the needs of three groups, which constitute the
market:

 the issuers of securities


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

SEBI has enjoyed success as a regulator by pushing systemic reforms aggressively


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

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

BSE is the first stock exchange in the country which obtained permanent
recognition (in 1956) from the Government of India under the Securities Contracts
(Regulation) Act 1956. BSE's pivotal and pre-eminent role in the development of
the Indian capital market is widely recognized. It migrated from the open outcry
system to an online screen-based order driven trading system in 1995. Earlier an
Association Of Persons (AOP), BSE is now a corporatised and demutualised entity
incorporated under the provisions of the Companies Act, 1956, pursuant to the
BSE (Corporatisation and Demutualisation) Scheme, 2005 notified by the
Securities and Exchange Board of India (SEBI). With demutualisation, BSE has
two of world's best exchanges, Deutsche Börse and Singapore Exchange, as its
strategic partners.

Over the past 133 years, BSE has facilitated the growth of the Indian corporate
sector by providing it with an efficient access to resources. There is perhaps no
major corporate in India which has not sourced BSE's services in raising resources
from the capital market.

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

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

The first Exchange Traded Fund (ETF) on SENSEX, called "SPIcE" is listed on
BSE. It brings to the investors a trading tool that can be easily used for the
purposes of investment, trading, hedging and arbitrage. SPIcE allows small
investors to take a long-term view of the market.

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

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

In 2006, BSE launched the Directors Database and ICERS (Indian Corporate
Electronic Reporting System) to facilitate information flow and increase
transparency in the Indian capital market. While the Directors Database provides a
single-point access to information on the boards of directors of listed companies,
the ICERS facilitates the corporate in sharing with BSE their corporate
announcements.
INTRODUCTION – NATIONAL STOCK EXCHANGE

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

The Organisation

The National Stock Exchange of India Limited has genesis in the report of the
High Powered Study Group on Establishment of New Stock Exchanges, which
recommended promotion of a National Stock Exchange by financial institutions
(FIs) to provide access to investors from all across the country on an equal footing.
Based on the recommendations, NSE was promoted by leading Financial
Institutions at the behest of the Government of India and was incorporated in
November 1992 as a tax-paying company unlike other stock exchanges in the
country.
On its recognition as a stock exchange under the Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt
Market (WDM) segment in June 1994. The Capital Market (Equities) segment
commenced operations in November 1994 and operations in Derivatives segment
commenced in June 2000.
Our Group

NSCCL NCCL NSETECH

IISL NSE NSE.IT

DotExIntl. Ltd.
NSDL

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

NSE lists securities in its Capital Market (Equities) segment and its Wholesale
Debt Market segment

Introduction of SENSEX

SENSEX, first compiled in 1986, was calculated on a "Market Capitalization-


Weighted" methodology of 30 component stocks representing large, well-
established and financially sound companies across key sectors. The base year of
SENSEX was taken as 1978-79. SENSEX today is widely reported in both
domestic and international markets through print as well as electronic media. It is
scientifically designed and is based on globally accepted construction and review
methodology. Since September 1, 2003, SENSEX is being calculated on a free-
float market capitalization methodology. The "free-float market capitalization-
weighted" methodology is a widely followed index construction methodology on
which majority of global equity indices are based; all major index providers like
MSCI, FTSE, STOXX, S&P and Dow Jones use the free-float methodology.
The growth of the equity market in India has been phenomenal in the present
decade. Right from early nineties, the stock market witnessed heightened activity
in terms of various bull and bear runs. In the late nineties, the Indian market
witnessed a huge frenzy in the 'TMT' sectors. More recently, real estate caught the
fancy of the investors. SENSEX has captured all these happenings in the most
judicious manner. One can identify the booms and busts of the Indian equity
market through SENSEX. As the oldest index in the country, it provides the time
series data over a fairly long period of time (from 1979 onwards). Small wonder,
the SENSEX has become one of the most prominent brands in the country.

SENSEX Calculation Methodology

SENSEX is calculated using the "Free-float Market Capitalization" methodology,


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

The base period of SENSEX is 1978-79 and the base value is 100 index points.
This is often indicated by the notation 1978-79=100. The calculation of SENSEX
involves dividing the free-float market capitalization of 30 companies in the Index
by a number called the Index Divisor. The Divisor is the only link to the original
base period value of the SENSEX. It keeps the Index comparable over time and is
the adjustment point for all Index adjustments arising out of corporate actions,
replacement of scrips etc. During market hours, prices of the index scrips, at which
latest trades are executed, are used by the trading system to calculate SENSEX
every 15 seconds. The value of SENSEX is disseminated in real time.
Concept of FREE FLOAT

Free-float methodology refers to an index construction methodology that takes into


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

Definition of Free-float

Shareholding of investors that would not, in the normal course come into the open
market for trading are treated as 'Controlling/ Strategic Holdings' and hence not
included in free-float. Specifically, the following categories of holding are
generally excluded from the definition of Free-float:

• Shares held by founders/directors/ acquirers which has control element


• Shares held by persons/ bodies with "Controlling Interest"
• Shares held by Government as promoter/acquirer
• Holdings through the FDI Route
• Strategic stakes by private corporate bodies/ individuals
• Equity held by associate/group companies (cross-holdings)
• Equity held by Employee Welfare Trusts
• Locked-in shares and shares which would not be sold in the open market in
normal course.

Maintenance of SENSEX

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

The BSE Index Cell does the day-to-day maintenance of the index within the broad
index policy framework set by the BSE Index Committee. The BSE Index
Cell ensures that SENSEX and all the other BSE indices maintain their benchmark
properties by striking a delicate balance between frequent replacements in index
and maintaining its historical continuity. The BSE Index Committee comprises of
capital market expert, fund managers, market participants and members of the BSE
Governing Board.

Function and purpose of stock market

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

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

Exchanges also act as the clearinghouse for each transaction, meaning that they
collect and deliver the shares, and guarantee payment to the seller of a security.
This eliminates the risk to an individual buyer or seller that the counterparty could
default on the transaction.

The smooth functioning of all these activities facilitates economic growth in that
lower costs and enterprise risks promote the production of goods and services as
well as employment. In this way the financial system contributes to increased
prosperity.
Depository

What is a Depository?

A depository holds shares and other securities of investors in electronic form.


Through Depository Participants (DPs), it also provides services related to
transactions in securities. Its structure and functioning are similar to the Bank.
Presently in India, there are two depository viz. National Securities Depository
Limited (NSDL) and Central Depository Services (I) Limited (CDSL). Both of
them are registered with SEBI.

What is a DP?

