BSE Investors Awareness

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Second level
Programme
Welcome to the Third level
●

● Fourth level
workshop ● Fifth level

“Empowering
Investors Through
Education”
 BSE Ltd Introduction
1875 -2010

135 Glorious Years of

Tradition Trust & Transparency
Some Key Statistics
No. of Member No. of No. of
Brokers Registered Terminals
Sub-brokers
1017 40,000+ 40,000+

No. of Cities Average Market

present Daily Turnover Capitalization
400+ Rs.4,700 Cr. Rs.62,800 Bn

TGF Corpus Listed Companies Daily Average

No. of trades
Rs.4,000 Cr. 4977 22.5 Lakh
Regulator of the Capital Market

Securities and Exchange Board of India is

established “to protect the interests of investors
in securities and to promote the development of
and to regulate the securities market and for
matters connected therewith or incidental
thereto”

SEBI Web Site : www.sebi.gov.in

 Investment Choices in the
Securities Market
Securities are considered
as
Challenging
as well as
Rewarding

BUT

Investing in securities requires skill and

expertise
AND

Carries the risk of loss

Investment Choices in the Securities Market contd.
You should evaluate securities broadly on
following criteria
• Liquidity
• Safety

• Returns

• Tax savings

• Whether your active involvement is required to

manage your investment

• Minimum amount that you can invest
Why should you invest?
So as to:
• earn return on your idle resources

• generate a specified sum of money for a

specific goal in life

• make a provision for an uncertain future.

For this you need to:

• Invest with knowledge

• Do financial planning so as to meet your

financial needs with your saving potential.

Investment Choices in the
Securities Market

I. Equity Shares

I. Bonds and debentures

I. Mutual Funds & Exchange

Traded Funds (ETF).

I. Derivatives
I. Equity Shares
Why Invest In Shares?
US $
Year1802 1997
Gold 1.00 0.84
Bills 1.00 275
Bonds 1.00 803
Equities 1.00 5,58,945

Study by Prof Jeremy Siegel of Wharton

Business School in U.S.A.
Why Invest In Shares? Cont..

Rs.100 invested in PPF on April 1, 1979,

would have become Rs.1086 in April 2010-
compounded @ 8% per annum.
Whereas investment in Sensex at 17,600
as on April 1, 2010 would have given a
compounded annual return of 18.1%. This
is excluding the dividend of generally @ of
2% p.a.
Primary Market

Enables Issuers to Mobilize savings

from investors for their projects /
expansion resulting in development of
economy, employment, tax collection,
creation of wealth.
Subsequently these securities get
listed and traded on the stock
exchanges.
Listing of Securities

Listing provides:-
•

• Liquidity to the Securities.

• Protection to Investors by ensuring full
disclosures.
Companies to enter into a listing
•

Agreement.
• The Exchange has power to suspend a
company if clauses of Listing
Agreement are Violated.
Requirements for the IPO’s
• Minimum 35 % of post-issue capital to
be offered to the Public.
• Offer Documents to be made available
to the Public.
• Issue to be kept open for a min of 3
days.
• Mandatory Collection Centers at 4
metros and regional centers for
collection of the applications.
• Minimum 90% of the issue to be
subscribed.
Book Building
•Price of the Issue is not fixed by the
Company.
•The floor price is, however, fixed by
the issuer Company.
•Book Building is a process of
discovering price for issue of Securities
to Investors.
•Bidding is done at or above the floor
price.
Safeguards for Investors

1% of the issue amount is deposited by

companies making public/ right issues with the
Exchange which can be forfeited in the event of
company failing to resolve the complaints of the
Investors regarding delay in sending refund
orders/ Share certificates, non-payment of
commission to underwriters, brokers etc.
 SECONDARY MARKET
What is the role of a Stock
The
Exchange?
Exchange provides ONLINE
ANONYMOUS SCREEN BASED TRADING
PLATFORM for buyers and sellers to
deal in the LISTED/PERMITTED
securities listed on the Exchange at a
FAIR PRICE (MARKET DRIVEN).
The Exchange ensures settlement of
trades between buyers and sellers at
the appointed time.
 T+2 Settlement Regime
Auction/
Close out (T2T/Block/6 Lakh Seri

