Indian Stock Markets is one of the oldest in Asia.

Its history dates back to nearly

200 years ago. The earliest records of security dealings in India are meager and
obscure. The East India Company was the dominant institution in those days
and business in its loan securities used to be transacted towards the close of the
eighteenth century.
At the end of the American Civil War, the brokers who thrived out of Civil War
in 1874, found a place in a street (now appropriately called as Dalal Street)
where they would conveniently assemble and transact business. In 1887, they
formally established in Bombay, the "Native Share and Stock Brokers'
Association, which is alternatively known as The Stock Exchange". In 1895,
the Stock Exchange acquired a premise in the same street and it was inaugurated
in 1899. Thus, the Stock Exchange at Bombay was consolidated.
The Indian stock market has been assigned an important place in financing the
Indian corporate sector. The principal functions of the stock markets are:
enabling mobilizing resources for investment directly from the investors
providing liquidity for the investors and monitoring.
Disciplining company management.

The two major stock exchanges in India are: National Stock Exchange (NSE)
Bombay Stock Exchange (BSE).
1.2 National Stock Exchange
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With the liberalization of the Indian economy, it was found inevitable to lift the
Indian stock market trading system on par with the international standards. On the
basis of the recommendations of high powered Pherwani Committee.
The National Stock Exchange was incorporated in 1992 by Industrial
Development Bank of India, Industrial Credit and Investment Corporation of
India, Industrial Finance Corporation of India, all Insurance Corporations,
selected commercial banks and others.
The National Stock Exchange (NSE) is India's leading stock exchange covering
various cities and towns across the country. NSE was set up by leading
institutions to provide a modern, fully automated screen-based trading system
with national reach. The Exchange has brought about unparalleled transparency,
speed & efficiency, safety and market integrity. It has set up facilities that serve as
a model for the securities industry in terms of systems, practices and
procedures.
Trading at NSE can be classified under two broad categories:
Wholesale debt market
Capital market
Wholesale debt market operations are similar to money market operations institutions and corporate bodies enter into high value transactions in financial
instruments such as government securities, treasury bills, public sector unit
bonds, commercial paper, certificate of deposit, etc.

Capital market: A market where debt or equity securities are traded.

There are two kinds of players in NSE:
Trading members
Participants
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large
players like banks who take direct settlement responsibility.
Trading at NSE takes place through a fully automated screen-based trading
mechanism which adopts the principle of an order-driven market. Trading
members can stay at their offices and execute the trading, since they are linked
through a communication network.
The prices at which the buyer and seller are willing to transact will appear on the
screen. When the prices match the transaction will be completed and a
confirmation slip will be printed at the office of the trading member.

NSE has several advantages over the traditional trading exchanges. They are as
follows:
NSE brings an integrated stock market trading network across the nation.
Investors can trade at the same price from anywhere in the country since intermarket operations are streamlined coupled with the countrywide access to the
securities.
Delays in communication, late payments and the malpractices prevailing in
the traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with
the support of total computerized network.
NSE Nifty
S&P CNX Nifty is a well-diversified 50 stock index accounting for 22 sectors
of the economy. It is used for a variety of purposes such as benchmarking fund
portfolios, index based derivatives and index funds.
NSE came to be owned and managed by India Index Services and Products Ltd.
(IISL), which is a joint venture between NSE and CRISIL. IISL is India's first
specialized company focused upon the index as a core product. IISL have a
consulting and licensing agreement with Standard & Poor's (S&P), who are world
leaders in index services. CNX stands for CRISIL NSE Indices. CNX ensures
common branding of indices, to reflect the identities of both the promoters, i.e.
NSE and CRISIL. Thus, 'C' Stands for CRISIL, 'N' stands for NSE and X stands
for Exchange or Index. The S&P prefix belongs to the US-based Standard & Poor's
Financial Information Services.
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1.3 Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It
was established as "The Native Share & Stock Brokers Association" in 1875.
It is the first stock exchange in the country to obtain permanent recognition in
1956 from the Government of India under the Securities Contracts (Regulation)
Act, 1956. The Exchange's pivotal and pre-eminent role in the development of
the Indian capital market is widely recognized and its index, SENSEX, is
tracked worldwide.