DP is a member of a Depository who offers its services to hold securities of


Investors (Beneficial Owners) in dematerialized form. DP is like a Bank branch. It
is an agent of the depository. DP works as an interface between Depository and
Investors. DPs are required to be registered with SEBI. If an investor wants to avail
the services offered by Depository, he has to open a Demat account with DP
similar to opening of a bank account with a branch of the bank.

Depository is responsible for keeping stocks of investors in electronics form. There


are two depositories in India, NSDL (National Securities Depository Ltd) and
CDSL (Central Depository Services Ltd).

CDSL (Central Depository Services Ltd.)

CDSL was promoted by Bombay Stock Exchange Limited (BSE) jointly with
leading banks such as State Bank of India, Bank of India, Bank of Baroda, HDFC
Bank, Standard Chartered Bank, Union Bank of India and Centurion Bank.
CDSL was set up with the objective of providing convenient, dependable and
secure depository services at affordable cost to all market participants. Some of the
important milestones of CDSL system are:

CDSL received the certificate of commencement of business from SEBI in


February, 1999.

Honourable Union Finance Minister, Shri Yashwant Sinha flagged off the
operations of CDSL on July 15, 1999.

Settlement of trades in the demat mode through BOI Shareholding Limited, the
clearing house of BSE, started in July 1999.

All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have
established connectivity with CDSL.

As at the end of Dec 2007, over 5000 issuers have admitted their securities
(equities, bonds, debentures, commercial papers), units of mutual funds, certificate
of deposits etc. into the CDSL system.

About NSDL

Although India had a vibrant capital market which is more than a century old, the
paper-based settlement of trades caused substantial problems like bad delivery and
delayed transfer of title till recently. The enactment of Depositories Act in August
1996 paved the way for establishment of National Securities Depository Limited
(NSDL), the first depository in India. This depository promoted by institutions of
national stature responsible for economic development of the country has since
established a national infrastructure of international standards that handles most of
the securities held and settled in dematerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to support the
investors and brokers in the capital market of the country. NSDL aims at ensuring
the safety and soundness of Indian marketplaces by developing settlement
solutions that increase efficiency, minimise risk and reduce costs. At NSDL, we
play a quiet but central role in developing products and services that will continue
to nurture the growing needs of the financial services industry.

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

NSDL is promoted by Industrial Development Bank of India Limited (IDBI) - the


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

NSDL Facts & Figures

As on December 31, 2008

• Number of certificates eliminated (Approx.) : 550 Crore


• Number of companies in which more than 75% shares are dematted : 2282
• Average number of accounts opened per day since November 1996 : 3636
• Presence of demat account holders in the country : 78% of all pincodes in
the country.

Central Securities Depository (CSD)

A Central Securities Depository (CSD) is an organization holding securities


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

International Central Securities Depository (ICSD) is a central securities


depository that settles trades in international securities and in various domestic
securities, usually through direct or indirect (through local agents) links to local
CSDs. ClearStream International (earlier Cedel), Euro clear and SIX SIS are
considered ICSDs. While some view The Depository Trust Company (DTC) as a
national CSD rather than an ICSD, in fact DTC -- the largest depository in the
world -- holds over $2 trillion in non-US securities and in American Depository
Receipts from over 100 nations.

Functions

• Safekeeping Securities may be in dematerialized form, book-entry only


form (with one or more "global" certificates), or in physical form
immobilized within the CSD.
• Deposit and Withdrawal Supporting deposits and withdrawals involves the
relationship between the transfer agent and/or issuers and the CSD. It also
covers the CSD's role within the underwriting process or listing of new
issues in a market.
• Dividend, interest, and principal processing, as well as corporate actions
including proxy voting Paying and transfer agents, as well as issuers are
involved in these processes, depending on the level of services provided by
the CSD and its relationship with these entities.
• Other services CSDs offer additional services aside from those considered
core services. These services include Securities Lending and Borrowing,
Matching, and Repo Settlement
• Pledge - Central depositories provide pledging of share and securities. Every
country require to provide legal framework to protect the interest of the
pledgor and pledgee.

However, there are risks and responsibilities regarding these services that must be
taken into consideration in analyzing and evaluating each market on a case-by-case
basis.

FII (Foreign Institutional Investors) in Indian Stock Market

Foreign Institutional Investor (FII) is used to denote an investor - mostly of the


form of an institution or entity, which invests money in the financial markets of a
country different from the one where in the institution or entity was originally
incorporated.

FII investment is frequently referred to as hot money for the reason that it can leave
the country at the same speed at which it comes in.
In countries like India, statutory agencies like SEBI have prescribed norms to
register FIIs and also to regulate such investments flowing in through FIIs. In
2008, FIIs represented the largest institution investment category, with an
estimated US$ 751.14 billion.

Since 1990-91, the Government of India embarked on liberalisation and economic


reforms with a view of bringing about rapid and substantial economic growth and
move towards globalisation of the economy. As a part of the reforms process, the
Government under its New Industrial Policy, revamped its foreign investment
policy recognising the growing importance of foreign direct investment as an
instrument of technology transfer, augmentation of foreign exchange reserves and
globalisation of the Indian economy. Simultaneously, the Government, for the first
time, permitted portfolio investments from abroad by foreign institutional investors
in the Indian capital market. The entry of FIIs seems to be a follow up of the
recommendation of the Narsimhan Committee Report on Financial System. While

recommending their entry, the Committee, however did not elaborate on the
objectives of the suggested policy. The committee only suggested that the capital
market should be gradually opened up to foreign portfolio investments.

From September 14, 1992 with suitable restrictions, FIIs were permitted to invest
in all the securities traded on the primary and secondary markets, including shares,
debentures and warrants issued by companies which were listed or were to be
listed on the Stock Exchanges in India.

While presenting the Budget for 1992-93, the then Finance Minister Dr.
Manmohan Singh had announced a proposal to allow reputed foreign investors,
such as Pension Funds etc., to invest in Indian capital market. To operationalise
this policy announcement, it had become necessary to evolve guidelines for such
investments by Foreign Institutional Investors (FIIs). The policy framework for
permitting FII investment was provided under the Government of India guidelines
vide Press Note date September 14, 1992. The guidelines formulated in this regard
were as follows:

1. Foreign Institutional Investors (FIIs) including institutions such as Pension


Funds, Mutual Funds, Investment Trusts, Asset Management Companies,
Nominee Companies and Incorporated/Institutional Portfolio Managers or
their power of attorney holders (providing discretionary and non-
discretionary portfolio management services) would be welcome to make
investments under these guidelines.

2. FIIs would be welcome to invest in all the securities traded on the Primary
and Secondary markets, including the equity and other
securities/instruments of companies which are listed/to be listed on the
Stock Exchanges in India including the OTC Exchange of India. These
would include shares, debentures, warrants, and the schemes floated by
domestic Mutual Funds. Government would even like to add further
categories of securities later from time to time.

