Suman's Present

8/14/2019 Suman's Present

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A LECTURE ON SECURITIESMARKET

Mr. Suman KumarCom an Secretar



Awareness about

Securities Market

OBJECTIVEOBJECTIVE



Topic For DiscussionTopic For Discussion

1. Genesis of Corporation sole and shares.

2. Overview of the Indian Securities

Market.3. Categories of Listed Companies w.r.t.

Market Capitalisation

4. Types of Securities

5. Market Sensitivity Index

6. Capital Market Operation (Movement of

Funds & Securities from one hand to another)



1. Auction & Defaults

2. Derivatives Market Operation (F&O)

3. Investment Strategies (Arbitrage,

Hedging etc.)

4. Other Important Imformation

11. Mutual Funds12. Current Thoughts.

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GENESIS:GENESIS:

Individual PartnershipFirms

Corporates

Individual

Partnership

CO RP ORA TE

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Overview of Overview of

thetheSecuritiesSecurities

MarketMarket



Equities Market Overview Equities Market Overview

With over a billion people in India, less than 3% invest inequities .

One of the highest savings rate of 29.1% in the world.

California Public Employees' Retirement System(CalPERS), the largest pension fund in the US,withretirement savings of more than one million Americans hasrecognised India as one of the best performers among all

the emerging markets in its investment policy report for 2007.

The Bombay Stock Exchange is the largest stockexchange in terms of the number of listed companies



Indian equity markets are the third best performer inAsia and the eight best in the world.

India has one of the world’s lowest transaction costbased on screen based transaction, paperlesstrading and T+2 settlement cycle.

Currently over 1029 FIIs have been registered withSEBI.

Rapidly increasing demand: Trading volumesexpected to double each year for the next two tothree years (Wall Street Journal).

NSE is ranked second in the world in terms of thenumber of transactions conducted after New York

Stock Exchange (NYSE). The National Stock Exchange has emerged as thethird largest stock market in the world, just behindthe top-ranked NYSE followed by the NASDAQ.



Market capitalization of all listed companies 2006-07 hascrossed $1trillion which is almost equal to the GDP of thecountry.

About 20% of the retail turnover in India is being transactedthrough internet trading. This is a very low number comparedto markets like South Korea, Japan & USA where more than75% of the total retail turnover is transacted through internet.

Market share of online trading is expected to rise in India

given growing retail investor participation, growing internetusage, faster telecom connectivity and increasingcomfortable levels with internet trading.

Population of more than 20 million NRI’s with a combinedwealth of more than $1 trillion, i.e. more than India’s GDP.

India has the 3rd largest investor base in the world with morethan 20 million shareholders.



Categories of ListedCategories of Listed

CompaniesCompanies

1. Small Cap Companies(upto 100 Crores)

2. Mid Cap Companies

(100 Crores-500 Crores)

3. Large Cap Companies

(500 Crores plus)



SOME IMPORTANT STATISTICS

•No. of Companies in India – Approx. 6,50,000

•No. of listed Co.s in India- Approx. 10,000

•No. of Co.s listed on NSE – Approx. 1200

•No. of Co.s listed on BSE - Approx. 5000

•No. of Securities available for trading on NSE-

Approx. 1549 (as on 31.07.07)

•No. of Co.s with CDSL- 5726

•No. of Co.s with NSDL- 6810

•There are total 22 Stock Exchanges.

•No. of Co.s on CDSL- 383•No. of Co.s on NSDL- 248



38393738383938M. F.

132846054473923Port.

Mngr.

130128123124145233186Merch.

Bank.

882685540502490527506FII

06050403020100Perticulars

526477431438380335191DP

1120994829795705519----Broker

(Der.)

234791368412815132911220899575675Sub-

brokers

9335912893689519968797829192Brokers

Source: un & Bradstreet



RESOUCES RAISED THROUGHRESOUCES RAISED THROUGH PUBLIC & RIGHT ISSUES;PUBLIC & RIGHT ISSUES;

PRIVATE PLACEMENTS AND MUTUAL FUNDSPRIVATE PLACEMENTS AND MUTUAL FUNDS

125.2383,8276671,04,974588Private

Placements

122.3727,38213933,508124Public and

Right Issues

Amount

(Rs. Crore)

No.Amount

(Rs. Crore)

No.

