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Securities-Market-in-india-Certification
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CHAPTER 1: SECURITIES MARKET IN INDIA–AN OVERVIEW …………………………. 11
1.1 INTRODUCTION
…………………………………………………………………………..11
1.2 PRODUCTS, PARTICIPANTS AND FUNCTIONS …………………………………………..12
1.3 SECURITIES MARKET AND FINANCIAL SYSTEM ………………………………………..14
1.4 DERIVATIVES MARKET
………………………………………………………………………16
1.5 REGULATORY FRAMEWORK ………………………………………………………………..17
1.5.1
Legislations
………………………………………………………………………..17
1.5.2
Rules Regulations and Regulators …………………………………………….19
1.5.3
Reforms Since 1990s…………………………………………………………….19
1.6 ROLE OF NSE IN INDIAN SECURITIES MARKET ………………………………………..31
CHAPTER 2: PRIMARY MARKET
…………………………………………………………………. 37
2.1 INTRODUCTION
…………………………………………………………………………..37
2.2 MARKET DESIGN
…………………………………………………………………………..37
2.2.1
SEBI Issue of Capital and Disclosure Requirements (ICDR)
Regulations 2009
………………………………………………………………..37
2.2.2
Merchant Banking ………………………………………………………………..44
2.2.3
Credit Rating
………………………………………………………………………45
2.2.4
Demat Issues ……………………………………………………………………..45
2.2.5
Private Placement ………………………………………………………………..45
2.2.6
Virtual Debt Portal ……………………………………………………………….46
2.2.7 ADRs/GDRs
………………………………………………………………………..46
CHAPTER 3: SECONDARY MARKET …………………………………………………………….. 49
3.1 INTRODUCTION
…………………………………………………………………………..49
3.2 MARKET DESIGN
…………………………………………………………………………..49
3.2.1
Stock Exchanges …………………………………………………………………49
3.2.2
Membership in NSE ………………………………………………………………53
3.2.3
Listing of securities ………………………………………………………………58
3.2.4
Delisting of Securities
……………………………………………………………59
3.2.5
Listing of Securities on NSE
…………………………………………………….61
3.2.6 Dematerialisation
…………………………………………………………………64
2
3.3 TRADING
…………………………………………………………………………..65
3.3.1
Trading Mechanism ………………………………………………………………65
3.3.2
Order Management ………………………………………………………………74
3.3.3
Trade Management ………………………………………………………………80
3.3.4 Auction
…………………………………………………………………………..81
3.3.5
Internet Broking ………………………………………………………………….83
3.3.6
Wireless Application Protocol …………………………………………………..83
3.3.7
Trading Rules ……………………………………………………………………..83
3.4 CLEARING AND SETTLEMENT
………………………………………………………………87
3.4.1
Clearing and Settlement Mechanism ………………………………………….87
3.4.2
Rolling Settlement ……………………………………………………………….94
3.5 RISK MANAGEMENT …………………………………………………………………………99
3.5.1
Capital Adequacy Requirements ……………………………………………….99
3.5.2 Margins
…………………………………………………………………………101
3.5.3
On-Line Exposure Monitoring
…………………………………………………109
3.5.4
Off-line Monitoring ……………………………………………………………..109
3.5.5
Index-based Market-wide Circuit Breakers/ Price Bands for Securities . 109
3.5.6
Settlement Guarantee Mechanism …………………………………………..110
3.5.7
Investor Protection Fund
………………………………………………………115
3.6 MARKET INDEX
…………………………………………………………………………116
3.6.1
Understanding the index number ……………………………………………117
3.6.2
Understanding S&P CNX NIFTY ………………………………………………121
3.6.3
India Index Services & Products Ltd. (IISL) ……………………………….124
CHAPTER 4: GOVERNMENT SECURITIES MARKET ………………………………………. 127
4.1 INTRODUCTION TO INDIAN DEBT MARKETS ………………………………………….127
4.1.1
Market Subgroups
………………………………………………………………129
4.1.2 Instruments ……………………………………………………………………..130
4.1.3 Participants
………………………………………………………………………130
4.2 PRIMARY MARKET
…………………………………………………………………………133
4.2.1
Issuance Process-Government securities
…………………………………..133
4.2.2
Issuance Process–Treasury Bills
……………………………………………..136
4.2.3 Participants
………………………………………………………………………137
3
4.3 SECONDARY MARKET ……………………………………………………………………..137
4.3.1
Trading of Government Securities on Stock Exchanges ………………… 137
4.3.2
Repo and Reverse Repo ……………………………………………………….139
4.3.3
Negotiated Dealing System …………………………………………………..140
4.3.4
Wholesale Debt Market of NSE
……………………………………………….142
4.3.5
Clearing and Settlement ………………………………………………………148
4.3.6
Retail Debt Market ……………………………………………………………..153
4.3.7
Interest Rate Derivatives ……………………………………………………..155