3. FIIs would be required to obtain an initial registration with Securities and


Exchange Board of India (SEBI), the nodal regulatory agency for securities
markets, before any investment is made by them in the Securities of
companies listed on the Stock Exchanges in India, in accordance with these
guidelines. Nominee companies, affiliates and subsidiary companies of a
FII would be treated as separate FIIs for registration, and may seek separate
registration with SEBI.
4. Since there were foreign exchange controls in force, for various
permissions under exchange control, along with their application for initial
registration, FIIs were also supposed to file with SEBI another application
addressed to RBI for seeking various permissions under FERA, in a format
that would be specified by RBI for the purpose. RBI's general permission
would be obtained by SEBI before granting initial registration and RBI's
FERA permission together by SEBI, under a single window approach.

5. For granting registration to the FII, SEBI should take into account the track
record of the FII, its professional competence, financial soundness,
experience and such other criteria that may be considered by SEBI to be
relevant. Besides, FII seeking initial registration with SEBI were be
required to hold a registration from the Securities Commission, or the
regulatory organisation for the stock market in the country of
domicile/incorporation of the FII.

6. SEBI's initial registration would be valid for five years. RBI's general
permission under FERA to the FII would also hold good for five years.
Both would be renewable for similar five year periods later on.

7. RBI's general permission under FERA would enable the registered FII to
buy, sell and realize capital gains on investments made through initial
corpus remitted to India, subscribe/renounce rights offerings of shares,
invest on all recognized stock exchanges through a designated bank branch,
and to appoint a domestic Custodian for custody of investments held.

8. This General Permission from RBI would also enable the FII to:
• Open foreign currency denominated accounts in a designated bank.
(There could even be more than one account in the same bank branch
each designated in different foreign currencies, if it is so required by
FII for its operational purposes);
• Open a special non-resident rupee account to which could be credited
all receipts from the capital inflows, sale proceeds of shares, dividends
and interests;
• Transfer sums from the foreign currency accounts to the rupee account
and vice versa, at the market rate of exchange;
• Make investments in the securities in India out of the balances in the
rupee account;
• Transfer repatriable (after tax) proceeds from the rupee account to the
foreign currency account(s);
• f. Repatriate the capital, capital gains, dividends, incomes received by
way of interest, etc. and any compensation received towards
sale/renouncement of rights offerings of shares subject to the
designated branch of a bank/the custodian being authorized to deduct
with holding tax on capital gains and arranging to pay such tax and
remitting the net proceeds at market rates of exchange;
• Register FII's holdings without any further clearance under FERA.
What Does Foreign Institutional Investor - FII Mean?

An investor or investment fund that is from or registered in a country outside of the


one in which it is currently investing. Institutional investors include hedge funds,
insurance companies, pension funds and mutual funds.

Regulation imposed by SEBI on FII

(a) "Act" means the Securities and Exchange Board of India Act, 1992 (15 of
1992);

(b) "certificate" means a certificate of registration granted by the Board under


these regulations;

(c) "designated bank" means any bank in India, which has been authorised by
the Reserve Bank of India to act as a banker to Foreign Institutional Investors;

(d) "domestic custodian" includes any person carrying on the activity of


providing custodial services in respect of securities;

(e) "Enquiry officer" means any officer of the Board, or any other person
appointed by the Board under Chapter V of these regulations;

(f) "Foreign Institutional Investor" means an institution established or


incorporated outside India which proposes to make investment in India in
securities;
(g) "Form" means a form specified in the First Schedule to these regulations;

(h) "Government of India Guidelines" means the guidelines dated September


14, 1992 issued by the Government of India for Foreign Institutional Investors,
as amended from time to time;

(i) "institution" includes every artificial juridical person;

(j) "schedule" means a schedule to these regulations;

(k) "sub-account" includes those institutions, established or incorporated


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

Participatory notes (PNs / P-Notes) are instruments used by investors or hedge


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

Indian based brokerages buy Indian-based securities and then issue PNs to foreign
investors.

Any dividends or capital gains collected from the underlying securities go back to
the investors.

Participatory notes are instruments used for making investments in the stock
markets. However, they are not used within the country. They are used outside
India for making investments in shares listed in that country. That is why they are
also called offshore derivative instruments.

In the Indian context, foreign institutional investors (FIIs) and their sub-accounts
mostly use these instruments for facilitating the participation of their overseas
clients, who are not interested in participating directly in the Indian stock market.
For example, Indian-based brokerages buy India-based securities and then issue
participatory notes to foreign investors. Any dividends or capital gains collected
from the underlying securities go back to the investors. According to an expert
group constituted by the finance ministry in India, in August 2004, participatory
notes constituted about 46 per cent of the cumulative net investments in equities by
FIIs.
Any entity investing in participatory notes is not required to register with SEBI
(Securities and Exchange Board of India), whereas all FIIs have to compulsorily
get registered. Trading through participatory notes is easy because participatory
notes are like contract notes transferable by endorsement and delivery. Secondly,
some of the entities route their investment through participatory notes to take
advantage of the tax laws of certain preferred countries. Thirdly, participatory
notes are popular because they provide a high degree of anonymity, which enables
large hedge funds to carry out their operations without disclosing their identity.

Participatory notes in brief is as follows :

What are participatory notes or PNs? Participatory notes are instruments used by
foreign funds which are not registered to trade in domestic Indian Capital Markets.
PNs are derivative instruments issued against an underlying security permitting
holders to get a share in the income from the security.

How does it work? Investors who buy PNs deposit their funds in US or European
operations of Foreign Institutional Investors (FII) operating in India . The FII uses
its proprietary account to buy stocks.

Why do investors use PNs? Reason for using PNs is to keep investor name
anonymous, some investors have used them to save transaction and overhead costs.

Tax officials fear that PNs are becoming a favourite with a host of Indian money
launderers who use them to first take funds out of country through hawala and then
get it back using PNs.

Participatory Notes Crisis of 2007

On the 16th of October, 2007, SEBI (Securities & Exchange Board of India)
proposed curbs on participatory notes which accounted for roughly 50% of FII
investment in 2007. SEBI was not happy with P-Notes because it is not possible to
know who owns the underlying securities and hedge funds acting through PNs
might therefore cause volatility in the Indian markets.

However the proposals of SEBI were not clear and this led to a knee-jerk crash
when the markets opened on the following day (October 17, 2007). Within a
minute of opening trade, the Sensex crashed by 1744 points or about 9% of its
value - the biggest intra-day fall in Indian stock-markets in absolute terms. This led
to automatic suspension of trade for 1 hour. Finance Minister P.Chidambaram
issued clarifications, in the meantime, that the government was not against FIIs and
was not immediately banning PNs. After the markets opened at 10:55 am, they
staged a remarkable comeback and ended the day at 18715.82, down just 336.04
from Tuesday’s close after tumbling to a day’s low of 17307.90.

