Bse by Anand Mohan

8/8/2019 Bse by Anand Mohan

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BOMBAY STOCK EXCHANGE



CONTENT

WHAT IS STOCK EXCHANGE

BACKGROUND

FORMATION OF BSE

STRUCTURE OF BSE MEMBERSHIP AT BSE

FUNCTIONS

PRODUCTS

INDEXES

INDEX CALCULATION & MAINTENANCE

ROLE PLAYER

SPECULATION :

CAUSES OF PRICE FLUCTUATION

HOW RATING IS GIVEN TO THE COMPANY?



CONTENT CONT««

BENEFITS OF BOMBAY STOCK EXCHANGE

SCANDLAS ON THE BSE

CHALLENGES & COMPETITION

CONCLUSION

REFERANCES



WHAT IS STOCK EXCHANGE

Stock exchange is that place where trading of

shares is done in terms of sale and purchase.



Background

The functions of the

stock exchange are

threefold

Provides a market

place for purchase

and sale of securities

Provides linkage

between savings and

investment

Plays the role of abarometer



FORMATION

OF THE

BOMBAYSTOCK

EXCHANGE



INTRODUCTION :

Started in 1850 in front of Town-Hall in

Bombay currently known as Horniman circle

Formed in 1875 as Bombay Stock Exchange

In 1986 launched its first stock index named

µSENSEX¶ with base year 1978-79

Non-profit association & evolved as the

premier stock exchange

Oldest stock exchange of Asia

Accounts for 75% of listed capital & 75% of

shares in terms of market capitalization Its turnover is 1/3rd of the total turnover in

securities in India



Structure of BSE

BSE has

± A Board of 9 directors

± Executive Director

± 3 Gov Nominees

± A RBI Nominee

± 5 Public representatives

Executive Director is responsible for day-2-day functioning and administration of Stock Exchange



Membership at the BSE

Transactions are carried by TM on behalf of their clients

Financial soundness, track record, experience,infrastructure and manpower

TM must be registered and pay fee to BSE &Regulatory Authority

TM¶s play a role of brokers, sub-brokers,floor-brokers, agents, jobbers, dealers, Badlafinanciers, dealer in G-Sec and underwriters



Functions

Ready Market for ListedSecurities

Barometer of Economy Needed to Attract

Foreign Funds

Exit Route for Investors

Evaluation

Stability in Prices

Investors Grievances

Stimulate IPOs Corporate Governance

Public Finance



Products

Equity

Corporate Debt

Govt Securities

T Bills

Commercial paper

Certificate of Deposits

Mutual Fund units Derivatives

Currency futures



INDEXES

SENSEX

BSE-100

BSE-TECK

BSE-PSU

BSE -500

BSE MID CAP AND SMALL CAP

BSE IPO INDEX

DOLLEX



SENSEX - The Barometer of Indian

Capital Markets

SENSEX, first compiled in 1986, was

calculated on a "Market Capitalization-

Weighted" methodology of 30 componentstocks representing large, well-established

and financially sound companies across

key sectors.

The base year of SENSEX was taken as

1978-79



The formula for adjusting the Base Market

capitalization is as follows:

New base market capitalization=

Old Base Market capitalization × New Market capitalization /Old

Market capitalization



Illustration

suppose a company issues right shares which increases the

market capitalization of the shares of that company by say,

Rs.100 crores. The existing Base Market capitalization (Old

Base Market capitalization), say, is Rs.2450 crores and theaggregate market capitalization of all the shares included in

the index before the right issue is made is, say Rs.4781

crore. The "New Base Market capitalization " will then be:

2450 x (4781+100)-------------------------- = Rs.2501.24 crores

4781



BSE-100 Index

A broad-based index, the BSE-100 was

formerly known as the BSE National

index. This Index has 1983-84 as the base year

and was launched in 1989.



Dollex Series of BSE Indices

Dollex-30

Dollex-100

Dollex-200

Dollex =(Index Value (In local currency) *

Base rupee-US$ rate)/ Current rupee-US$

rate



BSE-500 Index

Bombay Stock Exchange Limited constructed a new

index, christened BSE-500, consisting of 500 scrips w.e.f.

August 9, 1999. The changing pattern of the economy

and that of the market were kept in mind whileconstructing this index.

BSE-500 index represents nearly 93% of the total market

capitalization on BSE.

BSE-500 covers all 20 major industries of the economy.



BSE IPO Index

BSE introduced the new index series - BSE IPO index to

track the current primary market conditions in the Indian

capital market and measure the growth in investor¶s

wealth within a period of two years after listing of acompany subsequent to successful completion of initial

public offering (IPO).