SENSEX
The Stock Exchange, Mumbai (BSE) 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 launch of SENSEX in 1986 was later followed up in January 1989 by
introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100
stocks listed at five major stock exchanges.

The values of all BSE indices are updated every 15 seconds during the market
hours and displayed through the BOLT system, BSE website and news wire
agencies.
All BSE-indices are reviewed periodically by the index committee of the
exchange.
1. OVERVIEW OF THE REGULATORY FRAMEWORK OF THE
CAPITAL MARKET IN INDIA
India has a financial system that is regulated by independent regulators in the
sectors of banking, insurance, capital markets and various service sectors. The
Indian Financial system is regulated by two governing agencies under the
Ministry of Finance. They are
1 Reserve Bank of India
The RBI was set up in 1935 and is the central bank of India. It regulates
the financial and banking system. It formulates monetary policies and
prescribes exchange control norms.
2 The Securities Exchange Board of India
The Government of India constituted SEBI on April 12, 1988, as a nonstatutory body to promote orderly and healthy development of the
securities market and to provide investor protection.

Department Economic Affairs

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The capital markets division of the Department of Economic Affairs regulates

capital markets and securities transactions.
The capital markets division has been entrusted with the responsibility of
assisting the Government in framing suitable policies for the orderly growth and
development of the securities markets with the SEBI, RBI and other agencies. It
is also responsible for the functioning of the Unit Trust of India (UTI) and
Securities and Exchange Board of India (SEBI).
The principal aspects that are dealt with the capital market division are:
Policy matters relating to the securities market
Policy matters relating to the regulation and development and investor
protection of the securities market and the debt market.
Organizational and operational matters relating to SEBI

The Capital Market is governed by:

Securities Contract (Regulation) Act, 1956
Securities Contract (Regulation) Rules, 1957
SEBI Act, 1992
Companies Act 1956
SEBI (Stock Brokers and Sub Brokers) Rules, 1992

 Exchange Bye-Laws Rules & Regulations

Self-regulating Role of the Exchange

The exchange functions as a Self Regulatory Organization with the parameters
laid down by the SCRA, SEBI Act, SEBI Guidelines and Rules, Bye-laws and
Regulations of the Exchange. The Governing Board discharges these functions.
The Executive Director has all the powers of the governing board except
discharging a member indefinitely or declaring him a defaulter or expelling him.
The Executive Director takes decisions in the areas like surveillance, inspection,
investigation, etc. in an objective manner as per the parameters laid down by the
governing board or the statutory committees like the Disciplinary Action
Committee.

3 TRADING WITH STOCK MARKET

This section will introduce us about the process and instruments used to help a
customer or a client to trade with arcadia securities. This process is almost similar
to any other trading firm but there will be some difference in the cost of brokerage
commission.
Trading: It is a process by which a customer is given facility to buy and sell share
this buying and selling can only be done through some broker and this is where
Arcadia helps its customer. A customer willing to trade with any brokerage house
need to have a demat account, trading account and saving account with a
8

brokerage firm. Any one having following document can open all the above
mentioned account and can start trading.

Basic Requirement for doing Trading

Trading requires Opening a Demat account. Demat refers to a dematerialized
account.
You need to open a Demat account if you want to buy or sell stocks. So it is just
like a bank account where actual money is replaced by shares. We need to
approach the Depository Participants (DP, they are like bank branches), to open
Demat account.
A depository is a place where the stocks of investors are held in electronic form.
The depository has agents who are called depository participants (DPs).
Think of it like a bank. The head office where all the technology rests and details
of all accounts held is like the depository. And the DPs are the branches that
cater to individuals.
There are only two depositories in India
The National Securities Depository Ltd (NSDL) and the
Central Depository Services Ltd (CDSL).

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

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Combination of Futures and Option

Hedging means, minimizing the risk, i.e., minimizing the losses. Under index
futures and index options investor can minimize his losses. Hedging does not
remove losses but removes unwanted exposure, i.e. unnecessary risk. One should
not enter into a hedging strategy hoping to make excess profits; all it can do is
reduce the risk.
Definition of "Share"
Sub-section 84 of Section 2 of the Companies Act, 2013 defines 'Share' as below:
"Share" means a share in the share capital of a company and includes stock.
Shares is one type of securities. Securities is defined in Sub-section 80 of Section 2
of the said Act, which refers to the definition of the securities as defined in clause
(h) of section 2 of the Securities Contracts (Regulation) Act, 1956.
Nature of Shares
In accordance with the Section 44 of the said Act, the shares of any member in a
company shall be movable property. It is transferable in the manner provided by
the articles of the company.
What Is an IPO?