Trading T+1 T+2 T+3

T+4
Day Day Day Day Day
Mon Tue Wed Thu Fri
t l e m e n t ( F u n d s & S e c u r i t iS
e sh) o r t a g e s
are done on T+2 Day
H I G H E (Ri f
any
will be Close Ou
BSE On Line Trading System
(BOLT)
• Trading in Equity Shares through BOLT.
• It is transparent and faster way of execution of
trades. Response time less than two seconds.
• Makes trading possible – from anywhere during
market hours.
• Instantaneous dissemination of information.
• Brings depth and faster execution of trades.
• Trading through Member Brokers (800) or their
SEBI registered Sub-Brokers.
• 11000 trading terminals in 413 cities across the
country.
• Investors can place Limit or Market orders.
Do’s and Don’ts for Investors

Deal with only SEBI Registered Brokers or Sub-Brokers.

Give clear & unambiguous instructions to the Broker/
Sub-Broker with regard to the Price, Qty, Buy/Sell, Order
Type.
Keep a record of all instructions issued to your broker /
Sub-Broker.
Confirm whether the delivery is in Physical form or
Demat form before buying / selling shares.
Verify your trades on www.bseindia.com .
Do’s and Don’ts for Investors

Clearly mark your option to receive order confirmations,

Contract Notes in digital or physical form. If you choose
digital form, provide the e-mail id regularly used by you.
If you choose physical form, provide the complete
address and STRIKE OFF e-mail id column.
Make sure that you receive contract notes for all your
trades within 24 hours.
In case you have opted for digital contract notes, Please
verify your email account on daily basis so that all
transactions in your account came to your knowledge.
Do’s and Don’ts for Investors
Enter into in proper Client Broker agreement with your broker and
keep a signed copy of the same for your records.
Furnish Know your Client form to your broker.
Don’t fall prey to unrealistic / guaranteed returns.
If Single order is more than Rs. 1,00,000/- details of PAN No etc.
to be furnished. A Unique Code at the Brokers Level.
10% up-front margin in case position more than Rs. 5,00,000/-
Rights of the Investors
Receive Contract Notes / Confirmation memo in the
specified format within 24 hours.
The Contract Notes / Confirmation Memo should
contain SEBI Registration No of the Member / Sub-
Broker and transaction details such as :
● Order No, Trade No & Trade Time
● Qty, Brokerage, Price & Settlement Details
● Details of other levies, if any.
Money and Securities to be received within one working
day of the Pay-Out from the Member Broker.
Rights of the Investors
Brokerage not to Exceed 2.5% of the Contract Price.
Insist on a Statement of Account along with the
details of Shares and monies outstanding from your
broker at least once in every six months and report
discrepancy in writing within 15 days from the receipt
thereof.
Access to Arbitration Mechanism of the Exchange in
case of any dispute with broker.
Depositories - Safeguards for
Investors
Depository A/c is like Bank A/c.
Keep Delivery Instruction (DI) Book
safely.
DI Book should have a preprinted serial
no and your account number should be
stamped on each slip.
Do not sign on DI book unless all the
details are filled up.
Depositories - Safeguards for
Investors
Entitled to receive a transaction statement from
DP every 15 days if you have done any transaction
and once a Quarter if no transaction is done.
Insist on a transaction statement and not a holding
statement.
Regularly verify the Debits and Credits in your
account.
Principles of Safe Investments
Diversification
Diversify your investment into different sectors and
companies to avoid Unsystematic Risk.

Systematic Investment
Regular systematic investment is the Best option.
Think long term.

Know your risk profile

Time Horizon & Bankroll
Principles of Safe Investments- Cont..

Check the Fundamentals

§ Invest in stocks of fundamentally good companies
having strong sales and earnings growth. Shift your
investments from weaker to fundamentally stronger
companies
§ Consider important factors like promoter’s track
record, growth in sales and profitability, EPS and
dividend payments etc.
§ Valuation in terms of PE multiple
§ Look for growth sectors and stocks
§ Avoid investments in penny stocks
§ Look for stocks with good dividend yield
§ Have modest expectations of returns
 Principles of Safe Investments- Cont..

Impact of Leverage (Margin Trading)

Assume Maintain Margin required is 50%.