This was, however not the end of the volatility. The next day (October 18, 2007),
the Sensex tumbled by 717.43 points — 3.83 per cent — to 17998.39, its second
biggest fall. The slide continued the next day when the Sensex fell 438.41 points to
settle at 17559.98 at the end of the week, after touching the lowest level of that
week at 17226.18 during the day.

The SEBI chief, M.Damodaran held an hour long conference on the 22nd of
October to clear the air on the proposals to curb PNs where he announced that
funds investing through PNs were most welcome to register as FIIs, whose
registration process would be made faster and more steamlined. The markets
welcomed the clarifications with an 879-point gain — its biggest single-day surge
— on October23, thus signalling the end of the PN crisis. SEBI issued the fresh
rules regarding PNs on the 25th of October, 2007 which said that FIIs cannot issue
fresh P-Notes and existing exposures were to be wound up within 18 months.
UPSE
U.P. Stock Exchange Association Ltd.

The UP Stock Exchange association limited, Kanpur is situated at a


very important place. It holds a very important position among other
existing stock exchanges in India. The exchange was inaugurated on 27th
august 1982 by the then finance minister Shri Pranab Mukherjee. From
the very first day it has been playing role in the development of the
capital market of north India.

Incorporation in 15th NOV 1979 and Commencement of business on


5th May 1982 has made a long way through the time.

The UP Stock Exchange association limited, Kanpur occupies a very


prominent place among the existing Stock Exchanges in India. The
exchange was inaugurated on 27th august 1982 by the then finance
minister Shri Pranab Mukherjee. Right from its inception it has been
playing a very prominent role in the development of capital market of
northern India. UPSE is the only. Initially it had 350 members which
have now increased to 540 members belonging to almost all important
cities of the country. Members living outside Kanpur have contributed a
lot by creating the equity cult in whole of the Uttar Pradesh. Not only
these members are highly qualified and professional and devoted to the
cause of capital formulation in the country.

The Exchange was initially started in the rented building but with the
efforts of our members, a new complex was constructed and was
inaugurated by his Excellency Shri R Venkatraman the then President of
India on 8th February, 1989.
At present we have 843 companies listed with the total capitalization
of Rs. 81184 Crores. The annual turnovers of this Exchange for the last
three years are : 1998-99: 18429 Crores, 1999-2000: 23876 Crores and
2000-01: 25112 Crores. Thus every year we have increased our turnover
creating more and more awareness among the people of Northern India.

This stock Exchange is wedded to the investor’s protection and


investor’s education as we have firm conviction that any investor
protection cannot be achieved without proper awareness and education of
investors. Thus the Exchange has a very active investor service Cell and
also a very equipped Research and Development Wing is functioning.
We have also a very effective system of readdressing the investor’s
complaints.

The Exchange has one of the best developed Exchanges of the country
so far its infrastructure is concerned. The Ex-Finance Minister Dr.
Manmohan Singh, Ex-Commerce Minister Shri Pranab Mukherjee, other
central Ministers and Chief Ministers Uttar Pradesh have visited this
Exchange and appreciated its efforts in maintaining the transparency and
the integrity of the market. To keep pace of changing technology the
Exchange has embarked upon the Project of Screen Based Trading. The
On-Line Trading based on VECTOR Software supplied by CMC has
commenced on UPSE from 11th November 1997.

To increase the further business and to facilitate the On-Line trading


facility to about 22 members at Lucknow an additional trading Floor has
been established at Lucknow. At present at the additional trading at
Lucknow 22 Lucknow based members have been allotted Computer
Terminals which have been connected with UPSE main server via
VSAT.
As per recent decision of SEBI for the revival of the smaller Stock
Exchanges in the country, they can obtain the membership of big Stock
Exchanges like, BSE, NSE, CSE etc. through forming a subsidiary
company of the Exchange and in turn the members of the Exchange can
trade through the said subsidiary as sub-broker(s).

Accordingly we have incorporated a wholly owned subsidiary namely


UPSE Securities Ltd. and obtained the membership of BSE to enable the
members of UPSE on BOLT.

Main objective of UPSE

1. To organize and carry on the stock exchange and


regulate the business of exchange and stock and share, debentures
and debenture stocks. Government securities, bonds and equities of
any description and with a view to establish and conduct stock
exchange in Kanpur.
2. To acquire the membership of any other recognized
exchange in India and abroad including membership of OCTEL,
broad base the operations of the stock exchange for the benefit of
the general public and investor.
3. To promote one or more subsidiary whether wholly or
partly owned, with object to promote the trade in share and stocks,
debenture bond and other securities of any description issued by
companies statutory corporation, government of state or union
government, financial institution.
4. Provides quotation for shares/stock for fascinating and
marketability.
5. Extends liquidity (conversion in to cash) to such stock
as they are easily marketable and traded.
6. Provides an orderly regulated market for securities
whose prices are determined by the free market forces of supply
and demand.
7. Promotes savings and investments in the economy by
attracting funds for investment in corporate share and securities.
Location and other communication details:

THE UTTAR PRADESH STOCK EXCHANGE ASSOCIATION LTD.

‘Padam Towers’, 14/113, Civil Lines, Kanpur-208001

Telephone No: 2338115, 2338074

Fax No: 0512-2338175/2338220

Email Address: upse@vsnl.in,

Website: upse-india.com

LIST OF DIRECTORS IN THE BOARD (UPSE) FOR THE YEAR


2009-2010

(Constituted on 29-03-10)

SL. No. Name of Director Particulars Telephone/ Fax Nos.

1. Shri K. D. Gupta Public Interest Director

Telephone No: 0512-2556585/2535356

Address: Flat No. 104, Ratan Bhawan 9336453452

7/108A, Swaroop Nagar, upstockexchange@gmail.com


Kanpur-208002

upse@vsnl.in
2. Shri A. K. Shah Public Interest Director

Telephone No: 0512-2550688/2540383

Address: Registrar of U.P. & Uttarakhand 0512-2540423 (Fax)

10/499-B, Allenganj, 9935606399


Kanpur-208002

Kashmir.kamboj@mca.gov.in

3. Shri T. K. Das Public Interest Director

Telephone No: 011-22756035

Address: Flat No. A-201, 9910518074

Anand Lok Society (purvasha),Mayur Vihar, Phase-1 Delhi-110091

upse@vsnl.in

4. Shri B. K. NadhaniExecutive Director

Telephone No: 0512-2338288, 2338153, 9793035588

Address: The U.P. Stock Exchange Assn. Ltd.