Definition: An IPO is short for an initial public offering. Like the name says, it's
when a company initially offers shares of stocksto the public. It's also called "going
public." An IPO is the first time the owners of the company give up part of that
ownership to stockholders.
Advantages of an IPO for the Company
The IPO is an exciting time for a company because it means it has become
successful enough to require much more capital to continue to grow. It's often the
11

only way for the company to get enough cash to fund a massive expansion. For the
owners, it's finally time to cash in on all their hard work. They usually award
themselves a significant percentage of the stock, and so stand to make millions the
day it goes public. An IPO is the first sale of stock by a private company to the
public. Its often called going public.

5 reasons why companies go public

Raise capital The company can sell shares to raise money to expand and
improve its business.
Get financing It may be able to borrow more easily and on better terms.
Attract good people It will be more likely to offer stock purchase plans or
stock options to keep its top employees or attract new ones.
Create a stronger brand Going public often creates more media attention
so people get to know a companys brand better.
Attract other companies Other companies may evaluate it for potential
mergers and acquisitions.
A public company is more closely watched by securities regulators. It also has to
meet tougher reporting rules.
1.

What are the risks? IPOs are usually more risky than a stock thats been
on the stock market for a while. No one can predict how the price of an IPO will
change once it goes on sale. Before you decide, read the prospectus from the
company issuing the IPO. The prospectus describes the business plan and notes
important risk factors. Check whether the company is making money or when it
expects to become profitable.

2.

Are there any fees? In most cases, you wont pay any commission to buy
an IPO. Thats because the company issuing the IPO hires underwriters to price
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and market the new stock. Underwriters get large fees for their services. Their fees
are built into the initial offering price of the stock.

What Are Stocks?

Definition: Stocks allow you to own a portion of a public corporation. Initially,

they are sold by the original owners of a company to gain additional funds to help
the company grow. This is called the Initial Public Offering The owners sell
control of the company to the stockholders. After the IPO, the shares are resold on
the stock market.

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Stock prices are driven by expectations of corporate earnings, or profits If traders

think the company's earnings are high, or will rise further, they bid up the price of
the stock. One way that stockholders make a return on their investment is when
they buy a stock low, and sell it high. Conversely, if the company does poorly, then
the shares decrease in value, and the stockholders lose part or sometimes even all
of their investment when they sell.
A second way that stockholders profit is if the company pays a dividend These are
usually quarterly payments distributed to stockholders on a per share basis.
The company's board of directors pays dividends out of earnings. It is a way to
reward stockholders, who are the actual owners of the company, for their
investment. It's especially important for companies that are profitable, but may not
be growing quickly.

Types/Kinds of Shares
As per section 43 of the said Act, the share capital of a company limited by shares
shall be of two kinds only, namely : (a) equity share capital (b) preference share capital

Meaning of Equity Shares

Equity share capital means all share capital which is not preference share capital.

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Types of Equity Shares

There can be two kinds of equity shares.
1.
Equity shares with voting rights;
2.
Equity shares with differential rights as to dividend, voting or otherwise in
accordance with such rules and subject to such conditions as may be prescribed by
the Central Govt.
Meaning of Preference Share
"Preference share capital" means that part of the issued share capital of the
company which carries or would carry a preferential right with respect to

Dividend : payment of dividend, either a fixed amount or an amount

calculated at a fixed rate, which may either be free of or subject to income-tax; and

Repayment : In case of winding up of the company or repayment of capital,

repayment of the amount of the share capital paid-up or deemed to have been paidup, whether or not, there is a preferential right to the payment of any fixed
premium or premium on any fixed scale, specified in the memorandum or articles
of the company.
Deemed Preference share capital
When the share capital is entitled to either or both of the following rights, it will be
deemed to be Preference share capital.

