STOCK MARKETS IN INDIA

B.COM( HONS.) SEC-A ROLL NO.09/328 TUTORIAL GROUP- A5

What is Stock Exchange ?

Stock Exchanges are an organised marketplace, either corporation or mutual organisation, where members of the organisation gather to trade company stocks and other securities. The members may act either as agents for their customers, or as principals for their own accounts. Stock exchanges also facilitate for the issue and redemption of securities and other financial instruments including the payment of income and dividends. The record keeping is central but trade is linked to such physical place because modern markets are computerised. The trade on an exchange is only by members and stock broker do have a seat on the exchange.

The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock). In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors dont have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet. Indias oldest and first stock exchange is Mumbai (Bombay) Stock Exchange which was established in 1875 and has more than 6000 stocks listed on it. There are a total of 22 stock exchanges in India located in Ahemadabad, Calcutta, Bangalore, Jaipur etc. Theres also a National Stock Exchange which is located in Mumbai.

There is also an Over The Counter Exchange of India (OTCEI) which allows listing of small and medium sized companies. Its purpose is to aid enterprising promoters in raising finance for new projects in a cost effective manner and to provide transparent and efficient mode of trading to the investors.

Trading Pattern of the Indian Stock Market

Indian Stock Exchanges allow trading of securities of only those public limited companies that are listed on the Exchange(s). They are divided into two categories:

Types of Transactions
The flowchart below describes the types of transactions that can be carried out on the Indian stock exchanges:

Bombay Stock Exchange

Bombay Stock Exchange 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 (over 4900). 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 exchange in India and the second in the world to obtain an ISO 9001:2000 certification.

BSE Facts 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 Sensex. First in India to launch Exchange Enabled Internet Trading Platform. First in India to obtain ISO certification for Surveillance, Clearing & Settlement. '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. Acquired a 15% stake in United Stock Exchange (USE) to drive the development and growth of the currency and interest rate derivatives markets. BSE now offers AMFI Certification for Mutual Fund Advisors through BSE Training Institute (BTI)

National Stock Exchange

The National Stock Exchange of India (NSE) was incorporated in November 1992 as a tax-paying company located in Mumbai. It is recognised under Securities Contracts (Regulation) Act, 1956 in 1993 as a stock exchange. In June 1994, it commenced operations in the Wholesale Debt Market (WDM). In November, the same year, the Capital Market (Equities) segment commenced operations and the Derivatives segment in June 2000. NSE Facts It uses satellite communication technology to energise participation from around 400 cities in India. NSE can handle up to 1 million trades per day. It is one of the largest interactive VSAT based stock exchanges in the world. The NSE- network is the largest private wide area network in India and the first extended C- Band VSAT network in the world. Presently more than 9000 users are trading on the real timeonline NSE application

NSE has the following major segments of the capital market: Equity Futures and Options Retail Debt Market Wholesale Debt Market Currency futures Mutual Fund Stocks Lending and Browning It has written for itself the mandate to create World-class Stock Exchange and use it as an instrument of change for the industry as a whole through competitive pressure. National Stock Exchange of India (NSE) is India's largest Stock Exchange & World's third largest Stock Exchange in terms of transactions. NSE has set up its trading system as a nation-wide, fully automated screen based trading system.

Regional Stock Exchanges

Ahmedabad: Ahmedabad is the second oldest exchange of
India. It was constituted in the year 1894 as a Public Charitable Trust. Ahmedabad Stock Exchange got the permanent recognition from the Government of India in 1982. The exchange went live on screen based trading on December 12, 1996. Currently there are 333 trading members in the exchange to serve the investors with one of the best transparent trading system in India. The trading of approximately 2000 nationally listed equities are done in the exchange. Over 200 high growth companies listed in the ASE or with other exchanges are also traded here. Bangalore Stock Exchange Limited (BgSE) is a self regulatory organisation .The Exchange is managed by the Governing Board consisting of members nominated by

Bangalore:

Securities Exchange Board of India (SEBI), Public Representatives, Elected members and an Executive Director. The Exchange has been serving the investor community continuously since its inception in the year 1963. As on 31st May 2009, the number of companies listed on the Exchange are 340 consisting of 158 regional and 182 non regional companies.

Bhubaneshwar: Bhubaneswar Stock Exchange Association

Ltd. (BhSE) came into existence in the year 1989. It has been registered under the Companies Act, 1956 as a company limited by guarantee. On 15th September, 2005, SEBI approved the corporatisation and demutualisation schemes of the Bhubaneswar Stock Exchange which were required in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956.

Calcutta : At the time of incorporation in 1908, the Stock

Exchange had 150 members. Today the total membership has risen to more than 900, which contains several corporate and institutional members. The number of companies listed on the Exchange is more than 3,500.

Cochin :Cochin Stock Exchange (CSE) was established in 1978

and had undergone tremendous transformation over the years. In 1978, it had only 5 companies listed and had only 14 members. Currently, it has 508 members and 240 listed companies. . To keep pace with the market, it took various initiatives, one such initiative was trading dematerialised shares. It also became one of the promoters of the Interconnected Stock Exchange of India (ISE).

