RESEARCH METHODOLOGY

1. BACKGROUND OF THE TOPIC

The topic, I selected is the “The Overview of Bombay Stock

Exchange”. This topic is challenging and related to the various functions,
activities & services which BSE offers.

2. OBJECTIVE OF THE STUDY

The following are the objectives undertaken for the study of Bombay
Stock Exchange:

1) To obtain information regarding stock market.

2) To study the procedure & workings of Stock Exchange.
3) To obtain in depth knowledge about BSE.
4) To understand the behaviour of stock market investors.

3. SCOPE & IMPORTANCE OF THE STUDY

1. This project helped me to know more about Bombay Stock Exchange. It

gave me practical as well as theoretical knowledge.
2. The study of the project has improved my knowledge from economics
point of view.
3. It has cleared many of my doubts regarding functioning of stock
exchanges.

1
4. METHODS OF DATA COLLECTION

I collected data via both Primary as well as secondary Data.

Primary Data-

I asked few questions to the Stock market investors.

Secondary Data-

 Books
 Websites

2
Chapter Contents Page.No

1 Introduction 10-22
1.1 Executive summary
1.2 Introduction
1.3 Bombay Stock Exchange(BSE)
1.4 BSE History
1.5 Vision
1.6 Need fo BSE
1.7 Functions of BSE
1.8 Technological Impact on BSE
1.9 Minimum requirement for listing in BSE

2 Shares 23-35
2.1 Shares
2.2 Classifications of shares
2.3 Top 30 companies listed in BSE
2.4 Procedure to buy shares online

3 Indices used in BSE 36-52

3.1 Indices used in BSE
3.2 calculation of sensex
3.3 Milestones

4 Players in Stock exchange 53-61

4.1 Investors
4.2 Market Makers
4.3 Mutual funds
4.4 Underwriters
4.5 Foreign institutional investors (FII)

5 SEBI 62-66
5.1 Introduction
5.2 Functions of SEBI
5.3 Powers of SEBI
5.4 Limitations of SEBI

3
6 Awards achieved by BSE 67-70
6.1 Awards achieved by BSE
6.2 Heritage
6.3 Several Firsts

Data analysis& interpretation 71-75

76

Conclusion

Annexure 77
Bibliography &Webliogarphy 78

4
Chapter 1-

Introduction

Contents:

1.1 Executive Summary

1.2 Stock exchange

1.3 Bombay Stock Exchange (BSE)

1.4 BSE History

1.5 Vision & logo

1.6 Need of BSE

1.7 Functions of BSE

1.8 Technological Advancement in BSE

1.9 Minimum requirement for listing in BSE

5
1.1 Executive Summary
BSE is the oldest stock exchange in India. It was established in year 1875.
It is ranked 1st in India, 6th in Asia and 14th in world in terms of market
capitalization. It also has the title of largest number of company listed in the
world. Over 5112 listed companies are listed in BSE.
The equity market capitalization of the total companies listed is more than
US $1 trillion as of Dec 2011. BSE is 1st in India and 2nd in world to obtain ISO
9001:2000 certification.
BSE has been the backbone of country’s capital market located in
PhirozeJeejobhoy tower, Dalal Street in Mumbai which is financial capital of
India. Bse carries in-depth knowledge of capital market acquired since its
inception in 1875.
The BSE Index, SENSEX, is India's first and most popular Stock Market
benchmark index. It has also launched many sectorial indices to monitor the
growth of a particular sector like FMCG, automobile industry, banking industry to
name a few.
To facilitate smooth transactions, BSE had replaced its open outcry
system with the BSE On-line Trading (BOLT) facility in 1995. This totally
automated, screen-based trading in securities was put into practice nation-wide.
BSE has classified Equity scripts into categories A, B1, B2, S, T, TS, & Z
to provide guidance to the investors. The classification is on the basis of several
factors like market capitalization, trading volumes and numbers, track records,
profits, dividends, shareholding patterns, and some qualitative aspects.

6
1.2Stock exchange
Stock exchange is a marketplace in which securities, commodities,
derivatives and other financial instruments are traded. The core function of an
exchange - such as a stock exchange - is to ensure fair and orderly trading, as
well as efficient dissemination of price information for any securities trading on
that exchange. Exchanges give companies, governments and other groups a
platform to sell securities to the investing public.
An exchange may be a physical location where traders meet to conduct
business or an electronic platform. May also be referred to as "share exchange"
or "bourse" depending on geographical location.A stock exchange is a form of
exchange which provides services for stock brokers and traders to trade stocks,
bonds, and other securities. Stock exchanges also provide facilities for issue and
redemption of securities and other financial instruments, and capital events
including the payment of income and dividends. Securities traded on a stock
exchange include shares issued by companies, unit trusts, derivatives, pooled
investment products and bonds.
To be able to trade a security on a certain stock exchange, it must be
listed there. Usually, there is a central location at least for record keeping, but
trade is increasingly less linked to such a physical place, as modern markets are
electronic networks, which gives them advantages of increased speed and
reduced cost of transactions. Trade on an exchange is by members only.
There are 24 stock exchanges in India. Among them two are national level
stock exchanges, namely the Bombay Stock Exchange (BSE) and the National
Stock Exchange of India (NSE). The other 22 are Regional Stock Exchanges
(RSE).

7
1.3 Bombay Stock Exchange(BSE)

The Phiroze Jeejeebhoy Towers, popularly known by its original name of

BSE Towers, is a 29 storey building in downtown Mumbai on Dalal Streetand is
the oldest stock exchange in Asia. The equity market capitalization of the
companies listed on the BSE
was US$1 trillion as of December 2011,
making it the 6th largest stock exchange in
Asia and the 14th largest in the world. The
BSE has the largest number of listed
companies in the world.

As of December 2011, there are over

5,112 listed Indian companies, the Bombay
Stock Exchange has a significant trading
volume. TheBSE SENSEX, also called
"BSE 30", is a widely used market index in
India and Asia. Though many other
exchanges exist, BSE and the National
Stock Exchange of India account for the
majority of the equity trading in India. While both have similar total market
capitalization (about USD 1.6 trillion), share volume in NSE is typically two times
that of BSE.

BSE Limited is the oldest stock exchange in Asia what is now popularly
known as the BSE was established as "The Native Share & Stock Brokers’
Association" in 1875. Over the past 135 years, BSE has facilitated the growth of
the Indian corporate sector by providing it with an efficient capital raising
platform.

Today, BSE is the world's number 1 exchange in the world in terms of the
number of listed companies. It is the world's 5th most active in terms of number
of transactions handled through its electronic trading system. And it is in the top
ten of global exchanges in terms of the market capitalization of its listed
companies (as of December 31, 2009). The companies listed on BSE command
a total market capitalization of USD Trillion 1.28 as of Feb, 2010.BSE is the first
8
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). Presently, BSE is ISO
27001:2005 certified, which is a ISO version of BS 7799 for Information Security.

The BSE Index, SENSEX, is India's first and most popular Stock Market
benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE
and in Hong Kong. Futures and options on the index are also traded at BSE.

9
1.4BSE History

The Bombay Stock Exchange is the oldest exchange in Asia. It traces its
history to the 1850s, when four Gujarati and one Parsi stockbroker would gather
under banyan trees in front of Mumbai's Town Hall. The location of these
meetings changed many times, as the number of brokers constantly increased.
The group eventually moved to Dalal Street in 1874 and in 1875 became an
official organization known as 'The Native Share & Stock Brokers Association'.

In 1956, the BSE became the first stock exchange to be recognized by

theIndian Government under the Securities Contracts Regulation Act. The
Bombay Stock Exchange developed the BSE SENSEX in 1986, giving the BSE a
means to measure overall performance of the exchange. In 2000 the BSE used
this index to open its derivatives market, trading SENSEX futures contracts. The
development of SENSEX options along with equity derivatives followed in 2001
and 2002, expanding the BSE's trading platform. Historically an open outcry floor
trading exchange, the Bombay Stock Exchange switched to an electronic trading
system in 1995. It took the exchange only fifty days to make this transition. This
automated, screen-based trading platform called BSE On-line trading (BOLT)
currently has a capacity of 8 million orders per day. The BSE has also introduced
the world's first centralized exchange-based internet trading system,
BSEWEBx.co.in to enable investors anywhere in the world to trade on the BSE
platform. The BSE is currently housed in PhirozeJeejeebhoy Towers at Dalal
Street, Fort area.

10
1.5Vision, Logo & Management team

Vision

"Emerge as the premier Indian stock exchange by establishing global

Benchmarks”

Logo

The Stock Exchange, Mumbai is now BSE Limited a new name, and an entirely
new perspective a perspective born out of
corporatization and demutualization. As a
corporate entity, our new logo reflects our
new mission smoother, seamless, and
efficient, whichever way you look at it. BSE is Asia's oldest stock exchange
carrying the depth of knowledge of capital markets acquired since its inception in
1875. Located in Mumbai, the financial capital of India, BSE has been the
backbone of the country's capital markets.

11
Management Team
No. Name
1 Mr. Madhu kannan
2 Mr. ashishkumarchauhan
3 Mr. balasubramaniam
4 Mr. nehalvora
5 Mr. kersiTavadia
6 Mr. V.K Agarwal
7 Dr. Sayee Srinivasan
8 Mr. Rahul paulekar
9 Mr. Lakshman Gogulothu
Designation
Managing Director & CEO
CEO
Chief Business Officer
Chief regulatory officer
Chief Information Officer
Chief Financial Officer
Head- Product Strategy
Head- market
Development
CEO- SME Exchange
12
1.6Need for BSE

BSE is one of the factors Indian Economy depends upon. BSE has played
a major role in the development of the country. Through BSE, Foreign Investors
have invested in India. Due to inward flow of foreign currency the, the Indian
economy has started showing the upward trend towards the development of the
country.

