CHAPTER - I

INTRODUCTION
 1. INTRODUCTION TO COST OF CAPITAL

The Cost of capital is a market for financial assets which have a long or
indefinite maturity. Generally, it deals with long term securities which have a maturity
period of above one year. Cost of capital may be further divided into three types i.e.,
Industrial securities market, Government securities market and Long term loans
market. Industrial securities market is further divided into two types i.e., primary
market or new issue market and secondary market or stock exchange. Government
securities market is also called as Gilt-Edged securities market. It is the market where
Government securities are traded. Long term loans market is divided into three types
Term loans market, Mortgages market and financial guarantees market.
Absence of cost of capital instruments acts as a deterrent to capital formation
and economic growth. Resources would remain idle if finances are not funneled
through the cost of capital.
a) The cost of capital instruments serves as an important source for the productive
use of the economy’s savings. It mobilizes the savings of the peoples for further
investment and thus avoids their wastage in unproductive uses.
b) It provides incentives to saving and facilitates capital formation by offering
suitable rates of interest as the price of capital.
c) It provides an avenue for investors, particularly the household sector to invest in
financial assets which are more productive than physical assets.
d) It facilitates increase in production and productivity in the economy and thus,
enhances the economic welfare of the society. Thus, it facilitates “the movement
of stream of command over capital to the point of highest yield.”
e) A healthy cost of capital instrument consisting of expert intermediaries
promotes stability in values of securities representing capital funds.
1.1 OBJECTIVES OF THE STUDY

 To study about the Cost of capital.

 To study about Dematerialization or Demit in the stock exchange for easy

Transfer and error prone system.

 Knowing about the latest and future developments is the stock exchange system.

 Recent development in derivatives market.

1.2 NEEDS & IMPORTANCE

Cost of capital deals with long term funds.These funds are subject to uncertainty and
risk.It supplies long term funds and medium term funds to the corporate sector.It
provides the mechanism for facilitating capital fund trasactions.It deals with ordinary
shares,debentures and stocks and securities of the governments. In this market the funds
flow will come from savers.It converts financial assets in to productive physical
assets.It provides incentives to savers in the form of intrest or dividend to the investors.
The following factors plays an important role in the growth of cost of capital:
 A strong and powerful government
 Financial dynamics
 Speedy industrialization
 Attracting oreign investments
 Investments from NRI’S
 Speedy implementation of policies
 Globalization
 Development of financial theories
 Sophisticated technological advices
1.3 SCOPE OF THE STUDY
The current study involves a variety of work in economics, accounting and finance
in this.Valuation of stocks and functions of the stock markets, valuation of bonds
convertible debentures and market for debt,issue market and merchant banking,
market efficiency, dividends, bonus and right issues rates of return and regulations.
1.4 RESEARCH & METHODOLOGY

The data collection methods include both the Primary and Secondary
Collection methods.
1. Primary Collection Methods:
This method includes the data collected from the personal discussions
with the authorized clerks and members of the Exchange.
2. Secondary Collection Methods:
The Secondary Collection Methods includes the lectures of the
superintend of the Department of Market Operations, EDP etc, and also the data
collected from the News, Magazines of the NSE and different books issues of this
study.

1.5 LIMITATIONS OF THE PROJECT

 Forty five days were insufficient to go on with the study. since the time
constraint was not enough.

 Most of the implementation and strategies studied were not properly used.

 Improper communication channel with speculators.

 A small difference makes feel difficult about theory and practices.

 An improper absence of information about technology.

 CHAPTER-II

INDUSTRY PROFILE

&

COMPANY PROFILE
INDUSTRY PROFILE
For the Indian investors, the year belonged to stock markets, which have been shining
bright when it comes to generating wealth, while the glitter of gold and silver faded for
the second straight year in 2017.
Measured by BSE Sensex, stock market has generated a positive return of about 9 per
cent for investors in 2017, while gold prices fell by about three per cent and its poorer
cousin silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot
for two consecutive years now vis-a-vis equities, shows an analysis of their price
movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid
anticipated tapering over last several months combined with FII investment in Indian
stocks.
"This movement has been equally true for global markets as 2017 saw gold losing its
shine and markets coming back with a bang," said Jayant Manglik, President Retail
Distribution, Karvy Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.
Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to
its under-performance, an expert said.
In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of
about 12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets
have particularly shown great strength post July-August 2017 when RBI took some
strong measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given
the economy shows improvement, a knee-jerk correction was seen in most risky assets,
including stocks in Indian markets. However, assurance by the Fed about planned and
staggered tapering in stimulus once again proved to be a catalyst for the markets."

"External factors affecting Indian stocks seem to be negative for the first half of 2017
due to continued strength of the US dollar and benign in the second half. By that time,
elections too would have taken place. A combination of domestic and international
factors point to a bumper closing of Indian markets in 2017 with double-digit
percentage growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent
and 17 per cent, respectively, in 2017.
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly
USD 20 billion) till December 19. In 2012, they had pumped in Rs 1.28 lakh crore
(USD 24.37 billion).

Evolution

Indian Stock Markets are 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.

By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half a
dozen brokers recognized by banks and merchants during 1840 and 1850.

The 1850's witnessed a rapid development of commercial enterprise and brokerage

business attracted many men into the field and by 1860 the number of brokers increased
into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in 1865,
a disastrous slump began (for example, Bank of Bombay Share which had touched Rs
2850 could only be sold at Rs. 87).

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.
Other leading cities in stock market operations

Ahmadabad gained importance next to Bombay with respect to cotton textile industry.
After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new
mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in
1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".

What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was
to Calcutta. Also tea and coal industries were the other major industrial groups in
Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in
jute shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a
coal boom between 1904 and 1908. On June 1908, some leading brokers formed "The
Calcutta Stock Exchange Association".

In the beginning of the twentieth century, the industrial revolution was on the way in
India with the Swadeshi Movement; and with the inauguration of the Tata Iron and
Steel Company Limited in 1907, an important stage in industrial advancement under
Indian enterprise was reached.

Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.

In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange"
with 100 members. However, when boom faded, the number of members stood reduced
from 100 to 3, by 1923, and so it went out of existence.

In 1935, the stock market activity improved, especially in South India where there was
a rapid increase in the number of textile mills and many plantation companies were
floated. In 1937, a stock exchange was once again organized in Madras - Madras Stock
Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock
Exchange Limited).

Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with
the Punjab Stock Exchange Limited, which was incorporated in 1936.
Indian Stock Exchanges - An Umbrella Growth

The Second World War broke out in 1939. It gave a sharp boom which was followed
by a slump. But, in 1943, the situation changed radically, when India was fully
mobilized as a supply base.

On account of the restrictive controls on cotton, bullion, seeds and other commodities,
those dealing in them found in the stock market as the only outlet for their activities.
They were anxious to join the trade and their number was swelled by numerous others.
Many new associations were constituted for the purpose and Stock Exchanges in all
parts of the country were floated.

The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.

In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited
and the Delhi Stocks and Shares Exchange Limited - were floated and later in June
1947, amalgamated into the Delhi Stock Exchnage Association Limited.

Post-independence Scenario

Most of the exchanges suffered almost a total eclipse during depression. Lahore
Exchange was closed during partition of the country and later migrated to Delhi and
merged with Delhi Stock Exchange.

Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.

Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956.
Only Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well
established exchanges, were recognized under the Act. Some of the members of the
other Associations were required to be admitted by the recognized stock exchanges on a
concessional basis, but acting on the principle of unitary control, all these pseudo stock
exchanges were refused recognition by the Government of India and they thereupon
ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India
(mentioned above). The number virtually remained unchanged, for nearly two decades.
During eighties, however, many stock exchanges were established: Cochin Stock
Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur,
1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange
Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock
Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at
Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange
Association Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot,
1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established
exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one
recognized stock exchanges in India excluding the Over The Counter Exchange of India
Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).

The Table given below portrays the overall growth pattern of Indian stock markets
since independence. It is quite evident from the Table that Indian stock markets have
not only grown just in number of exchanges, but also in number of listed companies
and in capital of listed companies. The remarkable growth after 1985 can be clearly
seen from the Table, and this was due to the favouring government policies towards
security market industry.

Trading Pattern of the Indian Stock Market

Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend paying,
growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market
capitalization of atleast Rs.100 million and having more than 20,000 shareholders are,
normally, put in the specified group and the balance in non-specified group.

Two types of transactions can be carried out on the Indian stock exchanges: (a) spot
delivery transactions "for delivery and payment within the time or on the date stipulated
when entering into the contract which shall not be more than 14 days following the date
of the contract" : and (b) forward transactions "delivery and payment can be extended
by further period of 14 days each so that the overall period does not exceed 90 days
from the date of the contract". The latter is permitted only in the case of specified
shares. The brokers who carry over the outstandings pay carry over charges (cantango
or backwardation) which are usually determined by the rates of interest prevailing.

A member broker in an Indian stock exchange can act as an agent, buy and sell
securities for his clients on a commission basis and also can act as a trader or dealer as a
principal, buy and sell securities on his own account and risk, in contrast with the
practice prevailing on New York and London Stock Exchanges, where a member can
act as a jobber or a broker only.

The nature of trading on Indian Stock Exchanges are that of age old conventional style
of face-to-face trading with bids and offers being made by open outcry. However, there
is a great amount of effort to modernize the Indian stock exchanges in the very recent
times.

Over The Counter Exchange of India (OTCEI)

The traditional trading mechanism prevailed in the Indian stock markets gave way to
many functional inefficiencies, such as, absence of liquidity, lack of transparency,
unduly long settlement periods and benami transactions, which affected the small
investors to a great extent. To provide improved services to investors, the country's first
ringless, scripless, electronic stock exchange - OTCEI - was created in 1992 by
country's premier financial institutions - Unit Trust of India, Industrial Credit and
Investment Corporation of India, Industrial Development Bank of India, SBI Cost of
capitals, Industrial Finance Corporation of India, General Insurance Corporation and its
subsidiaries and CanBank Financial Services.

Trading at OTCEI is done over the centres spread across the country. Securities traded
on the OTCEI are classified into:

 Listed Securities - The shares and debentures of the companies listed on the
OTC can be bought or sold at any OTC counter all over the country and they
should not be listed anywhere else

 Permitted Securities - Certain shares and debentures listed on other exchanges

and units of mutual funds are allowed to be traded
  Initiated debentures - Any equity holding atleast one lakh debentures of a
particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The
original certificate will be safely with the custodian. But, a counter receipt is generated
out at the counter which substitutes the share certificate and is used for all transactions.

In the case of permitted securities, the system is similar to a traditional stock exchange.
The difference is that the delivery and payment procedure will be completed within 14
days.

Compared to the traditional Exchanges, OTC Exchange network has the following
advantages:

 OTCEI has widely dispersed trading mechanism across the country which
provides greater liquidity and lesser risk of intermediary charges.

 Greater transparency and accuracy of prices is obtained due to the screen-based

scripless trading.

 Since the exact price of the transaction is shown on the computer screen, the
investor gets to know the exact price at which s/he is trading.

 Faster settlement and transfer process compared to other exchanges.

 In the case of an OTC issue (new issue), the allotment procedure is completed in
a month and trading commences after a month of the issue closure, whereas it
takes a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency
investors are gradually becoming aware of the manifold advantages of the OTCEI.
National Stock Exchange (NSE)

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.

Trading at NSE can be classified under two broad categories:

(a) Wholesale debt market and

(b) Cost of capital.

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.

There are two kinds of players in NSE:

(a) trading members and

(b) 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 inter-
market operations are streamlined coupled with the countrywide access to the
securities.

 Delays in communication, late payments and the malpractice’s 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.

Unless stock markets provide professionalized service, small investors and foreign
investors will not be interested in cost of capitaloperations. And cost of capitalbeing
one of the major source of long-term finance for industrial projects, India cannot afford
to damage the cost of capitalpath. In this regard NSE gains vital importance in the
Indian cost of capitalsystem.

Preamble

Often, in the economic literature we find the terms ‘development’ and ‘growth’ are
used interchangeably. However, there is a difference. Economic growth refers to the
sustained increase in per capita or total income, while the term economic development
implies sustained structural change, including all the complex effects of economic
growth. In other words, growth is associated with free enterprise, where as development
requires some sort of control and regulation of the forces affecting development. Thus,
economic development is a process and growth is a phenomenon.

Economic planning is very critical for a nation, especially a developing country like
India to take the country in the path of economic development to attain economic
growth.
Why Economic Planning for India?

One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels
of income, saving and investment. However, increasing the rate of capital formation in
India is beset with a number of difficulties. People are poverty ridden. Their capacity to
save is extremely low due to low levels of income and high propensity to consume.
Therefor, the rate of investment is low which leads to capital deficiency and low
productivity. Low productivity means low income and the vicious circle continues.
Thus, to break this vicious economic circle, planning is inevitable for India.

The market mechanism works imperfectly in developing nations due to the ignorance
and unfamiliarity with it. Therefore, to improve and strengthen market mechanism
planning is very vital. In India, a large portion of the economy is non-monitised; the
product, factors of production, money and cost of capitals is not organized properly.
Thus the prevailing price mechanism fails to bring about adjustments between
aggregate demand and supply of goods and services. Thus, to improve the economy,
market imperfections has to be removed; available resources has to be mobilized and
utilized efficiently; and structural rigidities has to be overcome. These can be attained
only through planning.

In India, capital is scarce; and unemployment and disguised unemployment is

prevalent. Thus, where capital was being scarce and labour being abundant, providing
useful employment opportunities to an increasing labour force is a difficult exercise.
Only a centralized planning model can solve this macro problem of India.

Further, in a country like India where agricultural dependence is very high, one cannot
ignore this segment in the process of economic development. Therefore, an economic
development model has to consider a balanced approach to link both agriculture and
industry and lead for a paralleled growth. Not to mention, both agriculture and industry
cannot develop without adequate infrastructural facilities which only the state can
provide and this is possible only through a well carved out planning strategy. The
government’s role in providing infrastructure is unavoidable due to the fact that the role
of private sector in infrastructural development of India is very minimal since these
infrastructure projects are considered as unprofitable by the private sector.

Further, India is a clear case of income disparity. Thus, it is the duty of the state to
reduce the prevailing income inequalities. This is possible only through planning.
Planning History of India

The development of planning in India began prior to the first Five Year Plan of
independent India, long before independence even. The idea of central directions of
resources to overcome persistent poverty gradually, because one of the main policies
advocated by nationalists early in the century. The Congress Party worked out a
program for economic advancement during the 1920’s, and 1930’s and by the 1938
they formed a National Planning Committee under the chairmanship of future Prime
Minister Nehru. The Committee had little time to do anything but prepare programs and
reports before the Second World War which put an end to it. But it was already more
than an academic exercise remote from administration. Provisional government had
been elected in 1938, and the Congress Party leaders held positions of responsibility.
After the war, the Interim government of the pre-independence years appointed an
Advisory Planning Board. The Board produced a number of somewhat disconnected
Plans itself. But, more important in the long run, it recommended the appointment of a
Planning Commission.

The Planning Commission did not start work properly until 1950. During the first three
years of independent India, the state and economy scarcely had a stable structure at all,
while millions of refugees crossed the newly established borders of India and Pakistan,
and while ex-princely states (over 500 of them) were being merged into India or
Pakistan. The Planning Commission as it now exists, was not set up until the new India
had adopted its Constitution in January 1950.

Objectives of Indian Planning

The Planning Commission was set up the following Directive principles :

 To make an assessment of the material, capital and human resources of the

country, including technical personnel, and investigate the possibilities of
augmenting such of these resources as are found to be deficient in relation to the
nation’s requirement.

