History of Stock Trading in India

History of Stock Trading in India Introduction Background of Exchanges The stock trading history in India is obscured in the mists of time. Historical records, as and where they exist, rarely speak about business and speculative activity except in passing. However, the origin of stock broking in the country may go back to a time, when shares, debentures and bonds representing titles to property were first issued on the condition of transfer from one person to another and the earliest record of dealings in securities in India is the East India Companys loan securities, way back in the 18th century. The first stock exchange in India, Tokyo Stock Exchange, which was founded in 1878. The countrys second stock exchange was established in Ahmedabad in 1894, followed by the Calcutta Stock Exchange (CSE). CSE can also trace its origin back to 19th century. From a get together under a neem tree way back in the 1830s, the CSE was formally established in May 1908. Indias other major stock exchange National Stock Exchange (NSE), promoted by leading financial institutions, was established in April 1993. Over the years, several stock exchanges have been established in the major cities of India. There are now 23 recognised stock exchanges — Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai, Ahmedabad, Bangalore, Bhubhaneswar, Coimbatore, Guwahati, Hyderabad, Jaipur, Kochi, Kanpur, Ludhiana, Mangalore, Patna, Pune, Rajkot, Vadodara, Indore and Meerut. Today, most of the global stock exchanges have become highly efficient, computerised organisations. Computerised networks also made it possible to connect to each other and have fostered the growth of an open, global securities market. Though Stock Broking was practiced in Calcutta as early as 1836, the members of the broking profession had neither any code of conduct for their guidance, nor any permanent place for congregation. The centre of their activity was near a neem tree, where at present, stands the offices of the Chartered Bank (now known as Standard Chartered) on Netaji Subhas Road, Calcutta. In 1905, Chartered Bank began to construct their own building, which led brokers to shift the arena of their operation, the neighbourhood of the recent Allahabad Bank. The brokers had no shelter and business was carried on in the open place. The inconvenience of such trading, prompted brokers to organise themselves and in May 1908, an association was formed under the name and style of the Calcutta Stock Exchange Association at 2, China Bazar Street. At the time of incorporation in 1908, the Stock Exchange had 150 members. Today the total membership has risen to more than 900, which contains several corporate and institutional members. The number of companies listed on the Exchange is more than 3,500. The Annual turnover of the Exchange in 1997-98 was to the tune of Rs, 1,78,779 crores. The Calcutta Stock Exchange has been granted permanent recognition by the Central Government with effect from April 14, 1980 under the relevant provisions of the Securities Contracts (Regulation) Act, 1956, with a view to render useful service to investors. In December 1993, SEBI directed the stock exchanges to discontinue the traditional system of carry forward of transactions (badla). Subsequently, it proposed an alternative system in March 1994, but no agreement could be reached on implementing this system. In February 1995, SEBI set up the G. S. Patel Committee (GSPC) to review the system of carry forward transactions. The GSPC submitted its report in March 1995. SEBI adopted the system recommended by the GSPC with some modifications in its decisions of July 27, 1995 and October 5, 1995. This Revised Carry Forward System (RCFS) was implemented in the BSE in January 1996, but the other exchanges in which the traditional carry forward system had been prevalent before December 1993 did not come forward to adopt the RCFS. A year after the implementation of RCFS, the President of the BSE wrote to SEBI in January 1997 requesting a relaxation of certain aspects of the RCFS to make it more practical and efficient. In its meeting of March 27, 1997, SEBI reviewed the entire sequence of developments relating to the RCFS and specifically noted that while introducing the RCFS in July 1995, SEBI had decided that the implementation of the revised carry forward system would be reviewed periodically by the Board, the first review being after three months. History of BSE An informal group of 22 stockbrokers began trading under a banyan tree opposite the Town Hall of Bombay from the mid-1850s, each investing a (then) princely amount of Rupee 1. This banyan tree still stands in the Horniman Circle Park, Mumbai. The informal group of stockbrokers organized themselves as the The Native Share and Stockbrokers Association which, in 1875, was formally organized as the Bombay Stock Exchange (BSE). In January 1899, the stock exchange moved into the Brokers Hall after it was inaugrated by James M Maclean. After the First World War, the