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AN OVERVIEW OF INDIAN STOCK MARKET

RUSHABH VORA
831

INTRODUCTION
DEFINATION OF STOCK EXCHANGE :
The securities regulation act of 1956 defined stock exchange as an association ,
organization , or a individual which is established for the purpose of assisting,
regulating, and controlling business in buying ,selling and dealing in securities.

HISTORY OF STOCK EXCHANGE
The stock exchange was established by East India company in 18th century . In
India it was established in 1850 with 22 stock brokers opposite to town hall
Bombay. This stock exchange is known as oldest stock exchange of Asia.








TYPES OF STOCK MARKET
1. Primary Market:

The first group of investors to whom a new issue of a security is
sold. The primary market consists of the issuer and the first buyers
of the issue. The primary market can be a time more volatile than the
secondary market because it is difficult to determine the underlying
value of new issues.

2. Secondary Market:

A market where investors purchase securities or assets from other
investors, rather than from issuing companies themselves. The
national exchanges - such as the New York Stock Exchange, BSE,
NSE and the NASDAQ are secondary markets.

TYPES OF STOCK EXCHANGES
Bombay Stock Exchange
Type Stock Exchange
Location Mumbai, India
Founded 1875
Owner
Bombay Stock
Exchange Limited
Key people
Ashish Kumar
Chauhan (CEO & MD)
Currency Indian rupee
No. of listings 5,381
Market Cap
US$ 1.51 trillion (May
2014
Volume
US$ 231 billion (Nov
2010)
Indexes
BSE SENSEX
BSE Small Cap
BSE Mid-Cap
BSE 500
Website www.bseindia.com
TYPES OF STOCK EXCHANGES
National Stock Exchange

Type Stock Exchange
Location Mumbai, India
Founded 1992
Owner
National Stock
Exchange of India
Limited
Key people
Chitra
Ramkrishna(MD)
Currency Indian rupee
No. of listings 1,552
Market Cap
US$ 1.5 trillion
(June 2014
Indexes
CNX Nifty
CNX Nifty Junior
S&P CNX 500
Website www.nse-india.com
REVIEW OF LITERATURE
Grewal S.S and Navjot Grewall (1984) revealed some basic investment rules
and rules for selling shares. They warned the investors not to buy unlisted
shares, as Stock Exchanges do not permit trading in unlisted shares. Another
rule that they specify is not to buy inactive shares, ie, shares in which
transactions take place rarely. The main reason why shares are inactive is
because there are no buyers for them. They are mostly shares of companies,
which are not doing well.

Jack Clark Francis (1986) revealed the importance of the rate of return in
investments and reviewed the possibility of default and bankruptcy risk.

Preethi Singh (1986) disclosed the basic rules for selecting the company to
invest in. She opined that understanding and measuring return and risk is
fundamental to the investment process. According to her, most investors are
'risk averse'. To have a higher return the investor has to face greater risks.

Nabhi Kumar Jain (1992) specified certain tips for buying shares for holding
and also for selling shares. He advised the investors to buy shares of a growing
company of a growing industry. Buy shares by diversifying in a number of
growth companies operating in a different but equally fast growing sector of
the economy.




REVIEW OF LITERATURE
Lewis Mandells (1992) reviewed the nature of market risk, which according to
him is very much 'global'. He revealed that certain risks that are so global that
they affect the entire investment market. Even the stocks and bonds of the
well-managed companies face market risk. He concluded that market risk is
influenced by factors that cannot be predicted accurately like economic
conditions, political events, mass psychological factors, etc. Market risk is
the systemic risk that affects all securities simultaneously and it cannot be
reduced through diversification.

Yasaswy N.J. (1993) disclosed how 'turnaround stocks' offer big profits to
bold investors and also the risks involved in investing in such stocks.
Turnaround stocks are stocks with extraordinary potential and are relatively
under priced at a given point of time.

Sunil Damodar (1993) evaluated the 'Derivatives' especially the 'futures' as a
tool for short-term risk control. He opined that derivatives have become an
indispensable tool for finance managers whose prime objective is to manage
or reduce the risk inherent in their portfolios.




REVIEW OF LITERATURE
Pattabhi Ram (1995) emphasised the need for doing fundamental analysis and
doing Equity Research (ER) before selecting shares for investment. He opined
that the investor should look for value with a margin of safety in relation to
price.

