Indian Stock Markets

#1
Info

Indian Stock Markets On The March

M.R.Mayya
(Chairman, The ISEI)

(COMPLETE TEXT AVAILABLE ON www.mega-ace.com/M.R.Mayya.htm)

Indian Stock Markets are Among the Advanced Markets

We have today on-line screen-based trading, resulting in access to the market on an equal footing to all the operators, irrespective of their location, be it Kargil in the North, Kanyakumari in the South, Dispur in the East and Dwaraka in the West. New York Stock Exchange has still floor-based trading.

We have successfully introduced rolling settlements and at present, all securities are traded and settled on a T+2 rolling basis. We will soon be moving on to trading and settlement on a T+1 rolling basis. Advanced markets of U.S. and U.K. have still settlements done on T+3 rolling basis.

Internet trading in India, which started about five years ago, has been picking up gradually, currently accounting for about five per cent of the total volume of trading. Quite a significant portion of the volume of trading in internet comes from countries like U. S., U. K., Singapore, Hong Kong, etc.

Investor Awareness Programmes
Hundreds of investor awareness programmes have since been conducted all over the country by SEBI, stock exchanges, depositories and investors associations, educating the investors about all aspects of investment in industrial securities, including risk factors, rights and obligations, dos and donts, etc. This, I believe, will be a continuous process as laws relating to the securities industry are not only complex, but also keep changing from time to time.

Fora for Redressal of Grievances
There are several fora for redressal of grievances of investors. All the stock exchanges have Investor Grievance Cells (IGC) dealing exclusively with grievances of investors. All complaints against stock brokers and sub-brokers as also against listed companies can be referred to these IGCs, which try to resolve these disputes administratively by directly taking up the matter with the concerned parties. In case IGCs are not able to resolve the complaints against stock brokers and sub-brokers, the matter can then be referred to the Investors Grievance Redressal Committee (which is headed by a retired High Court Judge at the Bombay Stock Exchange). If this Committee is also not able to resolve the dispute, the investor can ask the stock exchange for conciliation. If conciliation proceedings also fail, the investor can proceed for arbitration.

In the case of a listed company, the investor can also go for arbitration and the company is liable to compensate the investor for the opportunity losses, if any.

With regard to complaints against companies,

Yet another avenue open to an aggrieved investor is to approach the concerned District Forum, State Commission or National Commission set up under the Consumer Protection Act, 1986. They have powers not only to redress the grievances but also to award suitable compensation to the consumer.

Yet another forum available to an aggrieved investor is to approach the Office of Ombudsman proposed to be established shortly by SEBI. The ombudsman will initially try to approve a friendly and amicable settlement of the dispute between the parties, failing which he will adjudicate the complaint and award reasonable compensation along with interest, including future interest till date of satisfaction of the award which may not exceed one per cent per month.

Enhance Percentage of Minimum Public Offer
Percentage of public offer entitling a company for listing on a stock exchange used to be 60 per cent of the capital of the company under the Securities Contracts (Regulation) Rules, 1957. This was brought down to 25 per cent in 1993. This is lowered further down further to 10 per cent in case of companies making a public offer of 20 lakh

securities with a minimum size of Rs.100 crore. The percentage of public offer must be raised to at least 40 per cent of the capital. This will help not only to widen the shareholding population in the country, but also act as a deterrent against manipulation of prices because of the larger floating stocks.

Increase the Share of Retail Individual Investors
It is equally necessary to raise the percentage earmarked for retail individual investors who apply for shares of the value upto Rs.50,000 from the presently permitted level of 25 per cent to at least 50 per cent of the public offer. In case of heavy subscription, allotment to retail individual investors can be made in lots of 10 shares as the trading lot in the demat mode is one share. This will result in a wider distribution of the shares in the hands of the investing public. It is relevant to note in this connection that as per the guidelines issued by the Ministry of Finance, applicants applying upto 500 shares were required to be granted weightage in allotment with no applicant being allotted more than 500 shares unless all applicants applying upto 500 shares were allotted in full. Retail investors can also be offered shares at a discount of five per cent as has been rightly recently done by the PSUs.

Compensation to Shareholders of Vanishing Companies
It is commendable that drastic penal action is being taken against promoters and directors of vanishing companies. Shareholders of these companies need to be compensated and this can easily be done by the Investor Education and Protection Fund set up by the Department of Company Affairs under Section 205C of the Companies Act, 1956, which reportedly has about Rs.200 crore in its corpus.