BSE provides employment for many people. Trading in BSE is also a

business for a few, their family income depends on it that is the reason why when
scandals occur in the stock market it not only affects the companies listed but
also affects many families. In the few extreme cases, it is observed that the
bread winner of a family tends to suicide due to the losses occurred.

In most of major industrial cities all over the world, where the businesses
were evolving and required investment capital to grow and thrive, stock
exchanges acted as the interface between Suppliers and Consumers of capital.
One of the key advantages of the stock exchanges is that they are efficient
medium for raising resources and channeling savings from the general public by
the way of issue of Equity / Debt Capital by joint stock companies which are
listed on stock exchanges.

The taxes and other statutory charges paid by BSE are substantial and
make a sizeable contribution to the Government exchequer (Financial resources;
funds). For example, transactions on the stock exchanges are subject to stamp
duties, which are paid to the State Government. The annual revenue from this
source ranges from Rs 75 – 100 crores.

With the opening up of the financial markets to Foreign Investors a

number of foreign institutional investors and brokers have established a sizeable
presence in Mumbai.

With no doubt we can clearly state without BSE, the Indian Economy
would have been a complete different story. Various companies wouldn’t have
been a strong and successful as they are today and the brokers and traders
would have been elsewhere.

13
 BSE is an asset to our country and its existence plays a vital role in many
people’s life who depends on it. Indeed, BSE has made a major contribution to
the industrial and economic development of India.

14
1.7Functions of BSE

The Bombay Stock Exchange is a pivotal institution in the financial system of

India. A well-ordered stock market performs several economic functions:

•It ensures the measure of safety and fair dealing

•It performs an ‘act of magic’ by translating short-term investments into long-term
funds for companies.
•It directs the flow of capital in the most profitable channels.
•It induces companies to raise their standard of performance.
•It offers guidance to management about the cost of capital.

1. Measure of Safety and Fair Dealing:

BSE operates under a regulatory framework which seeks to protect the

interest of investors. The rules, regulations, and bye-laws of a stock exchange,
which are approved by the central government, are meant to ensure that a
reasonable measure of safety is provided to investors and transactions take
place in competitive conditions which are fair to all concerned.

2. Act of Magic:

Most of the investors are interested in short-term investments. The

requirements of companies are, however, long-term in nature—they require
equity capital on a more or less permanent basis and debenture capital for 3 to
15 years. Thanks to the negotiability and transferability of securities, through the
stock market, it is possible for companies to obtain their long-term requirements
from investors with short-term horizons. While one investor is substituted by
another when a security is transacted, the company is assured of availability of
funds.

3. Flow of Capital in the Most Profitable Channels:

Companies which have more profitable investment opportunities are

normally able to raise substantial funds through the stock market, whereas
companies which do not have such opportunities are normally not able to do so.

15
As a result, the stock market facilitates the direction of the flow of capital in the
most profitable channels.

4. Inducement to Companies to Raise their Standard of Performance:

When the equity, capital of a company is listed on a stock exchange, the

performance of the company is reflected in the market price of the equity stock,
which is readily available for public consumption. Put differently, the company’s
performance is more ‘visible’ in the eyes of public. Such a public exposure
normally induces companies to raise their standard of performance.

5. Guidance of Cost of Capital:

The market values of the securities of company are required for computing
its cost of capital. Such values can be obtained from stock market quotations.
Hence the stock market offers guidance on cost of capital.

16
1.8Technological Advancement in BSE

BSE places a great deal of emphasis on Information Technology for its

operations and performance. The 'Operations & Trading Department' at BSE
continuously upgrades the hardware, software and networking systems, thus
enabling BSE to enhance the quality and standards of service provided to its
members, investors and other market intermediaries. BSE strictly adheres to IS
policies and IS Security policies and procedures for its day-to-day operations on
24x7 basis which has enabled it to achieve the BS7799 certification and the
subsequent ISO 27001 certification. In addition, BSE has also been successful in
maintaining systems and processes uptime of 99.99%.

1. Dematerialization

With the age of computers and the Depository Trust Company, securities
no longer need to be in certificate form. They can be registered and transferred
electronically. This enables speedy transactions and also saves cost.

2. BOLT

To facilitate smooth transactions, BSE had replaced its open outcry

system with the BSE On-line Trading (BOLT) facility in 1995. This totally
automated, screen-based trading in securities was put into practice nation-wide
within a record time of just 50 days. BOLT has been certified by DNV for
conforming to ISO 27001:2005 security standards. The capacity of the BOLT
platform stands presently enhanced to 80 lakh orders per day.

BOLT is the trading platform used by all the dealers / terminal operators to
punch the buy/sell orders. The orders are updated on this computer and
broadcast to all the terminals instantly. The trades and orders information is
updated continuously

3. BSEWebx.co.in

BSE has also introduced the worlds first centralized exchange based
Internet trading system, BSEWEBx.co.in. The initiative enables investors
anywhere in the world to trade on the BSE platform.

17
4. bseindia.com

BSE's website www.bseindia.com provides comprehensive information on

the stock market. It is one of the most popular financial websites in India and is
regularly visited by financial organizations and other stakeholders for updates.

5. Large Private Network

BSE operates a large private network in India. The network uses following
segments to cater to market intermediaries:-

 BSE's Campus LAN

Connects market participant offices across 28 floors of BSE campus to
BSE systems. BSE Campus comprises of 3 BSE buildings: P.J. Towers,
Rotunda and Cama building.
 BSE WAN
TDM / MPLS lines from different service providers cater to connectivity
requirements of market participants across the country. Wired / Wireless
media is used.

VSATs: Satellite based communication system serves the connectivity

requirements of market participants in remote areas. Services are provided
through BSE's Satellite Communication Hub in Mumbai. BSE Online Surveillance
System - integrated (BOSS-i). an Real-time system to closely monitor the trading
and settlement activities of the member-brokers. This system enables BSE to
detect market abuses at a nascent stage, improve the risk management system
and strengthen the self-regulatory mechanisms.

18
1.9Minimum Listing Requirements for listing in BSE

The following eligibility criteria have been prescribed for listing of

companies on BSE, through Initial Public Offerings (IPOs) & Follow-on Public
Offerings (FPOs):

 The minimum post-issue paid-up capital of the applicant company

(hereinafter referred to as "the Company") shall be Rs. 10 crore for IPOs &
Rs.3 crore for FPOs; and
 The minimum issue size shall be Rs. 10 crore; and
 The minimum market capitalization of the Company shall be Rs. 25 crores.

19
Chapter 2

Shares &

Other Securities

Contents:

2.1 Securities dealt in BSE

2.2 classifications of Shares

2.3 Top 30 companies listed in BSE

2.4 Procedure to buy shares online

20
2.1 Securities Dealt in Stock Exchange

(A) Shares

Aunitof ownership interest in a corporation or financial asset. While owning

shares in a business does not mean that the shareholder has direct control over
the business's day-to-day operations, being a shareholder does entitle the
possessor to an equal distribution in any profits, if any are declared in the form of
dividends.

Types of shares
The capital of the company can be divided into different units with definite
value called shares. Holders of these shares are called shareholders or members
of the company. There are two types of shares which a company may issue (1)
Preference Shares (2) Equity Shares.

(1) Preferences Shares

Shares which enjoy the preferential rights as to dividend and repayment of
capital in the event of winding up of the company over the equity shares are
called preference shares. The holder of preference shares will get a fixed rate of
dividend. Preference shares may be
(a) Cumulative Preference Share:
If the company does no earn adequate profit in any year, dividends on
preference shares may not be paid for that year. But if the preference shares are
cumulative such unpaid dividends on these shares go on accumulating and
become payable out of the profits of the company, in subsequent years. Only
after such arrears have been paid off, any dividend can be paid to the holder of
quality shares. Thus a cumulative preference shareholder is sure to receive
dividend on his shares for all the years our of the earnings of the company.

(b) Non-cumulative Preference Shares

21
 The holders of non-cumulative preference shares no doubt will get a
preferential right in getting a fixed dividend it is distributed to quality
shareholders. The fixed dividend is to be paid only out of the divisible profits but if
in a particular year there is no profit as to distribute it among the shareholders,
the non-cumulative preference shareholders, will not get any dividend for that
year and they cannot claim it in the next year during which period there might be
profits. If it is not paid, it cannot be carried forward. These shares will be treated
on the same footing as other preference shareholders as regards payment of
capital in concerned.

(c) Redeemable Preference Shares

Capital raised by issuing shares, is not to be repaid to the shareholders
(except buy back of shares in certain conditions) but capital raised through the
issue of redeemable preference shares is to be paid back by the raised thought
the issue of redeemable preference shares is to be paid back to the company to
such shareholders after the expiry of a stipulated period, whether the company is
wound up or not.

(2) Equity Shares

Equity shares will get dividend and repayment of capital after meeting the
claims of preference shareholders. There will be no fixed rate of dividend to be
paid to the equity shareholders and this rate may vary from year to year. This
rate of dividend is determined by directors and in case of larger profits, it may
even be more than the rate attached to preference shares. Such shareholders
may go without any dividend if no profit is made.