 To formulate a plan for the most effective and balanced use of the country’s
resources.
  Having determined the priorities, to define the stages in which the plan should
be carried out, and propose the allocation of resources for the completion of
each stage.

 To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political
situation, should be established for the successful execution of the Plan.

 To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

 To appraise from time to time the progress achieved in the execution of each
stage of the Plan and recommend the adjustments of policy and measures that
such appraisals may show to be necessary.

 To make such interim or auxiliary recommendations as appear to it to be

appropriate either for facilitating the discharge of the duties assigned to it or on
a consideration of the prevailing economic conditions, current policies,
measures and development programs; or on an examination of such specific
problems as may be referred to it for advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

 Increasing National Income

 Reducing inequalities in the distribution of income and wealth

 Elimination of poverty

 Providing additional employment; and

 Alleviating bottlenecks in the areas of : agricultural production, manufacturing

capacity for producer’s goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year
Plans. Approximately, economic growth has been targeted at a rate of five per cent per
annum. High priority to economic growth in Indian Plans looks very much justified in
view of long period of stagnation during the British rule
 COMPANY PROFILE
Background:

Karvy Stock Broking Limited, one of the cornerstones of the Karvy edifice, flows
freely towards attaining diverse goals of the customer through varied services. Creating
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Karvy Stock Broking Services:

It is an undisputed fact that the stock market is unpredictable and yet enjoys a high
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We offer services that are beyond just a medium for buying and selling stocks and
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We offer trading on a vast platform National Stock Exchange and Bombay Stock
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reviewed. To add to this repository of information, we publish a monthly magazine
"Karvy The Finapolis", which analyzes the latest stock market trends and takes a close
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Our Stock Broking services are widely networked across India, with the number of our
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Over the years we have ensured that the trust of our customers is our biggest returns.
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To empower the investor further we have made serious efforts to ensure that our
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Our foray into commodities broking has been path breaking and we are in the process
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In the future, our focus will be on the emerging businesses and to meet this objective,
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Depository Participants

The onset of the technology revolution in financial services Industry saw the emergence
of Karvy as an electronic custodian registered with National Securities Depository
Ltd (NSDL) and Central Securities Depository Ltd (CSDL) in 1998. Karvy set
standards enabling further comfort to the investor by promoting paperless trading
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Offering a wide trading platform with a dual membership at both NSDL and CDSL, we
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Karvy Consultants Limited was started in the year 1981, with the vision and enterprise
of a small group of practicing Chartered Accountants. Initially it was started with
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Today, Karvy has access to millions of Indian shareholders, besides companies,
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decades, Karvy has evolved as a veritable link between industry, finance and people. In
January 1998, Karvy became the first Depository Participant in Andhra Pradesh. An
ISO 9002 company, Karvy's commitment to quality and retail reach has made it
an integrated financial services company.
An Overview:
KARVY, is a premier integrated financial services provider, and ranked among the top
five in the country in all its business segments, services over 17 million individual
investors in various capacities, and provides investor services to over 300 corporates,
comprising the who is who of Corporate India. KARVY covers the entire spectrum of
financial services such as Stock broking, Depository Participants, Distribution of
financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,
Commodities Broking, Personal Finance Advisory Services, Merchant Banking &
Corporate Finance, placement of equity, IPOs, among others. Karvy has a professional
management team and ranks among the best in technology, operations and research of
various industrial segments.

Today, Karvy service over 6.5 lakhs customer accounts spread across over 250
cities/towns in India and serves more than 85 million shareholders across 7500
corporate clients and makes its presence felt in over 15 countries across 5 continents.
All of Karvy services are also backed by strong quality aspects, which have helped
Karvy to be certified as an ISO 9002 company by DNV.

ACHIEVEMENTS:

 Among the top 5 stock brokers in India (4% of NSE volumes)

 India's No. 1 Registrar & Securities Transfer Agents
 Among the top 3 Depository Participants
 Largest Network of Branches & Business Associates
 ISO 9001:2000 certified operations by DNV
 Among top 10 Investment bankers
 Largest Distributor of Financial Products
 Adjudged as one of the top 50 IT uses in India by MIS Asia
 Full Fledged IT driven operations
 First ISO-9002 Certified Registrars in India
 Ranked as “The Most Admired Registrar” by MARG
 Largest mobilize of funds as per PRIME DATABASE
 First depository participant from Andhra Pradesh.
 Handled over 500 public issues as Registrars.
  Handling the Reliance account, which accounts for nearly 10 million account
holders?
Range of services:
 Stock broking services
 Distribution of Financial Products (investments & loan products)
 Depository Participant services
 IT enabled services
 Personal finance Advisory Services
 Private Client Group
 Debt market services
 Insurance & merchant banking
 Mutual Fund Services
 Corporate Shareholder Services
 Other global services

Besides these, they also offer special portfolio analysis packages that provide daily
technical advice on scrips for successful portfolio management and provide customized
advisory services to help customers make the right financial moves that are specifically
suited to their portfolio. They are continually engaged in designing the right investment
portfolio for each customer according to individual needs and budget considerations.

Karvy Consultants limited deals in Registrar and Investment Services. Karvy is one of
the early entrants registered as Depository Participant with NSDL (National Securities
Depository Limited), the first Depository in the country and then with CDSL (Central
Depository Services Limited).

Karvy stock broking is a member of National Stock Exchange (NSE), The Bombay
Stock Exchange (BSE), and The Hyderabad Stock Exchange (HSE). The services
provided are multi dimensional and multi-focused in their scope: to analyze the latest
stock market trends and to take a close looks at the various investment options and
products available in the market. Besides this, they also offer special portfolio analysis
packages.

The paradigm shift from pure selling to knowledge based selling drives the
business today. The monthly magazine, Finapolis, provides up-dated market
information on market trends, investment options, opinions etc. Thus empowering the
investor to base every financial move on rational thought and prudent analysis and
embark on the path to wealth creation.

Karvy is recognized as a leading merchant banker in the country, Karvy is registered

with SEBI as a Category I merchant banker. This reputation was built by capitalizing
on opportunities in corporate consolidations, mergers and acquisitions and corporate
restructuring.

Karvy has a tie up with the world’s largest transfer agent, the leading Australian
company, Computer share Limited. It has attained a position of immense strength as a
provider of across-the-board transfer agency services to AMCs, Distributors and
Investors. Besides providing the entire back office processing, it also provides the link
between various Mutual Funds and the investor.

Karvy global services limited covers Banking, Financial and Insurance Services
(BFIS), Retail and Merchandising, Leisure and Entertainment, Energy and Utility and
Healthcare sectors.
 Karvy comtrade limited trades in all goods and products of agricultural and mineral
origin that include lucrative commodities like gold and silver and popular items like oil,
pulses and cotton through a well-systematized trading platform.

Karvy Insurance Broking Pvt. Ltd. provides both life and non-life insurance
products to retail individuals, high net-worth clients and corporates. With Indian
markets seeing a sea change, both in terms of investment pattern and attitude of
investors, insurance is no more seen as only a tax saving product but also as an
investment product.

Karvy Inc. is located in New York to provide various financial products and
information on Indian equities to potential foreign institutional investors (FIIs) in the
region. This entity would extensively facilitate various businesses of Karvy viz., stock
broking (Indian equities), research and investment by QIBs in Indian markets for both
secondary and primary offerings.

.QualityPolicy:
To achieve and retain leadership, Karvy shall aim for complete customer satisfaction,
by combining its human and technological resources, to provide superior quality
financial services. In the process, Karvy will strive to exceed Customer's expectations.
Quality Objectives

As per the Quality Policy, Karvy will:

 Build in-house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of services.
 Establish a partner relationship with its investor service agents and vendors that
will help in keeping up its commitments to the customers.
 Provide high quality of work life for all its employees and equip them with
adequate knowledge & skills so as to respond to customer's needs.
 Continue to uphold the values of honesty & integrity and strive to establish
unparalleled standards in business ethics.
 Use state-of-the art information technology in developing new and innovative
financial products and services to meet the changing needs of investors and
clients.
 Strive to be a reliable source of value-added financial products and services and
constantly guide the individuals and institutions in making a judicious choice of
same.

Strive to keep all stake-holders (shareholders, clients, investors, employees, suppliers

and regulatory authorities) proud and satisfied
 CHAPTER – II
REVIEW OF LITERATURE
 REVIEW OF LITERATURE

There has been a wide range of studies concerning financial sector reforms in general,
and cost of capitalreforms in particular, since mid 1980s in India. This section
highlights certain important studies that are context relevant. Several studies such as
Sahni (1985), Kothari (1986), Mookerjee (1988), Lal (1990), Chandra (1990),

Franscis (1991), Ramesh Gupta (1991,1992), Raghunathan (1991), Varma (1991),

Gupta (1992), and Sinha (1993) comment upon the Indian cost of capitalin general
and trading systems in the stock exchanges in particular and suggest that the systems
therein are rather antiquated and inefficient, and suffer from major weakness and
malpractices. According to most of these studies, significant reforms are required if
the stock exchanges are to be geared up to the envisaged growth in the Indian cost of
capital.

Barua et al (1994) undertakes a comprehensive assessment of the private corporate debt

market, the public sector bond market, the govt. securities market, the housing finance
and other debt markets in India. This provides a diagnostic study of

the state of the Indian debt market, recommending necessary measures for the
development of the secondary market for debt. It highlights the need to integrate the
regulated debt market with the free debt market, the necessity for market making for
financing and hedging options and interest rate derivatives, and tax reforms.

Cho (1998) points out the reasons for which reforms were made in Indian cost of
capitalstating the after reform developments. Shah (1999) describes the financial sector
reforms in India as an attempt at developing financial markets as an alternative vehicle
determining the allocation of capital in the economy.

Shah and Thomas (2003) review the changes which took place on India’s equity and
debt markets in the decade of the 1990s. This has focused on the importance of
crises as a mechanism for obtaining reforms.

Mohan (2004) provides the rationale of financial sector reforms in India, policy
reforms in the financial sector, and the outcomes of the financial sector reform process
in some detail.
Shirai (2004) examines the impact of financial and cost of capitalreforms on corporate
finance in India. India’s financial and cost of capitalreforms since the early 1990s
have had a positive impact on both the banking sector and cost of capitals.
Nevertheless, the cost of capitals remain shallow, particularly when it comes to
differentiating high-quality firms from low-quality ones (and thus lowering capital
costs for the former compared with the latter). While some high-quality firms (e.g.,
large firms) have substituted bond finance for bank loans, this has not occurred to any
significant degree for many other types of firms (e.g., old, export-oriented and
commercial paper-issuing ones). This reflects the fact that most bonds are privately
placed, exempting issuers from the stringent accounting and disclosure requirements
necessary for public issues. As a result, banks remain major financiers for both high-
and low-quality firms. The paper argues that India should build an infrastructure that
will foster sound cost of capitals and strengthen banks’ incentives for better risk
management.

Chakrabarti and Mohanty (2005) discuss how cost of capitalin India is evolved in the
reform period. Thomas (2005) explains the financial sector reforms in India with
stories of success as well as failure.

Bajpai (2006) concludes that the cost of capitalin India has gone through various
stages of liberalization, bringing about fundamental and structural changes in the
market design and operation, resulting in broader investment choices, drastic
reduction in transaction costs, and efficiency, transparency and safety as also
increased integration with the global markets. The opening up of the economy for
investment and trade, the dismantling of administered interest and exchange rates
regimes and setting up of sound regulatory institutions have enabled time.

Gurumurthy (2006) arrives at the conclusion that the achievements in the financial
sector indicate that the financial sector could become competitive without involving
unhealthy competition, within the constraints imposed by the macro- economic policy
stance.

Mohan (2007) reviews India’s approach to financial sector reforms that set in process
since early 1990s. Allen, Chakrabarti, and De (2007) concludes that with recent
growth rates among large countries second only to China’s, India has experienced
nothing short of an economic transformation since the liberalisation process began in
the early 1990s.
Chhaochharia (2008) arrives at the conclusion that India has a more modern financial
and banking system than China that allocates capital in a more efficient manner.
However, the study is skeptical about who would emerge with the stronger cost of
capital, as both the country is facing challenges regarding their cost of capitals.

Prasad and Rajan (2008) argues that the time has come to make a more concerted
push toward the next generation of financial reforms. The study advocates that a
growing and increasingly complex market-oriented economy and its greater
integration with global trade and finance will require deeper, more efficient, and well-
regulated financial markets.

The survey and review of literature about the financial sector reforms in India reveals
that the reforms have been pursued vigorously and the results of the reforms have
brought about improved efficiency and transparency in the financial sector. The
reforms also brought into inter-linkage of financial markets across the globe leading to
new product development and sophisticated risk management tools. Derivatives in
general perform as an instrument to hedge the risk arising from movement in prices
not only in commodity markets but also in securities market.

Bose, Suchismita conducted research on (2006) found that Derivatives products provide
certain important economic benefits such as risk management or redistribution of risk
away from risk-averse investors towards those more willing and able to bear risk.
Derivatives also help price discovery, i.e. the process of determining the price level for
any asset based on supply and demand. These functions of derivatives help in efficient
capital allocation in the economy. At the same time their misuse also poses threat to the
stability of the financial sector and the overall economy.

Routledge, Bryan and Zin, Stanley E of Carnegie Mellon University conducted research
on “Model Uncertainty and Liquidity” in year 2001. Extreme market outcomes are
often followed by a lack of liquidity and a lack of trade. This market collapse seems
particularly acute for markets where traders rely heavily on a specific empirical model
such as in derivative markets.

Sen Shankar Som and Ghosh Santanu Kumar (2006) studied the relationship between
stock market liquidity and volatility and risk. The paper also deals with time series data
by applying “Cochrane Orchutt two step procedures”. An effort has been made to
establish a relation between liquidity and volatility in their paper. It has been found that
there is a statistically significant negative relationship between risk and stock market
liquidity. Finally it is concluded that there is no significant relationship between
liquidity and trading activity in terms of turnover.

Shenbagraman (2004) reviewed the role of some non-price variables such as open
interests, trading volume and other factors, in the stock option market for determining
the price of underlying shares in cash market. The study covered stock option
contracts for four months from Nov. 2002 to Feb. 2003 consisting 77 trading

days. The study concluded that net open interest of stock option is one of the
significant variables in determining future spot price of underlying share. The results
clearly indicated that open interest based predictors are statistically more significant
than volume based predictors in Indian context.

All the existing studies found that the Equity return has a significant and
positive impact on the FII (Agarwal, 1997; Chakrabarti, 2001; and Trivedi & Nair,
2003). But given the huge volume of investments, foreign investors could play a role
of market makers and book their profits i.e., they can buy financial assets when the
prices are declining thereby jacking-up the asset prices and sell when the asset prices
are increasing (Gordon & Gupta, 2003). Hence, there is a possibility of bi-directional
relationship between FII and the equity returns.

Masih AM, Masih R, (2007), had studied “Global Stock Futures: A Diagstinoc
Analysis of a Selected Emerging and Developed Markets with Special Reference to
India”, by using tools correlation coefficients , granger’s causality test, augmented
Dicky Fuller test (ADF), Elliott, Rothenberg and Stock point optimal test. The
Authors, through this paper, have tried to find out what kind of relationship exists
between emerging and developed futures markets of selected countries.

