Sensex And The Indian Stock Market Finance Essay - Free Essay Example

In the year 1986 the Stock Exchange, Mumbai (BSE) introduced with a stock index and it subsequently became the basic barometer of the Indian stock market. SENSEX is a measure tool using in Indian stock market that well designed scientifically. It is based on construction and review methodology that having global acceptance. As first complied in 1986, SENSEX is like a basket which contains 30 constitute stock representing a sample of liquid, large and representative companies. The base year of SENSEX is considered as 1978-79. The base value of SENSEX is taking as 100. The index is widely reported and published in domestic as well as international markets through print and electronic media. Initially the index was calculated based on the Full Market Capitalization methodology. Later in September 1, 2003 it shifted to the free-float Market Capitalisation methodology as well. The construction of Free-float Market Capitalization methodology of index is regarded as a global industry best practice. Many of the prominent index providers like MSCI, FTSE, STOXX, SP and Dow Jones have been using the Free-float methodology. SENSEX has wide acceptance among Indian investors. So SENSEX considered as the pulse of the Indian stock market as well. SENSEX as an oldest index in the country, it has been providing tim e series of data over long period of time. With its wide performance SENSEX now becomes one of the prominent brands in India. As a measure tool in Indian stock market, SENSEX captured all its recognitions through a well judicial manner. One can identify all the variations like boom and bust of Indian stock market judicially After the launch of SENSEX in 1986, it followed re introduction in January 1989 by introduction of BSE National Index with base year as 1983-84 and 100 as base point. It comprised of 100 stocks listed in five various stock exchanges across. In May 22, 2006, the Exchange launched Dollex-100 which is a dollar linked version of BSE -100 INDEX. In order to consummate the needs and requirements of the market participants for segment specific, sector specific and broader indices, the Exchange has frequently been increasing the range of its indices. After the launch of BSE -200 Index in 1994, they launched neo version by updating with BSE-500 Index and 5 sector al indices in 1999. In the year 2001, BSE introduced the BSE-PSU Index and DOLLEX-30. The countrys first free-float based index-BSE TECK index also developed later by Bombay Stock Exchange. Except BSE PSU, they shifted all their indices to a free float methodology in a phased manner. During the market hours BSE keeps updating its BSE indices in every 15 seconds as well. And it displays all its values through a system called BOLT system. Moreover, all BSE indices keeps reviewing periodically by a particular committee called Index Committee BSE provides various kinds of services to investors, in order to make solid its signature in investment sector. They are following: Investor Services: This is a particular department that deals with the services regarding redressing grievances of investors. BSE became the first exchange in the country that provided Rs.1 million towards the investor protection fund. It was highest amount of money that than any stock exchanges in the country to contribute. BSE had conducted a nationwide investor awareness programme with the caption of Safe Investing in the Stock Market. Under this program, 264 programmes were held across more than 200 cities. The BSE online Trading (BOLT): To facilitate online trading for investors BSE has introduced this BSE Online Trading system. It enables the investors to deal with securities more conveniently in front of the screen. It has currently been operating in 25000 workstations placed almost 450 cities across the country. BSEWEBX.com: this web system was introduced In February 2001. By the system called BSEWEBX.com, BSE meant that to make convenience to investors to operate with their securities from any part of the world with the help of internet. Surveillance: This On Line Surveillance System (BOSS) was introduced to monitors the price movements, volume positions and members positions on real time basis. Timely measurement and displaying of risk on various securities is importan t feature of the system. It also helps to market reconstruction and generation of cross market alerts. BSE Training Institute: BTI provide training on capital marketing and certificate in collaboration with various management institutes and universities. It offers almost 40 courses on various aspects of the capital market and financial sector. More than 20000 people have attended this training program under BTI programmes. SERVICES PROFILE Equities The separate section of Equities provides an insight about the equity instruments of NSE BSE. This section also provides quotes and statistics of the equities market on-time basis. The main function of equity section is to supply with various information regarding listing of securities, trading of securities, entire trading process, clearing and settlement of whole process. It also covers the area of risk management and trading statistics. Sharewealth is the registered member of NSE, giving equities at the most importance. Derivatives The term derivative, as its name indicates it does not have independent value. The real value of derivatives is derived from the value of underlying asset. The underlying asset may be various assets like live stock, commodities, securities, bullions and currency. Derivatives would be in forward and future characteristics. It would be a type of hybrid contract of pre determined certain duration that linked for the purpose of contract consummations to the value of a real or financial asset or to an index of particular securities As per the Second Amendment of Securities Laws Act, 1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as:- A Derivative includes: a). a security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument or contract for differences or any other form of security; b). a contract which derives its value from the prices, or index of prices, of underlying securities; Depository A depository is almost like banks and can be compared with banks. Prime function of a depository is to holds securities like shares, debentures, bonds, Government Securities, units etc. of investors in electronic mode. A depository also provides various services related to transactions in securities. Currently BSE have two Depositories to work with. They are National Securities Depository Limited (NSDL) and Central Depository Services (I) Limited (CDSL). Both these depositories are registered with SEBI. A