(3) Deferred shares:

These shares are those shares which are held by the founders or pioneer
or beginners of the company. They are also called as Founder shares or
Management shares. In deferred shares, the right to share profits of the company
is deferred, i.e. postponed till all the other shareholders receive their normal
dividends. Being the last claimants of the profits, they have a considerable

22
element of speculation or uncertainty and they have to bear the greatest risk of
loss. The market price of such shares shows a very wide fluctuation on account
of wide dividend fluctuations. Deferred shares have disproportionate voting
rights. These shares have a small denomination or face value.

(4) Bonus shares:

The word bonus means a gift given free of charge. Bonus shares are
those shares which are issued by the company free of charge as bonus to the
shareholders. They are issued to the existing shareholders in proportion to their
existing share holdings. It is a kind of gift to the shareholders from the company.
It is bonus in the form of shares instead of cash. It is given out of accumulated
profits and reserves. These shares have all types of preferences which are
available to the existing shares. For example. Two bonus shares for five equity
shares. The issue of bonus shares is also termed as capitalization of
undistributed profits.
Bonus shares is a type of windfall gain to the equity shareholders. They are
advantageous to the equity shareholders as they get additional shares free of
cost and also they earn dividend on them in future.

(B) Bonds

A debt investment in which an investor loans money to an entity

(corporate or governmental) that borrows the funds for a defined period of time at
a fixed interest rate. Bonds are used by companies, municipalities, states and
U.S. and foreign governments to finance a variety of projects and activities.
Bonds are commonly referred to as fixed-income securities and are one of
the three main asset classes, along with stocks and cash equivalents. It is a fixed
income (debt) instrument issued for a period of more than one year with the
purpose of raising capital. The central or state government, corporations and
similar institutions sell bonds. A bond is generally a promise to repay the principal
along with a fixed rate of interest on a specified date, called the Maturity Date.
(C) Debentures

23
 A type of debt instrument that is not secured by physical asset or
collateral. Debentures are backed only by the general creditworthiness and
reputation of the issuer.Debentures have no collateral. Bond buyers generally
purchase debentures based on the belief that the bond issuer is unlikely to
default on the repayment. An example of a government debenture would be any
government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and
T-bills are generally considered risk free because governments, at worst, can
print off more money or raise taxes to pay these type of debts.

Today BSE provides an efficient and transparent market for trading in equity,
currencies, debt instruments, derivatives, mutual funds. It also has a platform for
trading in equities of small-and-medium enterprises (SME). India INX, India's 1st
international exchange, located at GIFT CITY IFSC in Ahmedabad is a fully
owned subsidiary of BSE. BSE is also the 1st listed stock exchange of India.

BSE provides a host of other services to capital market participants including risk
management, clearing, settlement, market data services and education. It has a
global reach with customers around the world and a nation-wide presence. BSE
systems and processes are designed to safeguard market integrity, drive the
growth of the Indian capital market and stimulate innovation and competition
across all market segments. BSE is the first exchange in India and second in the
world to obtain an ISO 9001:2000 certification. It is also the first Exchange in the
country and second in the world to receive Information Security Management
System Standard BS 7799-2-2002 certification for its On-Line trading System
(BOLT). It operates one of the most respected capital market educational
institutes in the country (the BSE Institute Ltd.). BSE also provides depository
services through its Central Depository Services Ltd. (CDSL) arm.

BSE's popular equity index - the S&P BSE SENSEX - is India's most widely
tracked stock market benchmark index. It is traded internationally on the EUREX
as well as leading exchanges of the BRCS nations (Brazil, Russia, China and
South Africa).

24
Bombay Stock Exchange, under new CEO Madhu Kannan, wants to re-invent
itself. Is it too late?

Before the year is over, Sensex, which comprises the 30 most-traded shares
on Bombay Stock Exchange (BSE), will begin to trade on Deutsche Borse,
Europe’s largest stock exchange. The stated intention of the move is to draw the
attention of large investors abroad to the happening Indian stock markets. The
unstated intention is to regain market share and mind space from arch rival
National Stock Exchange (NSE). Nifty, the NSE index of top 50 shares, is already
traded in the United States and Singapore.

BSE, which traces its history to 1875, has been hammered black and blue
by NSE which was born as a “child of competition” in 1992. BSE’s share of stock
trading, cash as well as derivatives, has fallen from 45 per cent in 2000 to 12 per
cent in 2005 and just 6 per cent now. NSE has a virtual monopoly over
derivatives (futures and options) trading in the country. This is a vicious cycle. In
stock markets, liquidity breeds liquidity. Because of higher liquidity, the bid-ask
spreads (the difference between the best buy and best sell prices of any scrip)
on NSE are lower, which brings down the transaction costs for brokers. So,
NSE’s position as the preferred stock exchange gets strengthened day after day,
week after week.

MR Mayya, a former executive director of BSE, says that the securities scam of
2001, wherein some BSE officials were accused of leaking market-sensitive
information, was the final straw. “That was the point when BSE began to lose out
and people moved on to NSE,” says he. More than that, BSE was unable to read
the trend correctly when derivatives trading started in the country in June 2000.
NSE, with its nationwide reach, was able to capitalise on it better. The daily
volumes in the derivatives segment are now close to Rs 90,000 crore — way
above the Rs 20,000 crore in the cash segment — and almost the entire trade is
carried out on NSE. Moreover, NSE has put in place strong system and
compliance processes that have ensured that the exchange never suffered on
account of any payment issue. Even when the market went through tough times
in 2008, thanks to the liquidity crunch, there was never any stoppage.

Equity trading is big business. Transactions have grown at a compounded annual

rate of 46 per cent in the last 14 years. The future too looks good. Analysts at
IDFC SSKI estimate that with improving penetration, volumes could grow at 12
per cent per annum till 2014 and will reach the size of $5.3 trillion (Rs
2,46,10,000 crore) per annum. Operating profit margins of a stock exchange can
be as high as 60 per cent. The stakes are too big for BSE to throw in the towel. It
has a gameplan ready to recover lost ground.

BSE, for a long time, was seen as a club of a select few and a largely western-
India-oriented exchange. “Repositioning ourselves as a national exchange with
professionals and persons of eminence guiding us has been the first step,” says
BSE Managing Director & CEO Madhu Kannan. Before he took up this
assignment in June last year, Kannan was the managing director of Bank of

25
America Merrill Lynch. He has also worked as a senior executive with NYSE
Euronext.

26
2.2 Classifications of shares

An investor can choose from more than 5,112 listed companies, which for
easy reference, are classified into A, B, S, T and Z groups.

What is Group A, B1, B2, S, T, TS, & Z classification of BSE?

The Bombay Stock Exchange (BSE), India’s leading stock exchange, has
classified Equity scripts into categories A, B1, B2, S, T, TS, & Z to provide
guidance to the investors. The classification is on the basis of several factors like
market capitalization, trading volumes and numbers, track records, profits,
dividends, shareholding patterns, and some qualitative aspects.

As on February 2008 following criterion are used for classifying stocks into
various categories by the Bombay Stock Exchange (BSE).

Group A:

It is the most tracked class of scripts consisting of about 200 scripts. Market
capitalization is one key factor in deciding which scrip should be classified in
Group A.

At present there are 216 companies in the A group.

Group S:

“The Exchange has introduced a new segment named “BSE Indonext” w.e.f.
January 7, 2005. The “S” Group represents scripts forming part of the “BSE-
Indonext” segment. “S” group consists of scripts from “B1” & “B2” group on BSE
and companies exclusively listed on regional stock exchanges having capital of 3
crores to 30 crores. All trades in this segment are done through BOLT system
under S group.”

Group Z:
“The ‘Z’ group was introduced by the Exchange in July 1999 and includes the
companies which have failed to comply with the listing requirements of the
Exchange and/or have failed to resolve investor complaints or have not made the
required arrangements with both the Depositories, viz., Central Depository

27
Services (I) Ltd. (CDSL) and National Securities Depository Ltd. (NSDL) for
dematerialization of their securities.”

Group B1 & B2:

All companies not included in group ‘A’, ‘S’ or ‘Z’ are clubbed under this category.
B1 is ranked higher than B2.

B1 and B2 groups will be merged as a single Group B effective from March 2008.

Group T:

“It consists of scripts which are traded on trade to trade basis.”

Group TS:

“The “TS” Group consists of scripts in the “BSE-Indonext” segments which are
settled on a trade to trade basis as a surveillance measure.”

28
2.3 Top 30 companies listed in BSE

The BSE Sensex currently consists of the following 30 major Indian

companies as of 17 February 2012.

# Company Industry

1 Housing Development Finance Corporation Consumer finance

2 Cipla Pharmaceuticals

3 Bharat Heavy Electricals Electrical equipments

4 State Bank Of India Banking

5 HDFC Bank Banking

6 Hero Motocorp Automotive

7 Infosys Information Technology

8 Oil and Natural Gas Corporation Oil and gas

9 Reliance Industries Oil and gas

10 Tata Power Power

11 Hindalco Industries Metals and Mining

29
# Company Industry

12 Tata Steel Steel

13 Larsen & Toubro Conglomerate

14 Mahindra & Mahindra Automotive

15 Tata Motors Automotive

16 Hindustan Unilever Consumer goods

17 ITC Conglomerate

18 Sterlite Industries Metals and Mining

19 Wipro Information Technology

20 Sun Pharmaceutical Pharmaceuticals

21 GAIL Oil and gas

22 ICICI Bank Banking

23 Jindal Steel & Power Steel and power

30
# Company Industry

24 Bharti Airtel Telecommunication

25 Maruti Suzuki Automotive

26 Tata Consultancy Services Information Technology

27 NTPC Power

28 DLF Real estate

29 Bajaj Auto Automotive

30 Coal India Metals and Mining

31
2.4 Procedure to buy shares online

Online buying of shares is very easy. There are some simple steps to follow for
people who want to buy shares first time.