% change2005-06

(April- March)

2006-07

(April- March)

Particulars



Types of Securities as per Types of Securities as per

BSEBSE

Scrips with comparatively lowliquidity

B2

(1830)

3.

Scrips relatively liquid and with

good track records

B1

(800)

2.

Scrips most liquid and with

credible track records

A

(200)

1.

DetailsCategoriesS. No.



More Info……More Info……

Group represent the Central

Government Securities, which

are listed and traded on theRetail Debt Segment at the

Exchange

G6.

Group represent the Corporate

Debt Segment(fixed income

securities)

F

(735)

5.

DetailsCategoriesS.No.



More Info…..More Info…..

It is trade to trade segment of BSEINDO NEXT

TS7.

Scrips in this group are called BSE

Indonext, which provides a Nationwide Trading Platform for enterprises

listed with BSE and regional Stock

Exchanges.

S6




More Info…..More Info…..

a) Scrips which have to failed to

comply with the listing

Agreement.

b) Non- redressal of Grievancesof Investors.

c) Lacking in demat on both

depository.

d) As a part of Surveillanceaction.

e) Any other reason in public

interest.

Z

(3500)

9.




Market Sensitivity Indices (Main)Market Sensitivity Indices (Main)

NSE INDICES BSE INDICES

S&P CNX Nifty

CNX Nifty Junior

S&P CNX 500

CNX Midcap

S&P CNX Defty

SENSEX

Dollex 30

BSE MIDCAP

BSE SMLCAP

BSE 100



BRIEF OVERVIEWBRIEF OVERVIEW

CNX Nifty at time t * 34.65 / Exchange Rate at time t (Dollar

denominated S&P CNX Nifty)

S&P CNX Defty

90.3080.02Top 500 Co.s

72 Industries

CNX 500

66.6156.02Top 100 Co.s

35 Sectors

S&P CNX 100

8.6910.822nd Top 50 Co.s

Not Specific

CNX Nifty

Junior

55.7843.7250 Co.

22 Sectors

S&P CNX Nifty

Market

Capitalization(%)

Traded

Value(%)

No. of Co.s

No. of Sect.

INDICES



OTHER INDICES

•IT SECTOR INDEX

•BANK INDEX

•FMCG INDEX

• PHARMA INDEX

ET MINDEX

ET BANKEX

ET BRANDEX

ET LIFEX



MARKET AND INVESTMENTMARKET AND INVESTMENT

TRENDTREND

Market index during 1984 is about 400 but

now a days it crossed the 10000 level

– i.e. 16% rate of appreciation each year over the

past 22 year.

{400(1.16)22}= 10474



but if same formula applied then the Index

will appreciate by 14% then the Index level

in next 20 years.

{10000(1.14)20}=1,37,434



Percentage change in Indian as well International IndicesPercentage change in Indian as well International Indices

9.716338257774Egypt HERMES

20.694580537952Brazil IBOV

29.062626720352South Africa JALSH

145.3031841298China SHCOMP

30.1110627681683Argentina IBG

19.2078846614Taiwan TWSE

8.0831452910S&P CNX 500

27.5632312533Singapore STI

1.341728817060Japan NKY

25.281980115805Hong Kong HSI

5.7563085965UK FTSE 100

3.5024222340USA NASDAQ Composite

11.211235411109USA DOW JONES

12.3138223403S&P CNX Nifty

15.891307211280BSE Sensex

Change in %As on 31.03.07As on 31.03.06Indices



MIS-CONCEPTIONS ABOUTMIS-CONCEPTIONS ABOUT

SECURITIES MARKET.SECURITIES MARKET.1. There is complete un-certainty in the Securities Market.

3. Securities Market is nothing but mere Speculation or Gambling.

5. Stock Market leads to huge losses and bankruptcy..

7. There is no safety and security in the securities market.

5. Fundamental or Technical research is worthless in stock market.



Capital

Market

operations



NSCCL

NSEIL

9:55 TO 3:30 P. M.

SMC

RAVI DELHI

purchased 1000

Rel. shares onMonday

KOTAK

Ankit–Mumbai

sold 1000 Rel.

shares

Data transfer after 3:30 P. M.

SMC

Bank

A/c

upto

10.30

A.M.(Wed.)

2:30 Wed.

Pool

A/c



Auction

&

Default

NSE DEFAULT & AUCTION



M

A (T+2)

Pay in

9:30 A.M.