Aswath Damodaran (1996) reviewed the ingredients for a good risk and return
model. According to him a good risk and return model should-
a. Come up with a measure for risk that is universal
b. Specify what types of risks are rewarded and what types are not.
c. Standardise risk measures, to enable analysis and comparison.
d. Translate the risk measure into an expected return

Bhalla V.K." (1997) reviewed the various factors influencing the equity price and
price eamings ratio. He is of the opinion that equity prices are affected primarily
by financial risk considerations that, in turn, affect earnings and dividends. He
also stated that market risk in equity is much greater than in .bonds, and it
influences the price also



REVIEW OF LITERATURE
Akash Josh (2000) reviewed the utility of derivatives in reducing risks. He opined
that derivatives allow an investor to hedge or reduce risks.

Gerea.S.T. and Balsara.K.A. (2001) reviewed the risk management system at the
Bombay Stock Exchange. They reported that the BSE has strengthened the risk
management measures to maintain the market integrity. The introduction of the
modified carry forward system, coupled with the BOLT (Bombay Online Trade)
expansion to cities all over India has led to a significant increase in the liquidity
and volumes at the exchange

The Economic Times Investors' year Book (2OOO-Ol) commented on the
"Paperless World and described what makes dematerialisation the preferred
choice and how it reduces risk. The dematerialised trading was introduced in
India in 1996 to reduce pains and risks in settlement through the loss of share
certificates in transit, bad deliveries, delays in transfer and forged/ fake/ stoIen
certificates.



OVERVIEW OF K R CHOKSEY
Introduction
Kisan Ratilal Choksey Shares & Securities Pvt. Ltd. (KRC) is a Mumbai
based full-fledged service broking firm incorporated in the year 1979. Its
clientele comprises of high net worth individuals, corporates, NRI, mutual
funds, as well as other financial institutions.

COMPETITORS
K.R. CHOKSEY faces significant competition from companies seeking to
attract client financial assets, including traditional and online brokerage
firms, mutual fund companies and institutional players having wide
presence and a strong brand name. They are;

ICICI Securities Ltd.
Kotak Securities Ltd.
IndiaInfoline
MotilalOswal Securities
Sharekhan
Religare Securities

OPERATIONS OF KRC
BROKING
KRC provide great convenience to clients with the wide range of services which
includes broking on Cash and Derivative segments of both Bombay Stock
Exchange of India Limited (BSE) and National Stock Exchange of India Limited
(NSE).

SHARE BANK
KRC Share Bank Division functions as a single window facility that enables day-to-
day execution of instructions slips expediting client transactions. The division's
web-enabled process also helps the client to check his account online.

FIXED INCOME
Basing its strategy on your requirements, the Fixed Income Division provides
suitable investment opportunities with its Safety-Liquidity-Returns plans providing
safe, assured and regular levels of fixed income.
OPERATIONS OF KRC
CONTINUED..

INSURANCE
The KRC Insurance Division helps you identify the particular Insurance Product
that provides you with maximum returns and gains for a protected future. The
KRC Insurance Division carefully matches the Insurance Products available to
your personal and financial profiles and then offers you suitable solution options.

RESEARCH
KRC Research Division offers a strong research-based support system to ground
your investment decisions. The Division's unique systematic approach and
methodology have been recognized as opinion drivers in world of investment with
its reports and findings recorded on the country's leading financial portals

PORTFOLIO MANAGEMENT
The services are offered on a personalized basis with a highly
Qualified/Experienced team backed by a solid infrastructure. KRC-PMS ensures
margin of safety in managing portfolio funds while attempting to generate regular
returns for investors
OPERATIONS OF KRC
CONTINUED..


FINANCIAL PLANNING
KRChoksey Financial Planning, creating a process for you to meet your
financial objectives considering your assets, liabilities, income, expenses &
inflation & your other financial commitments.

E SERVICES
KRChoksey had been one of the first brokerage firms to realize the potential
of the Internet, recognizing it as a powerful tool for investment and as the
inevitable part of trading.

KRC GLOBAL
Growth-oriented investment solutions and guidance based on proven
methodology and in-depth fundamental research, with dedicated customer
focus and capital growth through structured counseling have led to Kisan
Ratilal Choksey Shares & Securities Pvt Ltd, being recognized as opinion
drivers in the global world of investment.