Dividend : The capital is in respect of dividends, in addition to the

preferential rights to the amounts specified as above, it has a right to participate,
whether fully or to a limited extent, with capital not entitled to the preferential right
aforesaid;

Repayment of capital : In respect of capital, in addition to the preferential

right to the repayment, on a winding up, of the amounts specified above, it has a
right to participate, whether fully or to a limited extent, with capital not entitled to
that preferential right in any surplus which may remain after the entire capital has
been repaid.
Market Capitalization
Market cap is the total stock market value of the company, or the share price
multiplied by the number of shares outstanding. There are three sectors within this.

15

1.

Small cap stocks have a market cap of Rs.2000 cr or less. They are likely to
grow quickly, but are riskier.
2.
Mid cap stocks have a market value of between Rs.2000 to 10000 cr
3.
Large cap stocks have a market cap of Rs.10000 cr or more. They grow
more slowly, but are not as risky.

Blue chip stocks are fairly valued, may not be growing quickly, but have proven
themselves over the years to be solidly run companies in stable industries. They
usually pay dividends, and are considered a safer investment than growth or value
stocks They are also known as income stocks.
Sector: Stocks are also grouped by industry sector Here are the nine most common
sectors:
1.
2.
3.
4.
5.
6.
7.

Basic Materials - Companies that extract natural resources.

Conglomerates - Global companies that are in different industries
Consumer Goods - Companies that provide goods to sell at retail to the
general public.
Financial - Banks, insurance and real estate.
Healthcare - Healthcare providers, as well as health insurance medical
equipment suppliers and drug companies.
Industrial Goods - Manufacturing.
Services - Companies that get the products to the consumer.

8.

Technology - Computer, software and telecommunications.

9.

Utilities - Electric, gas and water companies.

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Stock index
Stock market index (stock index) - a composite measure of price change for a
certain group of assets (commodities, derivatives, securities), which is called
"index basket".
Accounting for stock index of the selected group of securities and other assets you
can see the behavior of a particular market sector. With it, investors can track the
mood of the market (its direction of motion) or a separate sector. This is possible
even if the asset price index in the sample vary in different directions. So why, in
fact, need a stock market index? By itself, the stock market index does not mean
anything. This is the usual number, devoid of value. Interestingly not the stock
market index and its dynamics, down from a daily calculation of the index.
What to study and analyze large volumes of information on all traded securities,
the investor is much easier to track the desired stock indexes in order to see the
status of a particular industry or general economic picture. I must say that now, to
exchange stock indexes are often judged on the state of the economy of entire
countries. In the case where the dynamics of the index is negative, that is, the
market falls, then it is called a "bear." When the motion is directed upwards taking power, "bull."
All the exchanges make their calculations based on stock indices traded on these
securities. In addition, markets and stock exchanges can simultaneously calculate
the number of market indexes that contain various "index basket". The values of
stock indices and their dynamics are published in the media, in the regular reports
of financial news, as well as information on Internet sites.
Securities:

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Definition: Securities are a form of ownership that are traded on a secondary

market Securities allow you to own the underlying asset without taking possession.
For this reason, securities are readily traded. That's also called being very liquid
They are easy to price, and so are an excellent indicators of the underlying value of
the assets. Traders must be licensed to buy and sell securities to assure they are
trained to follow the laws set by the Securities and Exchange Commission (SEC).
The invention of securities helped the create the huge success of the financial
markets

Types of Securities

There are many different securities that you can invest your money in. They're
usually divided into two categories. Equity securities grant you partial ownership
of a company. Debt securities are considered loans to companies or entities of the
government. Here's a quick refresher on some of the most popular security
investments.

Definition of Equity Securities

Equity securities are represented by ownership shares as common stock or

preferred stock, rights to acquire ownership shares such as stock warrants or rights
or call options. It also includes rights to dispose of ownership in shares by way of
put options. It should be noted that equity securities do not include preferred stock
that are redeemable at the option of the investor or stock that is redeemed by the
issuer, own stock purchased by the company often known as treasury stock and
convertible bonds.
Definition of Debt Securities

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A debt security is an investment in bonds issued by the government or a

corporation. At the time of purchasing a bond, the acquisition costs are recorded in
an asset account, such as Debt Investments. Acquisition costs include the market
price paid for the bond and any investment fees or broker's commissions

WHAT IS A TRADING CYCLE IN STOCK MARKET?