Kumar, R. and Chandra, A. (2000), had studied that Individuals often invest in
securities based on approximate rule of thumb, not strictly in tune with market
conditions. Their emotions drive their trading behavior, which in turn drives asset
(stock) prices. Investors fall prey to their own mistakes and sometimes other’s
mistakes, referred to as herd behavior. Markets are efficient, increasingly proving a
theoretical concept as in practice they hardly move efficiently. The purely rational
approach is being subsumed by a broader approach based upon the trading sentiments
of investors. The present paper documents the role of emotional biases towards
 investment (or disinvestment) decisions of individuals, which in turn force stock
prices to move.

Srivastava, S., Yadav, S. S., Jain, P. K. (2008), had conducted a survey of brokers in
the recently introduced derivatives markets in India to examine the brokers’
assessment of market activity and their perception of benefits and costs of
derivative

trading. The need for such a study was felt as previous studies relating to the impact of
derivatives securities on Indian Stock market do not cover the perception of market
participants who form an integral part of the functioning of derivatives markets. The issues
covered in the survey included: perception of brokers about the attractiveness of different
derivative securities for clients; profile of clients dealing in derivative securities; popularity
of a particular derivative security out of the total set; different purposes for which the clients
are using these securities in order of preference; issues concerning derivatives trading;
reasons for non usage of derivatives by some investors.

The investors are using derivative securities for different purposes after its penetration into
the Indian Cost of capital. They use these securities not only for risk management and profit
enhancement but also for speculation and arbitrage. High net worth individuals and
proprietary traders account for a large proportion of broker turnover. Interestingly, some
retail participation was also witnessed despite the fact that these securities are beyond the
reach of retail investors (because of complexity and high initial cost).

Naresh, G., (2006), studied the dynamic growth of the Derivatives market, particularly
Futures & Options and the perceived risks to the financial sector continue to stimulate
debate on the proper regulation of these instruments. Even though this market was initially
fuelled by various expert teams survey, regulatory framework, recommendations byelaws
and rules there is still a debate on the existing regulations such as why is regulation needed?
When and where regulation needed? What are reasonable and attainable goals of these
regulations? Therefore this article critically examines the views of market participants on
the existing regulatory issues in trading Derivative securities in Indian cost of
capitalconditions.
COST OF CAPITAL:
A cost of capitalis a market for securities (debt or equity), where business
enterprises (companies) and governments can raise long-term funds. It is defined as a market
in which money is provided for periods longer than a year, as the raising of short-term funds
takes place on other markets (e.g., the money market). The cost of capitalincludes the stock
market (equity securities) and the bond market (debt). Financial regulators, such as the UK's
Financial Services Authority (FSA) or the U.S. Securities and Exchange Commission (SEC),
oversee the cost of capitals in their designated jurisdictions to ensure that investors are
protected against fraud, among other duties.

Cost of capitals may be classified as primary markets and secondary markets. In

primary markets, new stock or bond issues are sold to investors via a mechanism known as
underwriting. In the secondary markets, existing securities are sold and bought among
investors or traders, usually on a securities exchange, over-the-counter, or elsewhere.

INDIAN COST OF CAPITAL

The Indian Cost of capitalis one of the oldest cost of capitals in Asia which evolved
around 200 years ago.

Chronology of the Indian cost of capitals:

1830s: Trading of corporate shares and stocks in Bank and cotton Presses in Bombay.

1850s: Sharp increase in the capital market brokers owing to the rapid
development of commercial enterprise.

1860-61: Outbreak of the American Civil War and ' Share Mania ' in India.

1894: Formation of the Ahmadabad Shares and Stock Brokers Association.

1908: Formation of the Calcutta Stock Exchange Association.

A market is any one of a variety of different systems, institutions, procedures, social

relations and infrastructures whereby persons trade, and goods and services are exchanged,
forming part of the economy. It is an arrangement that allows buyers and sellers to exchange

76
things. Markets vary in size, range, geographic scale, location, types and variety of human
communities, as well as the types of goods and services traded. Some examples include local
farmers’ markets held in town squares or parking lots, shopping centers and shopping malls,
international currency and commodity markets, legally created markets such as for pollution
permits, and illegal markets such as the market for illicit drugs.

In mainstream economics, the concept of a market is any structure that allows buyers and
sellers to exchange any type of goods, services and information. The exchange of goods or
services for money is a transaction. Market participants consist of all the buyers and sellers of
a good who influence its price. This influence is a major study of economics and has given
rise to several theories and models concerning the basic market forces of supply and demand.
There are two roles in markets, buyers and sellers. The market facilitates trade and enables
the distribution and allocation of resources in a society. Markets allow any tradable item to be
evaluated and priced. A market emerges more or less spontaneously or is constructed
deliberately by human interaction in order to enable the exchange of rights (cf. ownership) of
services and goods.

Historically, markets originated in physical marketplaces which would often develop into —
or from — small communities, towns and cities.

Types of markets

Although many markets exist in the traditional sense — such as a marketplace — there
are various other types of markets and various organizational structures to assist their
functions. The nature of business transactions could define markets.

77
Financial markets

Financial markets facilitate the exchange of liquid assets. Most investors prefer investing
in two markets, the stock markets and the bond markets. NYSE, AMEX, and the NASDAQ
are the most common stock markets in the US. Futures markets, where contracts are
exchanged regarding the future delivery of goods are often an outgrowth of general
commodity markets.

Currency markets are used to trade one currency for another, and are often used for
speculation on currency exchange rates.

The money market is the name for the global market for lending and borrowing.

Prediction markets

Prediction markets are a type of speculative market in which the goods exchanged are
futures on the occurrence of certain events. They apply the market dynamics to facilitate
information aggregation.

Organization of markets

A market can be organized as an auction, as a private electronic market, as a commodity

wholesale market, as a shopping center, as a complex institution such as a stock market, and
as an informal discussion between two individuals.

Markets of varying types can spontaneously arise whenever a party has interest in a good
or service that some other party can provide. Hence there can be a market for cigarettes in
correctional facilities, another for chewing gum in a playground, and yet another for contracts
for the future delivery of a commodity. There can be black markets, where a good is
exchanged illegally and virtual markets, such as eBay, in which buyers and sellers do not
physically interact during negotiation. There can also be markets for goods under a command
economy despite pressure to repress them.

Mechanisms of markets

In economics, a market that runs under laissez-faire policies is a free market. It is

"free" in the sense that the government makes no attempt to intervene through taxes,
subsidies, minimum wages, price ceilings, etc. Market prices may be distorted by a seller or
sellers with monopoly power, or a buyer with monophony power. Such price distortions can
have an adverse effect on market participant's welfare and reduce the efficiency of market
outcomes. Also, the level of organization or negotiation power of buyers, markedly affects

78
the functioning of the market. Markets where price negotiations meet equilibrium though still
do not arrive at desired outcomes for both sides are said to experience market failure.

Study of markets

The study of actual existing markets made up of persons interacting in space and
place in diverse ways is widely seen as an antidote to abstract and all-encompassing concepts
of “the market” and has historical precedent in the works of Fernand Braudel and Karl
Polanyi. The latter term is now generally used in two ways. First, to denote the abstract
mechanisms whereby supply and demand confront each other and deals are made. In its
place, reference to markets reflects ordinary experience and the places, processes and
institutions in which exchanges occurs. Second, the market is often used to signify an
integrated, all-encompassing and cohesive capitalist world economy. A widespread trend in
economic history and sociology is skeptical of the idea that it is possible to develop a theory
to capture an essence or unifying thread to markets.. For economic geographers, reference to
regional, local, or commodity specific markets can serve to undermine assumptions of global
integration, and highlight geographic variations in the structures, institutions, histories, path
dependencies, forms of interaction and modes of self-understanding of agents in different
spheres of market exchange Reference to actual markets can show capitalism not as a
totalizing force or completely encompassing mode of economic activity, but rather as “a set
of economic practices scattered over a landscape, rather than a systemic concentration of
power”

C. B. Macpherson identifies an underlying model of the market underlying Anglo-

American liberal-democratic political economy and philosophy in the seventeenth and
eighteenth centuries: Persons are cast as self-interested individuals, who enter into contractual
relations with other such individuals, concerning the exchange of goods or personal
capacities cast as commodities, with the motive of maximizing pecuniary interest. The state
and its governance systems are cast as outside of this framework.). This model came to
dominant economic thinking in the later nineteenth century, as economists such as Ricardo,
Mill, Jevons, Walras and later neo-classical economics shifted from reference to
geographically located marketplaces to an abstract “market”. This tradition is continued in
contemporary neoliberalism, where the market is held up as optimal for wealth creation and
human freedom, and the states’ role imagined as minimal, reduced to that of upholding and
keeping stable property rights, contract, and money supply. This allowed for boilerplate

79
economic and institutional restructuring under structural adjustment and post-Communist
reconstruction.

Similar formalism occurs in a wide variety of social democratic and Marxist discourses that
situate political action as antagonistic to the market. In particular, commodification theorists
such as Georg Lukács insist that market relations necessarily lead to undue exploitation of
labour and so need to be opposed in toto. ,). Pierre Bourdieu has suggested the market model
is becoming self-realizing, in virtue of its wide acceptance in national and international
institutions through the 1990s. ). The formalist conception faces a number of insuperable
difficulties, concerning the putatively global scope of the market to cover the entire Earth, in
terms of penetration of particular economies, and in terms of whether particular claims about
the subjects (individuals with pecuniary interest), objects (commodities), and modes of
exchange (transactions) apply to any actually existing markets.

A central theme of empirical analyses is the variation and proliferation of types of markets
since the rise of capitalism and global scale economies. The Regulation School stresses the
ways in which developed capitalist countries have implemented varying degrees and types of
environmental, economic, and social regulation, taxation and public spending, fiscal policy
and government provisioning of goods, all of which have transformed markets in uneven and
geographical varied ways and created a variety of mixed economies. Drawing on concepts of
institutional variance and path dependency, varieties of capitalism theorists (such as Hall and
Soskice) identify two dominant modes of economic ordering in the developed capitalist
countries, “coordinated market economies” such as Germany and Japan, and an Anglo-
American “liberal market economies”. However, such approaches imply that the Anglo-
American liberal market economies in fact operate in a matter close to the abstract notion of
“the market”. While Anglo-American countries have seen increasing introduction of neo-
liberal forms of economic ordering, this has not lead to simple convergence, but rather a
variety of hybrid institutional orderings.. Rather, a variety of new markets have emerged,
such as for carbon trading or rights to pollute. In some cases, such as emerging markets for
water, different forms of privatization of different aspects of previously state run
infrastructure have created hybrid private-public formations and graded degrees of
commodification, commercialization and privatization

Problematic for market formalism is the relationship between formal capitalist economic
processes and a variety of alternative forms, ranging from semi-feudal and peasant economies
widely operative in many developing economies, to informal markets, barter systems, worker

80
cooperatives, or illegal trades that occur in most developed countries. Practices of
incorporation of non-Western peoples into global markets in the nineteenth and twentieth
century did not merely result in the quashing of former social economic institutions. Rather,
various modes of articulation arose between transformed and hybridized local traditions and
social practices and the emergence world economy. So called capitalist markets in fact
include and depend on a wide range of geographically situated economic practices that do not
follow the market model. Economies are thus hybrids of market and non-market elements

Helpful here is J. K. Gibson-Graham’s complex topology of the diversity of

contemporary market economies describing different types of transactions, labour, and
economic agents. Transactions can occur in underground markets (such as for marijuana) or
be artificially protected (such as for patents). They can cover the sale of public goods under
privatization schemes to co-operative exchanges and occur under varying degrees of
monopoly power and state regulation. Likewise, there are a wide variety of economic agents,
which engage in different types of transactions on different terms: One cannot assume the
practices of a religious kindergarten, multinational corporation, state enterprise, or
community-based cooperative can be subsumed under the same logic of calculability (pp. 53–
78). This emphasis on proliferation can also be contrasted with continuing scholarly attempts
to show underlying cohesive and structural similarities to different markets.

A prominent entry point for challenging the market model’s applicability concerns
exchange transactions and the homo economicus assumption of self-interest maximization.
There are now a number of streams of economic sociological analysis of markets focusing on
the role of the social in transactions, and the ways transactions involve social networks and
relations of trust, cooperation and other bonds.. Economic geographers in turn draw attention
to the ways in exchange transactions occur against the backdrop of institutional, social and
geographic processes, including class relations, uneven development, and historically
contingent path dependencies. A useful schema is provided by Michel Callon’s concept of
framing: Each economic act or transaction occurs against, incorporates and also re-performs a
geographically and cultural specific complex of social histories, institutional arrangements,
rules and connections. These network relations are simultaneously bracketed, so that persons
and transactions may be disentangled from thick social bonds. The character of calculability
is imposed upon agents as they come to work in markets and are “formatted” as calculative
agencies. Market exchanges contain a history of struggle and contestation that produced
actors predisposed to exchange under certain sets of rules. As such market transactions can

81
never be disembedded from social and geographic relations and there is no sense to talking of
degrees of embeddedness and disembeddeness.

An emerging theme worthy of further study is the interrelationship, interpenetrability and

variations of concepts of persons, commodities, and modes of exchange under particular
market formations. This is most pronounced in recent movement towards post-structuralist
theorizing that draws on Foucault and Actor Network Theory and stress relational aspects of
personhood, and dependence and integration into networks and practical systems.
Commodity network approaches further both deconstruct and show alternatives to the market
models concept of commodities. Here, both researchers and market actors are understood as
reframing commodities in terms of processes and social and ecological relationships. Rather
than a mere objectification of things traded, the complex network relationships of exchange
in different markets calls on agents to alternatively deconstruct or “get with” the fetish of
commodities. Gibson-Graham thus read a variety of alternative markets, for fair trade and
organic foods, or those using Local Exchange Trading Systems as not only contributing to
proliferation, but also forging new modes of ethical exchange and economic subjectivities.

Most markets are regulated by state wide laws and regulations. While barter markets exist,
most markets use currency or some other form of money.

A security is a fungible, negotiable instrument representing financial value. Securities are

broadly categorized into debt securities (such as banknotes, bonds and debentures) and equity
securities, e.g., common stocks; and derivative contracts, such as forwards, futures, options
and swaps. The company or other entity issuing the security is called the issuer. A country's
regulatory structure determines what qualifies as a security. For example, private investment
pools may have some features of securities, but they may not be registered or regulated as
such if they meet various restrictions.

Securities may be represented by a certificate or, more typically, "non-certificated", that is

in electronic or "book entry" only form. Certificates may be bearer, meaning they entitle the
holder to rights under the security merely by holding the security, or registered, meaning they
entitle the holder to rights only if he or she appears on a security register maintained by the
issuer or an intermediary. They include shares of corporate stock or mutual funds, bonds
issued by corporations or governmental agencies, stock options or other options, limited
partnership units, and various other formal investment instruments that are negotiable and
fungible.

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Classification

Securities may be classified according to many categories or classification systems:

 Currency of denomination

 Ownership right

 Term to maturity

 Degree of liquidity

 Income payments

 Tax treatment

 Credit rating

 Industrial sector or "Industry". ("Sector" often refers to a higher level or broader

category, such as Consumer Discretionary, whereas "industry" often refers to a lower
level classification, such as Consumer Appliances. See Industry for a discussion of
some classification systems.)

 Region or country (such as country of incorporation, country of principal sales/market

of its products or services, or country in which the principal securities exchange on
which it trades is located)

 Market capitalization

 State (typically for municipal or "tax-free" bonds in the U.S.)