BSE was shifted to an old building near the Town Hall. In 1928, the plot of land on which the BSE building now stands (at the intersection of Dalal Street, Bombay Samachar Marg and Hammam Street in downtown Mumbai) was acquired, and a building was constructed and occupied in 1930. Premchand Roychand was a leading stockbroker of that time, and he assisted in setting out traditions, conventions, and procedures for the trading of stocks at Bombay Stock Exchange and they are still being followed. Several stock broking firms in Mumbai were family run enterprises, and were named after the heads of the family. The following is the list of some of the initial members of the exchange, and who are still running their respective business. D.S. Prabhudas Company (now known as DSP, and a joint venture partner with Merrill Lynch) Jamnadas Morarjee (now known as JM) Champaklal Devidas (now called Cifco Finance) Brijmohan Laxminarayan In 1956, the Government of India recognized the Bombay Stock Exchange as the first stock exchange in the country under the Securities Contracts (Regulation) Act. The BSE moved into its current premises the Phiroze Jeejeebhoy Towers in 1980. The Bombay Stock Exchange followed the familiar outcry system for stock trading up until 1995, when it was replaced by an electronic (eTrading) system named BOLT, or the BSE OnLine Trading system. In 2005, the status of the exchange changed from an Association of Persons (AoP) to a full fledged corporation under the BSE (Corporatization and Demutualization) Scheme, 2005 (and its name was changed to The Bombay Stock Exchange Limited). BSE-Sensex The BSE SENSEX (also known as the BSE 30) is a value-weighted index composed of 30 scrips, with the base April 1979 = 100. The set of companies which make up the index has been changed only a few times in the last 20 years. These companies account for around one-fifth of the market capitalization of the BSE BSE other Indices Apart from BSE SENSEX, which is the most popular stock index in India, BSE uses other stock indices as well: BSE 100 BSE 500 BSEPSU BSEMIDCAP BSESMLCAP BSEBANKEX The National Stock Exchange Of India The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges. NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992. It is a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000. NSE Group NSCCL, The Organization NSE.IT Ltd. India Index Services Products Ltd. (IISL) Dot Ex International Limited National Securities Depository Ltd. (NSDL) NSCCL, The Organization The National Securities Clearing Corporation Ltd. (NSCCL), a wholly owned subsidiary of NSE, was incorporated in August 1995. It was set up with the following objectives: to bring and sustain confidence in clearing and settlement of securities; to promote and maintain, short and consistent settlement cycles; to provide counter-party risk guarantee, and to operate a tight risk containment system 2. NSE.IT Ltd NSE.IT, a 100% subsidiary of National Stock Exchange of India Limited (NSE), is the information technology arm of the largest stock exchange of the country. NSE.IT possesses the wealth of expertise acquired in the last six years by running the trading and clearing infrastructure of largest stock exchange of the country. NSE.IT is an Export Oriented Unit with STP and plans to go global for various IT services in due course. In the near future the company plans to release new products for Broker Back-office Operations and enhance NeatXS / Neat iXS to support Straight Through Processing on the net. 3. India Index Services Products Ltd. (IISL) India Index Services and Products Limited (IISL), a joint venture between NSE and CRISIL Ltd. (formerly the Credit Rating Information Services of India Limited). It was set up in May 1998 toIt provides a variety of indices and index related services and products for the Indian capital markets. It has a consulting and licensing agreement with Standard and Poors (SP), the worlds leading provider of investible equity indices, for co-branding equity indices. It maintains over 80 equity indices comprising broad-based benchmark indices, sect oral indices and customized indices. Many investment and risk management products based on IISL indices have been developed in the recent past, within India and abroad. These include index based derivatives traded on NSE and Singapore Exchange (SIMEX) and a number of index funds. 