Padam Towers, 14/113, Civil Lines, Kanpur

Kanpur-208002

upstockexchange@gmail.com

upse@vsnl.in
5. Shri S. K. Kanodia Trading Member Director

Telephone No: 0512-2305958, 0512-2305883 (Fax), 9839035346

Address: Director

Kanodia Shares & Securities (P) Ltd.

407, Padam Towers, 14/113 Civil Lines,


Kanpur

6. Shri Rajesh Agrawal Trading Member Director

Telephone No: 9336332505

Address: C/o. Haryana Securities

407, Padam Towers, 14/113 Civil Lines,

Kanpur

7. Shri G. S. Diwedi Trading Member Director

Telephone No: 0512-2338192, 193, 0512-264381 (R), 9415074767

Address: 49/62, Nayaganj,

Kanpur

8. Shri Ashok Sharma Shareholder Director

Telephone No: 0512-2366629, 0512-2363726, 0512-3042039 (R)

Address: Chartered Accountant

58/4, Birhana Road, 9839068023


Post Box No. 389, Kanpur-01

9. Shri Mukul Tandon Shareholder Director

Telephone No: 0512-2373680, 2393970, 9336114347, 9935568890

Address: 413, Plaza Kalpana

24/14-A, Birhana Road

Kanpur-01

10. Shri R. K. Agrawal Sahreholder Director

Telephone No: 9336117324, 9336222842

Address: 3/109, Vishnupuri


Kanpur-208001

11. Shri S. K. Jain FCA Sahreholder Director

Telephone No: 0512-2531195/2532110, 9871055255,


9839032305

Address: 113/233, Swaroop Nagar


Kanpur-208001

12. Shri S. K. Gupta Sahreholder Director

Telephone No: 0512-2302737, 9839084094, 9336103555

Address: 51/40, Goldiee House, NayaGanj


Kanpur-208001
13. Shri Vinod Kumar Sahreholder Director

Telephone No: 0522-2208030, 9415012598

Address: FF-2, Rajnigandha-2

Gulmohar Avenue
3-C, Gokhla Marg, Lucknow-226001
DEPARTMENTS

1. R & D department
2. Membership Inspection / Grievances / Complain / Audit
3. Listing
4. Market operation department (Margin)
5. Secretarial Department
6. Surveillance Department
7. EDP (Computer)
8. Accounts
9. Legal
10. UPSE securities (Subsidiary Company)
11. Clearing House (Trade and Operation)
1. R & D, Library and Investor service department

Research and development wing of the Uttar Pradesh Stock Exchange


Association Limited has been functioning eve since 1992 under SEBI
direction and providing valuable services to the investors. The wing
presently names ‘investor service center’ has a well maintained, library
comprising of books, journals, periodicals, and newspapers on financial
market, annual reports of companies, prime directory etc.

They maintain the records of day to day quotations of major


exchanges, the annual reports of companies, PRIME directory, complete
set of volumes of the Stock Exchange, Mumbai Directories. Along with
this it also maintains the news letters, daily bulletin, books on Capital
Markets, Investor awareness, Budget Taxation with other relevant books.

The UPSE has been organizing summer camps to give trainings to


Company Securities and MBAs different institutes giving those complete
data and helping the student to know the practical day-to-day working of
the exchanges. Along with this it also organizes Investor Awareness
Shows.

The changing technology has helped the exchange to install a


corporate database of over 7000 companies. The rates of UPSE, BSE,
and NSE are displayed live for the benefit of investors.

There are three main function of this department

• To render investor services


• To maintain library
• To conduct research and development
All the above facilities are provided free of cost to one and all any query
is mandatory attended by the help desk situated in the investor service
center, headed by a responsible official of the exchange.

2. Membership and Grievances

There are two types of membership

1. Shareholder
2. Trading member

Eligibility for membership

To have the membership of the stock exchange one has to satisfy the
following criteria

1. He has to be the citizen of India.


2. Experience of 2 year in the securities department.
3. Capital of 10 lakh (individual) and 20 lakh (company).
4. He must submit 4 lakh as Base Minimum Capital (BMC). This
becomes operational in the stock market.

a) The BMC must comprise of at least of 50% of cash or cash


equivalents (FDR, bank guarantee, etc)
b) Other 50% can comprise of the following type of assets
(shares-valued on the daily basis)
5. He must submit extra money as Margin, to trade in shares of the
stock exchange.

a) The margin again has to be of 50% of cash or cash


equivalents (FDR, bank guarantee, etc.)
b) Other 50% can comprise of the following type of assets
(shares-valued on the daily basis)

6. No association with defaulter member, i.e. the member has to


provide an undertaking

Of not being involved with defaulting broker.

Procedure to get membership

Application → screening committee (UPSE) → Board approval


(UPSE) → SEBI approval

Grievances and problems

There are of two types of problem between the investor and the following
parties

1. Companies
2. Broker

Transfer of share committee

This committee takes care of the hassle free transfer of the share from
one party to another.
Investor services committee

This committee helps solve problem between the broker and stock
holder. There is no charge for the resolution of the problem of the
investor regarding the above parties.

Arbitration committee (upper committee)

To appeal against the decision of the Investor Service Committee


(ISC), one has to submit the decision of ICS along with Rs. 1000 in the
arbitration committee.

The arbitration panel headed by presiding arbitrator appoints a sole


arbitrator. The sole arbitrator undertakes investigation and hearing of the
case. Then arbitration award decision is given. The execution of the order
of the arbitration has to be made within 15 days.

Default committee

The department collects and keeps track of the various dues to the
stock exchange. It also takes action against the defaulting brokers and
company.

It can invite investor claim by advertising in the newspapers.

The assets of the defaulting party are disbursed to the lenders and the
surplus goes to the investor protection fund (IPF).
If the asset of the defaulting party falls the lenders demand, 1 lakh
(maximum) can be released from the IPF, condition being it is per person
case.

Disciplinary committee

The department takes care of the imaginaries that occur that during
the regular conduct of the business of the stock exchange.

It can penalize the party involved in the earlier mentioned acts with
following

1. Financial fines
2. Expulsion

Investor grievance with the broker or vise versa goes to the Investor
Service Committee (ISC).

Investor having complained against any company then the case goes
to the Arbitration committee.

Here the investor only has to deposit arbitration fees but no security.
Whereas the brokers has to deposit 100% of the award, given against him
by the ISC.