1. Choose best stock broker:

A stock broker is like a consultant who is expert into stock market and is
authorized by SEBI. Stock broker has deep knowledge of the market as they
keep on doing the research work and can guide to buy shares for the best
benefits.Only the members of the stock exchange can. These members are
called brokers and they buy and sell shares on behalf of investors. So, if
someone wants to start investing in shares, they can do it only through a broker.

2. Open demat and trading account:

Gone are the days when shares were held as physical certificates. Today,
they are held in an electronic form in demat accounts. Demat refers to a
dematerialized account. To buy shares you need to have your own demat and
trading account. Demat account hold securities which you buy. It can be open
through financial brokers. Trading account is required to buy or sell shares. A
bank account is also required to carry out financial transactions with the trading
account in which the money is credited and debited on purchase and sell of
shares.

Let's say portfolio of shares looks like this: 40 shares of Infosys, 25 of

Wipro, 45 of HLL and 100 of ACC. They will show in the demat account. One
doesn’t have to possess any physical certificates showing you own these shares.
They are all held electronically in theaccount. Periodically, accountholder will get
a demat statement telling what shares one has in his demat account.

3. Buying and selling shares:

When an investor wants to buy or sell a share, he has to login the Trading
account software with account details and password and selects which share is
to buy or sell, define the number of shares, company name and the price at

32
which he wants to buy or sell. At the desired price is reached, this trade gets
executed. The amount will be debited or credited from the Bank account and the
shares are debited or credited into the Demat account.

Following are the list of leading stock brokers in India

1. Share khan
2. India Infoline
3. ICICI Direct
4. Motilal Oswal
5. Angel Broking
6. Indiabulls
7. Religare
8. Geojit financial services
9. Anand rathi securities ltd
10. Reliance money

33
Chapter 3-

Indices used in BSE

Contents:

3.1 Indices used in BSE

3.2 Calculation of Sensex

3.3 Milestones achieved by Sensex

34
3.1 Indices used in BSE

1). Broad market Indices

a. BSE SENSEX

The BSE SENSEX, also called the BSE 30 or simply the SENSEX, is
a free-float market capitalization-weighted stock market index of 30 well-
established and financially sound companies listed on Bombay Stock Exchange.
The 30 component companies which are some of the largest and most actively
traded stocks are representative of various industrial sectors of the Indian
economy. Published since January 1, 1986, the SENSEX is regarded as the
pulse of the domestic stock markets in India. The base value of the SENSEX is
taken as 100 on April 1, 1979, and its base year as 1978-79. On 25 July, 2001
BSE launched DOLLEX-30, a dollar-linked version of SENSEX. As of 21 April
2011, the market capitalisation of SENSEX was about 29,733 billion (US$593
billion)(42.34% of market capitalization of BSE), while its free-float market
capitalization was 15,690 billion (US$313 billion).

b. BSE100

BSE-100 Index is a broad based Index. This Index has 1983-84 as the
base year and was launched in 1989. In line with the shift of the BSE Indices to
the globally accepted Free-Float methodology, BSE-100 was shifted to Free-
Float methodology effective from April 5, 2004. The method of computation of
Free-Float index and determination of free-float factors is similar to the
methodology for SENSEX.

Over the years, the number of companies listed on BSE continued to

register a phenomenal increase; from 992 in to over 3,200 companies by March
1994, with combined market capitalization rising from Rs.5,421 crore to Rs.
3,98,432 crore as on 31st March, 1994.

c. BSE200

35
 Though SENSEX (1978-79=100) was serving the purpose of quantifying the
price movements as also reflecting the sensitivity of the market in an effective
manner, the rapid growth of the market necessitated compilation of a new broad-
based index series reflecting the market trends in a more effective manner and
providing a better representation of the increased equity stocks, market
capitalization as also to the new industry groups. As such, BSE launched on 27th
May 1994, two new index series-BSE-200 and Dollex-200.The equity shares of
200 selected companies from the specified and non-specified lists of BSE were
considered for inclusion in the sample for `BSE-200'. The selection of companies
was primarily been done on the basis of current market capitalization of the listed
scrips. Moreover, the market activity of the companies as reflected by the
volumes of turnover and certain fundamental factors were considered for the final
selection of the 200 companies.

d. BSE500

Bombay Stock Exchange Limited constructed a new index, christened

BSE-500, consisting of 500 scrips w.e.f. August 9, 1999. The changing pattern of
the economy and that of the market were kept in mind while constructing this
index.BSE-500 index represents nearly 93% of the total market capitalization on
BSE. BSE-500 covers all 20 major industries of the economy. In line with other
BSE indices, effective August 16, 2005 calculation methodology was shifted to
the free-float methodology.

e. BSE Midcap and Smallcap

BSE introduced the new index series called 'BSE MID-Cap' index and
'BSE Small-Cap' index to track the performance of companies with relatively
smaller market capitalization. It was launched in year 2005 with the base year
2002-03 with the base index 1000.

2) Sectoral indices

36
 BSE also constructs various sectoral indices as detailed below. All these
indices are calculated and disseminated on BOLT, BSE's trading terminal on a
real time basis.
a. Bse Auto

Considering the growth in automobile sector Bse launched BSE auto

index in year 2004 with the base year 1999 and base index 1000 under free float
capitalization method.

b. Bankex
In view of the emergence of banking stocks as a major segment in the
equity markets, BSE considered it desirable to design an index exclusively for
bank stocks. BANKEX tracks the performance of the leading banking sector
stocks listed on the BSE. BANKEX is based on the free-float methodology of
index construction. The base date for BANKEX is 1st January 2002. The base
value for BANKEX is 1000 points.

c. Capital Goods
Launched on full market capitalization method and effective August 23,
2004, calculation method shifted to free-float market capitalization with the base
index 1000 and base year 1999-00.

d. BSE Fmcg
Launched on full market capitalization method and effective August 23,
2004, calculation method shifted to free-float market capitalization with the base
year 1999-00 and base index 1000.
Though the BSE FMCG Index is made up of 11 scrips, it is ITC that
dominates with a 53 per cent weight. Hindustan Unilever with a 20 per cent
weight and Nestle with a 7.9 per cent weight take the next two positions, while
Colgate Palmolive, Dabur India and United Spirits each have 3 per cent weights.
Godrej Consumer, Tata Global, Marico, United Breweries and Jubilant
FoodWorks are the other companies in the index. The BSE FMCG index
registered its life-time high at 4,274 on November 14, 2011 and life time low at
705 on April 24, 2003.

37
e. BSE Realty
One of the latest index launched by BSE is BSE realty which shows
growth in construction company or real estate sector. It was launhed in year 2007
with base year 2005 and base index 2007.

f. BSE Healthcare

Launched on full market capitalization method and effective August 23,

2004, calculation method shifted to free-float market capitalization. Wockhardt,
fortis, cipla, glenmark are some companies that falls under BSE healthcare.

g. BSE IT
This indices was launched on 23rd august 2004 with base year 1999 and
shows the growth in IT sectors. TCS, HCl, Tech Mahindra, Oracle and Mphasis
are some companies that comes under this Indice.

h. BSE Metal
This indice views growth rate in Metal sector. It was launched at 23rd
August 2004 with base year 1999 under free float capitalization method. Tisco,
Jindal steel, SAIL, NMDC are some companies that comes under BSE metal.

I. BSE Oil & Gas

This indice views growth rate in Oil & gas industry. Launched on 23rd
august it has a base year of 1999 under freefloat capitalization method. BPCL,
GAIL, ONGC, Petronet LNG, Oil India are some companies that falls under this
sector.

J. BSE Power
This indices is the newest indices launched by BSE till now. It was
launched in year 2007 with base year of 2005. BHEL, Reliance infra, Torrent
power, TATA power are some of the renowned companies in BSE power.

38
3) Dollar linked version
a. Dollex 30
DOLLEX-30 is the dollar version of BSE Sensex, the benchmark index of
equity markets in India. Similar to Sensex, the base year for the DOLLEX-30 is
fixed as 1978-79 and base value at 100 points. BSE has computed historical
index values of DOLLEX-30 since 1979. The scope for DOLLEX-30 emerged
from the background of Indian equity markets increasingly getting integrated with
global capital markets and the need to assess the market movements in terms of
international benchmarks. While Sensex reflects growth in market value of
constituent stocks over the base period in rupee terms, the DOLLEX-30 would
reflect the changes in both the stock prices as well as currency values. DOLLEX-
30 could be found useful by foreign investors to enable them to measure the
equity returns in real terms both in respect of domestic and international
currencies. DOLLEX-30 is the second dollar denominated index designed by the
BSE.

b. Dollex 100
Dollex 100 is a dollar version of BSE 100 launched on 27 may 1994, This
indices is initially calculated at the end of the trading session by taking into
consideration day's rupee/ US$ reference rate as announced by India 's Central
Bank i.e. Reserve Bank of India.

c. Dollex 200
In 1994 BSE had launched DOLLEX-200, a dollar version of BSE-200
Index. Like Dollex 100 This indices is also initially calculated at the end of the
trading session by taking into consideration day's rupee/ US$ announced by
India’s Central Bank i.e. Reserve Bank of India.