4. DotEx International Limited DotEx was a joint venture between i-flex Solutions Ltd. and NSE.IT Ltd. Recently NSE has taken over the shareholding and management of DotEx. DotEx was formed to provide world-class internet trading platforms which allows members of NSE to offer online trading facilities to their customers. Members of NSE can service a larger clientele by using the automated risk management features and thus increase volumes. Investors get comprehensive and updated information necessary to trade, along with a single-click convenience to fulfill their obligations The initial offering of DotEx is DotEx Plaza where multiple market participants such as members of NSE, depository participants and banks can offer web-based services to their customers. As a neutral aggregator and infrastructure provider, DotEx offers choice and convenience to investors. DotEx products may be classified under the following broad categories: Equity Trading Module Trading Module 5. National Securities Depository Ltd. (NSDL) In order to solve the myriad problems associated with trading in physical securities, NSE joined hands with the Industrial Development Bank of India (IDBI) and the Unit Trust of India (UTI) to promote dematerialization of securities. Together they set up National Securities Depository Limited (NSDL), the first depository in India. NSDL commenced operations in November 1996 and has since established a national infrastructure of international standard to handle trading and settlement in dematerialized form and thus completely eliminated the risks to investors associated with fake/bad/stolen paper. List of the companies in the sensex Scope and importance of the study RESEARCH OBJECTIVES Objective: â€Å"Comparative analysis of Religare Securities Ltd. online share trading and Religare Securities Ltd. offline share trading. Sub objectives To study the procedure, product and services of online and offline share trading. To know the preference of the factors which are important in online and offline share trading. To compare the online medium with Offline medium. To know the trading status of the Religare Securities Ltd. Clients. To know the service level of the Religare Securities Ltd. RESEARCH METHOLOGYS Define the problem. Planning a research design. Planning a sample. Gathering the data. Processing and analyzing the data. Formulating conclusions and preparing the report. Define the new problem. Problems online share trading As there are couples of good advantages there are also some technical disadvantages. As every coin have two sides. Disconnection from Internet In online share trading there is the possibility that your internet connection may get slow or get stopped, this may result in disconnection from share market. At such critical times you have to call your executive (from whom you opened your trading account) and place your order or square off your pending orders.] Computer Problem If your computer stops functioning then this may also result in disconnection from share market at this time also you have contact your executive. Other Problem Other problems like electricity disconnection. Solution for this is inverter or batter backup. Data collection Sources- Primary Data. Secondary Data. Primary Data Questionnaire. Secondary Data Magazines. Journals. Websites. THEROTICAL PROSPECTIVES RELIGARE Values that bind Religare : Company Profile Religare is a leading Financial Services Brokerage House with acknowledged industry Leadership in execution and clearing services on Exchange Traded Derivatives and cash market products. Key elements that place Religare amongst the leading Brokerage Houses and makes it the preferred service provider for value based financial services are: A Client-driven foundation and strategy committed to client-specific investment needs and objectives. Integrated and innovative use of Technology enabling clients to trade offline,online and Strategic tie-ups with latest technology partners to facilitate trading access and direct processing across 400 outlets in 160 cities Client-focused philosophy backed by memberships of all principal Indian Stock and Commodity Exchanges makes Religare a preferred service provider in the Industry for value based services. Religare confidently steers you through a challenging Financial and Trade Market every moment, whether you are present or not! Religare Group Religare Securities Ltd. Religare Finevest Ltd. Religare Wealth Management Services. Religare Capital Market Ltd. Religare Finance Ltd. Religare Insurance Holding Co. Ltd. Religare Realty Ltd. Religare Venture Capital Pvt. Ltd. Religare Insurance Broking Ltd. Religare Comodities Ltd. Religare Affiliation and Distribution Network Proven and accredited leaders in the Financial Services business, Religare provides you the unique opportunity to trade offline and online while cutting across all geographic barriers. Strategic Tie-ups that provide latest technology for access and processing Trading over 425 locations across 160 cities in India 24 hour access to Account Information via the Net or Electronic File Transfer (FTP) facilities. Membership of all Principal Indian Stock and Commodity Exchanges National Stock Exchange of India Ltd (NSEIL) Bombay Stock Exchange (BSE) Futures Option Segment of NSEIL BSE Dubai Gold Commodities Exchange (DGCX) National Commodity Derivatives Exchange Ltd. (NCDEX) Multi Commodity Exchange (MCX) OTC Exchange of India Ltd (OTCEIL) Depository Participant with NSDL CDSL Corporate Agents for Life Non-Life Insurance (both foreign / private and state owned insurance companies) One of the largest distributors of leading Mutual Funds in India Religare Research Desk