Once you have bought or sold shares, the transaction is complete only when you
have got the shares you purchased, or received money for the shares you sold. This
is called settlement in stock market parlance. The stock exchanges have a complex
mechanism in place to ensure that every trade is properly matched, and shares are
received or delivered properly. There are basically three tasks that are performed in
the process of buying and selling of securities. They are:

Trading
Clearing
Settlement
Trading basically deals with placing an order and its execution. Clearing deals with
the determination of obligations in terms of funds and securities. Settlement means
that the trade will be completed and for trades on the BSE the settlement agent is
called as Clearing House (CH) while on the NSE it is termed the National
Securities Clearing Corporation (NSCCL).
The clearing and settlement mechanism in the Indian securities market has
witnessed several innovations. The stock exchanges in India were earlier following
a system of account period settlement for cash market transactions and then the
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T+2 rolling settlement was introduced for all the securities. The members receive
the funds / securities in accordance with the pay-in / pay-out schedules notified by
the respective exchanges. The trades are settled irrespective of default by any
member and the exchange follows up with the defaulting member subsequently for
recovery of his or her dues to the exchange.
Two depositories viz., the National Securities Depositories (NSDL) and the Central
Depositories Services (CDSL) provide electronic transfer of securities and more
than 99 per cent of the turnover is settled in dematerialised form. The members /
custodians make available the required securities in their pool accounts with
depository participants (DPs) by the prescribed pay-in time for securities. The
depository transfers the securities from the pool accounts of members / custodians
to As per the schedule determined by the clearing agency, the securities are
transferred on the pay-out day by the depository from the settlement account of the
clearing agency to the pool accounts of members / custodians. The pay-in and payout of securities is put into effect on the same day for all settlements. Select banks
have been empanelled by the clearing agencies for the electronic transfer of funds.
The members are required to maintain accounts with any of these banks.
The members are informed electronically of their pay-in obligations of funds. The
members make available the required funds in their accounts with clearing banks
by the prescribed pay-in day. The clearing agency forwards the funds obligations
files to the clearing banks which, in turn, debit the accounts of members and credit
the account of the clearing agency. In some cases, the clearing agency runs an
electronic file to debit members accounts with clearing banks and credit its own
account. On the payout day, funds are transferred by the clearing banks from the
account of the clearing agency to the accounts of members as per the members
obligations. In the T+2 rolling settlement, the pay-in and pay-out of funds as well
as securities take place within two working days after the date of trade.
WHAT ARE SETTLEMENT AGENCIES?
Clearing Corporations
A clearing corporation, with the help of clearing members, custodians, clearing
banks and depositories, settles the trades executed on exchanges. It performs the
following tasks:
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Clears all trades.

Determines obligations of members.
Arranges for pay-in of funds and securities.
Arranges for pay-out of funds and securities.
Assumes the counter-party risk of each member and guarantees financial
settlement.

It also undertakes settlement of transactions on other stock exchanges like

the, Over the Counter Exchange of India.
In India, the clearing corporation for the NSE is the NSCCL and for the BSE it is
BOI Share Holding. The NSCCL, a wholly-owned subsidiary of the NSE, was
incorporated in August 1995. It is responsible for the post-trade activities of the
NSE.

Clearing Members :
Clearing members (CMs) are the members of the clearing houses/clearing
corporations who facilitate settlement of trades done on the stock exchanges.
He/she could be a broker or a custodian registered with the SEBI since he/ she is
an important intermediary in the capital market and an essential link in the
depository system. The CMs main activity is to facilitate pay-in/pay-out of
securities to / from stock exchanges/clearing house/ clearing corporations either on
their own behalf or on behalf of their clients. The securities which are due for
delivery can be delivered directly from the clients account (depending on whether
the exchange provides this facility) or through CMs to the stock exchanges /
clearing house / clearing corporation account.
Similarly, pay-out of securities can be delivered directly to the clients account on
the basis of information given to a clearing house by the CM or to the CMs
account. In the capital market segment all the trading members of the exchange are
the clearing members of the clearing corporation. However, please note that in the
case of trades done in the future and option market, clearing members can be a

21

separate entity as compared to trading members as the volume of trades done in

this segment is huge.
Custodians : A custodian is a clearing member but not a trading member. He /she
settles trades assigned to him/her by the trading members. He/she is required to
confirm whether he/she is going to settle a particular trade or not.
Clearing Banks : Clearing banks act as a link between the clearing members and
the NSCCL for the settlement of funds, i.e., pay-in and pay-out of funds. Every
clearing member gets an account opened with a clearing bank for this purpose only.
A clearing bank works on the instructions of the clearing member. A clearing
member after defining the obligations in terms of funds informs the clearing bank
about the obligations to be fulfilled. The clearing bank makes the funds available
required on the pay-out day to meet the obligations on time.