39
3.2.1 Calculation of sensex

The Bombay Stock Exchange (BSE) regularly reviews and modifies its
composition to be sure it reflects current market conditions. The index is
calculated based on a free float capitalization method—a variation of the market
capitalization method. Instead of using a company's outstanding shares it uses
its float, or shares that are readily available for trading. The free-float method,
therefore, does not include restricted stocks, such as those held by promoters,
government and strategic investors.

Initially, the index was calculated based on the ‘full market

capitalization’ method. However this was shifted to the ‘free float method’ with
effect from September 1, 2003. Globally, the free float market capitalization is
regarded as the industry best practice.

As per free float capitalization methodology, 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 multiplied by a free float factor to determine the free float
market capitalization. Free float factor is also referred as adjustment factor. Free
float factor represents the percentage of shares that are readily available for
trading.

The calculation of SENSEX involves dividing the free float market

capitalization of 30 companies in the index by a number called index divisor. The
divisor is the only link to 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.

The index has increased by over ten times from June 1990 to the present.
Using information from April 1979 onwards, the long-run rate of return on the
BSE SENSEX works out to be 18.6% per annum, which translates to roughly 9%
per annum after compensating for inflation.

For the premier Bombay Stock Exchange that pioneered the stock broking
activity in India, 128 years of experience seems to be a proud milestone. A lot

40
has changed since 1875 when 318 persons became members of what today is
called The Stock Exchange, Mumbai by paying a princely amount of Re 1.
Since then, the country's capital markets have passed through both good
and bad periods. The journey in the 20th century has not been an easy one. Till
the decade of eighties, there was no scale to measure the ups and downs in the
Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a
stock index that subsequently became the barometer of the Indian stock market.
Sensex is not only scientifically designed but also based on globally
accepted construction and review methodology. First compiled in 1986, Sensex
is a basket of 30 constituent stocks representing a sample of large, liquid and
representative companies.
The base year of Sensex is 1978-79 and the base value is 100. The index
is widely reported in both domestic and international markets through print as
well as electronic media.
The Index was initially calculated based on the "Full Market Capitalization"
methodology but was shifted to the free-float methodology with effect from
September 1, 2003. The "Free-float Market Capitalization" methodology of index
construction is regarded as an industry best practice globally. All major index
providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float
methodology. (See below: Explanation with an example)
Due to is wide acceptance amongst the Indian investors; Sensex is
regarded to be the pulse of the Indian stock market. As the oldest index in the
country, it provides the time series data over a fairly long period of time (From
1979 onwards). Small wonder, the Sensex has over the years become one of the
most prominent brands in the country.
The growth of equity markets in India has been phenomenal in the decade
gone by. Right from early nineties the stock market witnessed heightened activity
in terms of various bull and bear runs. The Sensex captured all these events in
the most judicial manner. One can identify the booms and busts of the Indian
stock market through Sensex.
S&PBSECARBONEX
The S&P BSE CARBONEX aims to provide the investors with an index that is
indicative of companies' commitment to mitigating the effects of climate change

41
and moving forward to tackle the environmental challenges of the coming years.

It uses comprehensive data acquired from independent providers of sustainibility

data and companies' public disclosures and tracks the underlying benchmark
index'S&PBSE100Index'closely.

AIPL (Asia Index Private Limited, JV of BSE and SPDJI) is the index calculating
partner with BSE for S&P BSE CARBONEX. RobecoSAM shall be the
knowledge partner and CDP India would continue to be data provider for the
Index.

42
3.2.2 Sensex Calculation Methodology
Sensex is calculated using the "Free-float Market Capitalization"
methodology. As per this methodology, 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 and
disseminated in real time.

43
3.2.3 Understanding Free-float Methodology

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 Index. Free-
float market capitalization is defined as that proportion of total shares issued by
the company that are readily available for trading inthemarket.

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.

In India, BSE pioneered the concept of Free-float by launching BSE TECk in July
2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark,
Bankex is positioned as a benchmark for the banking sector stocks. Sensex
becomes the third index in India to be based on the globally accepted Free-float
Methodology.

44
3.2.4Example
Suppose the Index consists of only 2 stocks: Stock A and Stock B.
Suppose Company A has 1,000 shares in total, of which 200 are held by the
promoters, so that only 800 shares are available for trading to the general public.
These 800 shares are the so-called 'free-floating' shares.
Similarly, company B has 2,000 shares in total, of which 1,000 are held by the
promoters and the rest 1,000 are free-floating.
Now suppose the current market price of stock A is Rs 120. Thus, the 'total'
market capitalization of company A is Rs 120,000 (1,000 x 120), but its free-float
market capitalization is Rs 96,000 (800 x 120).
Similarly, suppose the current market price of stock B is Rs 200. The total market
capitalization of company B will thus be Rs 400,000 (2,000 x 200), but its free-
float market cap is only Rs 200,000 (1,000 x 200).So as of today the market
capitalization of the index (i.e. stocks A and B) is Rs 520,000 (Rs 120,000 + Rs
400,000); while the free-float market capitalization of the index is Rs 296,000.
(Rs 96,000 + Rs 200,000).
The year 1978-79 is considered the base year of the index with a value set to
100. What this means is that suppose at that time the market capitalization of the
stocks that comprised the index then was, say, 60,000 (remember at that time
there may have been some other stocks in the index, not A and B, but that does
not matter), then we assume that an index market cap of 60,000 is equal to an
index-value of 100.
Thus the value of the index today is = 296,000 x 100/60,000 = 493.33
This is how the Sensex is calculated.
The factor 100/60000 is called index divisor.
3.3 Milestones

45
The graph of SENSEX from July 1997 to March 2011

The launch of SENSEX in 1986 was later followed up in January 1989 by

introduction of BSE National Index (Base: 1983-84 = 100). It comprised 100
stocks listed at five major stock exchanges in India -
Mumbai, Calcutta, Delhi, Ahmedabad and Madras. The BSE National Index was
renamed BSE-100 Index from October 14, 1996 and since then, it is being
calculated taking into consideration only the prices of stocks listed at BSE. BSE
launched the dollar-linked version of BSE-100 index on May 22, 2006. BSE
launched two new index series on 27 May 1994: The 'BSE-200' and the
'DOLLEX-200'. BSE-500 Index and 5 sectoral indices were launched in 1999. In
2001, BSE launched BSE-PSU Index, DOLLEX-30 and the country's first free-
float based index - the BSE TECk Index. Over the years, BSE shifted all its
indices to the free-float methodology (except BSE-PSU index). BSE
disseminates information on the Price-Earnings Ratio, the Price to Book Value
Ratio and the Dividend Yield Percentage on day-to-day basis of all its major
indices. The values of all BSE indices are updated on real time basis during
market hours and displayed through the BOLT system, BSE website and news
wire agencies. All BSE Indices are reviewed periodically by the BSE Index
Committee. This Committee which comprises eminent independent finance
professionals frames the broad policy guidelines for the development and
maintenance of all BSE indices. The BSE Index Cell carries out the day-to-day

46
maintenance of all indices and conducts research on development of new
indices.

SENSEX is significantly correlated with the stock indices of other emerging

markets

Here is a timeline on the rise of the SENSEX through Indian stock market history.

 1000- July 25, 1990 - On July 25, 1990, the SENSEX touched the four-digit
figure for the first time and closed at 1,001 in the wake of a good monsoon
and excellent corporate results.
 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 finance minister and current Prime Minister
Dr Manmohan Singh.
 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
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 11, 1999 - On October 8, 1999, the SENSEX crossed the
5,000-mark as the Bharatiya Janata Party-led coalition won the majority in
the 13th Lok Sabha election.
 6000- February 11, 2000 - On February 11, 2000, the information technology
boom helped the SENSEX to cross the 6,000-mark and hit and all time high
of 6,006.
 7000- June 21, 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.

47
 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- December 9, 2005 - The SENSEX on November 28, 2005 crossed
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 7, 2006 - The SENSEX on February 6, 2006 touched
10,003 points during mid-session. The SENSEX finally closed above the
10,000-mark on February 7, 2006.
 11-000, March 27, 2006 - The SENSEX on March 21, 2006 crossed 11,000
and touched a 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 12,000 and
touched a peak of 12,004 points during mid-session at the Bombay Stock
Exchange for the first time.
 13,000- October 30, 2006 - The SENSEX on October 30, 2006 crossed
13,000 for the first time. It touched a peak of 13,039.36 and finally closed at
13,024.26.
 14,000- December 5, 2006 - The SENSEX on December 5, 2006 crossed
14,000.
 15,000- July 6, 2007 - The SENSEX on July 6, 2007 crossed 15,000 mark.
 16,000- September 19, 2007- The SENSEX (Sensitivity Index) on
September 19, 2007 crossed the 16,000 mark and reached a historic peak of
16322 while closing.
 17,000- on September 26, 2007 crossed the 17,000 mark for the first time,
creating a record for the second fastest 1000 point gain in just 5 trading
sessions. It failed however to sustain the momentum and closed below
17000. The SENSEX closed above 17000 for the first time on the following
day. Reliance group has been the main contributor in this bull run,
contributing 256 points. This also helped Mukesh Ambani's net worth to grow

48
 to over $50 billion or Rs.2 trillion. It was also during this record bull run that
the SENSEX for the first time zoomed ahead of the Nikkei of Japan.
 18,000- October 9, 2007- The SENSEX crossed the 18k mark for the first
time on October 9, 2007. The journey from 17k to 18k took just 8 trading
sessions which is the third fastest 1000 point rise in the history of the
SENSEX. The SENSEX closed at 18,280 at the end of day. This 788 point
gain on October 9 was the second biggest single day absolute gains.
 19,000- October 15, 2007- The SENSEX crossed the 19k mark for the first
time on October 15, 2007. It took just 4 days to reach from 18k to 19k. This
is the fastest 1000 points rally ever and also the 640 point rally was the
second highest single day rally in absolute terms. This made it a record 3000
point rally in 17 trading sessions overall.
 20,000- October 29, 2007 - The SENSEX on October 29, 2007 crossed the
20,000 mark for the first time.
 21,000- Jan 08, 2008 - The SENSEX on January 8, 2008 touched all-time
peak of 21078 before closing at 20873.