Buyback of Shares
Buyback of shares, which is increasingly being resorted to by companies, particularly by multi-national companies, resulting in delisting of shares, is detrimental to the progress of the securities market. While it may not be desirable to prevent buyback of shares, a deterrent that can be considered is to impose say a ten percentage point higher rate of taxes on unlisted companies. Such a distinction with a five percentage higher rate of tax was in vogue earlier till 1993 when it was removed by the Finance Act, 1993.


Lack of Liquidity
A matter of grave concern to the investors of the country is lack of liquidity in listed stocks. Out of a total of about 10,000 companies listed on the 23 stock exchanges of the country, the number of active scrips having consistent and adequate liquidity is about 100 which account for over 95 per cent of the volume of turnover in the country. Out of this 100, top 10 scrips account for 75 to 80 per cent of the turnover. Out of 5,650 companies listed on the Bombay Stock Exchange (BSE) as on March 31, 2003, shares of only 2,679 companies were traded during the year 2002-03, out of which number of companies whose shares were traded for more than 100 occasions was 1,815 only. BSE has at present 2,737 shares in the Z Group out of about 5,675 listed companies whose aggregate volume of trade is Rs.20 crore per day. A redeeming feature, however, is that while about 1,200 shares were traded in a day about a year ago, currently about 2,000 shares are traded daily mainly due to the buoyancy in the market. The shares listed exclusively on the 19 regional stock exchanges numbering about 4,000 are, however, not traded at all.

In order to tackle this serious problem of liquidity, efforts have been on for well over a year now to carve out a market on the lines of Euronext of Europe, which consists of Paris, Amsterdam, Brussels and Lisbon Stock Exchanges. A joint proposal by the Federation of Indian Stock Exchanges consisting of 19 regional stock exchanges of the country and BSE to create a market christened as BSE-Indonext has recently been submitted to SEBI. Shares of companies with a paid-up capital upto Rs.20 crore listed on the regional stock exchanges and of the companies listed on BSE in the B1 and B2 groups would be traded in this market. Z group of securities listed on BSE would, however, not be included in this segment. A significant feature of trading in this segment is that members of the regional stock exchanges trading in this segment and clearing their trades through the respective clearing houses of the regional stock exchanges would issue contract notes of their respective stock exchanges, which would help greatly to ensure the survival of the regional stock exchanges.

Hopefully, this venture should prove to be a success as all attempts to generate liquidity by appointment of market makers, introduction of call auction system (a system which would result in the execution of trades at the consensus price), etc. would be introduced.

With all these facilities and incentives, there could still be a sizeable chunk of shares which may remain totally illiquid. In addition, a large chunk of shares in the Z group would also not be traded for days together. One possible way of grant of an exit facility in respect of such securities is to prevail upon the recently formed Asset Reconstruction Corporations (ARCs) to buy these shares at a nominal price of say, 1 paisa per share, so that the holders of these securities would be able to book losses. The ARCs would hopefully benefit by this as some of these companies could revive over a period of time.

Conclusion
The shareholding population of the country has also been stagnating at about 21 million, that is just about 2% of the population. In fact, there has been a shrinkage in the shareholding population by a percent every year in the last three years. This compares very poorly with the shareholding population of over 25% of the advanced markets. In fact, 85% of the households in the United States have interest in equities, either directly or through mutual funds. We have to carry the cult of equity to the four corners of the country, so that small investors also benefit by the expanding capital market. We can then rightly say that small investors are also part of India Shining
 
#2
hello
I am a new member. Please tell me do you think that indian stock market will touch 10000 mark in the year 2007.
Your article was good.
 
#3
Re: Info

well written yor conclusion was spot on.equity cult is very low among the indians.it is restricted to few communities and regions.that can b attributed to sme extent to the reputation of the markets and scams and to large extent to the lack of knowledge transmission abt markets in the education system.if u walk into a classroom of even the best of th ecoilleges in india i think u can hardly find 2 or 3 students having knowledge abt stock mkt.
 

Traderji

Super Moderator
#4
Re: Info

creameeee said:
well written yor conclusion was spot on.equity cult is very low among the indians.it is restricted to few communities and regions.that can b attributed to sme extent to the reputation of the markets and scams and to large extent to the lack of knowledge transmission abt markets in the education system.if u walk into a classroom of even the best of th ecoilleges in india i think u can hardly find 2 or 3 students having knowledge abt stock mkt.
If we have a long term bull market lasting several years hopefully this trend will be reversed.
 