Depositories : The earlier settlement system followed by the Indian stock

exchanges was very inefficient as it was unable to take care of the transfer of
securities in a speedy manner. Since the securities were in the form of physical
certificates their quick movement was again difficult. This led to settlement delays,
theft, forgery, mutilation and bad deliveries and also to added costs. To wipe out
these problems, the Depositories Act 1996 was passed. It was formed with the
purpose of ensuring free transferability of securities with speed, accuracy and
security. It has been able to do so by:

Making securities of public limited companies freely transferable, subject to

certain exceptions.

Dematerialising the securities in the depository mode.

Providing for maintenance of ownership records in a book entry form.

At present, in India, there are two depositories viz., the National Securities
Depository (NSDL) and the Central Depository Services (India) (CDSL) which are
registered with the SEBI. A clearing member /custodian opens a securities pool
account (demat) with a depository participant of these depositories to make the
securities available in the account on the settlement day. As per the instructions, the
depository transfers the securities electronically.
22

National Securities Depository (NSDL) NSDL, the first and the largest
depository in India, was established in August 1996. NSDL has been promoted by
the Industrial Development Bank of India (IDBI), Unit Trust of India (UTI) and
National Stock Exchange of India (NSE). As on January 18, 2010, they have
crossed 1 crore active investor accounts.

Central Depository Services (I) (CDSL) : CDSL has been promoted by the
Bombay Stock Exchange and the Bank of India. It was formed in February 1999.
Both the depositories have a network of depository participants (DPs) which are
further electronically connected to their clients. So, DPs act as a link between the
depositories and the clients. CDSL was promoted by the Bombay Stock Exchange
(BSE) jointly with leading banks such as the State Bank of India, Bank of India,
Bank of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank of India,
Bank of Maharashtra, Canara DS Bank & The Calcutta Stock Exchange.

Factors that can affect stock prices

Many factors can cause the price of a stock to rise or fall from specific news
about a companys earnings to a change in how investors feel about the stock
market in general.
Company news and performance
Here are some company-specific factors that can affect the share price:
news releases on earnings and profits, and future estimated earnings
announcement of dividends
introduction of a new product or a product recall
securing a new large contract
employee layoffs
anticipated takeover or merger
a change of management
23

accounting errors or scandals

Industry performance
Often, the stock price of the companies in the same industry will move in tandem
with each other. This is because market conditions generally affect the companies
in the same industry the same way. But sometimes, the stock price of a company
will benefit from a piece of bad news for its competitor if the companies are
competing for the same market.
Investor sentiment
Investor sentiment or confidence can cause the market to go up or down, which can
cause stock prices to rise or fall. The general direction that the stock market takes
can affect the value of a stock:

bull market a strong stock market where stock prices are rising and
investor confidence is growing. It's often tied to economic recovery or an economic
boom, as well as investor optimism.