SSF

A (T+1)

T 1200

800

W 1100T 1000M

900

T+2T+1T

NSE - DEFAULT & AUCTION

Pay in 10:30 - Default 1000 Rel. - Auction - Penalty (0.20 % * t+1 price * No. of

shares) + Value = 1000 * 1200

If the auction takes place on the price less than the trading price then value= t+1 price *

1000 and penalty = (0.20 % * t+1 price * No. of shares

AUCTION

(T)

In the Case of Major Defaults:•Penalty•Suspension of Brokership•Invoke the Bank Guarantee/ Counter Guarantee•Premature F. D.

BSE DEFAULT & AUCTION



M

A (T+2)

Pay in

12:30 P.M.

SSF

A (T+1)

T 1200

800

W 1100T 1000M 900

T+2T+1T

BSE - DEFAULT & AUCTION

Pay in 10:30 A.M. - Default 1000 Rel. - Auction - Penalty (1 % * t+1 price * No. of

shares) + Value = 1000 * 1200

If the auction takes place on the price less than the trading price then value= t+1

price * 1000 and penalty = (1 % * t+1 price * No. of shares)

AUCTION

(T)

In the Case of Major Defaults:

Penalty

Suspension of Brokership

Invoke the Bank Guarantee/ Counter GuaranteePremature F. .



Derivatives

MarketOperation

(F&O)



ParticipantsParticipants

Hedgers

Speculators

Arbitrageurs



FUTURES OPTIONS

PutCall

Derivative MarketDerivative Market



DERIVATIVES

FUTURE OPTION

Index

Future

Stock

futurePut Option Call

Option

• Nifty Future

•CNX IT Future

•CNX Bank Future

• Nifty Junior Future

•CNX 100 Future

InApprox.

125 Scrips

Futures

are

available

Index

Put

option

Stock

Put

Option

Index

Call

Option

Stock

Call

Option

D I



1050

1040

1030

1020

1010

1000990

980

970

960

950

S

T

R

I

CK

P

II

N

C

R

EA

S

E

D

E

C

R

E

AS

E

Reliance

Call

Option

Premium

Reliance

Put

O tion

D

E

C

R E

A

S

E

Premium

I

N

C

R

E

AS

E

S

T

R

I

CK

P

I

1050

1040

1030

1020

1010

1000

990

980

970

960

950



GENERATION OF STRIKES FOR NIFTY OPTIONSGENERATION OF STRIKES FOR NIFTY OPTIONS

9 – 1 – 910> 2500

7 – 1 – 710> 2000 upto 2500

5 – 1 – 510> 1500 upto 2000

3 – 1 – 310Upto 1500

Scheme of strikes to

be introduced

(ITM-ATM-OTM)

Strike intervalNifty Index Level



GENERATION OF STRIKES FOR STOCK OPTIONSGENERATION OF STRIKES FOR STOCK OPTIONS

3 – 1 – 350>Rs. 2500

3 – 1 – 330> Rs. 1000 –Rs. 2500

3 – 1 – 320> Rs. 500 – Rs. 1000

3 – 1 – 310> Rs. 250 – Rs. 550

3 – 1 – 35> Rs. 50 – Rs. 250

3 – 1 – 32.5Less than or equal to

Rs. 50

Scheme of strikes to

be introduced(ITM-ATM-OTM)

Strike price

interval

Pricing of underlaying



HEDGING & THE BLACK MONDAY (17HEDGING & THE BLACK MONDAY (17THTH MAY 2004)MAY 2004)

NIFTY Down by 377.75 Points (during 03/05/04 to 17/05/04)NIFTY Down by 377.75 Points (during 03/05/04 to 17/05/04)

Net Profit = 2,640

Profit = 77,130Less loss from Eq 74,490

Total loss from Equity Mkt.= 74,490

PUR REL FUTURE(17-05-

2004) = 600*398.20=2,38,920

REL (17-05-2004)

600*404.30=2,42,580

REL FUTURE (03-05-2004)

SOLD 600*526.75=3,16,050

REL (03-05-2004)

600*528.45=3,17,070

HEDGED POSITONUN-HEGED POSITON



HEDGING (03-10-2005 to 28-10-2005)HEDGING (03-10-2005 to 28-10-2005)

NIFTY Down by 314 PointsNIFTY Down by 314 Points

Net Loss = 4,780

(i.e.7.98 %)

Profit = 55,060

Less loss from Eq 59,840

Total loss from Equity Mkt.