By type of issuer

Issuers of securities include commercial companies, government agencies, local

authorities and international and supranational organizations (such as the World Bank). Debt
securities issued by a government (called government bonds or sovereign bonds) generally
carry a lower interest rate than corporate debt issued by commercial companies. Interests in
an asset—for example, the flow of royalty payments from intellectual property—may also be
turned into securities. These repackaged securities resulting from a securitization are usually
issued by a company established for the purpose of the repackaging—called a special purpose
vehicle (SPV). See "Repackaging" below. SPVs are also used to issue other kinds of
securities. SPVs can also be used to guarantee securities, such as covered bonds.

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New capital

Commercial enterprises have traditionally used securities as a means of raising new

capital. Securities may be an attractive option relative to bank loans depending on their
pricing and market demand for particular characteristics. Another disadvantage of bank loans
as a source of financing is that the bank may seek a measure of protection against default by
the borrower via extensive financial covenants. Through securities, capital is provided by
investors who purchase the securities upon their initial issuance. In a similar way, the
governments may raise capital through the issuance of securities (see government debt).

Repackaging

In recent decades securities have been issued to repackage existing assets. In a traditional
securitization, a financial institution may wish to remove assets from its balance sheet in
order to achieve regulatory capital efficiencies or to accelerate its receipt of cash flow from
the original assets. Alternatively, an intermediary may wish to make a profit by acquiring
financial assets and repackaging them in a way which makes them more attractive to
investors. In other words, a basket of assets is typically contributed or placed into a separate
legal entity such as a trust or SPV, which subsequently issues shares of equity interest to
investors. This allows the sponsor entity to more easily raise capital for these assets as
opposed to finding buyers to purchase directly such assets.

By type of holder

Investors in securities may be retail, i.e. members of the public investing other than by
way of business. The greatest part in terms of volume of investment is wholesale, i.e. by
financial institutions acting on their own account, or on behalf of clients. Important
institutional investors include investment banks, insurance companies, pension funds and
other managed funds.

Investment

The traditional economic function of the purchase of securities is investment, with the view
to receiving income and/or achieving capital gain. Debt securities generally offer a higher
rate of interest than bank deposits, and equities may offer the prospect of capital growth.
Equity investment may also offer control of the business of the issuer. Debt holdings may
also offer some measure of control to the investor if the company is a fledgling start-up or an

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old giant undergoing 'restructuring'. In these cases, if interest payments are missed, the
creditors may take control of the company and liquidate it to recover some of their
investment.

Collateral

The last decade has seen an enormous growth in the use of securities as collateral.
Purchasing securities with borrowed money secured by other securities or cash itself is called
"buying on margin." Where A is owed a debt or other obligation by B, A may require B to
deliver property rights in securities to A, either at inception (transfer of title) or only in
default (non-transfer-of-title institutional). For institutional loans property rights are not
transferred but nevertheless enable A to satisfy its claims in the event that B fails to make
good on its obligations to A or otherwise becomes insolvent. Collateral arrangements are
divided into two broad categories, namely security interests and outright collateral transfers.
Commonly, commercial banks, investment banks, government agencies and other
institutional investors such as mutual funds are significant collateral takers as well as
providers. In addition, private parties may utilize stocks or other securities as collateral for
portfolio loans in securities lending scenarios.

On the consumer level, loans against securities have grown into three distinct groups
over the last decade: 1) Standard Institutional Loans, generally offering low loan-to-value
with very strict call and coverage regimens; 2) Transfer-of-Title (ToT) Loans, typically
provided by private parties where borrower ownership is completely extinguished save for
the rights provided in the loan contract; and 3) Enhanced Institutional Loan Facilities - a
marriage of public and private entities in the form of fully regulated, institutionally managed
brokerage financing supplemented ("enhanced") by private capital where the securities
remain in the client's title and account unless there is an event of default. Of the three,
transfer-of-title loans typically allow the lender to sell or sell short at least some portion of
the shares (if not all) to fund the transaction, and many operate outside the regulated financial
universe as a private loan program. Institutionally managed loans, on the other hand, draw
loan funds from credit lines or other institutional funding sources and do not involve any loss
of borrower ownership or control thereby making them more transparent.

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Debt and equity

Securities are traditionally divided into debt securities and equities

Debt

Debt securities may be called debentures, bonds, deposits, notes or commercial paper
depending on their maturity and certain other characteristics. The holder of a debt security is
typically entitled to the payment of principal and interest, together with other contractual
rights under the terms of the issue, such as the right to receive certain information. Debt
securities are generally issued for a fixed term and redeemable by the issuer at the end of that
term. Debt securities may be protected by collateral or may be unsecured, and, if they are
unsecured, may be contractually "senior" to other unsecured debt meaning their holders
would have a priority in a bankruptcy of the issuer. Debt that is not senior is "subordinated".

Corporate bonds represent the debt of commercial or industrial entities. Debentures have a
long maturity, typically at least ten years, whereas notes have a shorter maturity. Commercial
paper is a simple form of debt security that essentially represents a post-dated check with a
maturity of not more than 270 days.

Money market instruments are short term debt instruments that may have characteristics
of deposit accounts, such as certificates of deposit, and certain bills of exchange. They are
highly liquid and are sometimes referred to as "near cash". Commercial paper is also often
highly liquid.

Euro debt securities are securities issued internationally outside their domestic market in
a denomination different from that of the issuer's domicile. They include eurobonds and
euronotes. Eurobonds are characteristically underwritten, and not secured, and interest is paid
gross. A euronote may take the form of euro-commercial paper (ECP) or euro-certificates of
deposit.

Government bonds are medium or long term debt securities issued by sovereign
governments or their agencies. Typically they carry a lower rate of interest than corporate
bonds, and serve as a source of finance for governments. U.S. federal government bonds are
called treasuries. Because of their liquidity and perceived low risk, treasuries are used to
manage the money supply in the open market operations of non-US central banks.

Sub-sovereign government bonds, known in the U.S. as municipal bonds, represent the
debt of state, provincial, territorial, municipal or other governmental units other than
sovereign governments.

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 Supranational bonds represent the debt of international organizations such as the World
Bank, the International Monetary Fund, regional multilateral development banks and others.

Equity

An equity security is a share of equity interest in an entity such as the capital stock of a
company, trust or partnership. The most common form of equity interest is common stock,
although preferred equity is also a form of capital stock. The holder of an equity is a
shareholder, owning a share, or fractional part of the issuer. Unlike debt securities, which
typically require regular payments (interest) to the holder, equity securities are not entitled to
any payment. In bankruptcy, they share only in the residual interest of the issuer after all
obligations have been paid out to creditors. However, equity generally entitles the holder to a
pro rata portion of control of the company, meaning that a holder of a majority of the equity
is usually entitled to control the issuer. Equity also enjoys the right to profits and capital gain,
whereas holders of debt securities receive only interest and repayment of principal regardless
of how well the issuer performs financially. Furthermore, debt securities do not have voting
rights outside of bankruptcy. In other words, equity holders are entitled to the "upside" of the
business and to control the business.

Hybrid

Hybrid securities combine some of the characteristics of both debt and equity securities.

Preference shares form an intermediate class of security between equities and debt. If the
issuer is liquidated, they carry the right to receive interest and/or a return of capital in priority
to ordinary shareholders. However, from a legal perspective, they are capital stock and
therefore may entitle holders to some degree of control depending on whether they contain
voting rights.

Convertibles are bonds or preferred stock which can be converted, at the election of the
holder of the convertibles, into the common stock of the issuing company. The convertibility,
however, may be forced if the convertible is a callable bond, and the issuer calls the bond.
The bondholder has about 1 month to convert it, or the company will call the bond by giving
the holder the call price, which may be less than the value of the converted stock. This is
referred to as a forced conversion.

Equity warrants are options issued by the company that allow the holder of the warrant to
purchase a specific number of shares at a specified price within a specified time. They are
often issued together with bonds or existing equities, and are, sometimes, detachable from

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them and separately tradable. When the holder of the warrant exercises it, he pays the money
directly to the company, and the company issues new shares to the holder.

Warrants, like other convertible securities, increases the number of shares outstanding, and
are always accounted for in financial reports as fully diluted earnings per share, which
assumes that all warrants and convertibles will be exercised.

The securities markets

Primary and secondary market

In the U.S., the public securities markets can be divided into primary and secondary
markets. The distinguishing difference between the two markets is that in the primary market,
the money for the securities is received by the issuer of those securities from investors,
typically in an initial public offering transaction, whereas in the secondary market, the
securities are simply assets held by one investor selling them to another investor (money goes
from one investor to the other). An initial public offering is when a company issues public
stock newly to investors, called an "IPO" for short. A company can later issue more new
shares, or issue shares that have been previously registered in a shelf registration. These later
new issues are also sold in the primary market, but they are not considered to be an IPO but
are often called a "secondary offering". Issuers usually retain investment banks to assist them
in administering the IPO, obtaining SEC (or other regulatory body) approval of the offering
filing, and selling the new issue. When the investment bank buys the entire new issue from
the issuer at a discount to resell it at a markup, it is called a firm commitment underwriting.
However, if the investment bank considers the risk too great for an underwriting, it may only
assent to a best effort agreement, where the investment bank will simply do its best to sell the
new issue.

In order for the primary market to thrive, there must be a secondary market, or aftermarket
which provides liquidity for the investment security, where holders of securities can sell them
to other investors for cash. Otherwise, few people would purchase primary issues, and, thus,
companies and governments would be restricted in raising equity capital (money) for their
operations. Organized exchanges constitute the main secondary markets. Many smaller issues
and most debt securities trade in the decentralized, dealer-based over-the-counter markets.

In Europe, the principal trade organization for securities dealers is the International Cost
of capitalAssociation. In the U.S., the principal trade organization for securities dealers is the
Securities Industry and Financial Markets Association, which is the result of the merger of

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the Securities Industry Association and the Bond Market Association. The Financial
Information Services Division of the Software and Information Industry Association
(FISD/SIIA) represents a round-table of market data industry firms, referring to them as
Consumers, Exchanges, and Vendors.

Public offer and private placement

In the primary markets, securities may be offered to the public in a public offer.
Alternatively, they may be offered privately to a limited number of qualified persons in a
private placement. Sometimes a combination of the two is used. The distinction between the
two is important to securities regulation and company law. Privately placed securities are not
publicly tradable and may only be bought and sold by sophisticated qualified investors. As a
result, the secondary market is not nearly as liquid as it is for public (registered) securities.

Another category, sovereign bonds, is generally sold by auction to a specialized class of

dealers.

Listing and OTC dealing

Securities are often listed in a stock exchange, an organized and officially recognized
market on which securities can be bought and sold. Issuers may seek listings for their
securities in order to attract investors, by ensuring that there is a liquid and regulated market
in which investors will be able to buy and sell securities.

Growth in informal electronic trading systems has challenged the traditional business of
stock exchanges. Large volumes of securities are also bought and sold "over the counter"
(OTC). OTC dealing involves buyers and sellers dealing with each other by telephone or
electronically on the basis of prices that are displayed electronically, usually by commercial
information vendors such as Reuters and Bloomberg.

There are also eurosecurities, which are securities that are issued outside their domestic
market into more than one jurisdiction. They are generally listed on the Luxembourg Stock
Exchange or admitted to listing in London. The reasons for listing eurobonds include
regulatory and tax considerations, as well as the investment restrictions.

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Market

London is the centre of the eurosecurities markets. There was a huge rise in the
eurosecurities market in London in the early 1980s. Settlement of trades in eurosecurities is
currently effected through two European computerized clearing/depositories called Euroclear
(in Belgium) and Clearstream (formerly Cedelbank) in Luxembourg.

The main market for Eurobonds is the EuroMTS, owned by Borsa Italiana and Euronext.
There are ramp up market in Emergent countries, but it is growing slowly.

Physical nature of securities

Certificated securities

Securities that are represented in paper (physical) form are called certificated securities.
They may be bearer or registered.

Bearer securities

Bearer securities are completely negotiable and entitle the holder to the rights under the
security (e.g. to payment if it is a debt security, and voting if it is an equity security). They
are transferred by delivering the instrument from person to person. In some cases, transfer is
by endorsement, or signing the back of the instrument, and delivery.

Regulatory and fiscal authorities sometimes regard bearer securities negatively, as they
may be used to facilitate the evasion of regulatory restrictions and tax. In the United
Kingdom, for example, the issue of bearer securities was heavily restricted firstly by the
Exchange Control Act 1947 until 1953. Bearer securities are very rare in the United States
because of the negative tax implications they may have to the issuer and holder.

Registered securities

In the case of registered securities, certificates bearing the name of the holder are issued,
but these merely represent the securities. A person does not automatically acquire legal
ownership by having possession of the certificate. Instead, the issuer (or its appointed agent)
maintains a register in which details of the holder of the securities are entered and updated as
appropriate. A transfer of registered securities is effected by amending the register.

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Non-certificated securities and global certificates

Modern practice has developed to eliminate both the need for certificates and maintenance
of a complete security register by the issuer. There are two general ways this has been
accomplished.

Non-certificated securities

In some jurisdictions, such as France, it is possible for issuers of that jurisdiction to

maintain a legal record of their securities electronically.

In the United States, the current "official" version of Article 8 of the Uniform Commercial
Code permits non-certificated securities. However, the "official" UCC is a mere draft that
must be enacted individually by each of the U.S. states. Though all 50 states (as well as the
District of Columbia and the U.S. Virgin Islands) have enacted some form of Article 8, many
of them still appear to use older versions of Article 8, including some that did not permit non-
certificated securities.

In the U.S. today, most mutual funds issue only non-certificated shares to shareholders,
though some may issue certificates only upon request and may charge a fee. Shareholders
typically don't need certificates except for perhaps pledging such shares as collateral for a
loan.

Global certificates, book entry interests, depositories

In order to facilitate the electronic transfer of interests in securities without dealing with
inconsistent versions of Article 8, a system has developed whereby issuers deposit a single
global certificate representing all the outstanding securities of a class or series with a
universal depository. This depository is called The Depository Trust Company, or DTC.
DTC's parent, Depository Trust & Clearing Corporation (DTCC), is a non-profit cooperative
owned by approximately thirty of the largest Wall Street players that typically act as brokers
or dealers in securities. These thirty banks are called the DTC participants. DTC, through a
legal nominee, owns each of the global securities on behalf of all the DTC participants.

All securities traded through DTC are in fact held, in electronic form, on the books of
various intermediaries between the ultimate owner, e.g. a retail investor, and the DTC
participants. For example, Mr. Smith may hold 100 shares of Coca Cola, Inc. in his brokerage
account at local broker Jones & Co. brokers. In turn, Jones & Co. may hold 1000 shares of
Coca Cola on behalf of Mr. Smith and nine other customers. These 1000 shares are held by

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Jones & Co. in an account with Goldman Sachs, a DTC participant, or in an account at
another DTC participant. Goldman Sachs in turn may hold millions of Coca Cola shares on
its books on behalf of hundreds of brokers similar to Jones & Co. Each day, the DTC
participants settle their accounts with the other DTC participants and adjust the number of
shares held on their books for the benefit of customers like Jones & Co. Ownership of
securities in this fashion is called beneficial ownership. Each intermediary holds on behalf of
someone beneath him in the chain. The ultimate owner is called the beneficial owner. This is
also referred to as owning in "Street name".

Among brokerages and mutual fund companies, a large amount of mutual fund share
transactions take place among intermediaries as opposed to shares being sold and redeemed
directly with the transfer agent of the fund. Most of these intermediaries such as brokerage
firms clear the shares electronically through the National Securities Clearing Corp. or
"NSCC", a subsidiary of DTCC.

Other depositories: Euroclear and Clearstream

Besides DTC, two other large securities depositories exist, both in Europe: Euroclear and
Clearstream.

Divided and undivided security

The terms "divided" and "undivided" relate to the proprietary nature of a security.