Some Major Date And Events

1. May 2006

On May 22, 2006, the SENSEX plunged by 1100 points during intra-day trading,
leading to the suspension of trading for the first time since May 17, 2004. The
volatility of the SENSEX had caused investors to lose Rs 6 lakh crore (US$131
billion) within seven trading sessions. The Finance Minister of India, P.
Chidambaram, made an unscheduled press statement when trading was
suspended to assure investors that nothing was wrong with the fundamentals of
the economy, and advised retail investors to stay invested. When trading
resumed after the reassurances of the Reserve Bank of India and the Securities
and Exchange Board of India (SEBI), the SENSEX managed to move up 700
points, still 450 points in the red.

The SENSEX eventually recovered from the volatility, and on October 16, 2006,
the SENSEX closed at an all-time high of 12,928.18 with an intra-day high of

49
12,953.76. This was a result of increased confidence in the economy and reports
that India's manufacturing sector grew by 11.1% in August 2006.

2. May 2009

On May 18, 2009, the SENSEX surged 2110.79 points from the previous closing
of 12174.42 this leading to the suspension of trade for the whole day. This event
created history in Dalal Street, by being the first ever time that trade had been
suspended for an increase in value. This rally is primarily due to the victory of the
UPA in the 15th General elections. Trading was open for that day only for 55
seconds. Initially 25 seconds and 30 seconds market reached upper freeze limit
twice in that day itself.

Effects of the Subprime crisis in the U.S

On Monday July 23, 2007, the SENSEX touched a new height of 15,733 points.
On July 27, 2007 the SENSEX witnessed a huge correction because of selling
by Foreign Institutional Investors (FIIs) and global cues to come back to 15,160
points by noon. Following global cues and heavy selling in the international
markets, the BSE SENSEX fell by 615 points in a single day on Wednesday
August 1, 2007. Therefore the US Subprime crisis has a great effect even on
INDIA. gold cross the psychological barrier.

29 October 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.

50
November 5, 2010 - The SENSEX on November 5, 2010 closes at 20,893.6 with
highest peak in two years.

Since then, the country's capital markets have passed through both good and
bad periods. The journey in the 20th century has not been an easy one. Till the
decade of eighties, there was no scale to measure the ups and downs in the
Indian stock market. The Stock Exchange, Mumbai in 1986 came out with a
stock index that subsequently became the barometer of the Indian stock market.

Sensex is not only scientifically designed but also based on globally accepted
construction and review methodology. First compiled in 1986, Sensex is a basket
of 30 constituent stocks representing a sample of large, liquid and representative
companies.

The base year of Sensex is 1978-79 and the base value is 100. The index is
widely reported in both domestic and international markets through print as well
as electronic media.

The Index was initially calculated based on the "Full Market Capitalization"
methodology but was shifted to the free-float methodology with effect from
September 1, 2003. The "Free-float Market Capitalization" methodology of index
construction is regarded as an industry best practice globally. All major index
providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float
methodology. (See below: Explanation with an example)

Due to is wide acceptance amongst the Indian investors; Sensex is regarded to

be the pulse of the Indian stock market. As the oldest index in the country, it
provides the time series data over a fairly long period of time (From 1979
onwards). Small wonder, the Sensex has over the years become one of the most
prominent brands in the country.

The growth of equity markets in India has been phenomenal in the decade gone
by. Right from early nineties the stock market witnessed heightened activity in
terms of various bull and bear runs. The Sensex captured all these events in the
most judicial manner. One can identify the booms and busts of the Indian stock
market through Sensex.

Sensex Calculation Methodology

51
Sensex is calculated using the "Free-float Market Capitalization" methodology.
As per this methodology, 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 and
disseminated in real time.

Dollex-30

BSE also calculates a dollar-linked version of Sensex and historical values of this
index are available since its inception.

Understanding Free-float Methodology

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

into consideration only the free-float market capitalisation of a company for the
purpose of index calculation and assigning weight to stocks in Index. Free-float
market capitalization is defined as that proportion of total 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.

52
In India, BSE pioneered the concept of Free-float by launching BSE TECk in July
2001 and Bankex in June 2003. While BSE TECk Index is a TMT benchmark,
Bankex is positioned as a benchmark for the banking sector stocks. Sensex
becomes the third index in India to be based on the globally accepted Free-float
Methodology.

Example (provided by rediff.com reader Munish Oberoi):

Suppose the Index consists of only 2 stocks: Stock A and Stock B.

Suppose company A has 1,000 shares in total, of which 200 are held by the
promoters, so that only 800 shares are available for trading to the general public.
These 800 shares are the so-called 'free-floating' shares.

Similarly, company B has 2,000 shares in total, of which 1,000 are held by the
promoters and the rest 1,000 are free-floating.

Now suppose the current market price of stock A is Rs 120. Thus, the 'total'
market capitalisation of company A is Rs 120,000 (1,000 x 120), but its free-float
market capitalisation is Rs 96,000 (800 x 120).

Similarly, suppose the current market price of stock B is Rs 200. The total market
capitalisation of company B will thus be Rs 400,000 (2,000 x 200), but its free-
float market cap is only Rs 200,000 (1,000 x 200).

So as of today the market capitalisation of the index (i.e. stocks A and B) is Rs

520,000 (Rs 120,000 + Rs 400,000); while the free-float market capitalisation of
the index is Rs 296,000. (Rs 96,000 + Rs 200,000).

The year 1978-79 is considered the base year of the index with a value set to
100. What this means is that suppose at that time the market capitalisation of the
stocks that comprised the index then was, say, 60,000 (remember at that time
there may have been some other stocks in the index, not A and B, but that does
not matter), then we assume that an index market cap of 60,000 is equal to an
index-value of 100.

Thus the value of the index today is = 296,000 x 100/60,000 = 493.33

This is how the Sensex is calculated.

The factor 100/60000 is called index divisor.

ACC, Ambuja Cements, Bajaj Auto, BHEL, Bharti Airtel, Cipla, DLF, Grasim
Industries, HDFC, HDFC Bank, Hindalco Industries, Hindustan Lever, ICICI
Bank, Infosys, ITC, Larsen & Toubro, Mahindra & Mahindra, Maruti Udyog,
53
NTPC, ONGC, Ranbaxy Laboratories, Reliance Communications, Reliance
Energy, Reliance Industries, Satyam Computer Services, State Bank of India,
Tata Consultancy Services, Tata Motors, Tata Steel, and Wipro.

54
Chapter 4
Players in Stock Exchange

Contents:
4.1 Investors
4.2 Market Makers
4.3 Mutual Funds
4.4 Underwriters
4.5 FII’s

55
Players in Stock Exchange

4.1 Investors

An investor is someone who puts money into something with the expectation of a
financial return. The types of investments include, --- equity, debt securities, real
estate, currency, commodity, derivatives such as put and call options, etc.

Types of investors

Bull: An operator who expects the share price to rise and takes position in the
market to sell at a later date.

Bull Market: A rising market where buyers far outnumber the sellers

A bull market is one where prices are rising, whereas a bear market is one where
prices are falling. The two terms are also used to describe types of investors.

What are Bear?

Bear : An operator who expects the share price to fall

Bear Market : A weak and falling market where buyers are absent. A stock
market bull is someone who has a very optimistic view of the market; they may
be stock-holders or maybe investors who aggressively buy and sell stocks
quickly. A bear investor, on the other hand, is pessimistic about the market and
may make more conservative stock choices. Sometimes, the terms are used to
refer to specific funds or stocks. Bear market funds, for example, are those that
are falling and faring poorly. Investors sometimes refer to bull stocks to describe
securities that are aggressively rising and making their investors’ money.

Knowing what is meant by the bear and bull market can help you understand
whether the market is currently rising or falling. There is no need to get frightened

56
by a bear market indicator; however, as experts agree that the market is cyclical.
When prices start falling, they will eventually rise too.

The Other Animals on the Farm - Chickens and Pigs

Chickens are afraid to lose anything. Their fear overrides their need to make
profits and so they turn only to money-market securities or get out of the markets
entirely. While it's true that you should never invest in something over which you
lose sleep, you are also guaranteed never to see any return if you avoid the
market completely and never take any risk,

Pigs are high-risk investors looking for the one big score in a short period of time.
Pigs buy on hot tips and invest in companies without doing their due diligence.
They get impatient, greedy, and emotional about their investments, and they are
drawn to high-risk securities without putting in the proper time or money to learn
about these investment vehicles. Professional traders love the pigs, as it's often
from their losses that the bulls and bears reap their profits.

What Drives Bear and Bull Markets?