bear market a weak market where stock prices are falling and investor
confidence is fading. It often happens when an economy is in recession and
unemployment is high, with rising prices.
Economic factors
1. Interest rates
The bank can raise or lower interest rates to stabilize or stimulate the Canadian
economy. This is known as monetary policy. If a company borrows money to
expand and improve its business, higher interest rates will affect the cost of its
debt. This can reduce company profits and the dividends it pays shareholders. As a
result, its share price may drop. And, in times of higher interest rates, investments
that pay interest tend to be more attractive to investors than stocks.
2. Economic outlook
If it looks like the economy is going to expand, stock prices may rise. Investors
may buy more stocks thinking they will see future profits and higher stock prices.
If the economic outlook is uncertain, investors may reduce their buying or start
selling.
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3. Inflation
Inflation means higher consumer prices. This often slows sales and reduces profits.
Higher prices will also often lead to higher interest rates. For example, the RBI
may raise interest rates to slow down inflation. These changes will tend to bring
down stock prices. Commodities however, may do better with inflation, so their
prices may rise.
4. Deflation
Falling prices tend to mean lower profits for companies and decreased economic
activity. Stock prices may go down, and investors may start selling their shares and
move to fixed-income investments like bonds. Interest rates may be lowered to
encourage people to borrow more. The goal is increased spending and economic
activity. The Great Depression (2008) was one of the worst periods of deflation
ever.
5. Economic and political shocks
Changes around the world can affect both the economy and stock prices. For
example, a rise in energy costs can lead to lower sales, lower profits and lower
stock prices. An act of terrorism can also lead to a downturn in economic activity
and a fall in stock prices.
6. Changes in economic policy
If a new government comes into power, it may decide to make new policies.
Sometimes these changes can be seen as good for business, and sometimes not.
They may lead to changes in inflation and interest rates, which in turn may affect
stock prices.

How to buy and sell stocks

You buy stocks from an investment firm, commonly known as a brokerage firm.
The investment representative or advisor who sells you stocks is commonly known
as a stockbroker or broker. You can buy stocks by paying cash, borrowing
on margin or reinvesting your dividends.
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Where to buy stocks

Full-service investment firms You'll pay fees and commissions for the
investment advice they give you, and for buying and selling stocks.
Opening an investment account
Before you can buy stocks, you have to open an account with an investment firm.
There are 2 main types:
1.

Cash account This is the most common type of account. It allows you to
pay cash for your stocks. You will have to fill out an account opening form or an
investor profile form (also known as know your client information). Your
investor profile helps your advisor understand your goals and your tolerance for
risk.

2.

Margin account If you want to borrow from your investment firm to

invest, you have to open a margin account. You'll have to read and sign a margin
agreement.
Buying and selling stock
You can give your advisor or investment firm instructions to buy or sell a stock in
person, by phone or online. This is called placing your order. Youll pay brokerage
each time you buy or sell a stock.

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NSE Screen based Trading

SBT (Screen-Based Trading) gives you the ability to click in instantly execute trades when
connected to trade execution infrastructure through partner clearing firms and execution
providers. SBT, when used alongside helps empower to analyze options, quote markets, and
execute orders - all at the same time. With SBT, you can create defaults for a number of
contracts, order durations, and order types, and track the status of orders in the SBT Message
Log.
Features
Manages multiple order types simultaneously
Routes to major options exchanges
Features customizable settings and logging
Integrates with Micro Hedge Auto-Quote
Benefits
Executes trades instantly
Allows traders on and off the floor to send orders and receive trade confirmations
Helps empower traders to simultaneously analyze options, quote markets and execute orders
From basic order entry tickets to fully licensed Depth of Market (DOM) trading screens, ZenFire provides screen based trader's access to the same high-speed market data and order routing
used by professional firms and institutions world-wide.
Server-side order handling for order types not natively supported by the exchanges helps reduce
delays and complications that may arise from user connectivity, hardware and software failures.
With an API available to qualified developers and firms, traders can create proprietary trading
screens to accommodate any trading need not met by the available platforms.
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Global Trends towards Screen Based Trading

Since screen based trading has been found to be more cost-effective, transparent, and userfriendly it is gaining increasing foothold. In recent years, many developed markets have been
working to automate and introduce screen based trading systems. The last decade has witnessed a
dramatic increase in both the number and the market share of screen-based trading systems.
Electronic trading has been removing geographical constraints and allowing much higher trade
volumes to be handled, and in customized ways that until recently would have been technically
impossible or prohibitively expensive.
The BSE Online Trading System (BOLT) and later developments
The Bombay Stock Exchange (BSE) switched over from the open outcry
trading system to a fully automated computerized mode of trading known as
the BSE Online Trading (BOLT) system in 1995. This system, which is both
order and quote driven, was commissioned on 14 March 1995 and in May
1995, it was introduced for all the securities listed on the BSE.
Actually, it started with the screen based trading and in September 1997,
switched over to the direct online access facility. In the initial stages, BOLT
was available to brokers of the BSE based in Mumbai through leased lines.
Today, it is available all over the country and even abroad.
Firms that have generated significant profits are those that follow the best
forex practices. In spite of the lure of more profits, these traders never gave
up the business ethics that they had adhered to earlier. Thus, major
developments have taken place in the forex market, mainly due to the
presence of those honest players.
In the currency market, even though the prominently traded currencies are
the US dollar, Japanese yen, the Euro and the British pound, almost all the
other major currencies of the world are also traded in different parts of the
world. In most instances, the trade in currencies takes place more frequently
if there is a booming trade between particular countries.
Almost all the countries of the world have trade relationships with the United
States, Japan and the European Union. It is this advantage that has resulted
in the US dollar being the most traded currency in the world. All the trade in
commodities and other goods are invoiced in the dollar. Literally speaking,
the US is the main beneficiary of the liberalized financial system.
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In the currency market, there are about 10 currencies on which a majority of