Each divided security constitutes a separate asset, which is legally distinct from each other
security in the same issue. Pre-electronic bearer securities were divided. Each instrument
constitutes the separate covenant of the issuer and is a separate debt.

With undivided securities, the entire issue makes up one single asset, with each of the
securities being a fractional part of this undivided whole. Shares in the secondary markets are
always undivided. The issuer owes only one set of obligations to shareholders under its
memorandum, articles of association and company law. A share represents an undivided
fractional part of the issuing company. Registered debt securities also have this undivided
nature.

Fungible and non-fungible security

The terms "fungible" and "non-fungible" relate to the way in which securities are held.

If an asset is fungible, this means that if such an asset is lent, or placed with a custodian, it
is customary for the borrower or custodian to be obliged at the end of the loan or custody

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arrangement to return assets equivalent to the original asset, rather than the specific identical
asset. In other words, the redelivery of fungibles is equivalent and not in specie In other
words, if an owner of 100 shares of IBM transfers custody of those shares to another party to
hold them for a purpose, at the end of the arrangement, the holder need simply provide the
owner with 100 shares of IBM which are identical to that received. Cash is also an example
of a fungible asset. The exact currency notes received need not be segregated and returned to
the owner.

Undivided securities are always fungible by logical necessity. Divided securities may or
may not be fungible, depending on market practice. The clear trend is towards fungible
arrangements.

The primary market is that part of the cost of capitals that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain funding through
the sale of a new stock or bond issue. This is typically done through a syndicate of securities
dealers. The process of selling new issues to investors is called underwriting. In the case of a
new stock issue, this sale is an initial public offering (IPO). Dealers earn a commission that is
built into the price of the security offering, though it can be found in the prospectus.

Features of primary markets are:

 This is the market for new long term equity capital. The primary market is the market
where the securities are sold for the first time. Therefore it is also called the new issue
market (NIM).

 In a primary issue, the securities are issued by the company directly to investors.

 The company receives the money and issues new security certificates to the investors.

 Primary issues are used by companies for the purpose of setting up new business or
for expanding or modernizing the existing business.

 The primary market performs the crucial function of facilitating capital formation in
the economy.

 The new issue market does not include certain other sources of new long term
external finance, such as loans from financial institutions. Borrowers in the new issue
market may be raising capital for converting private capital into public capital; this is
known as "going public."

 The financial assets sold can only be redeemed by the original holder

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Methods of issuing securities in the primary market are:

 Initial public offering;

 Rights issue (for existing companies);

 Preferential issue.

The secondary market, also known as the aftermarket, is the financial market where
previously issued securities and financial instruments such as stock, bonds, options, and
futures are bought and sold.. The term "secondary market" is also used to refer to the market
for any used goods or assets, or an alternative use for an existing product or asset where the
customer base is the second market (for example, corn has been traditionally used primarily
for food production and feedstock, but a "second" or "third" market has developed for use in
ethanol production). Another commonly referred to usage of secondary market term is to
refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie
Mac.

With primary issuances of securities or financial instruments, or the primary market,

investors purchase these securities directly from issuers such as corporations issuing shares in
an IPO or private placement, or directly from the federal government in the case of treasuries.
After the initial issuance, investors can purchase from other investors in the secondary
market.

The secondary market for a variety of assets can vary from loans to stocks, from
fragmented to centralized, and from illiquid to very liquid. The major stock exchanges are the
most visible example of liquid secondary markets - in this case, for stocks of publicly traded
companies. Exchanges such as the New York Stock Exchange, Nasdaq and the American
Stock Exchange provide a centralized, liquid secondary market for the investors who own
stocks that trade on those exchanges. Most bonds and structured products trade “over the
counter,” or by phoning the bond desk of one’s broker-dealer. Loans sometimes trade online
using a Loan Exchange

Function

Secondary marketing is vital to an efficient and modern cost of capital. In the secondary
market, securities are sold by and transferred from one investor or speculator to another. It is
therefore important that the secondary market be highly liquid (originally, the only way to
create this liquidity was for investors and speculators to meet at a fixed place regularly; this is

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how stock exchanges originated, see History of the Stock Exchange). As a general rule, the
greater the number of investors that participate in a given marketplace, and the greater the
centralization of that marketplace, the more liquid the market.

Fundamentally, secondary markets mesh the investor's preference for liquidity (i.e., the
investor's desire not to tie up his or her money for a long period of time, in case the investor
needs it to deal with unforeseen circumstances) with the capital user's preference to be able to
use the capital for an extended period of time.

Accurate share price allocates scarce capital more efficiently when new projects are
financed through a new primary market offering, but accuracy may also matter in the
secondary market because: 1) price accuracy can reduce the agency costs of management,
and make hostile takeover a less risky proposition and thus move capital into the hands of
better managers, and 2) accurate share price aids the efficient allocation of debt finance
whether debt offerings or institutional borrowing.

Related usage

Term may refer to markets in things of value other than securities. For example, the ability
to buy and sell intellectual property such as patents, or rights to musical compositions, is
considered a secondary market because it allows the owner to freely resell property
entitlements issued by the government. Similarly, secondary markets can be said to exist in
some real estate contexts as well (e.g. ownership shares of time-share vacation homes are
bought and sold outside of the official exchange set up by the time-share issuers). These have
very similar functions as secondary stock and bond markets in allowing for speculation,
providing liquidity, and financing through securitization.

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Private Secondary Markets

Partially due to increased compliance and reporting obligations enacted in the Sarbanes-
Oxley Act of 2002, private secondary markets began to emerge. These markets are generally
only available to institutional or accredited investors and allow trading of unregistered and
private company securities.

In private equity, the secondary market (also often called private equity secondary’s or
secondary’s) refers to the buying and selling of pre-existing investor commitments to private
equity funds. Sellers of private equity investments sell not only the investments in the fund
but also their remaining unfunded commitments to the funds.

Fig 3.1

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EQUITY SHARES:

They are also called as common stock. The common stock holders of a company
are its real owners, the own the company and assume the ultimate risk associate with
ownership. Their liability, how ever is restricted to the amount of their investment in the
event of liquidation, these stock holders have a residual claim on the assets of the
company after the claims of all creditors and preferred stock holders,are settled in full.
Common stock like preferred stock, as no maturity date.NSE started trading in the
equities segment (Cost of capitalsegment) on November 3, 1994 and within a short span
of 1 year became the largest exchange in India in terms of volumes transacted.Trading
volumes in the equity segment have grown rapidly with average daily turnover increasing
from Rs.18 crores during 1994-95 to Rs.14,148 corers during FY 2007-08. During the
year 2007- o8,NSE reported a turnover of Rs.3,551,038 crores in the equities
segment.The Equities section provides you with an insight into the equities segment of
NSE and also provides real-time quotes and statistics of the equities market. In-depth
information regarding listing of securities, trading systems & processes,clearing and
settlement, risk management, trading statistics etc are available here.

AUTHORIZED, ISSUED AND OUTSTANDING SHARES:

An authorized shares is the maximum no. of shares that the articles of association
(AOA) of
thecompany permit it to issue in the market. A company can however amend its AOA to
increase the number. The number of shares that the company has actually issued out these
authorized shares is called as issued shares. A company usually likes to have a number of
shares that a authorized but un-issued. These un-issued allow flexibility in granting
stock options, pursuing merger targets andsplitting the stock. Outstanding shares refer to
the number of shares issued and actually held by public. The corporation can buy back
part of its issued stock and hold it as a treasury stock.Par value , book value and
liquidating value :The par value of a share of stock is merely a recorded figure in the
corporate charter and is of little economic significance. A company should not, however,
issue common stock at a price less than par value, because any discount from par value (
amount by which the issuing price is less than the par value) is considered a contingent

97
liability of the own wrest to the creditors of the company. In the event of liquidation, the
share holders would be legally liable to creditors of any discount from par value.

Example: suppose that xyz inc. is ready to start business for the first time and sold 10000
shares rupees 10 each . the share holders equity portion of the balance sheet would be
common stock @ 10 each at par value:10000 shares issued and outstanding RS100000
Total shares holders equity RS100000.The book value per share of common stock is the
shareholders equity – total assets minus liabilities and preferred stocks as listed on the
balance sheet- dividing by the number of shares outstanding .suppose that xyz is now 1
year old has generated RS 500000 after- tax profits, but pays number dividing. Thus,
retained earnings are RS 50000. the share holders equity is now RS 100000+ RS 50000
=150000 and the book value per share is rs 1500000/10000=RS 25.Although one might
expect the book value per share of stock to correspond to the liquidating value (per share)
of the company, most frequently does not. Often assts are sold for less than their values,
particularly when liquidating costs are involved.

Market value
Market value per share is the current price at which the stock is traded. For actively
traded stocks, market price quotations are readily available. For the many in active stocks
that have thin markets, price are difficult to obtain. Even when obtainable, the
information may reflect only the sale of a few shares of stock of common stock and not
typify the market value of the firm as the whole. The market value of a share of common
stock will usually differs from its book value and its liquidating value. Market value per
share of common stock is a function of the current and expected future dividends of the
company and the perceived risk of the stock on the part of investors.

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Rights of common share holders:
1.Rights of income:

If the company fails to pay contractual interest and principle and payments to
creditors, the creditors are able to take legal action to insure that principle payments are
made of company is liquidated. Common share holders, on the other hand, have legal
recourse to a company for not distributing profits. only if management, the board of
directors, or both engaged in fraud may share holders take their case to court and
possibly force the company to pay dividends.

1. voting rights:
The common shares of a company are its owners and they are entitled to elect a
board of directors. In a large corporations shares holders usually exercise only indirect
control through the board of directors they elect. The board, in turn, select the
management, and the management actually controls the operations of the company. In a
sole proprietorship, partnership, or small corporation, the owners usually control the
operation of the business directly.

2. Proxies and proxy contests:

Common share holders are entitled to one vote for each share of stock that they
own . it is usually difficult, both physically and financially, for the most share holders to
attend a corporation’s annual meetings. Because of this, many share holders vote of
means of a proxy, a legal document by which share holders assign their right to vote to
another person.

3. Voting procedures:
Depending on the corporate charter, the board of directors is elected under
either

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Majority rule voting system or a cumulative voting system. Under the majority rule
system, stock holders have one for each share of stock that they own, and they must vote
for each director position that is open. Under cumulating voting system, a stock holder is
able to accumulate votes and cast them for less than the total number of directors being
elected. The total number of votes of each share holders is equal to the number of shares
the stock holder times the number of directors being elected.
ISSUE MECHNISM:
The success of an issue depends, partly, on the Issue Mechanism.
The methods by, which new issues are made of

1. public issue through prospectus.

2. Offer for sale.

3. Placement.

4. Rights issue.

1.Public Issue Through Prospectus:

Under this method, the issuing companies themselves offer directly to general
public a fixed number of shares at a stated price, which in the case of new companies is
invariably the face value of the securities, and in the case of existing companies, it may
something include a underwritten to ensure arising out of unsatisfactory public response.
Transparency and wide distributions of shares are its important and advantages. The
foundation of the public issue method is a prospectus, the minimum contents of which
are prescribed by the Companies Act 1956. It also provides both civil and criminal
liabilityfor any misstatement in the prospectus. Additional disclosure requirements are
also mandated by the SEBI.

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The content of the prospectus, inter aria, include:

 Name and registered office of the issuing company.

 Existing and proposed activities.
 Board of directors.
 Location of the industry.
 Authorized, subscribed and proposed issued of capital to public.
 Dates of opening and closing of subscription list.
 Names of broker, underwriter, and other from whom application forms along
with copies
 prospectus can be obtained.
 Minimum subscription.
 Names of underwriter , if any, along with a statement that in the opinion of the
directors.
 resources of the underwriter are sufficient to meet the underwriting obligation.
 A statement that the company will make an application stock exchange for the
permission to deal in or for a quotation of its and so on.

2. offer for sale:

Broker to their own client of securities which have been previously purchased or
subscribed”. Under this method, securities are acquired by the issue houses, as in offer for
sale method, but instead of being subsequently offered to the public, they are placed with
the client of the issue houses, both individual and institutional investors. Each issue
house has a prepared to subscribe to any securities which are issued in this manner. Its
procedure is the same with the only Difference of ultimate investors. In this method, no
formal underwriting of the issue is required as the placement itself Amount to
underwriting since the houses agree to place the issue with their clients. The main
Advantages of placing, as a method issuing new securities, are its relative cheapness.
There is a cost cutting on account of underwriting commission, expense relating to
applications, allotment of shares and the stock exchange requirements relating to contents
of the prospectus and its advertisement. This method is generally adopted by small
companies with unsatisfactory financial performances. Its weakness arises from the

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 point of distribution of securities. As the securities are offered only to a select group of
investors, it may lead to the concentration of shares in to a few hands that may create
artificial scarcity of scripts in times of hectic dealings in such shares in the market.

3.Rights Issue :
Only the existing companies can use this method. In the case of companies
whose shares are already listed and widely-held , shares can be offered to the existing
shareholders. This is called right issue. Under this method, the existing shareholders. Are
offered the right to subscribed to new shares in proportion to the number of shares they
already hold. This is made by circular to existing shareholders only.
In India, section 81 of the companies act 1956 provides that where a company
increases its subscribed capital by the issue of new shares, either after two years of its
formation or after one year of first issue of shares whichever is earlier, these have to be
first offered to the existing shareholders with this requirement by passing a special
resolution to the same effect. The chief merit of rights issues is that it is an inexpensive
method.
Sweat equity shares:
Under section 9Aof the companies Act , 1956, a company can issue sweat equity
shares to its employees or directors at discount or for consideration other than cash for
providing know-how making available rights in the nature of intellectual property rights
or value additions etc on the following.

Conditions:

 The issue of sweat equity share is authorized by a special resolution passed by the
company in the general meeting.

2. The resolution specifies the number of shares, current market, Price, resolution, if
any, and the class or classes of directors Or employees to whom such equity shares are to
be issued.

3. The company is entitled to issue sweat equity shares after completion of one year
from the date of Commencement Of business.

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 4. The equity shares of the company must be listed on a recognized stock exchange.

5. The issue of sweat equity shares must be listed on a accordance with the regulations
made by the SEBI in the behalf.

6. An unlisted company can issue sweat equity shares in accordance with the prescribed
guidelines made for this purpose.

7. All the limitations, restrictions and provision relating to equity shares shall be
applicable to sweat equity shares.

PREFERENCE SHARES:

Preference shares are a hybrid security because it has both ordinary shares and
bonds. Preference shareholders have preferential rights in respect of assets and
dividends. In the event of winding up the preference share holders have a claim on
available assets before the ordinary shareholders. In addition, preference shareholders
get their stated dividend before equity shareholders can receive any dividends.

TYPES OF PREFERENCE SHARES:

1. Cumulative and Non-cumulative preference shares:The cumulative preference

gives rights to demand the unpaid dividends of any year, during the subsequent ears when
the profits and ample. All preference dividends arrears must be paid before any dividends
can be paid to equity shareholders. The non cumulative preference share carry a right to a
fixed dividend out of the profits to any year. In case profits are not available in a year, the
holders get nothing, nor can they claim unpaid dividends in subsequent years.

2. Cumulative convertible preference shares:

The cumulative convertible preference (CCP) share is an instruments that embraces
features of both equity shares and shares and preference shares, but which essentially is a
preference shares. Since the CCP shares capital would constitute a class of shares,
distinct from purely equity and purely preferences share capital, the rights of the

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instrument holders must be stated either in a general body resolution or in the articles or
in the terms of issues in the offer documents viz., prospectus /letter of offer.