Date Securities Mrket No of Your Broker

Purchased Price Shares Money Money

26-05-06 IDBI 95 2000 1,00,000 90,000 Margin 110%

01-06-06 67 2000 44,000 90,000 Margin 50%

(approx)
06-06-06 64 1000 38,000 90,000 Margin Call : Either
pay 7,000 or
Broker
will Sell stock of Rs.
14,000

Status of your account (If NOT paying margin demanded by broker time to time)-
08-06-06 50 400 10,000 10,000 Actual Loss Rs.
72,000 Notional
Loss Rs.18000
In case of stock bought with own money.
Principles of Safe Investments- Cont..

• Expect large volatility in the short term

• Don’t be panicky or greedy
• Have faith and patience
• Expenses and excitement are worst enemies of
investors
• Investigate thoroughly i.e. do your home
work before investing
• Monitor your investment regularly
• Invest certain portion of your investment in
Mutual Funds (MFs)
• Good judgment comes from experience and
experience come from bad judgment
What makes a great
Investor?
Constant reading and follow up of the
Companies
Look for Margin of Safety
Circle of Competency
Compounding (Start early, invest wisely)
Investment is 24X7 job
Have long term view of the market
Advantages of trading with
BSE
A Group
B Group
1. Groups S Group (INDO NEXT)
T Group (Surveillance Action)
TS Group (Surveillance
Action)
Z Group (Non Investor
Friendly/Non Compliance
with
Listing Agreement)
Debentures/Bonds: F Group
T, TS, Z – Settlement on Trade toSecurities:
Government Trade basis G
Group
Shifting a Company to “Z”
Group
• The Exchange considers any three out of
the following seven criterion on non-
compliance.
• Non Submission of Notice of Book Closure &
RD.
• Non Submission of Yearly Accounts.
• Non Submission of Quarterly Shareholding
pattern.
• Non Payment of Listing Fees.
• Quarterly results are not published.
• Non Settlement of Investors Complaints.
• Corporate Governance issues are not complied
with.
• Companies who have not signed
Advantages of trading with BSE
….. contd
2. Investors Grievance Redressal
Mechanism at BSE Ltd against BSE
Listed Companies
Type of Complaints -
Non-Receipt of Money.
Non-Receipt of Shares.
Non-Receipt of Debt Securities.
Non-Receipt of Corporate Benefits.
Non-Receipt of interest for delay.
Others
Advantages of trading with BSE
Ltd
…. Contd
3. Investors Grievance Redressal Mechanism at BSE
Ltd against Members
Type of Complaints

Non-Receipt / delay in payment.

Non-Receipt / delay in Securities.
Non-Receipt of documents.
Unauthorized Trades / Misappropriation.
Service Related.
Closing out / Squaring up.
Non-Implementation of Arbitration Awards.
Others
Investors’ Grievance Redressal
Committee
• On Receipt of a complaint
Explanation / Clarifications are
sought from the Member.
• IGRC is a Conciliatory Committee
chaired by a Retired High Court
Judge.
• The Committee tries to bring about
an amicable settlement between the
parties to resolve the disputes.
• In case the disputes could not be
resolved at IGRC then the parties, if
so advised, may go in for Arbitration.
Arbitration at BSE
• Quasi Judicial Mechanism.
• Matter decided by the Arbitrators.
• Arbitration Award passed by the
Arbitrators can be enforced under
the Civil Procedure Code, 1908 as if it
were a decree of Court.
• Exchange provides administrative
and secretarial assistance to the
arbitrators.
 Investors to select his own
Arbitrators
• Case decided by Sole Arbitrator or 3 Arbitrators
depending upon claim amount.
- Sole Arbitrator : If claim upto
Rs.10,00,000
- 3 Arbitrators : If claim above
Rs.10,00,000
• Awards given normally within 3 months. (Max 6
Months).
• Awarded Amount Set aside from the Deposits of
the Member if an award is passed against
Member.
• Award is binding on both parties. In case investor
not satisfied with award he can file an appeal
Challenge to Arbitration Award
Appeal Bench
•

• Within 15 days from the date of receipt of

Award.
• Appeal Bench of 5 Arbitrators.
• Awarded amount to be deposited with the
Exchange.
High Court
•