Philosophy â€Å"Investing means laying out money today to receive money in real terms after taking inflation into account, tomorrow† Thats because were realistic, experienced, backed by research and study and most importantly, client-driven. Empowering the Investor The Religare Research Desk has one key objective to empower you completely with Market Knowledge, Analysis and Advisory Services to help you prosper. Our team provides expert and timely analysis on equity and commodity to help you maximize your trading decisions. We offer value perspectives, suggest strategy, focus on opportunities for investment and growth, and endeavour to reduce risk potential. Trading Ideas Daily Market Strategies Monthly Updates Investment Ideas Trading Calls Commodity Views Religare as a trading partner Religare is driven by ethical and dynamic process for wealth creation. Religare Enterprise Limited through Religare Securities Limited, Religare Finevest Limited, Religare Commodities Limited and Religare Insurance Advisory Services Limited provides integrated financial services to its corporate, retail and wealth management clients. Religare operations are managed by highly skilled professionals who subscribe to Religare philosophy and are spread across its country-wide branches. Offline Service of Religare Se curities Limited R-ALLY RELIGAREs ALLY also known as R-ALLY is a perfect partner for savvy investers. Experience the comfort of our elite dealing rooms where all your trading requirements would be taken care of by experienced, well informed and contemporary dealers. You will also have dedicated relationship managers to take care of your multiple investments needs. Online Service of Religare Securities Limited R-ALLY Lite Brouser based plateform No software installation required NSE cash segment, NSE FO and BSE on single plateform Real-time streaming quotes Multiple watch lists Alerts and triggers Hot key functions Online transfer of funds through multiple banks Access your ledger balances and account information over internet, branch and call centre Trade online and over phone at branch Access to all your accounts through your customer relationship number (CRN) Dedicated Relationship Managers for assisting multiple investment needs R-ALLY Pro Application based plateform No software installation required NSE cash segment, NSE FO and BSE on single plateform Real-time streaming quotes Multiple watch lists Alerts and triggers Hot key functions Online transfer of funds through multiple banks Access your ledger balances and account information over internet, branch and call centre Trade online and over phone at branch Access to all your accounts through your customer relationship number (CRN) Dedicated Relationship Managers for assisting multiple investment needs How we will make trade easier Personal assistance Dedicated dealers for facilitating trading and post trade needs Dedicated Relationship Managers for assisting multiple investment needs Reasearch Advisory Regular news and updates on market Research services over SMS to keep you abreast Daily and weekly technical reports A complete information report on results and performance of individual companies. Complete reports on various economic sectors and their performance along with analysis of few major companies in that sector Trading calls in Future Opinion Daily capsule of market indices and index movement, national and international corporate news, bulk trade deals and market gains and losers, information on mutual funds and their performance along with forth coming IPO traker Add-Ons Access to all your accounts through your Customer Relationship Number (CRN) Access your ledger balances and account information over internet, branches and call centre What is a depository? A depository can be compared to a bank. A depository holds securities (like shares, debentures, bonds and units) of investors in electronic form. Besides holding securities, a depository also provides services related to transactions in securities. What are the benefits of depository system? The benefits of participating in a depository are: immediate transfer of securities; no stamp duty on transfer of securities; elimination of risks associated with physical certificates such as bad delivery, fake securities etc; reduction in paperwork involved in transfer of securities; reduction in transaction cost; nomination facility; change in address recorded with Depository Participant (DP) gets registered with all companies in which investor holds securities electronically, eliminating the need to correspond with each of them separately; transmission of securities is done by DP, eliminating correspondence with companies; convenient method of consolidation of portfolios/accounts; holding investments in equity and debt instruments in a single account. What is a DP? As an investor you open a securities account with a DP. DPs are attached to the depositories very much the same way as commercial banks are attached to RBI. All interactions including account