Stock Markets in India

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					                                      Stock Markets in India

On a daily basis, stocks are exchanged and traded in number of stock markets around the world.
The liquidity they bring is a vital component for economic growth. Stock exchanges are open
markets and they trade financial assets. Whether they are associated with a company or whether
acting as an individual, stock exchange is a place where stocks are bought and sold. There are
many stock exchanges around the world and each of them plays a part in determining the overall
financial & economic condition of any economy.

Stock exchanges deal in a number of financial instruments like stocks, bonds and equities.
Corporate as well as government bonds are traded in stock exchanges. Equities consist of
popular investment options, bonus issues, rights issues, and all other forms of shares and stocks.
Mediators such as stockbrokers, financial advisors and brokerage houses facilitate the actual
trading of stocks.

Stock Markets in India - a brief summary

    •   India's oldest and first stock exchange: Mumbai (Bombay) Stock Exchange. It was
        established in 1875 and has over 6,000 stocks listed.
    •   Total number of stock exchanges present in India: 22
    •   They are located in: Ahmedabad, Bangalore, Calcutta, Chennai, Delhi etc.
    •   There is also a National Stock Exchange (NSE) that is located in Mumbai.
    •   There is also an Over the Counter Exchange of India (OTCEI) which allows the listing of
        small and medium sized companies.
    •   The regulatory agency that oversees the functioning of stock markets is Securities and
        Exchange Board of India (SEBI), which is also located in Mumbai.

Opportunities for Foreign Investors in Indian Stock Markets

    •   Direct Investment

        Foreign companies are now permitted to have a majority stake in their Indian affiliates;
        except in few restricted industries. In certain specific industries, foreigners can also have
        holdings up to 100 per cent.

    •   Investment through Stock Exchanges

        Foreign Institutional Investors (FII) on registration with the Securities and Exchange
        Board of India (SEBI) as well as the Reserve Bank of India (RBI) are allowed to operate
        in Indian stock exchanges subject to the guidelines issued by SEBI
                           Important requirements under the guidelines

Portfolio investments in the primary or secondary markets are subject to a ceiling of 30 per cent
of issued share capital for total holding of all the registered FII's. In any one company an FII
holding is subject to a ceiling of 10 % of the total issued capital.

However, while applying the ceiling of 30 per cent, the following are excluded:

    •   Foreign investment under a financial collaboration that is permitted up to 51 per cent in
        priority areas.
    •   Investment by FII's through GDR's, offshore single/regional funds, and euro convertibles.

Disinvestment is permitted through a broker of a Stock Exchange.

A registered FII needs to buy or sell only for delivery. It is not permitted to offset a deal. It’s also
not allowed to sell short.

Investment in Euro Issues or Mutual Funds floated overseas

Foreign investors can invest in Euro issues of Indian companies & in India-specific funds that are
floated abroad.

Broking Business

Foreign brokers on registration with the SEBI can now route the business of registered FIIs.
Guidelines for the same are issued by SEBI.

Asset Management Companies and Merchant Banking

Foreign participation in AMCs i.e. Asset Management Companies and Merchant Banking
Companies is now permitted.

BSE India The Bombay Stock Exchange Limited is officially known as the Stock Exchange,
Mumbai. It is the main stock exchange in India which operates a bulk of the share sharing and the
equity market of the country. It is also the oldest stock exchange in Asia and has the most
number of listed companies in the world with over 4700 companies.

It is owned by the Bombay Stock Exchange Limited and is located at Dalal Street. It is popularly
known as BSE. It was founded in 1875 and since then, has become the mainstay of the equity
and stock market in India. On the global scenario, BSE ranks as the 12th largest stock exchange.
The BSE SENSEX (SENSitive indEX) is the index of the stock exchange that is widely used in
India as well as other parts of Asia. It is also sometimes referred to as the "BSE 30". Most of the
trading of shares in India takes place in the Bombay Stock Exchange

NSE India In 1991, the Pherwani Committee recommended to establish the National Stock
Exchange (NSE) in India. In 1992 IDBI was authorized by the Government of India for
establishing this exchange.

In National Stock Exchange there is trading of bonds, government securities and equity
shares. India's Stock Exchanges particularly the National Stock Exchange has achieved
world standards in recent years.