#6
Hello,

For NSE u can refer contract.txt and security.txt file provided by NSE itself, It contains all info about all stocks and futures available till date.

Thanks.

MANOJ GUPTA
 

bbm

New Member
#7
:) Hello friends:

I have joined today. I shall be thankful for educating me the names of the trading platforms who allow spot buying of equities.
 
#8
Hi guys,

I am new in this top but i have been reading the postings made by you guys.
Today's market can not be estimated. If you have any specific method please let me know.
 
#9
hi guys,
new on the site...but tell me which is the easiest way of knowing when and where to invest in? quartely resulst or forecasts? or what? i usually pick out one company from BSE...try to follow their trend and then make up my mind...any good advises for a lay man?
 
#10
Re: Info

Thanks!

For this Well compiled info.




Indian Stock Markets On The March

M.R.Mayya
(Chairman, The ISEI)

(COMPLETE TEXT AVAILABLE ON www.mega-ace.com/M.R.Mayya.htm)

Indian Stock Markets are Among the Advanced Markets

We have today on-line screen-based trading, resulting in access to the market on an equal footing to all the operators, irrespective of their location, be it Kargil in the North, Kanyakumari in the South, Dispur in the East and Dwaraka in the West. New York Stock Exchange has still floor-based trading.

We have successfully introduced rolling settlements and at present, all securities are traded and settled on a T+2 rolling basis. We will soon be moving on to trading and settlement on a T+1 rolling basis. Advanced markets of U.S. and U.K. have still settlements done on T+3 rolling basis.

Internet trading in India, which started about five years ago, has been picking up gradually, currently accounting for about five per cent of the total volume of trading. Quite a significant portion of the volume of trading in internet comes from countries like U. S., U. K., Singapore, Hong Kong, etc.

Investor Awareness Programmes
Hundreds of investor awareness programmes have since been conducted all over the country by SEBI, stock exchanges, depositories and investors associations, educating the investors about all aspects of investment in industrial securities, including risk factors, rights and obligations, dos and donts, etc. This, I believe, will be a continuous process as laws relating to the securities industry are not only complex, but also keep changing from time to time.

Fora for Redressal of Grievances
There are several fora for redressal of grievances of investors. All the stock exchanges have Investor Grievance Cells (IGC) dealing exclusively with grievances of investors. All complaints against stock brokers and sub-brokers as also against listed companies can be referred to these IGCs, which try to resolve these disputes administratively by directly taking up the matter with the concerned parties. In case IGCs are not able to resolve the complaints against stock brokers and sub-brokers, the matter can then be referred to the Investors Grievance Redressal Committee (which is headed by a retired High Court Judge at the Bombay Stock Exchange). If this Committee is also not able to resolve the dispute, the investor can ask the stock exchange for conciliation. If conciliation proceedings also fail, the investor can proceed for arbitration.

In the case of a listed company, the investor can also go for arbitration and the company is liable to compensate the investor for the opportunity losses, if any.

With regard to complaints against companies,

Yet another avenue open to an aggrieved investor is to approach the concerned District Forum, State Commission or National Commission set up under the Consumer Protection Act, 1986. They have powers not only to redress the grievances but also to award suitable compensation to the consumer.

Yet another forum available to an aggrieved investor is to approach the Office of Ombudsman proposed to be established shortly by SEBI. The ombudsman will initially try to approve a friendly and amicable settlement of the dispute between the parties, failing which he will adjudicate the complaint and award reasonable compensation along with interest, including future interest till date of satisfaction of the award which may not exceed one per cent per month.

Enhance Percentage of Minimum Public Offer
Percentage of public offer entitling a company for listing on a stock exchange used to be 60 per cent of the capital of the company under the Securities Contracts (Regulation) Rules, 1957. This was brought down to 25 per cent in 1993. This is lowered further down further to 10 per cent in case of companies making a public offer of 20 lakh

securities with a minimum size of Rs.100 crore. The percentage of public offer must be raised to at least 40 per cent of the capital. This will help not only to widen the shareholding population in the country, but also act as a deterrent against manipulation of prices because of the larger floating stocks.