The legal path for complaints of the investor is as follows:

ISC→ Arbitration committee → District judge→ High court→ Supreme


court
The various measures that court can take on the litigation of this type are
as follows:

1. Set aside
2. Confirm
3. Reprimand (send back the order to the lower court)
3. LISTING

Recruitment with respect to the listing of securities on a recognized


stock exchange

A public company as defined under the act 1956, desirous of getting


its securities listed on a recognized stock exchange, shall apply for the
purpose to the stock exchange and forward alone with its application the
following documents and particulars:

a) Memorandum and article of association and in case of a debenture issue,


a copy of the trust deed.

b) Copies of all prospectuses or statement in lieu of prospectuses issued by


the company at any time.

c) Copies of offer for the sale and circulars or advertisements offering any
securities for subscription or sale during the last five years.

d) Copies of balance sheet and audited accounts for the last five years, or
in the case of new companies, for such shorter period for which account
have been made up.

e) A statement showing-
i. Dividend and cash bonuses, if any, paid during the last ten years
(or such shorter period as the company has been in existence,
whether as a private or public company).
ii. Dividend or interest in arrear, if any.

f) Certified copy of agreement or other documents


relating to arrangements with or
between: -

i. Vendors and /or promoters


ii. Underwriters and sub-underwriters.
iii. Broker and sub-broker.

g) Certified copies of agreement with—

i. Managing agents and secretaries and treasures.


ii. Selling agents
iii. Managing directors and technical directors
iv. General manager, sales manager, manager or secretary.

h) Certified copy of every letter, report, balance sheet,


valuation, contract, court order or other document, or other
document, part of which is referred to in any prospectus, offer for
sale, circular or advertisement offering securities for subscription
or sale, during the last five years.

i) A statement containing particulars of the date of, and parties


to all material contracts, agreements (including agreement for
technical advice and collaboration) concessions and similar other
documents (except those entered into in the ordinary courses of
business carried on or intended to be carried on by the company)
together with a brief description of the terms, subject matter and
general nature of the documents.

j) A brief history of the company since its incorporation


giving details of its activities including any reorganization,
reconstruction or amalgamation, changes in its capital structure
(authorized, issued and subscribed) and debenture borrowings if
any.

k) Particulars of shares and debentures issued—


i. For consideration other than cash, whether in whole or part,
ii. At a premium or discount or,
iii. In pursuance of an opinion.
l) A statement containing particulars of any
commission, brokerage, discount or other special terms
including an opinion for the issue of any kind of the securities
granted to any person.

m) Certified copies of –

i. Acknowledgement card or the receipt of filling offer


document with the securities and exchange board of India.
ii. Agreement, if any, with the industrial finance corporation,
industrial credit and Investment Corporation and similar
bodies.

n) Particulars of shares forfeited.

o) A list of highest ten holder of each class or kind of


securities of the company as on the date of application along
with the particulars as to the number of shares or debentures
held by and the address of each such holders.

p) Particulars of shares or debentures for which


permission to deal is applied for:

Provided that a recognized stock exchange may either generally by


its buy laws or in any particular case call for such further
particulars of documents, as it deems proper.

An initial listing fee for a company to get listed with the Uttar Pradesh
Stock Exchange is 10500.

The Annual listing fees structure is as follows:

Capital (in crore) Fees

Up to 1 6000

1.5 9000

5.10 14000
10.20 28000

Each additional 1 crore over 20 crore onwards in the capital will


attract Rs 4600 more in addition to 28000.

If other company from different state listed with BSE or NSE the
company will be charged 50% of the above fees.

One day free run for the stock is provided to estimate the value of the
stock. That is, there is no circuit limits to the stock for the first day of the
trading of a stock.

Indian primary market ushered in an era of free pricing in 1992.


Following this, the guidelines have provided that the issuer in
consultation with Merchant Banker shall decide the price. There is no
price formula stipulated by SEBI. SEBI does not play any role in price
fixation. The company and merchant banker are however required to give
full disclosures of the parameters, which they had considered while
deciding the issue price. There are two types of issues one where
company and LM fix a price (called fixed price) and other, where the
company and LM stipulate a floor price or a price band and leave it to
market forces to determine the final price (price discovery through book
building process).

To have voluntary delisting, company must be listed in BSE and NSE.

For compulsory delisting, the stock exchange takes action against the
company. If there is violation of the listing clauses, the company can be
listed.
4. MARGIN DEPARTMENT

New scheme for margin is implemented from the date 30 June.

In the new system of margin there is the concept of “Upfront Margin”.


The upfront margins consist of the following types of margins VAT
(Value at Risk) and ELM (Extreme Loss Margin).

The VAR and ELM is fixed for the different scripts.

The Z group of shares can attract VAR and ELM of 100%, where as
for the “B and A” group share could attract lesser percentage.

Marked to Market is a special type of margin.

Further details please refer to the specialization portion of the report.

Which are stricter in its nature than those directed by SEBI.


5. SECRETARIAL

Governing Board

According to the article of association of the exchange governing board


comprises of

1. Six director elected under the provision of the article of association of the
exchange.
2. Person not exceeding two is nominated by SEBI as director
3. Four people from public as public representatives nominated by the
governing board of the exchange subject to SEBI approval.
4. One executive director appointed by the governing board subject to prior
approval of SEBI.

However w.e.r. 12-07-2002 SEBI has suspended the governing board


of the exchange and appointed an administrator to perform the power and
function of the governing board, under section 11 of SCRA, 1956.

According to the new regulation every stock exchange will now have
a board of director.
6. Surveillance

This department was established in 1995 under the requirement of the


SEBI. The main objective of the surveillance function of the exchange
is to manage risk by taking necessary action timely. All instruments
traded in the market come under the surveillance umbrella of UPSE.

Purpose of the surveillance

Purpose of surveillance is to prevent risk which may arise


due to-

a. Carry forward trade


b. Trade away from market price
c. Price manipulation
d. Insider trading
e. Circular trading
f. Creation of false market

In order to detect abnormal behavior/movement, it is necessary


to know the normal market behavior. The necessary actions are
initiated like imposition of special margin, suspensions,
deactivation of terminals, etc. to control abnormal behavior, the
department carries out investigation. If necessary, based on the
preliminary examination/analysis and suitable action are taken
against members involved based on investigation. The detailed
explanations of the various surveillance activities are as
follows:

On-line surveillance
One of the most important tools of the surveillance is the
on-line real time surveillance system with main objective of
detecting potential market abuses at a necessary stage to reduce
the ability of the market participants. To unduly influence the
price and volume of the scripts traded at the exchange, improve
the risk management system and strengthen the self regulatory
mechanism at the exchange the system has a facility to generate
the alters on-line based on certain preset parameters like price
and volume variation in scripts; members crossing intra day
limit or gross exposure limit.

Off-line surveillance
The of-line surveillance system comprises of the various
reports based on different parameters and securities, thereof.
High-low difference in price
Percentage change in price over a week/fortnight/month.
Top scripts by turnover
Scripts hitting new high/low, etc.