• U/s 34 of the Arbitration & Conciliation Act,

1996
• Within 90 days from the date of receipt of
Award.
Complaints status on BSE
website
 Advantages of trading with
BSE Ltd ….. contd
Highest number of listed companies.
Over 15000 terminals from more than 300 cities offering large pool
of liquidity.
Transparent and screen based trading.
Trade verification by investors.
Transaction cost 0.3 basis points.
Excellent Risk Management. Lowest Defaults.
Highest contribution to investors from IPF at Rs.15 lakhs.
Personalized Attention to the Investors in case of any clarification /
Grievance through DIS.
Dial 1800 22 6663 to report any unhealthy market practices
Investors Protection Fund

Fund Setup in 1987 to meet the claims of

Investors against Defaulter Member Brokers.
Up to Rs. 15 Lakh per Investors can be paid.
SEBI Requirement
Corpus of the Fund : Around 370 Crores.
Claim from Investors Protection
Fund
Claim against Defaulter Members.
The claimant has to file an arbitration within Six
month from the date of declaration of member as
defaultor by BSE and obtain an award in his/her
favour.
Awards to be submitted to the Defaulters’
Committee, Standing Committee with 60% outside
experts, for payment from IPF.
Committee recommends to the trustees of IPF for
release of the awarded amount or Rs. 10 Lakhs or
actual loss suffered by investor whichever is lower.
Trade Guarantee Fund

•To Guarantee Settlement of bonafide

transactions of Members inter-se which
forms part of BSE Settlement System.
•Contribution to the Fund :
•Corpus of the Fund : Rs. 900.76 crores (as
on 31.08.2003)
•Funds Accessed only on three occasions.
Default in last two years only 0.00001 % of
the pay-in obligations.
Risk Management at BSE
Risk Management
• Base Minimum Capital (BMC) /Additional
Capital (AC).
• Intraday Trading Limits.
• Gross Exposure Limits.
• Margins.
• Monitoring Businesses of Brokers.
• Trading Restrictions.
• BOLT Deactivations.
• Other Measures such as Insurance Policies
etc.
Margins
• VAR Margins.
• Group I (246 Highly traded Scrips)
• Group II (Remaining Scrips based on VAR on
Sensex)
• Additional Volatility Margins (AVM).
• Mark to Market (MTM).
• Special Adhoc Margins (SAM).
• Special Margin.
• Adhoc Margin.
Circuit Filters
Individual Circuit Filters :
•

• Scrips which form part of Sensex / Nifty

or on which derivative products are
offered, no circuit filters are applicable
(Only dummy filters )
• Circuit filters of 20% on the remaining
Scrips on the basis of closing price of
the scrip on the previous day.
Market Wide Circuit Breakers
• Applicable on movement in Sensex/Nifty.
• 10 % movement of either index.
• 1 hr. halt if movement takes place before 1:00 p.m.
• ½ hr. halt if movement between 1:00 p.m. and 2:30 p.m.
• No halt after 2.30 p.m.
• 15 % movement in either index.
• 2 hr. halt if movement takes place before 1:00 p.m.
• 1 hr. halt if movement between 1:00 p.m. and 2:00 p.m.
• Halt for the remainder of the day, if after 2.00 p.m.
• 20 % the market will halt for the remainder of
the day.
II. Bonds & Debentures
Bonds
A Bond is a loan given by the buyer to
the issuer of the instrument. These are
debt instruments. Over and above the
scheduled interest payments as and when
applicable, the holder of a bond is entitled
to receive the par value/face value of the
instrument at the specified maturity date
Debentures
Debentures are also debt instruments.
• Debt instruments are required to be rated
by credit rating agencies.
• Investors should track the ratings of the
same.
 III. Mutual Funds
And Exchange Traded Funds
(ETF)
Mutual Funds
Type
Equity (Growth) Funds
Debt (Income) Funds
Money Market (including Gilt) Funds
Balanced (Hybrid) Funds
Comparison of performance
Net Asset Value (NAV) = Market value of the assets of the scheme less liabilities
divided by Number of units outstanding.
Do not choose a fund based on its relatively lower net asset value
(NAV).
Management fee and other expenses

BSE Launches BSE StAR MF – Mutual Fund trading platform

Exchange Traded Funds (ETF)