3. Participating and non participating preference shares:

Participating preference shares are those shares which are entitled to
a fixed preferential dividend and. in addition, carry a right to participate in the surplus
profits along with equity shares holders after dividend at a certain rate has been paid to
equity share holders. Again in the event of winding up, if after paying back both
preference and equity share holders, there is still any surplus left, then the participating
preference share holders get additional shares in the surplus assets of the company.
Unless expressly provided, preference share holders get only the fixed preference
dividends and return on capital in the event of winding up out of realized values of assets
after meeting all external liabilities and nothing more. The rights to participate may be
given either in the memorandum or articles or by virtue of terms of issue.

4. Redeemable and Irredeemable preference shares:

Subjects to an authority in the articles of association, a public limited company may issue
redeemable preference shares to be redeemed either at a fixed date or after a certain
period of time during the life time of the company. The companies act, 1956 prohibits the
issue of any preference share which is irredeemable or is redeemable after the expiry of a
period of twenty years from the date issue.

Power to Issue Redeemable Preference Shares:

Section 80 of the companies act 1956 permits a company to issue

Redeemable preference shares if:
 The company is limited by shares.
 Its article of association authorizes the issue of redeemable preference shares.
 Those shares are redeemable at the option of the company.

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A company is allowed to issue redeemable preference shares in the following
circumstances:

 Such preference shares shall be redeemed only out of profits of the company, which
would otherwise be available for dividend.
 Such redemption can also be made out of the proceeded of fresh issues of shares
made of the purpose of redemption.
 Before redemption, such shares must be fully paid up.The premium on redemption
shall be provided out of profits of the company or out of securities premium account,
before the share are redeemed.
 Where shares are redeemed out of profits to a separate account called ‘capital
 The redemption of preference shares under this section shall not be taken as reducing
the authorized capital of the company.
 The capital redemption reserve account may used for issue of fully paid bonus
shares.Companies are not allowed to issued irredeemable preference shares or
preference shares which are redeemable after the expire of a period of 20 years from the
date of its issue.In case of default, the company and every officer of the company who is
indefault shall be punishable with a fine which may extend to Rs 10000.
Deferred/ Founders shares:

A private company any issue what are known as deferred or founder’s shares. Such
shares are normally held by promoters and directors of the company. That is why they are
usually called of a smaller denomination, say on rupee each. How ever they are generally
given. equal voting rights with equity shares, which may be of higher denomination, say
Rs10 each. Thus, by investing relatively lower amounts, the promoter may gain control
over the management of the company. As regards the payment of dividends have been
declared on the preference and equity shares. It is because of this deferment of the
dividend payment that these shares are also called deferred shares. The promoters,
founders and directors tend to have direct interest in the success of the company they will
receive dividends on these shares only if the profits are high enough to leave a balance of
after paying dividends to preference an equity shareholders. Besides greater the profits of
the company , the higher will be dividends paid on these shares.

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Issued share at a premium:

When a company issues shares at a premium, whether or cash or

consideration other than cash, the premium collected on those shares shall be transferred
to a separate account called ‘securities premium account’.The provision of the act
relating reduction of shares capital shall also apply to the securities premium account
may be applied by the company in the following ways:
In paying up un issued shares of the company to be issued to members of the
company as fully paid up shares.
 In writing off the preliminary expenses of the company.
 In writing off the expenses of, or the commission paid or discount allowed on, any
issue of shares debentures of the company.
 In providing for the premium payable on redemption of any preference shares or
debentures.

Issued share at a Discount:

1. The issued of shares at a discount must be of a class of shares issued by the
Company.
2. The issue of shares at a discount must be authorized by a resolution passed in the
general meeting and sanctioned by the central government.

2. The resolution shall specify the maximum rate of Discount at which the shares are to
be issued.
3. The maximum rate of discount must not exceed 10% unless the central government is
of the Opinion that higher percentage of discount may be allowed in special
circumstances.

4. The shares must be issued within two months from the date of sanction by the or
within such extended time as the central government may allow.

5. The issue of shares at a discount can be done by a company only a year after the
Commencement of the business by the company.

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 6. In case of revival and rehabilitation of sick industry companies under chapter VIA,
the issue of shares at discount shall be sanctioned by the ‘Tribunal’ instead of
‘central government’.
7. Every prospectus relating to issue of shares shall contain the details of discount
allowed on the issue of shares or the unwritten off amount f discount at the date of
issue of prospectus.
8. In case of default, the company and every officer of the company who is in default
shall be punishable with fine which may extend to Rs.500.Shares issued for
consideration other than cash
9. to the underwriters of shares and promoters by way of payment remuneration or for
Expenses incurred.
10. To the vendor from whom the running business is purchased, as purchase price or
Consideration.
11. Issued of bonus shares out of the reserves to the existing shareholders of the company.

DEBENTURES:
“Acknowledge of debt, given under the seal of the company and containing a contract for the
repayment of the principal sum at a specified date and for repayment of the principal sum at
a specified date and for the payment of interest at fixed rate percent until the principal sum is
repaid,and it may or may not give the charge on the assets to the company as security of the
Loan”.
Kind of debentures:
1. Bearer debentures: Bearer debentures are similar to share warrants in that too are
negotiable instruments, transferable by delivery. The interest on bearer debentures is paid by
the means of attached coupons. On maturity, the principal sum is paid to the bearers.
2. Registered debentures: These are debentures which are payable to the registered
holders i.e.. persons whose names appear in the register of debenture holders. Such
debentures are transferable in the same way as shares.
3. Perpetual or Irredeemable debentures: A debenture which contains no clause as to
payment or which contains a clause that it shall not be paid back is called a perpetual or :
irredeemable debenture. These debentures are redeemable only on the happening of a
contingency on the expiration of a period, however long. It follows that debentures can be
made perpetual, i.e. the loan is repayable only on winding up or after a long period of time.
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4. Redeemable debentures : These debentures are issued for a specified period of time.
On the expiry of the specified time the company has the right to pay back the debenture
holders and have its properties released from the mortgage or charge. Generally,
debentures are redeemable.
5. Debentures Issued as Collateral Security for a Loan: The term collateral security or
secondary security means, a security which can be realized by the party holding it in the
event of the loan being not paid at the proper time or according to the agreement of the
parties. At times, the lenders of money are given debentures as a collateral security for loan.
The nominal value of such debentures is always more than the loan. In case the loan is repaid,
The debentures issued as collateral security are automatically redeemed.

1. Naked debentures: Normally debentures are secured by a mortgage or a charge on the

company’s assets. However debentures may be issued without any charge on the assets of the
company. Such debentures are naked or unsecured debentures. They are mere
acknowledgment of a debt due from the company, creating no rights beyond those secured
creditors.
2. Secured debentures: when any particular or specified property of the company is
offered as security to the debenture holders and when the company can deal with it only
subject to the prior right of the debenture holders, fixed charge on the undertaking of the
company i.e.. whole of the property of the company, both present and future, an when it can
deal with the property in the ordinary course of business until the charge crystallized i.e..
when the company goes in to liqudation or when a receive is appointed, the charge is said to
be floating charge. When the floating charge crystallizes, the debentures holder have right
to be paid out of the assets subjects to the right of the preferential creditor but prior to
making any payment to unsecured creditors.

Methods of redemption of debentures:

A company may issue redeemable as well as irredeemable debentures.

There are two important ways of redeeming the debentures according to the terms of
the issue.

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 Redemption of debentures on a fixed date:

In this method payment to the debenture holders is made at the expiry of the stated
period. A ‘ sinking fund account’ is created by debiting the profits and loss appropriation
account’. The amount so credited in the sinking fund account is invested in the gilt
edged securities. The securities are sold at the date of redemption of debentures.
 Redemption of debentures by periodical drawings:
In this method, payment is made year after of a certain portion of the total
debentures by drawing. A such the revenue account is debited with the annual drawings
and the “redemption fund account” are credited.
 Convertible debentures (CDs):
A company may also issue CDs in which case an option is given to the debenture
holders to covert them in to equity or preference shares at stated rates of exchange, after
a certain period. Such debentures once converted in to shares cannot be reconverted in to
debentures. CDs may be fully or partly convertible. In case of fully convertible
debentures, the inter face values converted in to shares at the expiry of specified
period(S). In case of partly convertible debenture only convertible portion is redeemed
at the end of specified period. Non convertible debenture do not confer any option on the
holder to the debenture in to shares and are redeemed at the expiry of specified period
(s).CDs, whether fully or partly convertible, may be converted in to shares at the end of
specified periods in one or more stages. The company should get a credit rating of
debenture done by credit rating agency. CDs are listed on stock exchanges. The partly
convertible debenture (PCDs) offer more flexibility to both companies and investors. It
has been claimed to be better than fully convertible debenture as it does not
automatically entail large equity base, particularly in case of new companies. Experience
shows that servicing of large base of capital is not easy in case of new projects,
especially if the company runs in to rough weather due to marketing difficulties. As
such, the non-convertible portion of the debenture keeps the equity of a company within
manageable l

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American Depository Receipts (ADR):
An American depository receipt (ADR) is a negotiable receipt which represents one or
more
Depository shares held by a US custodian bank, which in turn represent underlying
shares of
non- issuer held by a custodian in the home country. ADR is an attractive investment to
US
investors willing to invest in securities of non US issuers for following reasons:

 ADR provide a means to US investors to trade the non US company shares in US

dollars ADR negotiable receipt (which represents the non US share) issued in US cost of
capitaland is traded in dollars. The trading in ADR effectively means trading in
underlying shares.

 ADR facilitates share transfers. ADRs are negotiable and can be easily transferred
among the investors like any other negotiable instrument. The transfer of ADRs
automatically transfers the underlying share.
 The transfer of ADRs does not involve any stamp duty and hence the transfer of
underlying share does not require any stamp duty. The dividends are paid to the holders
of ADRs in US dollars.

ADR OFFERINGS:

A public offering provides access to the broadest US investor base and most
liquid US securities market. The compliance requirements in public offerings are the
strictest and comprise of Registration of underlying security under the Act (From F1)
Registration of ADR under the 1993Act (From F6) Registration under the 1934 Act (if
the company is not already Regulation act under the 1934 Act).

Global Depository Receipt (GDR):

With the growth in international equity issuance, together with growth in the
underlying

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 Secondary market investment, an increasing need has been felt for better fungibility. The
investors demand stocks that trade freely on an international basis without restrictions.
The depository receipts have be used as a partial solution to this problem. American
depository receipts have been the favored forms of investments by US investors in
foreign equities. A number of international equity offers, particularly some Asian
markets have increasingly used global depository receipts (GDR),particularly where legal
restrictions and closed markets have prevented the world wide circulation of underlying
security on a freely trade basis. The GDRs continue to have value in liquid or restricted
markets and are frequently used by project companies to raise equity funds.

CHARACTERISTICS OF A GDR:
 Depository receipts are negotiable certificates with publicly traded equity of the issuer
as underlying security.
 An issue of depository receipts would involve the issuer, issuing agent to a foreign
depository.
 The depository, in turn, issues GDRs evidencing their rights as share holders.
 Depository receipts are denominated in foreign currency and are listed of
international exchange such as London or Luxembourg.
 GDRs enable investors trade a dollar denominated instrument on an international
stock exchange and yet have rights in foreign shares.
 The principle purpose of the GDR is to provide international investors with local
settlement.
 The issuer issuing the shares has to pay dividends to the depository in the domestic
currency.
 The depository has to then convert the domestic currency into dollars for onward
payment to receipt holders. GDRs bear no risk of capital repayment.

DERIVATIVES:
It is a contract whose value depends on or value depends on or derives from the value
of an underlying asset [say a share, forex, commodity or an index]. In its broadest sense a
derivative attempts to hedge against the variability of any economic variable. Thus
exposures or perceived risks to a firm arising from the variation in interest rates,
exchange rates, commodity prices and equity prices can be hedged through an

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appropriate derivative structure. Such a derivative structure covers a wide variety of
financial contracts viz. futures, forwards, options, swaps and different variations thereof.
These contracts can be traded on the various exchanges in a standardized manner or by
custom designed for individual requirements. The history of derivatives can be traced to
the middle ages when farmers and traders in grains and other agricultural products used
certain specific types of futures and forwards to hedge, the risks. Essentially the farmer
wants to ensure that he receives a reasonable price for the grain that he would harvest
[say] three to four months later. An over supply hurt him badly. For the grain merchant,
the opposite is true. A fall in the agricultural product will push up the prices. It made
sense therefore both of them to fix a price for the future. These was how the future
market first developed in agricultural commodities such as cotton, coffee, petroleum,
soya bean, sugar and then to financial products such at interest rates, foreign exchange
and shares. In 1995 the Chicago board of trade commenced trading derivatives. For the
derivatives market to develop three kinds of participants are necessary .They are the
hedgers, the speculators and the arbitrageurs. All three must co-exist.

Participation Hedger:
A hedger is a risk averse. Typically in India he may be a treasurer in a
public sector company who wants to know with certainty his interest costs for the year
2002. therefore based on current information he would enter into a future contracts and
lock up his interest rate four years henceBut in doing so he consciously ignores what is
called the upside potential-here the possibility that the interest rate may be lower in the
year 2002 than what he had contract four years earlier. A hedger plays it safe. For a
hedging transaction to be completed there must be another person willing to take
advantage of the price movements. That is the speculator.
Speculators:
Contrary to the hedger who avoids uncertainties the speculator thrives on
them. The Speculator may lose plenty of money if his forecast goes wrong but stands to
gain enormously if he is proved correct. The risk taking associated with speculation is an
integral part of a derivatives market.

ARBITRAGEUR:
The third category of participant is the arbitrageur, who looks at risk less profit by
simultaneously buying and selling the same or similar financial products in different
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 markets. Markets are seldom perfect and there is a possibility to take advantage of time or
space differentials that exits. Arbitrage evens out the price variation with the government
of India permitting futures trading in several commodities and with futures trading have
arrived in the stock markets, index based derivative trading has finally arrived in India.
For smooth functioning of derivative trading the government of India has commenced the
process of dematerialization of shares, short sale facility, electronic fund transfer facility
and rolling settlements in stock markets. This will hopefully bring transparency in the
process of price discovery of the derivative and also attract a board spectrum of the
hedgers and speculators from out of professionally managed corporate that not only must
have a good balance sheet but also significant trading and risk management skills. The
stock holding corporation of India has commenced discussions with the premier stock
exchanges of India about setting up a clearing house for derivatives transactions.
Futures:
A futures contract is an exchange – traded agreements between two parties to
buy or sell an asset at a specified time in the futures at the agreed price. In the case of
stock index futures contracts the underlying asset is the specified stock index. To
facilitate n the futures contracts, the exchange specifies certain standard features of the
contracts the standards contracts once bought can be sold at any time to square off the
position till the date of expiry of the contract. Similarly, once a futures contract issold, it
can be bought back at any time to square off the position. Thus a futures contract may be
offset prior to maturity by entering into an equal and opposite transaction. More than 99%
of futures transactions are offset this way.

FURTURE TERMINOLOGY:

SPOT PRICE:
The price at which an asset trades in the spot market.
FURTURE PRICE:
The price at which the future contract trades in –the futures market.

CONTRACT CYCLE:
The period over which a contract trades. The index futures contracts on the NSE as
well as BSE have one-month and two-month and three-month expiry cycles, which expire
on last Thursday of the month. Thus a July expiration contract would expire on the last
Thursday of July. On the Friday following the last Thursday, a new contract having a

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three - months expiry would be introduced for trading. More generally we can say, on the
first trading day after the day of the expiry of the month’s future contract a new contract
having a three - month’s expiry would be introduced for trading.
EXPIRY DATE:
It is the date specified in the future contract. This is the last day on which the
contract will be traded. I will cease to exist by the end of that day.