the trade is taking place. A similar situation can be seen in the stock market
in Mumbai. The benchmark index is determined by the performance of a few
most traded securities on any trading day.

Capital Market
Capital market deals with medium term and long term funds. It refers to all facilities and the
institutional arrangements for borrowing and lending term funds (medium term and long term).
The demand for long term funds comes from private business corporations, public corporations
and the government. The supply of funds comes largely from individual and institutional
investors, banks and special industrial financial institutions and Government

Definition: Capital market is a market where buyers and sellers engage in trade of
financial securities like bonds, stocks, etc. The buying/selling is undertaken by
participants such as individuals and institutions.
.
ROLE AND IMPORTANCE OF CAPITAL MARKET IN INDIA :Capital market has a crucial significance to capital formation. For a speedy economic
development adequate capital formation is necessary. The significance of capital market in
economic development is explained below
1.

Mobilisation Of Savings And Acceleration Of Capital Formation :-

In developing countries like India the importance of capital market is self evident. In this market,
various types of securities helps to mobilise savings from various sectors of population. The twin
features of reasonable return and liquidity in stock exchange are definite incentives to the
people to invest in securities. This accelerates the capital formation in the country.
2.

Raising Long - Term Capital :-

The existence of a stock exchange enables companies to raise permanent capital. The
investors cannot commit their funds for a permanent period but companies require funds
permanently. The stock exchange resolves this dash of interests by offering an opportunity to
investors to buy or sell their securities, while permanent capital with the company remains
unaffected.

3.

Promotion Of Industrial Growth :-

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The stock exchange is a central market through which resources are transferred to the industrial
sector of the economy. The existence of such an institution encourages people to invest in
productive channels. Thus it stimulates industrial growth and economic development of the
country by mobilising funds for investment in the corporate securities.
4.
Ready And Continuous Market :The stock exchange provides a central convenient place where buyers and sellers can easily
purchase and sell securities. Easy marketability makes investment in securities more liquid as
compared to other assets.
5.

Technical Assistance :-

An important shortage faced by entrepreneurs in developing countries is technical assistance.

By offering advisory services relating to preparation of feasibility reports, identifying growth
potential and training entrepreneurs in project management, the financial intermediaries in
capital market play an important role.
6.
Reliable Guide To Performance :The capital market serves as a reliable guide to the performance and financial position of
corporates, and thereby promotes efficiency.
7.
Proper Channelisation Of Funds :The prevailing market price of a security and relative yield are the guiding factors for the people
to channelise their funds in a particular company. This ensures effective utilisation of funds in
the public interest.
8.
Provision Of Variety Of Services :The financial institutions functioning in the capital market provide a variety of services such as
grant of long term and medium term loans to entrepreneurs, provision of underwriting facilities,
assistance in promotion of companies, participation in equity capital, giving expert advice etc.
9.
Development Of Backward Areas :Capital Markets provide funds for projects in backward areas. This facilitates economic
development of backward areas. Long term funds are also provided for development projects in
backward and rural areas.
10.
Foreign Capital :Capital markets makes possible to generate foreign capital. Indian firms are able to generate
capital funds from overseas markets by way of bonds and other securities. Government has
liberalised Foreign Direct Investment (FDI) in the country. This not only brings in foreign capital
but also foreign technology which is important for economic development of the country.
11.
Easy Liquidity :With the help of secondary market investors can sell off their holdings and convert them into
liquid cash. Commercial banks also allow investors to withdraw their deposits, as and when they
are in need of funds.

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