Increase the Share of Retail Individual Investors
It is equally necessary to raise the percentage earmarked for retail individual investors who apply for shares of the value upto Rs.50,000 from the presently permitted level of 25 per cent to at least 50 per cent of the public offer. In case of heavy subscription, allotment to retail individual investors can be made in lots of 10 shares as the trading lot in the demat mode is one share. This will result in a wider distribution of the shares in the hands of the investing public. It is relevant to note in this connection that as per the guidelines issued by the Ministry of Finance, applicants applying upto 500 shares were required to be granted weightage in allotment with no applicant being allotted more than 500 shares unless all applicants applying upto 500 shares were allotted in full. Retail investors can also be offered shares at a discount of five per cent as has been rightly recently done by the PSUs.

Compensation to Shareholders of Vanishing Companies
It is commendable that drastic penal action is being taken against promoters and directors of vanishing companies. Shareholders of these companies need to be compensated and this can easily be done by the Investor Education and Protection Fund set up by the Department of Company Affairs under Section 205C of the Companies Act, 1956, which reportedly has about Rs.200 crore in its corpus.

Buyback of Shares
Buyback of shares, which is increasingly being resorted to by companies, particularly by multi-national companies, resulting in delisting of shares, is detrimental to the progress of the securities market. While it may not be desirable to prevent buyback of shares, a deterrent that can be considered is to impose say a ten percentage point higher rate of taxes on unlisted companies. Such a distinction with a five percentage higher rate of tax was in vogue earlier till 1993 when it was removed by the Finance Act, 1993.


Lack of Liquidity
A matter of grave concern to the investors of the country is lack of liquidity in listed stocks. Out of a total of about 10,000 companies listed on the 23 stock exchanges of the country, the number of active scrips having consistent and adequate liquidity is about 100 which account for over 95 per cent of the volume of turnover in the country. Out of this 100, top 10 scrips account for 75 to 80 per cent of the turnover. Out of 5,650 companies listed on the Bombay Stock Exchange (BSE) as on March 31, 2003, shares of only 2,679 companies were traded during the year 2002-03, out of which number of companies whose shares were traded for more than 100 occasions was 1,815 only. BSE has at present 2,737 shares in the Z Group out of about 5,675 listed companies whose aggregate volume of trade is Rs.20 crore per day. A redeeming feature, however, is that while about 1,200 shares were traded in a day about a year ago, currently about 2,000 shares are traded daily mainly due to the buoyancy in the market. The shares listed exclusively on the 19 regional stock exchanges numbering about 4,000 are, however, not traded at all.

In order to tackle this serious problem of liquidity, efforts have been on for well over a year now to carve out a market on the lines of Euronext of Europe, which consists of Paris, Amsterdam, Brussels and Lisbon Stock Exchanges. A joint proposal by the Federation of Indian Stock Exchanges consisting of 19 regional stock exchanges of the country and BSE to create a market christened as BSE-Indonext has recently been submitted to SEBI. Shares of companies with a paid-up capital upto Rs.20 crore listed on the regional stock exchanges and of the companies listed on BSE in the B1 and B2 groups would be traded in this market. Z group of securities listed on BSE would, however, not be included in this segment. A significant feature of trading in this segment is that members of the regional stock exchanges trading in this segment and clearing their trades through the respective clearing houses of the regional stock exchanges would issue contract notes of their respective stock exchanges, which would help greatly to ensure the survival of the regional stock exchanges.

Hopefully, this venture should prove to be a success as all attempts to generate liquidity by appointment of market makers, introduction of call auction system (a system which would result in the execution of trades at the consensus price), etc. would be introduced.

With all these facilities and incentives, there could still be a sizeable chunk of shares which may remain totally illiquid. In addition, a large chunk of shares in the Z group would also not be traded for days together. One possible way of grant of an exit facility in respect of such securities is to prevail upon the recently formed Asset Reconstruction Corporations (ARCs) to buy these shares at a nominal price of say, 1 paisa per share, so that the holders of these securities would be able to book losses. The ARCs would hopefully benefit by this as some of these companies could revive over a period of time.

Conclusion
The shareholding population of the country has also been stagnating at about 21 million, that is just about 2% of the population. In fact, there has been a shrinkage in the shareholding population by a percent every year in the last three years. This compares very poorly with the shareholding population of over 25% of the advanced markets. In fact, 85% of the households in the United States have interest in equities, either directly or through mutual funds. We have to carry the cult of equity to the four corners of the country, so that small investors also benefit by the expanding capital market. We can then rightly say that small investors are also part of India Shining
 

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