Coimbatore : Coimbatore Stock Exchange Limited (CSX) is the

youngest stock exchange in India. The exchange also have Screen Based Trading (SBT) system which commenced operations on 9th of October, 1996. The system is equipped to handle 25,000 traders per day and 400 members.

Delhi : The Delhi stock Exchange Association Limited (DSE) was

incorporated on June 25, 1947. It is India's` fifth and one of the premier Stock Exchange in India. The Delhi Stock Exchange is well connected to 50 cities with terminals in North India. The exchange is having over 3,000 listed companies. It has received the market regulator's permission from BSE and has become its member. Now it facilitates the DSE members to trade on the BSE terminals.

Guwahati : The Guwahati (Gauhati) Stock Exchange (GSE)

was incorporated on 29 November, 1983 and it was recognised by the Government of India on 1May, 1984. The GSE is limited by guarantee by the member-brokers. Currently there are 290 companies listed in the GSE.

Hyderabad : The Hyderabad Stock Exchange Limited

(HSEL) was established on the year 1944. It was registered under the Companies Act, 1956 as a company limited by guarantee. According to the provision of the Securities Contracts (Regulation) Act, it is now corporatized and demutualised.

Jaipur : Jaipur Stock Exchange is the third largest exchange in

India in terms of membership. It was established in the year 1989. In the same year, the exchange was granted recognition in the month of January. Within seven years of its incorporation, i.e. by January'96, the exchange managed to attract 750 companies who were listed on the exchange.

Ludhiana : Ludhiana Stock Exchange Association Limited

(LSE) was established in the year 1983. Ludhiana Stock Exchange became the second bourse in India to introduce modified carry forward system after BSE on April 6, 1998. LSE became the first in India to start LSE Securities Ltd., a 100% owned subsidiary of the exchange.

Madhya Pradesh : Madhya Pradesh Stock Exchange,

(MPSE) set up as 'association of persons', is on the verge to get incorporated as a 'for-profit company limited' by the shares and demutualisation. With this, the ownership and management will be segregated from their trading rights.

Madras : Madras Stock Exchange Ltd (MSE) is a self

regulatory organization and the first exchange in southern part of the country, established in the year 1937. MSE has a strategic arrangement with the National Stock Exchange (NSE) which provides for the facility of trading by the members of MSE on NSE platform.

Magadh: Magadh Stock Exchange Association (MSEA) was

established in the year 1986 at Patna. MESA was registered under the Companies Act, 1956 as a company limited by guarantee. Magadh Stock Exchange signed a memorandum of understanding with the Calcutta Stock Exchange which enables MSE to provide online CSEs trading facility to its brokers in Patna.

Mangalore: The Mangalore Stock Exchange (MgSE) was

incorporated on 31st of July, 1984 as a public limited company. The company was granted recognition as a stock exchange on September 9, 1985.On August 31, 2004, SEBI decided to derecognise the Mangalore Stock Exchange. In case of derecognition, the companies listed in the MgSE can consider seeking listing at other stock exchanges or can opt for exit option to the shareholders as per the Delisting Guidelines of SEBI.

Meerut: Meerut Stock Exchange is a well known Regional Stock

Exchange has been registered under the Companies Act, 1956. The exchange is modelled to provide a high level liquidity to its investors, to spread equity cult in the region and the like.

Over the Counter Exchange of India: Over-theCountry Exchange of India (OTCEI) was incorporated in the year 1990 as a Section 25 company under the Companies Act 1956. It is recognised by the Securities Contracts Regulation Act, 1956 as a stock exchange. It is modelled along the lines of the NASDAQ market and has introduced several novel concepts to the Indian capital markets, like screen-based nationwide trading, sponsorship of companies, market making and scrip less trading. The screen-based scrip less trading ensures transparency and accuracy of prices and the allotment procedure (in case of a new issue) is shorter than other exchanges.

Pune: Pune Stock Exchange (PSE) was established on 2nd

September, 1982 with only 35 members. It is a company limited by guarantee. Based on VECTOR (Versatile Engine for Centralised Trading and On-line Reporting), the exchange is successfully using a screen based Trading System. More than 310 companies are listed with Pune Stock Exchange.

Saurashtra Kutch: The Saurashtra Kutch Stock Exchange

Ltd. (SKSE) was established in 1989 at Rajkot. Initially, it was registered under the Companies Act, 1956 as a company limited by guarantee. Later on 16 March, 2005 it was re-registered as a company limited by shares vide certification of incorporation.

Uttar Pradesh: Uttar Pradesh Stock Exchange Association

Ltd. was inaugurated on 27th August, 1982 and occupies one of the prominent place among the Stock Exchanges in India. It plays an important role in the development of the capital market of North India. Initially, it had only 350 members which has grown up to 540 at present.

Vadodra: Vadodra Stock Exchange Limited (VSE) was

established in 1990 at Baroda. It is the third stock exchange in the state of Gujarat after Ahmedabad and Rajkot.