= 59,840

PUR RANBAXY (28-10-2005)

= 400*364.70 = 1,45,880

RANBAXY (28-10-2005)

400*350.85= 1,40,340

RANBAXY FUTURE

(03-10-2005)

SOLD 400*502.35= 2,00,940

RANBAXY (03-10-2005)

400*500.45= 2,00,180

HEDGED POSITONUN-HEGED POSITON



Arbitrage: Buying in one market and selling in another Market.

Concept of Fund based Arbitrage :1. If Spot Price > Future Price

Sell Spot Buy Future

2. If Spot < Future

Buy Spot Sell Future

Example : Wipro Spot Future( 3rd March) (1 – Month)

529.70 525.15

diff 4.55 * 365 = 12.54 p.a.

-------

25Sell Buy

529.70 525.15

On 30th of March Let Price is 550, Hence

550-529.70 550.00-525.15

= 20.30 (Loss in Equity) = 24.85 (Profit inNet Profit = 24.85- 20.30 =4.55 Future)



OTHER

IMPORTANT

INFORMATION



IMPORTANT TERMINOLOGY

•American options – all stock options

•European options – all index options

•In - the – money option – positive cash flow

•At - the – money option – zero cash flow

•Out - of - the – money option – -ve cash flow

•Intrinsic value of an option – for call (spot- strike) & for

put (strike-spot)

•Time value of an option – premium–intrinsic value

•Open Interest – total no. of outstanding longs or shorts

in the market

•BOLT, NEAT



TRANSACTION CHARGES

TM Exchange Derivatives - Rs. 2 per lac of turnover

(0.002%) subject to

minimum of Rs. 1

lac per annum

Cash - Rs. 3.50

per lac of turnover (0. 0035 %)

IPF

Rs. 10 per

crore (F&O)

(0.0001%)

Rs. 1 per 100

crore (CM)

(0.0000001%)



SECURITIES TRANSACTION TAX (STT)

CASH

SEGMENT

DERIVATIVESEGMENT

Delivery Base – 0.125 % (Both Sides)

Jobbing – 0.025 % (Seller Only)

Future – 0.0167 % of Future Value

(seller only)

Option – 0.0133 % of Strike Price +

Premium



BROKERAGE

Cash Segment

Derivatives

Segment

INB Broker – 2.5%

(Max.)

Sub- Broker - N. A.

INF Broker – 2.5% of

INS Sub- Broker – 1.5 % (Max.)

Index Future

Stock Future

Premium *

Quantity



• November 1992 Incorporation•April 1993 Recognition as a stock exchange

• November 1994 Capital Market (Equities) segment goes live•April 1995 Establishment of NSCCL, the first Clearing Corporation•October 1995 Became largest stock exchange in the country•April 1996 Commencement of clearing and settlement by NSCCL•April 1996 Launch of S&P CNX Nifty

• November 1996 Setting up of National Securities Depository Limited, first depositoryin India, co-promoted by NSE•June 2000 Commencement of Derivatives Trading (Index Futures)•June 2001 Commencement of trading in Index Options•July 2001 Commencement of trading in Options on Individual Securities

• November 2001 Commencement of trading in Futures on Individual Securities•August 2003 Launch of Futures & options in CNXIT Index•June 2005 Launch of Futures & options in BANK Nifty Index•December 2006 'Derivative Exchange of the Year', by Asia Risk magazine•June 2007 NSE launches derivatives on Nifty Junior & CNX 100

NSE MILESTONES



Bombay StockBombay Stock

Exchange.Exchange.

Bombay Stock Exchange (BSE) was

incorporated in 1875 with the name Native

Share & Stock Brokers Association.



MUTUAL

FUNDS



Mutual FundMutual Fund

What is Mutual Fund?

How many companies(AMC) are there in

the MF Industries?Type of product w.r.t. liquidity?

Who are the regulatory authorities to

monitor & control MF Industries?



More Info………..More Info………..

What is NAV?• Please visit

www.amfiindia.com• It can provide you complete

understanding of MF

• You can watch NAV of any schemeany time.

http://www.acclaimimages.com/_gallery/_pages/0027-0409-2808-1502.html



http://www.acclaimimages.com/_gallery/_pages/0027-0409-2808-1502.html



Source: www.rbi.org.in

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