depository has an agent called Depository Participant. Depository interfaces with the investors through these agents. An investor who wants to avail the services of any depository, first of all the investor has to open an account with a Depository Participant. After opening an account investor can authenticate his deal with the depository and can avail the services. Some of the Depository facilities include following: Repurchase or redemption of units of mutual funds, dem aterialisation, electronic settlement of various trades in stock exchanges, receipt of corporate benefits like bonus, transmission of securities in electronic form etc. It also provides some facilities like holding debt instruments in the same account, availing stock lending or borrowing facility etc. Sharewealth is providing all Depository services to investors. Commodities Here the term commodity means any product that can be used for commerce or an article of commerce which is trading on an authorized commodity exchange. The value of article should be movable. An article should something which is bought or sold. It should also be something which is produced or used as the subject or barter or sale. In short, all such kinds of goods can be considered as commodity. Forward Contracts (Regulation) Act (FCRA), 1952 defines goods as every kind of movable property other than actionable claims, money and securities. As far as current situation is concerned, all products of agricultural and plantation, mineral and fossil origin are allowed for commodity trading recognized as per the FCRA. The Central Government recognised exchange called national commodity exchange, permits following items as commodities: precious items like gold and silver and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and j ute goods, sugar, vegetable items like potatoes and onions, coffee and tea, rubber and spices etc. Sharewealth is the registered member of MCX. Mutual Fund Mutual fund is a mechanism that pooling the resources from the investors by issuing small units to the investors and investing those funds in various securities as per the terms mentioned in offer document. Investments in securities are doing on portfolio basis that spreads wide cross-section of industries and hence the risk is reduced. All securities would not move well all times in the market. So diversification of investments reduces the risk. Investors are provided with units in accordance with the quantum of money invested by them. Investors who invested in mutual funds are known as unit holders. In mutual fund, profit or loss whatever it is are shared by the investors in accordance with the proportion of their investments. Generally, mutual funds come out with various attractive schemes with different investment objectives alternatively. Before collecting fund from the public any mutual fund needed to be registered for its viability with Securities and Exchange Board of India (SEBI) which regulates securities markets. Sharewealth is registered with AMFI and it guides all types of Mutual Fund. IPO IPO stands for Initial Public Offer. It is the selling of securities to the public in the primary market. An unlisted company may make a fresh issue of securities or it offers existing securities to the public. Both ways comes under Initial Public Offer. An IPO paves way for listing and trading of securities. The securities can be sold through either book building or normal public issues. As far as investment through IPO is concerned there is not much historical data on stock and company is available, we cannot analyse and predict the performance of the stock as well. Since it is new securities there is no assurance about the performance of the stock. So, the investment by IPO is more risky also. Since most of IPOs are going through a transitory growth period they are therefore subject to additional uncertainty regarding their future value. Insurance Life insurance is a contract between insurer and insured that assures payment of an amount to the person who insured on the happening of the peril insured against. The payment of contract happens by the insurer to insured happens: 1) On the date of maturity, or 2) Specified dates at periodic intervals, or 3) If death occurs before the maturity. ORGANIZATION STUCTURE COMPETITORS OF SHAREWEALTH SECURITIES LTD. There are several financial security companies playing their roles in Indian equity market. But Sharewealth faces competitions from these few companies. Share Khan (SSKI) Karvy Stock Brocking Ltd. Geojit BNP Paribas Religare Securities Hedge Equities Motital Oswal Securities Ltd. SWOT ANALYSIS Strengths It is a leading online trading firm with more than 520 peoples working in the organization. Sharewealth make avail multi-channel operation to all its customers through an online system with www.sharewealth.com, 165 share shops in Kerala and a call-centre based Dial-n-Trade facility Sharewealth has dedicated and well designed research department for fundamental and technical research as well. Research department regularly tackle with the pulse of the market and provide investment advices to its client at free cost on timely basis. They have a well strike rate of 70-80%. Weakness Lack of country wide expansion due to insufficiency of investment and so it has a localised presence almost. Lack of aggressive marketing promotional strategies like visual media, print media etc. Lack of well awareness among customers. Lack of programs for emphasising on customer retention. Rather than concentrating on retail investors, it gives more focus on HNIs. Less market share as compared with major competitors. Opportunities Country has featured with high boom in capital market and so it can raise its customer base by launching new services across. It can explore new promotional media like print media and electronic media to tap small investors easily. Recently, more small investors stepping stone in to stock market because of the poor return from the traditional investment modes like banks and post office. Government has declared abolition of long term capital gain tax on shares and reduction in short term capital gain. It makes stock market investment as better tax shelter. Miraculous popularity of internet in the country makes stock market dealings easier to any category of people from any part of the country. Threats Rival firms are coming out with aggressive marketing promotional strategies and it may hamper acceptance of bran by new clients. Rival players in the market are providing margin funds to investors on easy terms and conditions, rather than sharewealth provides. Recently more players have been stepping into this domain which is quite enough to destroy earnings of Sharewealth further.