opening, dematerialization, transactions, pledge etc are done through the DP. How do I select a DP? Are all DPs the same? You can select your DP to open a demat account just like you select a bank for opening a savings account. Some of the important factors for selection of a DP can be: Convenience: proximity to the office/residence, business hours. Comfort: reputation of the DP, past association, range of services etc. Find out if the DP is in a position to give the specific service you may need. Cost: the service charges levied by DP and the service standard. What should I do when I want to open an account with a DP? The process of opening an account with a DP is similar to the opening of a bank account. You can approach any DP of your choice and fill up an account opening form. At the time of opening an account, you have tosign an agreement with DP in a National Securities Depository Ltd (NSDL) prescribed standard agreement, which details your rights and duties and those of your DP. All investors have to submit their proof of identity and proof of address along with the prescribed account opening form. Proof of identity: your signature and photograph must be authenticated by an existing demat account holder with the same DP or by a bank manager. Alternatively, you can submit a copy of Passport, Voters ID card, Driving license or PAN card with photograph. Proof of address: you can submit a copy of Passport, Voters ID card, Driving license, PAN card with photograph, Ration card or Bank passbook as proof of address. You must remember to take original documents to the DP for verification. Passport-size photographs Dematerialization: Dematerialization is the process by which a client can get physical certificates converted into electronic balances maintained in his account with the DP. The dematerialization system is an alternative to the physical existence of securities. In this system securities are converted into the electronic form and deposited in a depository account in the investors name. In order to dematerialize certificates, an investor will have to first open an account with a DP and then request for the dematerialization of certificates by filling up a Dematerialization Request Form (DRF), which is available with the DP, and submitting the same along with the physical certificates. The investor has to ensure that before the certificates are handed over tothe DP for demat, they are defaced by marking Surrendered for Dematerialization on the face of the certificates. Features: Holdings in only those securities that are admitted for dematerialization by National Securities Depository Ltd (NSDL) can be dematerialized. Structure of holding in the securities should match with the account structure of the depository account. Now shares in different order of names can also be dematted. If the shares are in the name of X and Y, the same cannot be dematerialized into the account of either X or Y alone. However if the shares are in the name of X first and Y second, and the account is in the name of Y first and X second, then these shares can be dematerialized in this account. Only those holdings that are registered in the name of the account holder can be dematerialized. Physical shares which have not been transferred and are still there with a transfer deed cannot be dematted. Only a few companies have been given the permission to offer Transfer-cum-Demat. The list of these companies can be viewed here. Can I dematerialized any share certificate? You can dematerialize only those certificates that are already registered in your name and are in the list of securities admitted for dematerialization at NSDL. All the scrips included in SP CNX Nifty and BSE Sensex have already joined NSDL. This list has more than 2,800 companies and is steadily growing. Rematerialization: Rematerialization is the process by which a client can get his electronic holdings converted into physical certificates. The client has to submit the dematerialization request to the DP with whom he has an account along with a Remat request form. The physical shares will be posted by the company directly to the clients. Trades: For all sales made by clients, the shares will have to be given to the broker, so that the Pay In can be made by the broker to the stock exchange concerned. For that its essential that the shares be transferred to the account of the broker well before the deadline date. You must confirm with your broker the settlement date and settlement number and then submit your instructions to your DP. Alsoits important to give the instructions to your DP as early as possible. Pledge: Pledge enables you to obtain loans against your dematerialized shares. So you get liquidity without having to sell your shares. A highly simplified procedure may be availed of for pledging of securities in the electronic mode. The pledged securities continue tobe reflected in the DP account of the clients (pledgor) but the concerned securities are blocked and cannot be used for any transactions. As and when the pledg