ETF is a security that tracks an index,

commodity or sector but trades like a stock on
an Exchange. It is similar to close ended
mutual fund listed on stock exchange. ETF
experience the price changes throughout the
day as they are bought and sold.
- Instant exposure to a well diversified
portfolio or an asset class.
- Real time buying and selling like other
scrip.
- No sales load for investor. Only normal
brokerage charges apply.
 ETFs traded on BSE
All ETFS available in the Indian capital market are available for trade at BSE
Major Index-tracking ETFs – 1. SENSEX ETF
2. SENSEX Prudential ICICI ETF
3. Kotak SENSEX ETF
4. S&P CNX Nifty
5. Junior Nifty BeES
6. Hang sang BeES
7. Kotak Nifty
8. Nifty BeES – NIFTYBEES
Gold ETFs
Ø Reliance Mutual Fund – Gold ETF (RELIANCEGOLD).
Ø SBI Mutual Fund – SBI Gold ETF Scheme (SBI GOLD ETF)
Ø Kotak Mutual Fund – Gold ETF ( KOTAKGOLDETF).
Ø UTI Mutual Fund – UTI Gold Exchange Traded Fund.
IV. Equity Derivatives
Futures Contracts
Investment required - Initial Margin + Mark to
Market
Reliance(RIL) Future bought at Rs 1200/- (Lot size
300)
 OPTION
BUYER SELLER
Insured party: pays premium. Insurer: receives premium.
Loss is limited to the Profit is limited to the
premium paid. Profit can be premium received. Loss is
unlimited unlimited.
CALL OPTION
He is bullish He is moderately bearish
Buyer of the option has the Seller has the obligation to
right to buy sell
PUT OPTION
He is bearish (Mandi) He is moderately bullish (Teji)
Buyer of the option has the Seller has the obligation to
right to sell buy
Zero Sum
Game
 BSE Equity Derivatives
● Mid Month Expiry – Last Thursday to 3rd Last
Thursday
● Tick Size – Increased from 0.05 to 1 Index Point
[Index F&O]
Sensex, Mini Sensex, BSE TECK, BSE Oil & Gas
Indexes
and BSE Bankex
Multiplier 15 (for Sensex)
Expiration cycle 1,2 & 3 months
Tick size Rs. 1.00
Trading Hours 9.00 AM to 3.30 PM
Expiration day 3rd last Thursday of contract month
Final settlement Cash settled to closing price of the index
Other Services and Facilities
offered by BSE Ltd
BSE Training Institute
Conducts courses on:
Three months part time- Comprehensive course on capital Market in
coordination with Jamnalal Bajaj Institute of Management,
Investors Awareness programme
Retail Debt Market
Corporate Governance
Programmes on Derivatives / Futures Options etc.( Basic & Advanced)
Interest Rate / Fixed Income Derivatives
Mergers and Acquisitions / Mutual Funds
Technical Analysis / Fundamental Analysis.
Stock Market operations / BOLT Trading Operation.
Certification Courses.
BSE Publications

BSE Annual Capital Market Review.

Review of Markets
Addresses of Companies
The Stock Exchange Review
Technical Analysis
Fundamental analysis
Futures & Options
Capital Market Briefings.
BSE Web-Ex
Introduced in February, 2001 with a view to provide an
additional facility to the Investors to put their orders for
purchase or sale of securities using Internet.
Investors can put in their own orders through the internet.
Investors can get realtime confirmation of their trades.
They can view status of their orders, modify or cancel them, if
not executed and also view their order and trade history for the
day.
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Second level
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● Fourth level

● Fifth level
BSE Web Site : www.bseindia.com
Most popular web site of Capital Market : 5.7 million hits on
budget day. Average daily of 5 million hits.
New Features on www.bseindia.com
• Advance Stock Reach
Compare Pre-defined &
with Peers Technical
charts

Historical
High/Low

LTP Market Lates

Depth t5 Alerts

Key
Pointers
New Features on www.bseindia.com
• BSE Mkt Galaxy

Click thru to
Stock Watch

Cloud of
the most
eventful
scrips Events
New Features on www.bseindia.com
• SENSEX View
SENSEX
Share Price
Intra-day
Performance
Graph
Heat Map

SENSEX Scrips
Announcement
s

Intra-day
graph, price
info. of the
scrip
BSE Toll Free No. 1600 22 6663

Thank You
Kindly E-mail your suggestions, if any, with
regards to the Programme to
iscdelhi@bseindia.com
or write to :
Department of Investors
Services
Floor -7, Mercantile House
K. G Marg, New Delhi
BSE Ltd,
Ph-41510481 / 41510968