UNDERSTANDING CAPITAL MARKET


An Outlook on Indian Stock Market
Capital Markets Derivative Segment
Intraday Delivery Futures Options
INDIAN CAPITAL MARKETS - CHRONOLOGY
1994- Equity Trading commences on NSE
1995- All Trading goes Electronic
1996- Depository comes in to existence
1999- FIIs Participation- Globalization
2000- over 80% trades in Demat form
2001- Major Stocks move to Rolling Settlement
2003- T+2 settlements in all stocks
2003 - Demutualization of Exchanges

Capital Market Participants
Banks
Exchanges
Clearing Corporations
Brokers
Custodians
Depositories
Investors
Merchant Bankers
Types of Investors
Institutional Investors- MFs / FI / FIIs / Banks
Retail Investors
Arbitrageurs / Speculators
Hedgers
Day traders/Jobbers




DERIVATIVES
Definition:-
Derivatives are instruments whose value is derived, in whole or in part, from the value
of one or more underlying assets.

Understanding Derivatives-
The primary objectives of any investor are to maximize returns and minimize risks.
Derivatives are contracts that originated from the need to minimize risk.

The word 'derivative' originates from mathematics and refers to a variable, which has
been derived from another variable. Derivatives are so called because they have no
value of their own. They derive their value from the value of some other asset, which is
known as the underlying.

Difference between Commodity Derivative & Financial Derivative

If the underlying asset of the derivative contract is coffee, wheat, pepper, cotton, gold,
silver, precious stone or for that matter even weather, then the derivative is known as a
commodity derivative.
If the underlying is a financial asset like debt instruments, currency, share price index,
equity shares, etc., the derivative is known as a financial derivative.


Futures and Forwards
As the name suggests, futures are derivative contracts that give the holder the
opportunity to buy or sell the underlying at a pre-specified price sometime in the future.
They come in standardized form with fixed expiry time, contract size and price.
Forwards are similar contracts but customizable in terms of contract size, expiry date
and price, as per the needs of the user.


Options
Option contracts give the holder the option to buy or sell the underlying at a pre-
specified price sometime in the future.
An option to buy the underlying is known as a Call Option.
An option to sell the underlying at a specified price in the future is known as Put
Option.
In the case of an option contract, the buyer of the contract is not obligated to exercise
the option contract. Options can be traded on the stock exchange or on the OTC market










FINDINGS & SUGGESTIONS

Aggressive Promotions
K.R CHOKSEY compared to its competitors concentrates less on advertising and
promotions, especially through electronic media. Its competitors like Sharekhan,
ICICI and Kotak are advertising aggressively through media. Hence K.R Choksey
should concentrate more on advertising through print and electronic media.

Tapping Rural Market
The Indian rural investors market is relatively untapped, with only small and private
firms meeting the current demand. K.R Chokseycan gain the First Mover
Advantage over its competitors, especially in areas were commercial crops are
grown and the standard of living is high. These people do not have much option to
invest other than banks and post offices.

Reduce the initial account opening charges
The charge for opening a trading and Demat account in K.R Chokseyis high
compared to its competitors. This influences the potential investors to open their
account with another company that provides the same at lower prices. Thus it acts
as a mental barrier for potential customers, who tend to overlook all other benefits
offered byK.R Choksey. HenceK.R Choksey should consider reducing their account
opening charges.

FINDINGS & SUGGESTIONS

Bring in more product differentiation
Product differentiation here means that K.R Chokseyshould bring in more
customized services and more value proposition for large investors. It can
reduce the brokerage charges for large investors that will encourage them to
invest more in the company.

Invest more on R&D:
K.R Choksey should concentrate on its research and development since most
of its competitors are investing on R&D. This will help the company to read the
market better and will also be in a better position to understand the needs of
the customers. This can be extremely beneficial for in K.R Choksey the long
run.







BIBLIOGRAPHY

Internet Website

http://www.investopedia.com
http://www.investinganswers.com
http://www.nseindia.com
http://www.bseindia.com
http://www.stockgyaan.com

BOOKS

NCFM Fundamental Analysis course Book
NCFM Technical Analysis course Book

APPLICATION

Chart NEXUS
Share Khan Trade Tigers
MS- EXCEL