BSE TEC K Index

The decade of 1990s saw the emergence of the TMT

sector as a major force in the Indian economy. The

remarkable growth of this sector was reflected in the

financial markets. Recognizing the growing importance of the TMT sector,

BSE TECk index was launched in 2001.



BSE PSU Index

Bombay Stock Exchange Limited launched "BSE PSU

Index" on 4 June 2001. This index consists of major

Public Sector Undertakings listed on BSE.

Objective:

a. An Index to track the performance of listed equity of

PSU companies

b. A suitable benchmark for the Central Government to

monitor its wealth on the bourses.



BSE Mid-Cap and BSE Small-Cap Index

BSE introduced the new index series called

'BSE MID-Cap' index and 'BSE Small-

Cap' index to track the performance of companies with relatively smaller market

capitalization.



Index Calculation & Maintenance

All BSE indices (except BSE-PSU index) are calculated

using following formula:

Free-float market capitalization of index constituents/

Base Market capitalization * Base Index Value Capped market capitalization of index constituents/ Base

Market capitalization * Base Index Value

Free-float market capitalization takes into consideration

only those shares issued by the company that are readilyavailable for trading in the market



ROLE PLAYER

EXTERNAL:----

1.SHAREHOLDER

2.DEBENTURE HOLDER



SHAREHOLDER

Shareholders are divided into two parts

1.Preference shareholder: Preference shareholder

are those which have preferential right to the payment of dividend during the life time of the

company, and a preferential right to the return of

the capital when the company is wound up.



CHARACTERISTICS OF PREF.SHAREHOLDER

1.The dividend on them is fixed by the articles of

the company.

2.They get their fixed rate of dividend before anydividend is distributed among the other class of

shareholders.

3.At the time of winding up of the company, the

preference shareholder must be paid back their capital before anything is paid to the ordinary

shareholders.



KINDS OF PREF.SHAREHOLDER

1.Comulative shareholder: These shares are

entitled to fixed dividends whether there are

profits or loss. If profits are not sufficient to pay

in a particular year then that will pay on next

year.

2.Non cumulative pref.share: These shares cannot

claim arrears of dividends of any year (if not paiddue to insufficiency of profits) out of profits of

subsequent year.



Cont««.

3.Participating pref. Shares: These shares

receives a fixed rate of dividend in priority to

ordinary shares and further, the right to

participate in balance of profits in an agreed

proportion together with ordinary shares.

4.Redeemable pref.shares: These are shares

which can be purchased back by the company.The company reserves its rights to call back or

purchased these shares at any time .



EQUITY SHARES

All shares which are not preference shares are

equity shares.These shares do not have a fixed

rate of dividend,they are always irredeemable and

their holders have normal voting rights.

They are also the owners of the company.

They take dividend



DEBENTURES

A document under the company seal which

provides for the payment of a principal sum and

interest there on at regular intervals which is

usually secured by a fixed or floating charge on

the company¶s property or undertaking which

acknowledges a loan to the company.



INTERNAL PLAYERS

The members of the stock exchange can bedivided into two parts:

A. Broker : He is a commission agent who

transacts business in securities on behalf of non-members.They may have number of sub-brokersto canvass and secure business for them.

B. Jobber : He is an independent dealer securities.

He purchase and sells securities in his own name.He is not allowed to deal with non-membersdirectly. He works for profit.



Non-members : The following categories of non

members are also permitted to enter trading hall

and transact business on the behalf of members.

Authorized clerks: They are the assistant or

agents. They buy or sell on the behalf of

employers. They can not transact business on

their own account. Revisers: They are the sub-brokers. He is also

called the half commission men.



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SPECULATION :

Definition : it involves the buying, holding, selling, short-

term selling of stocks, bonds. commodities, currencies,

collectibles or any valuable financial instrument to profit

from fluctuations in its price as opposed to buying it for use or for income via method like dividends or interest.



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Kinds of speculation

Bull Market (Tejiwala): In case of that they purchase the

shares at current prices to sell at a higher price in the near

future and makes a profit if his expectations come true. he

is also called a long buyer. Bear Market (Mandiwala) : He sells security in the hope

that he will be able to buy them back at lesser price. It is

also called ³short selling´.



Cont««««««

Stag : He is that type of speculator who applies for a large

number of a shares in a new issue with the intention of

selling them at a premium. He is bullish and very

cautious.



CAUSES OF PRICE FLUCTUATION

1.DAMAND AND SUPPLY

2.BANK RATE

3.SPECULATIVE PRESSURE 4.ACTIONS OF UNDERWRITERS AND

OTHER FINANCIAL INSTITUTIONS

5.CHANGE IN COMPANY¶S BOARD OF

DIRECTORS

6.FINANCIAL POSITION OF THE COMPANY



CONT««..