The stock market is affected by many economic factors. High employment levels,
strong economy, and stable social and economic conditions generally build
investor confidence and encourage investors to put their money in the stock
market. Often, this can bolster bull markets. Also, new technologies and
companies that encourage investors to put their money in stocks can create bull
markets. For example, in the 1990s, the dot com craze encouraged many
investors to put their money in stocks that they felt would keep increasing. In
some cases, a bullish market is simply self-perpetuating. Since the market is
doing well, it only encourages investors to invest more money or to start
investing.

57
On the other hand, discouraging economic or social political changes in a society
can push the market down. Sudden instability or unemployment -- or even fears
of unemployment caused by wars and other problems -- can start to make
investors more conservative and therefore lead to bear markets. Of course, again
this becomes a self-perpetuating trend. As the economy slows down, companies
begin downsizing. Increased unemployment makes people far less willing to
gamble on the stock market. Sometimes, a panic caused by dire predictions
about the market can also create bearish conditions.

How to Predict Bear and Bull Markets?

The easiest way to predict both types of markets is to realize that what
goes up must come down. That is, if the market is rising, then you know that at
some point it will start to fall again. Similarly, if the market is currently falling, you
can be certain that eventually it will pick up again. There are no precise ways to
predict either bull or bear markets, although general social economic situations
can help you to determine what will happen. A country which wages a war will
experience bullish market conditions as government contracts create more jobs
and boost investor confidence if their expectation is to win. Sudden international
crises push the market downward and create bearish conditions. News is very
often a good indicator of where investors are headed. The reports will inform
about loss of investor confidence as well as sudden economic downturns that
may affect the market. If you notice from stock market research that several
indexes have changed by 15% to 20%, you can be sure that market direction is
changing. When you notice such changes, it is time to sit up and take notice. You
may be headed for a bullish or bearish market.

58
4.2 Market Maker

Investors probably take for granted that they can buy or sell a stock at a
moment's notice. Place an order with the broker, and within seconds, it is
executed. Many investors wonder how this is possible? Whenever an investment
is bought or sold, there must be someone on the other end of the transaction.

If one wants to buy 1,000 shares of HUL, then he must find a willing seller,
and vice versa. It's very unlikely that they always manage to find someone who is
interested in buying or selling the exact number of shares of the same company
at the exact same time. This begs the question, how is it that you can buy or sell
anytime? This is where a market maker comes in.

A market maker is a bank or brokerage company that stands ready every second
of the trading day with a firm ask and bid price. This is good for you, because
when you place an order to sell your thousand shares of Disney, the market
maker will actually purchase the stock from you, even if he doesn't have a seller
lined up. In doing so, they are literally "making a market" for the stock. Edelweiss
capital is the renowned example of market makers in India.

How do Market Makers make their Money?

Market Makers must be compensated for the risk they take; what if he buys your
shares in IBM then IBM's stock price begins to fall before a willing buyer has
purchased the shares? To prevent this, the market maker maintains a spread on
each stock he covers. Using our previous example, the market maker may
purchase your shares of IBM from you for $100 each (the ask price) and then
offer to sell them to a buyer at $100.05 (bid). The difference between the ask and

59
bid price is only $.05, but by trading millions of shares a day, he's managed to
pocket a significant chunk of change to offset his risk.

60
4.3Mutual funds

A mutual fund is a type of professionally-managed collective investment

scheme that pools money from many investors to purchase securities. While
there is no legal definition of mutual fund, the term is most commonly applied
only to those collective investment schemes that are regulated, available to the
general public and open-ended in nature.

Mutual funds collect money from the investors and invest it in various securities
on their behalf. The returns on these investments are passed on to the investors,
either periodically or at the end of a specified time period. They charge fees for
their services referred to as management fees.

61
4.4 Underwriters

A company or other entity that administers the public issuance and

distribution of securities from a corporation or other issuing body. An underwriter
works closely with the issuing body to determine the offering price of the
securities, buys them from the issuer and sells them to investors via the
underwriter's distribution network.

Underwriters generally receive underwriting fees from their issuing clients,

but they also usually earn profits when selling the underwritten shares to
investors. However, underwriters assume the responsibility of distributing a
securities issue to the public. If they can't sell all of the securities at the specified
offering price, they may be forced to sell the securities for less than they paid for
them, or retain the securities themselves.

62
4.5FII’s (Foreign institutional investors)

The term is used most commonly in India to refer to foreign companies

investing in the financial markets of India. International institutional investors
must register with the Securities and Exchange Board of India to participate in
the market. One of the major market regulations pertaining to FIIs involves
placing limits on FII ownership in Indian companies.

Institutional investors will have a lot of influence in the management of

corporations because they will be entitled to exercise the voting rights in a
company. They can actively engage in corporate governance. Furthermore,
because institutional investors have the freedom to buy and sell shares, they can
play a large part in which companies stay solvent, and which go under.
Influencing the conduct of listed companies, and providing them with capital are
all part of the job of investment management.

Foreign investment can be of two forms: Foreign direct investment (FDI)

and Foreign portfolio investment (FPI).FDI involves direct production activity and
has a medium to long term investment plans. In contrast the FPI has a short term
investment horizon. They mostly investment in the financial markets which
consist of Foreign Institutional Investors (FIIs). They invest in domestic financial
markets like money market, stock market, foreign exchange market etc.

FII has leaded a significant improvement in India relating to the flow of

foreign capital during the period of post economic reforms. The inflow of FII
investments has helped the stock market to raise at a greater height according to
financial analysts.

63
Chapter 5

SEBI

Contents:

5.1Introduction

5.2 Functions of SEBI

5.3 Powers of SEBI

5.4 Limitations of SEBI

64
5.1 Securities and exchange board of
India (SEBI)

The establishment of SEBI was a land

mark government measure to monitor and
regulate capital market activities and to
promote healthy development of the market.

It was constituted in 1988 by a

resolution of Government of India and was
made a statutory body by Securities and Exchange Board of India Act 1992.SEBI
was formed officially by the Government of India in 1992 with SEBI Act 1992
being passed by the Indian Parliament. SEBI is headquartered in the business
district of Bandra Kurla Complex in Mumbai, and has Northern, Eastern,
Southern and Western regional offices in New Delhi, Kolkata, Chennai and
Ahmedabad.

Management of the Board (Sec 4)

It consist of
a) Chairman
b) 2 members from among the officials of the ministries of central govt. dealing
with Finance and Law.
c) One member from amongst the officials of RBI
d) Two other members to be appointed by the central government.

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

 the issuers of securities

 the investors
 The market intermediaries.

5.2 Functions of SEBI

65
 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.

SEBI has also been instrumental in taking quick and effective steps in light
of the global meltdown and the Satyam fiasco.It had increased the extent and
quantity of disclosures to be made by Indian corporate promoters. More recently,
in light of the global meltdown it liberalized the takeover code to facilitate
investments by removing regulatory structures. In one such move, SEBI has
increased the application limit for retail investors to Rs 2 lakh, from Rs 1 lakh at
present.

66
5.3 Powers of SEBI

For the discharge of its functions efficiently, SEBI has been invested with the
necessary powers which are:

1. To regulate the business in stock exchange.

2. To regulate working of broker, merchant banker, portfolio managers and other
associates with security market.
3. To promote investors education.
4. To approve by−laws of stock exchanges.
5. To require the stock exchange to amend their by−laws.
6. To provide trainings to intermediaries of the security market.
7. Inspect the books of accounts and call for periodical returns from recognized
stock exchanges.
8. Inspect the books of accounts of financial intermediaries.
9. Compel certain companies to list their shares in one or more stock
exchanges.
10. Levy fees and other charges on the intermediaries for performing its
functions.
11. Grant license to any person for the purpose of dealing in certain areas.
12. To prohibit the fraudulent and unfair trade practices related to securities
market.
13. Prosecute and judge directly the violation of certain provisions of the
companies Act.

67
5.4 Limitations of SEBI

1. The Central Government has authorized SEBI to frame its rules and
regulation for actively monitoring capital markets. These rules and regulations
will have to be approved by the government first. This will cause unnecessary
delay and interference by the Finance Minister.
2. SEBI will have to seek prior approval for filling criminal complaints for
violations for the regulations. This will again cause delay at government level.
3. SEBI has not been given autonomy. Its Board of Directors is dominated by
government nominees. Out of 5 directors only 2 can be from outside and
these are to represent the Ministries of Finance, Law and Reserve Bank of
India
4. Its compositions are dominated by government nominees.
5. Its rules and regulations requires Approval of government which is a time
consuming process.
6. It faces lot of interference from finance ministry.
7. The chairman of the board has no fixed tenure.
8. It has to make prior approval for filing criminal complaints for validations of
rules and regulations.

68
Chapter 6

Awards and Achievements

Contents:

6.1 Awards achieved by BSE

6.2 Heritage

6.3 Several firsts

69
6.1 Awards Achieved by BSE
 The World Council of Corporate Governance has awarded the Golden
Peacock Global CSR Award for BSE's initiatives in Corporate Social
Responsibility (CSR).

 The Annual Reports and Accounts of BSE for the year ended March 31,
2006 and March 31, 2007 have been awarded the ICAI awards for
excellence in financial reporting.

 It has been cited as one of the world's best performing stock market by
Reuters.

 The Human Resource Management at BSE has won the Asia - Pacific HRM
awards for its efforts in employer branding through talent management at
work, health management at work and excellence in HR through technology.
Bombay Stock Exchange - Finance Learners.
As a pioneering financial institution in the Indian capital market, BSE has won
several awards and recognitions that acknowledge the work done and progress
made.