4.3.8
Zero Coupon Yield Curve ……………………………………………………..156
4.3.9
FIMMDA-NSE MIBID/MIBOR ………………………………………………….158
4.3.10 NSE-VaR System ……………………………………………………………….159
4.3.11 Bond Index ………………………………………………………………………159
CHAPTER 5: DERIVATIVES MARKET …………………………………………………………. 163
5.1 DERIVATIVES
…………………………………………………………………………163
5.1.1 Introduction ……………………………………………………………………..163
5.1.2
Products, participants and functions ………………………………………..164
5.1.3
Types of Derivatives
……………………………………………………………165
5.1.4
Derivatives Market in India …………………………………………………..166
5.1.5
Membership of NSE
…………………………………………………………….166
5.2 FUTURES AND OPTIONS ………………………………………………………………….167
5.2.1
Forward Contract ……………………………………………………………….167
5.2.2 Futures
…………………………………………………………………………169
5.2.3 Options
…………………………………………………………………………170
5.2.4
Pricing of Derivatives…………………………………………………………..173
5.3 TRADING SYSTEM
…………………………………………………………………………176
5.3.1 Introduction ……………………………………………………………………..176
5.3.2
Trading mechanism
…………………………………………………………….176
5.3.3
Adjustments for corporate actions
…………………………………………..181
5.3.4
Eligibility criteria for securities/indices traded in F&O …………………… 181
5.3.5
Products and Contract specifications
………………………………………..183
5.4 CLEARING AND SETTLEMENT
…………………………………………………………….187
5.4.1 Introduction ……………………………………………………………………..187
4
5.4.2 Clearing mechanism
……………………………………………………………188
5.4.3
Settlement mechanism ………………………………………………………..188
5.4.4
Risk management ………………………………………………………………191
5.5 MARGINING SYSTEM ………………………………………………………………………193
5.5.1
SPAN approach of computing initial margins ………………………………193
5.5.2 Mechanics of SPAN
……………………………………………………………..194
5.5.3 Cross Margining
…………………………………………………………………198
CHAPTER 6: REGULATORY FRAMEWORK …………………………………………………… 205
6.1 SECURITIES CONTRACTS (REGULATION) ACT, 1956 ………………………………..205
6.2 SECURITIES CONTRACTS (REGULATION) RULES, 1957 …………………………….209
6.3 SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992………………………… 209
6.4 SEBI (STOCK BROKERS & SUB-BROKERS) REGULATIONS, 1992
…………………. 213
6.5 SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS, 1992 ………………. 220
6.6 SEBI (PROHIBITION OF FRAUDULENT AND UNFAIR TRADE PRACTICES
RELATING TO SECURITIES MARKETS) REGULATIONS, 2003 ………………………. 225
6.7
THE DEPOSITORIES ACT, 1996 ………………………………………………………….228
6.8 INDIAN CONTRACT ACT, 1872 …………………………………………………………..230
6.9 THE COMPANIES ACT, 1956
………………………………………………………………232
6.10 GOVERNMENT SECURITIES ACT 2006 ………………………………………………….236
6.11 INCOME TAX ACT, 1961 …………………………………………………………………..237
6.12 MONEY LAUNDERING ACT, 2002 ………………………………………………………..248
6.13 SECURITIES TRANSACTION TAX ………………………………………………………..249
CHAPTER 7 : MATHEMATICS AND STATISTICS
…………………………………………… 258
7.1 MEASURES OF CENTRAL TENDENCY ……………………………………………………258
7.1.1 Mean
…………………………………………………………………………258
7.1.2
The weighted Arithmetic mean. ……………………………………………..258
7.1.3
Geometric Mean ………………………………………………………………..258
7.1.4
Variance and Standard Deviation ……………………………………………259
7.1.5
Coefficient of Variation ………………………………………………………..260
7.1.6 Covariance
……………………………………………………………………….260
7.1.7
Coefficient of Correlation ……………………………………………………..261
7.1.8
Normal Distribution …………………………………………………………….261
5
7.2 RETURN AND RISK
…………………………………………………………………………262
7.2.1
Return and Risk of a Single Asset
……………………………………………262
7.2.2
Return and Risk of a portfolio ………………………………………………..263
7.3 FUNDAMENTAL ANALYSIS
…………………………………………………………………267
7.3.1
Valuation of a Stock ……………………………………………………………268
7.3.2
Economic Analysis ……………………………………………………………..269
7.3.3
Industry Analysis ……………………………………………………………….270
7.4 TECHNICAL ANALYSIS …………………………………………………………………….271
7.4.1
Dow Theory ……………………………………………………………………..271
7.4.2 Charts
…………………………………………………………………………273
7.5 FINANCIAL STATEMENT ANALYSIS
………………………………………………………273
7.5.1
Balance Sheet …………………………………………………………………..273
7.5.2
Profit and Loss Account ……………………………………………………….275
7.5.3
Ratio Analysi s…………………………………………………………………..275

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