7.TRADE CYCLE

8.POLITICAL FACTORS

9.SYMPATHETIC FLUCTUATIONS

10.OTHER FACTORS:

A.EXPECTED MONSOON

B.PERSONAL HEALTH OF HEAD OF

GOVERNMENT OR CHAIRMAN OF THE

COMPANY

C.OIL PRICES IN THE INTERNATIONAL MARKET.



CONT««.

D.CHANGES IN EXCHANGE RATE

E.BORDER TENSION

F.STOCK BROKERS SCAM LIKE HARSHADMEHTA AND KETHAN PAREKH

G.STRIKES AND LOCK-OUT OF THECOMPANY.

H.NEW BUDGET PROPOSALS

I.LOBERLIZATION AND PRIVATIZATIONOF THE COMPANY.



HOW RATING IS GIVEN TO THE COMPANY?

Basically rating is given after see the company 'image,management quality, assets quality, auditors quality,accounting accuracy. Rating is not fixed, it may bechange. The rating grades are:

AAA: HIGHEST SAFTY

AA: HIGH SAFTY

A: ADEQUATE SAFTY

BBB: MODERATE SAFTY

BB: IN ADEQUATE SAFTY

BC&D: HIGH RISK AND DEFAULT



BENEFITS OF BOMBAY STOCK EXCHANGE

FROM THE POINT OF VIEW OF COMMUNITY:

1.It assist the economic development by providing a bodyof interested investors.

2.it uploads the position of superior enterprises and assistthem in raising further funds.

3.It encourages capital formation

4.Government can undertake projects of nationalimportance and social value raising funds through the sale

of its securities on the stock exchange. 5.It is the stock exchanges that central bank of a country

can control credit by undertaking open market operations(purchase and sale of securities)



FROM THE COMPANY POINT OF VIEW

1.A company whose shares quoted on stock

exchange they enjoy better reputation and credit.

2.The market for the shares of such a company is

naturally widened.

3.The market price of securities is likely to be

higher in relation to its earnings, dividends and

property values. This raises the bargaining power of the company in the event of a takeover, merger

or amalgamation.



FROM THE INVESTORS POINT OF VIEW

1.Liquidity of the investment is increased

2.The securities dealt on a stock exchange are good

collateral security for loans.

3.The stock exchange safeguards interests of investorsthrough strict enforcement of rules and regulations.

4.The present net worth of investments can be easily

known by the daily quotations.

5.His risk is considerably less when he holds or purchaseslisted securities.



SCANDALS ON THEBSE



Securities Scams

1997

C. R. Bhansali Group

± Fraudulent Accounting

Practices ± NBFC

1994-95

Harshad Mehta

± Collusion with top-

management for the purposeof price rigging

± BPL, Videocon, Sterlite

± Involvement of BSE Officials

± Lifetime Ban

T + 5 System, RollingSettlement System

BLESS



CHALLENGES &

COMPETITION



Challenges faced by BSE

Corporatization

To catch up with the development across

the world To bring transparencies in transactions.

To bring technological and structural

change Demutualization



Rise of the NSE

NSE was started in April 1993 as a corporate body.

In July 2005, became the largest exchange inIndia.

Trades over 1500 equity, 800 debt instrumentwith a corporate membership of 980.

Companies are selected on the basis of record,the profitability, paid-up capital, marketcapitalization and dividend payment.



NSE better than BSE?

Superior technology.

More transparent market place.

NSE is a corporate body

Promotes the growth of human capital. Innovative approach of trading

Regular inspection and investigation.

Proper risk management systems (PRISM and

SPAN). The telecommunication network is subjected to

periodic checkup.



CONCLUSION



conclusion

THE BOMBAY STOCK EXCHANGE

CAN BE CONSIDERED AS THE

BAROMETER OF INDIAN ECONOMICACTIVITY.



Reference1. http://www.bseindia.com/

2. http://en.wikipedia.org/wiki/Bombay_Stock_Exchange

3. http://finance.indiamart.com/markets/bse/

4. http://www.bsepsu.com/PSUConclave/Mr_Gopalkrishnan_Iyer_CEO_Concalve_Kolkata-1.ppt

5. http://learningfinancialmanagement.pbworks.com/f/Intro

duction.ppt

6. www.sibc.se/uploads/.../EVS_Indian_Economy_Opportunities.ppt

7. http://www.citeman.com/4010-rolling-settlement/

8. http://www.investopedia.com/terms/c/coporatization.asp

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Bse by Anand Mohan