The surveillance action or investigations are initiated in the scripts


identified in the scripts identified from the above-stated reports.

It takes finds the irregularities and ensures the


proper working of the stock exchange. Surveillance ensures risks
arising of the daily trading are managed efficiently, by enabling
proper collection of the margins.
Settlement guarantee fund is made for the
payment of the Clint of a defaulting broker.

Various Forms of errors and mal practices are as follows

1. Insider trading is utilization of the internal


information of a company to manipulate the price of
the share of the company, before that information is
made public.To avoid such irregularities, the
surveillance department keep track of the people
insider to the companies and their trading

2.Price rigging it is way by which a company tries to manipulate the prices


of the shares in the stock market.

3. Punching errors that occur while operator types the order on the
computer terminal.
4. Humors are another threat to the proper working of the stock exchanges.
These are false stories that are made up to manipulate the prices of the share.
Humor verifications another function of the
stock exchange and specially the surveillance department.
7. EDP (Computer Department)

Stock trading has evolved tremendously. Since the very first


Initial Public Offering (IPO) in the 13th century, owning shares of a company
has been a very attractive incentive.

Even though the origins or stock trading go back to the 13th


century, the market as we know now today did not catch on strongly until
the late 1800s. Co-*operation between technology and society has led the
push for effective and efficient way of trading. Technology has allowed the
stock market to grow tremendously, and all the while society has encourage
the growth. Within seconds of an order of a stock, the transaction can now
take the place. Most of the recent advancements with the trading have been
due to Internet. The interest has allowed online trading. In contrast to the
past where only those who could afford the expensive stock brokers could
trade, but now anyone who wishes to be active in the stock market can do so
at a very low cost per transaction. Trading can even be done through
computer-mediated communication (CMC) using mobile devices such as
handheld computers and cellular phones. These advances in technology have
made day trading possible.

The stock market has now grown so that some


argue that it represents a country’s economy. This growth has been enjoyed
largely to the credibility and reputation that the stock market has earned.

In the screen-based systems, the trading ring is


replaced by the computer screen and distant participants can trade the shares
with each other through the computer network. The screen-based trading
system, enhance the information efficiency of the marker as more
participants trade at a faster speed. A large number of participants,
geographically separated, can trade simultaneously at high speed.
RESEARCH

METHODOLOGY
RESEARCH METHODOLOGY

TITLE:

To analyse the changing trends of the share market, in last ten years share market
faces so many ups and down. And also anlayse that how the investor invest their
money with what perception.

• TITLE JUSTIFICATION:

The above title is self explanatory. In this study it is tried to find out that why
share market faces so many changes in last ten years what are the things which
affect the market most. And how the investor decide their shares to buy or sell.
OBJECTIVE

Objective One

• Analysis of Indian stock market in last ten years.


• To determine reasons for so many ups and down.
• To determine the procedures of investors to opting companies for share.
• To determine the reasons of increasing the number of investors.
• To determine the effect of all scams in the share market.
• To determine the use of Internet for valuable information and decision-
making process.

Objective Two

• To determine that how the Indian economy affected through the


changing trends in share market.
• To determine that how the changing trends affect investor’s behaviour.

Objective Three

• To study of milestones came across the journey.


• To determine the reasons for affect Sensex
SIGNIFICANCE OF THE STUDY

SIGNIFICANCE TO THE INDUSTRY:

This is a limited study which takes into consideration the responses of 30-40
people. This data can be explored to take in the trends across the industry. The
significance for the industry lies in studying these trends that emerge from the
study. It is a rapidly changing and evolving sector. People are only beginning to
wake up to it’s vast possibilities. A study like this can attempt to guide the future
of the industry based on current trends.

SIGNIFICANE FOR THE RESEARCHER :

To facilitate and provide all the useful information of the study, which can be
helpful to make decision for investing money in right shares which is profitable to
investors as well as brokers.

RESEARCH DESIGN :

 Source of Data.
 Method of Data collection.
 Types of research.
 Sampling
 Tools of analysis

Source of Data:
There are many sources which provide information regarding the research. The
data may be of two types

1) Primary Data.
2) Secondary Data

1) Primary Data:

Primary data is data which is not already available. Primary data is found in
its original form. Primary data are those which are collected afresh and for the first
time, and thus happen to be original in character.

Methods for collecting primary data are:

• Questionnaires
• Interviews
• Schedules etc.

In this study the interview method have been used

2) Secondary Data:
Secondary data means data that are already available i.e. they refer to the data
which have already been collected and analyzed by others. Secondary data may
be published or unpublished.

The sources of secondary data are:

• Bulletin, books and magazines organized by organizations.


• Web Sites, Official records.
• Case studies.

• DISCRIPTIVE AS WELL AS ANALYTICAL RESEARCH

The research is primarily descriptive as well as analytical in nature. The sources of


information are both primary & secondary.

Well-structured interviews were conducted to collect the customer’s perception


and buying behavior, through this interview.

SAMPLING METHODOLOGY

Sampling Technique:

Initially, a rough draft was prepared keeping in mind the objective of the research.
A pilot study was done in order to know the accuracy of the interview. The final
interview was arrived only after certain important changes were done. Thus my
sampling came out to be judemental and convinent.

Random Sampling:-
It is also known as random sampling or chance sampling. Under this every item of
the universe has an equal chance of inclusion in the sample.

In brief, the implications of random sampling are:

 It gives each element in the population an equal probability of getting into


the sample and all choice is independent of one another number.

 It gives each possible sample combination an equal probability of being


chosen.

Why random sampling has been chosen:-

 Sampling can save time and money: - Sample study is usually less
expensive than a census study and produces results faster.

 Sampling may enable more accurate measurements foe a sample study.

 Sampling usually enables to estimate the sampling errors and thus assists
in obtaining information concerning some characteristics of the
population.
Sampling Unit:

The respondents who were interviewed to analyse the subject are the sampling
units. These comprise of registered brokers and sub-brokers and the regular
investors.

Sample size:

The sample size was restricted to only 30-40, which comprised of mainly peoples
from different regions of Bhopal due to time constraints.

Sampling Universe:

The area of the research is Bhopal, India.

Tool of Analysis:

 Qualitative.

i. Observation
ii. Case Study

Qualitative:

It is concerned with the qualitative phenomenon i.e. phenomenon related to


or involves quality. For instance, when we are interested in investigating the reason
for human behavior i.e. why people think or do certain thing. We quite often talk
of “Motivation Research” an important type of qualitative research. This type of
research aims at discovering the underlying motives and desires, using the depth
interview for the purpose.

 Observation:-
Observation includes minute observation of activities take place in the field of
research. For observation in this study secondary data has been used.

 Case Study:
It includes the systematic study of cases related to research as well as it includes
the in-depth study of the literature which is already available.