 ‘IT Genius Awards 2017’ in the category ‘Data Centre Excellence’ for setup
of the India INX Data Centre by CORE (Centre of Recognition & Excellence)
 Digital Innovation Award 2017 for the Social Media Analytics Project by
Netmagic
 Business World Digital Leadership and CIO Award
 The IDC Digital Transformation Awards 2017
 The Best Exchange of the year award for equity and currency derivatives in
Tefla's Commodity Economic Outlook Award 2017
 Best Brand award 2017 by Economic Times
 CIO POWER LIST 2017
 Best Corporate film encompassing Vision, History, Value and Spirit of
Excellence award, Best Corporate film on Employer Branding award and
Most Influential HR Leaders in India award at World HRD Congress 2017

70
 'Best Exchange of the year' award at 4th India Bullion & Jewellery awards
2017
 Red Hat Innovation Awards 2016 by Red Hat Solutions
 Skoch Achiever Award 2016 for SME Enablement
 Best IT Implementation Award 2016 in the “Most Complex Project Category”
by PCQuest
 InfoSec Maestros Awards 2016 .
 Lions CSR Precious Awards 2016
 Golden Peacock Award 2015
 CIO Power List 2015
 SKOCH Rennaissance Award 2014 for Contribution to Economy
 SKOCH Rennaissance Award 2014 for Corporate Social Responsibility
 Netmagic Innovative Champion Award – IT Consolidation growth &
Scalability 2014
 India Innovative Awards- Big Data Innovation 2014
 ET Now – CISCO Technology Awards 2014
 Unicom –India Top 50 companies with best software 2014
 HR was awarded with Asia's Best Employer Brand Awards at Singapore in
two categoriesinAugust2014
o Asia's Best Employer Brand Award
o CHRO of the Year Award
 Lokmat HR Leadership Award at Mumbai in June-2014
 50 most talented global HR leaders in Asia at the World HRD congress at
Mumbai in February-2014
 FIICI-Frames Best Animation Film-International Category for the Investor
Education television commercial
 India Innovation Award for Big Data Implementation
 ICICI Lombard & ET Now Risk Manager Award in BFSI Category
 SKOCH Order of Merit for E-Boss for qualifying among India’s Best 2013
 Indian Merchant Chamber Award in the Large Enterprise Category for use of
Information Technology
 Best Managed Financial Derivatives Exchange in the Asia Pacific by the The
Asian Banker
 The Golden Peacock Global CSR Award for its initiatives in Corporate Social
Responsibility

71
 BSE has won NASSCOM - CNBC-TV18’s IT User Awards, 2010 in Financial
Services category
 BSE has won Skoch Virtual Corporation 2010 Award in the BSE StAR MF
category
 Responsibility Award (CSR), by the World Council of Corporate Governance
 Annual Reports and Accounts of BSE have been awarded the ICAI awards
for excellence in financial reporting for four consecutive years from 2006
onwards
 Human Resource Management at BSE has won the Asia - Pacific HRM
awards for its efforts in employer branding through talent management at
work, health management at work and excellence in HR through technology

72
6.2 Heritage

The first ever stock exchange in Asia (established in 1875) and the first in
the country to be granted permanent recognition under the Securities Contract
Regulation Act, 1956, BSE Limited has had an interesting rise to prominence
over the past 133 years.

In 2002, the name "The Stock Exchange, Mumbai" was changed to

Bombay Stock Exchange. Subsequently on August 19, 2005, the exchange
turned into a corporate entity from an Association of Persons (AoP) and renamed
as Bombay Stock Exchange Limited.

BSE Limited, which had introduced securities trading in India, replaced its
open outcry system of trading in 1995, with the totally automated trading through
the BSE Online trading (BOLT) system. The BOLT network was expanded
nationwide in 1997.

Prominent Position

The journey of BSE Limited is as eventful and interesting as the history of

India's securities market. In fact, as India's biggest bourse, in terms of listed
companies and market capitalisation, BSE Limited has played a pioneering role
in the development of the Indian securities market. It is surely BSE Limited pride
that almost every leading corporate in India has sourced BSE Limited services in
capital raising and is listed with BSE Limited.

Even in terms of an orderly growth, much before the actual legislations were
enacted, BSE Limited had formulated a comprehensive set of Rules and
Regulations for the securities market. It had also laid down best practices which
were adopted subsequently by 23 stock exchanges which were set up after India
gained its independence.

73
 BSE Limited, as a brand, has been and is synonymous with the capital
market in India. Its SENSEX is the benchmark equity index that reflects the
health of the Indian economy.

6.3 Several Firsts

At par with the international standards, BSE Limited has in fact been a pioneer in
several areas. It has several firsts to its credit even in an intensely competitive
environment.

 First in India to introduce Equity Derivatives.

 First in India to launch a Free Float Index.
 First in India to launch US$ version of BSE Limited.
 First in India to launch Exchange Enabled Internet Trading Platform.
 First in India to obtain ISO certification for a stock exchange.
 'BSE On-Line Trading System' (BOLT) has been awarded the globally
recognised the Information Security Management System standard BS7799-
2:2002
 First to have an exclusive facility for financial training.
 First in India in the financial services sector to launch its website in Hindi and
Gujarati.
 Shifted from Open Outcry to Electronic Trading within just 50 days.
 First bell-ringing ceremony in the history of the Indian capital markets (listing
ceremony of Bharti Televentures Ltd. on February 18, 2002)

74
 Data analysis and interpretation

Data is collected by filling questionnaire by 100 stock market investors.

Are you investing in Equity market?

a. Yes
b. No

60%

50%

40%

30% yes
no

20%

10%

0%
how many people invest in equity market

75
From how long you are investing in equity market?

a. Less than 1 year

b. 1 to 2 year/s
c. 2 to 3 years

100%

90%

80%

70%

60%
2 to 3 years
50%
1 to 2 years
40% less than 1 year
30%

20%

10%

0%
Category 1

76
Why do you invest in equity market?

a. For quick short term gain

b. For high long term gain

100%

90%

80%

70%

60%

50% for high long term gain

for quick short term gain
40%

30%

20%

10%

0%
why do you invest in equity market

77
What is the purpose of investment?

a. To meet the cost of Inflation

b. To earn return on idle resources
c. To generate a specified sum of money for a specific goal in life
d. To make a provision for an uncertain future

100%

90%

80%

70% to prevent from uncertainity

60%
to generate specified sum of
50% money
to earn return on idle resources
40%

30% to meet the cost of inflation

20%

10%

0%
what is the purpose for investment

78
In which sector you invest most?

a. IT
b. Pharmacy
c. Telecom
d. Banking
e. Petroleum
f. Others

100%

90%

80%

70%
petroleum
60%
banking
50%
telecom
40% pharmacy
30% IT

20%

10%

0%
in which sector you invest the most

79
 The stock market reflects the health of countries economy. Stock market
movements are largely influenced by money supply, inflation fiscal deficits,
political instability, corporate performance, industrial growths etc.

BSE is one of the factors Indian Economy depends upon. BSE has played
a major role in the development of the country. Through BSE, Foreign Investors
have invested in India. Due to inward flow of foreign currency the, the Indian
economy has started showing the upward trend towards the development of the
country.

Since investors can’t invest directly they need intermediaries like brokers
and mutual fund agent a lot of job opportunity is being created not only in
Mumbai but throughout India

The Bombay Stock Exchange is a pivotal institution in the financial system

of India. A well-ordered stock market performs several economic functions

The Indian Economy would have been a complete different story. Various
companies wouldn’t have been a strong and successful as they are today and
the brokers and traders would have been elsewhere.

The taxes and other statutory charges paid by BSE are substantial and
make a sizeable contribution to the Government.

80
 ANNEXURE
Questionnaire

QUESTIONNAIRE

1. Name:

2. Age:

3. Occupation

a. Service
b. Business
c. Student
d.Other

4. Are you investing in Equity market?

a. Yes
b. No

5. What percentage of your investment is invested in equity market?

a. Less than 25%

b. 25-50%
c. 51-75%
d. More than 75%

6. From how long you are investing in equity market?

a. Less than 1 year

b. 1 to 2 year/s
c. 2 to 3 years
d. More than 3 years

7. Why do you invest in equity market?

a. For quick short term gain

b. For high long term gain

8. What attracts you towards equity market?

81
a. High return
b. Speculation
c. Dividend d. Liquidity of invested fund

9. What is the purpose of investment?

a. To meet the cost of Inflation

b. To earn return on idle resources
c. To generate a specified sum of money for a specific goal in life
d. To make a provision for an uncertain future

10. How much is your total investment annually?

a. < 5000
b. 5000 – 10000
c. 10000 - 25000 d. 25000 – 50000

11. How much of investment for equity?

a. < 25%
b. 25% - 50%
c. 50% - 75%
d. 75% - 100%

12. Generally which is the holding period of equity?

a. Intraday
b. Delivery

13. In which sector you invest most?

a. IT
b. Pharmacy
c. Telecom
d. Banking
e. Petroleum
f. Others

14. What will be the future of equity market in India as per you?

a. Bullish
b. Bearish
c. Can’t say

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Bibliography

1. BMS Sem 5 Special studies in finance

2. BFM Sem 3 Equity Markets I

Webliography

1. Bseindia.com
2. Wikipedia
3. Sebi.gov.in
4. Investopedia.com
5. Sharetips.info

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