CONTRACT SIZE:

The amount of asset that has to be delivered under one contract. The contract size of
the stock index futures on NSE nifty is 200 and the contract size of the stock index
futures on BSE Sensex is 50.
BASIS:
Basis is usually defined as the spot price minus the futures price. There will be a
different basis for each delivery month for same asset at any point in time. On 19 th June
2001 nifty closed at 1206.65. August 2001 nifty futures closed at 1208.90. Therefore the
basis for the August nifty futures is -2.25 index points. In a normal market, basis will be
negative. This reflects the fact that the underlying asset is to be carried at a cost for
delivery in the future.
COST OF CARRY:
The relationship between futures prices can be summarized in terms of what is
known as the cost of carry. These measures the Storage cost plus the interest that is paid
to finance the asset less the income earned on the asset. In the case of stocks, dividend
will be the income earned on the asset. The storage cost will be negligible.
INITIAL MARGIN:
The amount that must be deposited in the margin account kept with the broker at the
time a futures contract is first entered into is known as initial margin. Margins are to be
strictly collected in the future and options markets by brokers as per the exchange
regulations. Otherwise the exchange cannot guarantee the trades to all participants in the
market.
MARKING TO MARKET
In the futures market, at the end of each trading day, the margin account is a adjusted
to reflect the investor’s gain or loss depending upon the futures closing price or settlement
price. This is called Marking-to-Market.
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MAINTENANCE MARGIN:
If the balance in the margin account falls below the maintenance margin, the investor
receives a margin call and is expected to top up the margin account to the initial margin
level before trading commences on the next day.

BETA:
Beta is a concept to be used futures and options for hedging. Beta measures the
sensitivity of a share or a portfolio to that of the index. Beta of a share is found out by
relating the daily price changes of a share to the daily changes in a stock price index. If a
graph is drawn with daily changes of the share price on y axis and daily changes in the
index on x axis the slope of the straight line fitted will be the value of beta.
mathematically it is found by regression method. If the beta of Tisco is found to bel.23,it
implies if the index increases by 10% in a period, price of Tisco will increase by 12.3%.
Beta of the portfolios is found by weighted average of the betas of the shares in the
portfolios. For example, an investor’s portfolio has equal value in Tisco and Infosys.
Tisco has a beta of 1.23 and Infosys has a beta 1.37. the portfolio beta is the average of
1.23 and 1.37 which is 1.3.NSE website is providing values of beta for a large number of
shares.

SPECULATORS AND HEDGERS IN FUTURES:

Speculators buy and sell derivatives to make profit, while hedgers buy and sell
derivatives to reduce risk. Speculators are vital to derivatives markets. They facilitate
hedging and provide liquidity. It is highly unlikely that hedger wishing to buy futures will
precisely match hedgers selling futures in terms of contracts to be traded. If hedgers are
net sellers there will be tendency for futures prices to fall. Speculators will buy such
under period futures. Such purchases by speculators allow net sales on the part of
hedgers. In so doing, they tend to maintain price stability since they are buying into a
falling market. Proper speculation thus provides stability to prices in markets.In a liquid
market, hedgers can make their transactions with ease and with little impact costs.
Speculative transactions add to market liquidity. Speculators by definition do a lot of
information search and processing to forecast future behavior of prices. Therefore they
make markets more information ally efficient. In the stock index futures markets
speculators have two alternative strategies. If they are bullish on the index they can go
long on index Futures. If the spot prices go up, future prices follow them along with their
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 carry premiums and the speculators make the profits.If the speculator is bearish he can go
short on the index futures. If the spot Index goes down, futures price also will go down
and speculator makes a profit. The two speculative strategies can be summarized as:

Bullish market, long index futures

Bearish market, short index futures

ARBITRAGE IN FUTURE AND SPOT MARKET:

Future prices and spot prices are tightly linked by the fair price formula. Also on the
day of the expiry, the final settlement price of the future is made equal to the spot index
price. thus at the end , the spot and futures prices converge. Any deviation between the
fair price and actual price of a future can be utilized for earning risk less profits by agents
who are willing to buy in the spot market and deliver in future at expiry. Such operations
are called as arbitrage operations. Buying in the spot and delivering in the future market is
resorted to when actual futures price in the market is higher than the fair price. if the
actual future price is lower than the fair, then futures are bought and shares are sold in the
spot market to carry out the arbitrage operations.

Introduction to options:
Options give the holder or buyer of the option the right to do something. If the option is
called option, the buyer or holder has the right to buy the number of shares mentioned in
the contract at the agreed strike price. if the option is a put option, the buyer of the option
has the right to sell the number of shares mentioned in the contract at the agreed strike
price. the holder or the buyer does not have to exercise this right. Thus on the expiry of
day of the contract the option may or may not be exercised by the buyer. In the contrast,
in a futures contract, the two parties to the contract have committed themselves to doing
something at future date. To have this privilege of doing the transaction at a future only if
it is profitable, the buyer of options has to a premium to the seller of options.

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HISTORY OF OPTIONS:

In 1983 trading on stock index options contracts started. Since 1983, trading on
options of individual options decreased as most of the trading shifted to index options.
One of the reasons is that volatilities of the individual scripts is high and therefore
premiums on individual scripts is also high. In India stock index options were introduced
in june 2001.
OPTION TERMINOLOGY:
INDEX OPTION:
An option having the index as the underlying asset. Like index futures contracts,
index option contract are also called cash settled.

STOCK OPTIONS:

Stock options are options on individual stocks. A contract gives the holder the right
to buy or sell shares at the specified price.

AMERICAN OPTIONS:
American options are options that can be exercised any time up to the expiration
date. This name is only a classification and does not imply that they are available only in
America.
EUROPEAN OPTIONS:
European options are options that can be exercised only on the expiration date.
European options are easier to analyze than American options, and properties of
American options are frequently deducted from those of its European counterpart.

CALL OPTIONS:
A call option gives the holder the right but not the obligation to buy an asset by a
certain date for a certain price.
PUT OPTIONS:
A put option gives the holder the right but not the obligation to sell an asset by a
certain date for a certain price.

117
BUYER OF OPTIONS:
The buyer of the option, calls or put, pays the premium and buys the right but not the
obligation to exercise his option on the seller/writer.

WRITER OF AN OPTION:
The writer of a call/put option is the one who receives the option premium and is
thereby obliged to sell/buy the asset if the buyer exercises on him. Option writer is the
seller of the option contract.
STRIKE PRICE:
The price specified in the option contract at which buying or selling will take place is
known as the strikeprice or the exercise price.
OPTIONS PRICE:
Option price is the premium, which the option buyer pays to the option seller or
writer. Black and scholes formula is widely used for determining the fair value of share.
EXPIRATION DATE:
It is the date on which the European option is exercised. It is also called as exercise
date, strike date or maturity date.

INTRINSIC VALUE OF AN OPTION:

The option premium cab be broken down into two components- intrinsic value and
time value.The intrinsic value of an option is the amount, which the holder will get by
exercising his option and immediately selling or buying the acquired shares in the spot
market. For example, if the strike price of a call option on Reliance shares is Rs.325 and
current market price is Rs.350. The holder of the option can buy the Reliance share at
Rs.325 by exercising the option and can make a profit of Rs.25 by immediately selling
them in the market. In this case the intrinsic value of the call option is Rs.25.
TIME VALUE OF THE OPTIONS:
The time value of an option is the difference between its premium and its intrinsic
value.
AT-THE-MONEY:
An option is called at-the-money option when the strike price equals, or nearly
equals, the spot price of the share. For example, if the strike price of stock index option
on Nifty index is also at 1080, the option is called at-the-money option.

118
SPOT PRICE > STRIKE PRICE
IN-THE-MONEY:
A call option is in the money when the underlying asset price is greater than the
strike price. For example, if the strike price in the case of Nifty stock index option is 1050
and nifty is at 1080, the option is in-the-money option.

SPOT PRICE = STRIKE PRICE

OUT-OF-THE-MONEY:
A call option is out-of-the-money if the strike price is greater than the underlying asset
price. For example, if the strike price in the case of Nifty stock index option is 1200 and
nifty is at 1080, the option is out-of-the-money option.
SPOT PRICE < STRIKE PRICE
USES OF OPTIONS:
Like futures options are also used for hedging and speculations. Arbitrageurs can
look for Mispricing between spot, option and futures markets and do transactions
whenever they find miss pricing.

TRADING OR SPECULATING WITH OPTIONS:

Options provide multiple opportunities for trading. Options premiums are
determined by volatility of the underlying asset, time to expiration of the option and the
risk free interest rate .Changes in any of these variables changes option premiums even
though the price of the underlying asset remains constant. Thus a speculator who analyses
multiple dimensions has a lot more opportunity in options to strategize and act.

ARBITRAGE WITH OPTIONS:

Arbitrage involves making risk less profits from miss pricing; relatively under priced
options are bought and relatively overpriced are sold. Pure arbitrage requires that none of
the arbitragers own capital is used. He should be able to borrow all the capital required. If
the arbitrager uses his own capital, the process is called quasi-arbitrage. There will be
number of situations providing arbitrage opportunity as three markets, spot, futures and
options are involved
SUMMING UP:
Options are used by hedgers and speculators. Options provide a variety of ways in
which they can be used to attain the hedging and speculative objectives. Thus trading
119
 interest comes from different participants with different motives. Arbitrageurs will have
opportunities whenever option premiums are out of line with the fair prices. A fully
developed option market provides a good market for traders to display their trading
expertise and hedgers an alternative-hedging medium.
FORWARD CONTRACTS:
In order to avoid this risk one way could be that the farmer may sell his crop at an
agreed-upon rate now with a promise to deliver the asset, i.e., crop at a pre-determined
date in future. This will at least ensure to the farmer the input cost and a reasonable profit.
Thus, the farmer would sell wheat forward to secure himself against a possible loss in
future. It is true that by this way he is also foreclosing upon him the possibility of a
bumper profit in the event of wheat prices going up steeply. But the, more important is
that the farmer has played safe and insured himself against any eventuality of closing
down his source of livelihood altogether. The transaction which the farmer has entered
into is called a forward transaction and the contract which covers such a transaction is
called a forward contract.
QUICK AND LOW COST TRANSACTIONS:
Futures contracts can be created quickly at low cost to facilitate exchange of
money for goods are delivered at future date. Since these low cost instruments lead to a
specified delivery of goods at a specified price on a specified date, it becomes easy for the
finance managers to take optimal decisions in regard to production, consumption and
inventory. The costs involved in entering into future contracts in significant as compared
to the value of commodities being traded underlying these contracts.
Price discovery function:

The price of futures contracts incorporates a set of information based on which the
producers and the consumers can get a fair idea of the future demand and supply position
of the commodity and consequently the futures spot price. This is known as the ‘price
discovery’ function of futures.

Advantage of informed individuals:

Individuals, who have superior information in regard to factors like commodity

demand supply, market behavior, technology changes etc., can operate in futures markets

120
and impart efficiency to the commodity’s price determination process. This in turn leads
to a more efficient allocation of resources.
Hedging Advantage:
Adverse price changes, which may lead to losses, can be adequately and efficiently
hedged against through futures contracts. An individual who is exposed to the risk of an
adverse change while holding a position, either long or short a commodity will need to
enter into a transaction which could protect him in the event of such an adverse change.
For example a trader who has imported a consignment of copper and the shipment is to
reach within a fortnight may sell copper futures if he foresees fall in copper prices. In
case copper prices actually fall, the trader will lose on sale of copper but will recoup
through futures. On the contrary if copper prices rise, the trader will honour the delivery
of the futures contract through the imported copper stocks already available with him.
Employee stock option plans:
“ Employees stock options means the options given to the whole-time directors,
officers or employees of acompany, which gives such directors, officers or employees the
benefit or right to purchase or subscribe at a future date, the securities offered by the
company at a pre-determined price”. Stock option is defined as the “right to buy a
designated stock at an option of the holder at any time within a specified period at a
determinable price. it can also represents the right to sell designated stock within an
agreed period at a determinable price.
Benefits of ESOPs:

The ESOPs will benefit the organization in the following ways:

It is used as a HRD tool by the management in connection with restriction of higher
turnover of the employees and retaining the best talents with the organization.

 The plan is used as a technique of corporate financing modernization, expansion,

spin-off a division, acquisition etc.
 Issuing share, alternative to cash, have no immediate effect until they are converted
into cash Affecting new monetary supply into the real company.
 Employees stock ownership plans in USA is used to avoid hostile takeover.
 Without any financial strains the employees are rewarded by
Printing of share certificated only.

121
 Studies undertaken in USA on ESOPs suggest that they tend to outperform their
traditionally organized counterparts in variety of ways, better survival rates, higher
productivity, a better employment and sales growth and higher net operating margins.
List of Bond:

1. Zero Interest Bond:

It refers to those bonds which are sold at a discount from their eventually maturity
value and have zero interest rate. These certificates are sold to the investors for discount
the difference between the face value of the certificates and the acquisition cost is the
gain to the investors. The investors are not entitled to any interest and are entitled to only
repayment of principle sum of the maturity period. The individual prefers ZIB because of
lower investment cost and low rate of conversion to equity if ZIBs are fully or partly
convertible bonds. This is also a means of tax planning because the Bond doesn’t carry
any interest, which otherwise taxable. Company also find ZIB quite attractive because
there is no immediate commitment. On maturity the bond can be converted into equity
share or convertible debentures depending on the requirement of capital structure of a
company.
2. Deep Discount Bond (DDB):
The IDBI for the first time issued DDB for a deep discount price
of Rs 2700/- an investor gets bond with a face value of Rs 100000/-. The DDB appreciates
to its face value over the maturity period of 25 Years. The unique advantage of DDB is the
elimination of investment risk. It allows an investor to lock in the yield to maturity or keep on
withdrawing from the scheme periodically after 5 years by returning the certificate.The main
advantage of DDB is that the difference between the sell price and the original cost of
acquisition will be treated as Capital gain, if the investor sends the bonds on stock
exchange.The DDB is safe, solid and liquid instrument. nvestors can take advantage of these
new instruments in balancing their mix of securities to minimize the risk and maximize
returns.
3. Callable Bonds:
A callable bonds is a bond which the issuer has the right to call in and payoff
at a price stipulated in the bond contract. The price the issuer must pay to retire a callable
bond when it is called is termed as call price. The main advantage in callable bond is the
issuers have an incentive to call their existing bonds if the current interest rate in the

122
market is sufficiently lower than the bonds coupon rate. Usually the issuer cannot call the
bond for a certain period after issue.
4. Option tender bonds:
The option tender bonds are bonds with put option which give the bond holders
the right to sell back their bonds to the issuers normally at par. Issuers with put are aimed
both at investors who are pessimistic about the ability of interest rates to decline over the
long term and at those who simply prefer to take cautious approach to their bond buying.
5. Guaranteed Debentures:
Some businesses are able to raise long term money because their debts are
guaranteed, usually by their parents companies. In some instances the state governments
guaranteed the bonds issued by the state government undertaking and corporation like
electricity supply board, irrigation corporation etc.