In this study qualitative technique of analysis has been chosen.

LIMITATIONS OF THE RESEARCH

1. The research is confined to a certain parts of Bhopal and does not necessarily
shows a pattern applicable to all of Country.

2. Some respondents were reluctant to divulge personal information which can


affect the validity of all responses.

3. In a rapidly changing industry, analysis on one day or in one segment can


change very quickly. The environmental changes are vital to be considered in
order to assimilate the findings.
RESULT ANALYSIS & INTERPRETATION

Analysis of changing trends in Indian stock market in last ten years.

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

To determine reasons for so many ups and down

There are so many reason which affect the share market for example elections,
FII’s sale and purchase, the world economy, future projects of different companies,
scams are also affect the share market for e.g. the Harshad Mehta scam affect so
much on the market as well as investors behaviour. And the last downfall’s reason
was recession and FII that downfall broke the belief of investors because the
investors bear huge losses in a that single day. The day was black Monday.

Black Monday saw bloodbath on Dalal Street as the Indian stock markets crashed
by over 1430 points in afternoon trade (the market has since then recovered
somewhat), reminding investors.

Why Did the Markets Crash?? I am listing below some of the reason that I
understand

1. Relent less selling by the FII's.

2. Lot of Investors turning into traders and taking long positions in the futures
Market.

3. Overall Change in the Global Investment Climate

4. Fear of the US Economy headed towards a recession.

5. Commodities Market Being Very Volatile.


6. Increasing Presence of Hedge funds across all asset classes increases chances of
volatility.

To determine the procedures of investors to opting Companies for share.

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

If you look at the price patterns of various different companies you will generally
see that when a stock is trending upwards it will never go up in a straight line.
Even when there is a very long-term upwards trend there will always be pull-backs
along the way.

So therefore if you are looking to trade these long-term trends then a very simple
but effective trading strategy would be to wait for one of these pull-backs and then
enter a long position as soon as the price moves back up again.

So you can see that this very simple trading strategy can produce some excellent
results and it’s a lot more effective than most of the overcomplicated systems that a
lot of traders use. Successful share trading isn’t really that difficult. You simply
need to look for shares that are trending either upwards or downwards and then
find a way of profiting from this trend.

To determine the reasons of increasing the number of investors

The lowering of interest rates on all major saving schemes is forcing small
investors to look at the stock markets. This has resulted in a sharp jump in liquidity
in the market. Investors are growing more enthusiastic about shares every day
highlighted by sharply higher fund inflows in the market that propelled the
benchmark market index.

There are many factors that have boosted the sentiment of not only domestic
investors but also foreign institutional investors who had lately adopted an
indifferent approach towards Indian market.

According to analysts, include sharp increase in foreign fund inflows in the market,
a smart pick up in industrial growth, and a downward trend in the overall interest
rate regime.

To determine the effect of all scams in the share market.

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

To determine that how the Indian economy affected through the changing
trends in share market.

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

The sensex climbed at a rapid rate, touching record heights in 2007 -2008. The
average Indian investor who traditionally has been a very conservative investor
became more confident and started investing heavily in the stock market. The stock
market grew in leaps and bounds and its growth in the last five years itself has
been a phenomenal twenty five per cent. All the economists and statisticians of the
world started making predictions about India becoming the next economic
superpower of Asia or perhaps the world. All this sounded very good to be true and
the whole country’s attitude seemed to be a vibrant one. Against this backdrop the
unthinkable happened, the stock market Of the United states of America or Wall
street stock exchange crashed due to a crisis in the housing finance sector of its
leading banks, caused due to delinquency and non-repayment of housing loans.
This resulted in a panic in the world market including India. The sensex dropped
more than nine thousand points in the Bombay Stock Exchange. The Foreign
Investment also came down heavily due to a liquidity crunch in the major
companies. The banks stopped lending to the bankers and in effect the market
came to a sudden stop. The Indian investor panicked again and started selling like
crazy. Major companies started making announcements like job layoffs to
minimize their losses.

Large domestic market will keep fuelling growth of the Indian economy, though at
a lower pace, despite financial crisis leaving the US and Europe reeling under
recession, experts have said.

While the Reserve Bank and stock regulator SEBI have announced measures to
improve liquidity in the system, the equity market has suffered painful bruises in
India in sync with the global bourses.
SUGGESTIONS
1. Brokers should improve their services.
2. SEBI should imply some mere regulations. So that investors can feel more
secure
3. Small investors cannot afford daily trading so script call updating facilities
should be improved.
4. Brokerage slabs should be flexible.
5. Compliance department should be more active in companies.
CONCLUSION

CONCLUSION
After going through all the analysis regarding the stock market in last ten years, we
can say that stock market faces so many ups and down during this time it comes
from its lowest point to its peak at 21000 but then crashed badly. During its
skimming point some scams were held by which it forms its new peak falls down
suddenly and so badly by which investors are afraid to invest in this market. Now
it is revolving around a 14000-15500 figure. Though the sensex is a barometer and
after seeing such fluctuations one could be afraid of investing. Still we can say that
people can play safe by investing the blue-chips and undervalued shares.

During year 2006, if we keep aside that brief period of loss that the market
witnessed from may 10 2006 to June 14 2006, investors’ wealth seem to have
grown double fold with the Sensex touching the 10000, 11000, 12000, 13000 and
14000 levels in the same calendar year. Investor wealth in terms of market
capitalization has been growing in the range of 6.84-12.41%

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

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

FOR INVESTORS:-
1. HOW DO YOU SELECT THE SHARE TO INVEST?
2. HOW DO YOU PERCEIVE THAT SHARE TRADING IS A GOOD
MODE OF INVESTMENT?
3. WHICH KIND OF BROKERS DO YOU PREFER?

FOR BROKERS & SUB BROKERS.:-

1. HOW THE TRENDS AFFECT YOUR BUSINESS?


2. WHAT ARE THE REASONS FOR INCREMENT OF INVESTORS?
3. HOW MUCH THE SCAMS EFFECT INVESTOR’S BEHAVIOUR?
4. WHAT IS THE MAIN REASON WHICH PROVOKED
INVESTORS FORM SMALL CITIES?
BIBLIOGRAPHY
BIBLIOGRAPHY

1. BOOKS/MAGAZINES REFFERED:

• DALAAL STREET
• INDIA TODAY
• BUSINESS TIMES

2. WEBSITES REFFERED:

• WWW.BSEINDIA.COM
• WWW.NSEINDIA.COM
• WWW.SEBI.GOV.IN
• WWW.MONEYCONTROL.COM

3. SEARCH ENGINES:

• WWW.GOOGLE.CO.IN
• WWW.WIKIPEDIA.ORG.IN

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