6. subordinated debentures:
A subordinated debenture is an unsecured debt, which is junior to all
other debts i.e.. Other debt holders must be fully paid before the subordinated debenture
holders receive anything. This type of debt will have a higher interest rate than more
senior debt and will frequently have rights of conversion into ordinary shares.
Subordinated debt is often called mezzanine finance because it ranks between equity and
standard debt.
7. Floating rate bond:
The interest paid to the floating Rate bondholders changes periodically depending on
the market rate of Interest payable on thegilt-edged securities these bonds are called
adjustable interest bond or variable rate bonds.
8. Junk bond:
Junk bonds are a high yield security which because a widely used source of finance
in take overs and leveraged buyouts. Firms with low credit ratings willing to pay 3 to 5 %
more than the high grade corporate debt to compensate for the greater risk.
9. Indexed bonds:
Fixed income are fixed sum repayments are uneconomic in times of rapid inflation.
Indexed bond is financial instrument which retain the security and fixed income of the
debenture but which also provides some safeguard against inflation.

123
10. Inflation adjusted bond:
IABs are bonds which promise to repay both the principal and interest,
by floating both these amounts upwards in line with the movements in the value of the
specific index of commodity prices.

124
 CHAPTER – IV
DATA ANALYSIS
AND
INTERPRETATION

125
STOCK MARKET
Stock Prices
Company : KARVY STOCK BROKING ( 532106 )
Period ( 01-Jan-2018 to 31-Jan-2018)
Open High Low Close No. of No. of Total Turnover
Date WAP
Price Price Price Price Shares Trades (Rs.)
1-01-18 43.20 43.60 42.85 43.10 43.25 1,82,106 1,046 78,76,672
2-01-18 43.20 44.50 43.20 44.10 43.84 1,87,107 1,464 82,03,362
3-01-18 44.55 45.85 44.35 45.00 45.22 3,88,564 2,278 1,75,71,610
4-01-18 45.10 45.15 43.90 44.10 44.55 1,27,734 1,180 56,90,920
7-01-18 44.40 44.95 44.10 44.35 44.55 92,155 912 41,05,228
8-01-18 44.50 46.50 44.45 46.05 45.67 3,86,437 2,565 1,76,47,452
9-01-18 45.95 47.85 45.50 47.45 46.82 7,65,524 3,796 3,58,45,260
12-01-18 47.95 49.60 47.40 49.20 48.61 12,59,808 5,915 6,12,41,940
12-01-18 49.90 50.25 46.70 47.20 48.81 10,53,496 4,830 5,14,25,510
14-01-18 47.20 47.20 46.05 46.20 46.56 2,10,233 1,451 97,40,861
15-01-18 46.40 46.40 44.00 44.85 45.46 4,49,893 1,684 2,04,49,899
18-01-18 44.30 45.80 43.65 44.95 45.03 5,00,218 2,340 2,25,24,008
18-01-18 45.00 45.60 44.55 44.90 44.98 3,59,191 1,805 1,61,58,183
18-01-18 43.25 45.00 43.25 43.95 44.42 3,65,120 1,387 1,62,19,480
21-01-18 43.50 47.20 43.50 46.10 46.10 9,55,648 4,612 4,40,53,990
22-01-18 46.50 49.85 46.15 48.85 48.56 20,38,618 8,107 9,90,02,539
23-01-18 48.95 49.80 47.60 48.50 48.75 8,25,921 4,218 4,02,66,363
24-01-18 48.60 48.90 47.20 48.00 48.14 3,49,518 2,189 1,68,26,351
29-01-18 47.95 50.50 47.05 50.00 49.32 6,93,983 3,303 3,42,26,632
30-01-18 50.25 50.80 48.80 49.15 50.05 6,63,300 3,810 3,32,01,019
31-01-18 49.50 49.65 48.05 48.65 48.95 2,45,452 1,348 1,20,14,941

Table 4.1

126
 CHART

5000
4500
4000
3500 Open

3000 High
2500 Low
2000 Close
1500
WAP
1000
Trades
500
No. of
0
01-01-2018 to 31-01-18

Fig 4.1

INTERPRETATION:

On 1st Jan open value has decreased to 43.10 than compared to lower value of
EPS 41.25. Then coming to higher price to 49.29 wholly the conclusion is 43.67.
Then coming to the volume on the same dates or days volume are increased.
Because totally this month KARVY STOCK BROKING . EPS value is decreased i.e.
percentage 03.52%.

127
Stock Prices
Company: FEDBANK ( 500469 )
Period ( 01-Jan-2018 to 31-Jan-2018 )
Open High Low Close No. of No. of Total Turnover
Date WAP
Price Price Price Price Shares Trades (Rs.)
1/01/18 235.35 243.50 235.35 242.45 240.68 45,995 847 1,10,70,120
2/01/18 250.00 250.00 243.50 248.05 246.87 1,06,279 1,296 2,62,37,525
3/01/18 250.00 252.50 241.10 244.25 248.61 64,766 1,051 1,61,01,503
4/01/18 244.00 247.50 241.10 242.65 244.38 18,523 527 45,26,643
7/01/18 244.85 246.10 242.00 242.30 243.61 23,010 467 56,05,125
8/01/18 241.25 249.00 241.25 248.00 245.22 36,680 545 89,94,518
9/01/18 250.00 251.50 245.00 248.75 248.68 74,775 1,288 1,85,94,943
10/01/18 251.00 251.00 246.00 248.65 248.55 42,812 797 1,06,40,995
12/01/18 250.80 252.00 244.00 246.00 246.86 42,870 597 1,05,82,682
14/01/18 248.00 248.00 244.05 244.90 246.32 51,843 491 1,27,70,058
15/01/18 245.50 246.40 235.00 236.05 239.98 93,850 697 2,25,22,218
18/01/18 237.00 240.00 233.10 237.25 234.79 5,39,359 661 12,66,36,232
18/01/18 239.50 241.50 237.15 240.05 239.22 29,893 506 71,50,961
18/01/18 243.00 243.00 237.50 239.35 238.75 43,269 325 1,03,30,482
21/01/18 239.90 241.95 238.00 239.20 239.57 38,505 379 92,24,706
22/01/18 240.80 242.00 240.00 241.00 240.98 25,454 218 61,33,910
23/01/18 243.50 244.80 241.15 242.25 242.99 21,337 325 51,84,704
24/01/18 244.90 245.00 239.05 241.55 241.79 32,042 435 77,47,452
29/01/18 245.90 245.90 237.30 238.35 241.36 50,514 582 1,21,92,205
30/01/18 239.30 240.70 235.00 237.45 237.33 1,75,678 1,020 4,18,93,769
31/01/18 239.25 243.00 233.70 235.75 239.37 98,196 719 2,35,05,522

Table 4.2

128
CHART

FEDBANK
300

250

200 Open
150 High

100 Low

50 Close
WAP
0
01-01-2018 to 31-01-18

Fig 4.2

INTERPRETATION:

On 1st Jan open value has increased to 242.45 than compared to higher value of
EPS 285.63. Then coming to higher price to 296.32 wholly the conclusion is 245.23.
Then coming to the volume on the same dates or days volume are increased.
Because totally this month FEDBANK OF INDIA. EPS value is increased i.e. percentage
10.37%.

129
Stock Prices
company: ADANIENTE ( 512599 )
Period ( 01-Jan-2018 to 31-Jan-2018 )
Open High Low Close No. of No. of Total Turnover
Date WAP
Price Price Price Price Shares Trades (Rs.)
1/01/18 834.20 834.20 818.00 821.10 822.72 21,149 845 1,73,99,664
2/01/18 830.00 830.00 815.15 818.50 822.30 19,502 748 1,60,36,556
3/01/18 821.10 825.50 818.05 819.25 820.12 26,791 661 2,19,71,937
4/01/18 820.00 848.00 818.00 830.70 834.18 64,938 2,189 5,41,68,683
7/01/18 755.00 868.00 755.00 840.30 840.39 35,183 1,478 2,95,50,751
8/01/18 842.45 857.50 833.00 842.10 848.55 93,793 2,445 7,95,87,862
9/01/18 840.00 858.00 831.00 844.85 845.94 78,128 2,381 6,60,91,496
10/01/18 397.00 432.70 397.00 429.00 427.94 84,570 1,607 3,61,91,037
12/01/18 433.00 437.00 424.70 425.60 430.76 39,960 1,157 1,72,18,330
14/01/18 430.10 433.00 423.10 424.55 426.69 24,724 734 1,05,49,479
15/01/18 428.00 429.00 415.10 418.25 420.40 21,599 582 90,80,121
18/01/18 418.00 425.00 415.45 423.70 422.45 25,043 652 1,05,79,386
18/01/18 420.00 427.90 420.00 424.80 425.37 18,562 443 57,68,806
18/01/18 420.40 429.85 419.95 424.20 425.71 23,750 446 1,01,10,614
21/01/18 424.25 425.75 418.20 422.85 422.89 42,108 512 1,78,02,848
22/01/18 424.00 425.80 418.00 418.60 421.30 47,142 541 1,98,60,828
23/01/18 419.00 427.00 419.00 426.15 423.28 42,925 575 1,81,69,379
24/01/18 426.80 431.25 422.60 430.05 427.42 38,796 658 1,65,82,347
29/01/18 437.90 437.90 428.00 429.35 432.10 23,978 531 1,03,60,971
30/01/18 431.00 444.40 427.25 434.25 435.93 7,81,182 2,918 34,05,33,964
31/01/18 437.40 441.80 432.00 436.15 438.57 3,38,999 964 14,86,74,349

Table 4.3

130
CHART

ADANIENTE
1000
900
800
700
Open
600
500 High
400
Low
300
200 Close
100 WAP
0
01-01-2018 to 31-01-18

Fig 4.3

INTERPRETATION:

On 1st Jan open value has decreased to 821.10 than compared to higher value of
EPS 868.00. Then coming to higher price to 865.21 wholly the conclusion is 863.58.
Then coming to the volume on the same dates or days volume are decreased.
Because totally this month ADANIENTE. EPS value is decreased i.e. percentage 06.38%.

131
Stock Prices
Company: UNITECH ( 507878 )
Period ( 01-Jan-2017 to 31-Jan-2017 )
Open High Low Close No. of No. of Total Turnover
Date WAP
Price Price Price Price Shares Trades (Rs.)
1/01/18 80.00 89.60 79.60 88.75 85.51 3,30,51,471 99,763 2,82,61,18,251
2/01/18 90.35 92.00 88.25 88.85 90.01 1,79,18,758 63,156 1,61,24,12,787
3/01/18 89.75 91.90 89.00 90.00 90.73 1,30,55,731 45,750 1,18,46,10,419
4/01/18 89.00 89.90 85.10 88.25 88.25 1,12,24,608 35,607 98,18,68,186
7/01/18 88.05 89.65 86.30 86.90 87.98 75,40,276 25,835 66,34,06,523
8/01/18 86.80 91.80 86.05 91.05 89.22 1,18,56,295 39,010 1,01,32,29,410
9/01/18 85.00 91.80 85.00 89.55 90.21 1,57,27,989 50,638 1,41,88,55,277
10/01/18 89.00 90.20 88.20 88.55 89.05 97,14,125 33,159 86,50,55,972
12/01/18 89.20 90.30 85.30 86.65 87.95 92,71,850 32,275 81,54,66,196
14/01/18 87.50 88.25 86.00 86.45 87.06 73,50,436 26,695 63,99,23,604
15/01/18 86.55 87.90 84.30 85.60 86.67 1,04,53,061 30,200 90,59,27,927
18/01/18 85.20 85.70 83.55 84.40 84.65 77,19,497 27,376 65,34,31,576
18/01/18 84.40 85.05 81.45 82.55 82.78 1,44,32,912 41,045 1,19,48,24,023
18/01/18 82.40 82.40 79.55 80.05 80.92 1,34,03,534 45,899 1,08,46,04,898
21/01/18 80.00 80.95 78.00 78.35 79.63 1,05,40,888 33,644 83,94,01,276
22/01/18 78.90 80.35 78.50 79.60 79.60 68,59,464 23,724 54,60,14,064
23/01/18 80.10 82.40 80.00 81.90 81.32 85,56,695 32,473 69,58,15,750
24/01/18 82.50 83.50 81.35 82.00 82.48 91,69,702 32,472 75,63,31,547
29/01/18 81.45 82.85 81.45 81.95 82.23 44,73,304 18,569 36,78,20,331
30/01/18 82.60 83.70 81.45 82.65 82.85 72,52,440 27,832 60,08,34,458
31/01/18 82.90 84.10 82.10 82.30 83.03 45,81,377 18,610 38,03,74,122

Table 4.4

132
CHART

UNITECH
100
90
80
70
Open
60
50 High
40
Low
30
20 Close
10 WAP
0
01-01-2018 to 31-01-18

Fig 4.4

INTERPRETATION:

On 1st Jan open value has increased to 88.75 than compared to higher value of EPS
91.80 Then coming to higher price to 89.36 wholly the conclusion is 86.58.
Then coming to the volume on the same dates or days volume are increased.
Because totally this month UNITECH. EPS value is increased i.e. percentage 19.32%.

133
CHAPTER – V
FINDINGS
AND
SUGGESTIONS

134
FINDINGS & SUGGESTIONS

 There must be prohibition on disposal of promoters share holding, and also

restrictions and the expansion without prior approval of the financial
institutions for declaration of higher amount/ rate.
 The availability of derivative products in eluding index futures, index options,
individual stock futures and individual stock options re-enforces the overall
attractiveness of this market to foreign and domestic investors.
 Volume of paper work is small but it is very complicated to maintain data in
system so tries to reduce that by regular audit and updating data.
 Most of the DPs do not have the necessary infrastructure to handle the high
work load of transactions leading to may error by DPs, so by giving full
infrastructure information to every DO can avoid this problem.
 The pool account doesn’t know the true owner of the share and hence
dividends are paid to the broker instead of owners by this the broker can do
any manipulation or any fraud with the owner, for this the owner can loose his
dividend.
 Hence for this try to pay the dividend directly to the owner.

 If the shares are fake/forged which delivery by the broker the share holder can
loose that shares an have to receive another lot of issued shares from the
broker in 21 days, this system stands abused.

 So minimize that waiting days are deliver the issued shares to the share holder
as soon as Possible.

135
CONCLUSION
 The comprehensive study of cost of capitalinstrument at KARVY STOCK
BROKING Connected stock exchange has been an enlightening experience
stressing on the positive aspects on Dematerialization.

 And settlement of shares, derivative market and capital instruments has done
in whole lot of good to the issuer, investor companies and country.

 The depository systems has reduced the lag in delivery and settlement of
securities but also supported the cause of providing more liquidity to the
security holder, the need for setting up of a depository paper less trading.

 Through online trading system and settlement became inevitable and

unavoidable for the smooth and the efficient functioning of the cost of capital.

 This system has proved its worthiness by increasing in the speed of

transactions within T+3 days which are earlier T+5 days.
 Now there is a proposal that the settlement will be done within T+1days in
near future which is in it an indication of a boon in the system of demat and
cost of capitalinstruments.
 It has been fairly long since derivative trading started off on the Indian
Indexes.
 Actively has failed to really take off with low figures being transacted in terms
of value and volumes.
 The introduction of derivative trading was hailed by the punters in the cost of
capitals but has not really brought about a wave so as to speak.
 There are several factors, which impede the growth of the derivative markets
in India.
 Of these factors the absence of clear guidelines on tax-related issues and the
high cost of transactions are the most prominent.
 Now it is T+2days started from 1 April 2018.

136
BIBLIOGRAPHY

Web sites Referred:

www. sharekhan.com
www.indiainfolie.com

 KARVY STOCK BROKING .com

 Sebi.com

 Nseindia.com

 Yahoo.com

 Economywatch.com

Referred Text Book:

V.K. Balla “Financial Investment”

Gordon & Natarajan “Financial Markets and Services”

137