Capital Market Segment 4

Transcription

1 Capital Market Segment 4

2 54

3 Capital Market Segment 4 The Trading on the NSE s capital market commenced on November 4, 1995 and has been witnessing a substantial growth over the years. The growth of NSE turnover figures shows a substantial rise from Rs. 1,805 crore (US $ million) in the year to Rs. 2,752,023 crore (US $ 540, million) in With the increase in volumes, efficient and transparent trading platform, a wide range of securities like equity, preference shares, debt warrants, exchange traded funds as well as retail government securities, NSE upholds its position as the largest stock exchange in the country. The CM segment of NSE provides an efficient and transparent platform for trading of equity, preference shares, debentures, warrants, exchange traded funds as well as retail Government securities. NEAT System National Exchange for Automated Trading (NEAT) is the trading system of NSE. NEAT facilitates a system on-line, fully automated, nationwide, anonymous, order driven, screen-based trading. In this system a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale for buy order for a counter party. The numerous advantages of the NEAT system are detailed out below : It electronically matches orders on a price/time priority and hence cuts down on time, cost and risk of error, as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices, thus increasing the informational efficiency of markets. It enables market participants to see the full market on real-time, making the market transparent. It allows a large number of participants, irrespective of their geographical locations, to trade with one another simultaneously, improving the depth and liquidity of the market. It provides tremendous flexibility to the users in terms of kinds of orders that can be placed on the system. It ensures full anonymity by accepting orders, big or small, from members without revealing their identity, thus providing equal access to everybody. It provides a perfect audit trail which helps to resolve disputes by logging in the trade execution process in entirety. The trading platform of the CM segment is accessed not only from the computer terminals from the premises of brokers spread over about 192 cities, but also from the personal computers in the homes of investors through the Internet. 55

4 Market Performance Trading Volume Over the years the Capital market has witnessed a growth in the trading volumes from Rs. 1,805 crore (US $ million) in the volumes increased to Rs. 2,752,023 crore (US $ 540,142 million) in The average daily trading volume increased from Rs. 17 crore during to Rs. 11,325 crore (US $ 2,223 million) during In the reporting year the volumes decreased by % to Rs. 2,752,023 crore (US $ 540,142 million) from Rs. 3,551,038 crore (US $ 888,426 million) during The business growth of the CM segment is presented in Table 4-1 and Chart 4-1. Chart 4-1 : Business Growth of Capital Market Segment Liquidity The liquidity in the CM segment, as measured by the turnover ratio, has witnessed a steady increase and reached nearly % during the year compared to 73.09% during the year The securities available for trading for more than 100 days accounted for 97.85% as indicated in the table below: Frequency Distribution of Securities Traded During No. of Days Traded No. of Securities % to Total Above 100 1, Contd... 56

5 Contd... No. of Days Traded No. of Securities % to Total Total 1, The percentage of companies traded compared to the number of companies available for trading is quite high at more than 99% for all the months during the fiscal The month wise statistics are indicated in the table below: Trading Frequency of Companies during the period Month Companies Available for Trading* No. of companies Traded % of Traded to Available for Trading Apr-08 1,244 1, May-08 1,252 1, Jun-08 1,262 1, Jul-08 1,272 1, Aug-08 1,278 1, Sep-08 1,278 1, Oct-08 1,282 1, Nov-08 1,286 1, Dec-08 1,283 1, Jan-09 1,286 1, Feb-09 1,284 1, Mar-09 1,291 1, *At the end of the period. Includes listed/permitted to trade companies but excludes suspended companies Distribution of Turnover The concentration of trading among top N Securities/members is presented in Table 4-2. It is observed that the top 5 and 100 securities account for about % and % of total turnover in the CM segment in The top 50 securities accounted for % of the total turnover, details of which are presented in Table 4-3. Member-wise distribution of turnover as presented in Table 4-2 indicates increasing diffusion of trades among a large number of trading members over the years. During , top 5 brokers accounted for only 13.56% of turnover, while top 100 brokers accounted for 75.42% of total turnover. Market Capitalisation The total market capitalisation of securities available for trading on the CM segment increased from Rs. 363,350 crore (US $ 115,606 million) as at end March 1995 to 57

6 Rs. 2,896,194 crore (US $ 568,439 million) as at end March The Market capitalization witnessed a huge decrease of % during as compared to the market capitalization of Rs.4,858,122 crore (US $ 1,215,442 million) in The details of 50 top companies by market capitalisation, which accounted for % of total market capitalisation as at end March 2009, are presented in Table 4-4. Sectoral Distribution Table 4-5 presents the sectoral classification of Top 50 companies based on their trading value and on their Market capitalization. The trading value of the banking stocks featuring in the Top 50 witnessed a rise and contributed to % of the trading value in comparison to 9.35 % in the previous fiscal Amongst the other sectors there has been no significant change in the contribution of the Top 50 companies in comparison to the previous fiscal. The infrastructure sector continued to dominate with % of the trading value in the Top 50 companies. On the other hand the Petrochemicals sector too continued to have the maximum share of % of the market capitalisation in the Top 50 companies. On the whole the Infrastructure, Petrochemicals, Manufacturing and Banking sector continue to be the major contributors in the share of trading value and market capitalisation of the Top 50 companies. Trading Records during Ten of NSE s most Active trading days in terms of trading values are presented in Table 4-6. During the fiscal, the highest trading value of Rs.20, cr (US $ 4,007 million). THE Individual Securities Single day Trading Records are presented in Table 4-7. Internet Trading At the end of March 2009, a total number of 349 members were permitted to allow investor s web based access to NSE s trading system. The members of the exchange in turn had registered 5,627,789 clients for web based access as on March 31, During the year % of the trading value in the Capital Market segment (Rs. 582,070 - US $ 114,243 million) was routed and executed through the internet. The table below shows the growth of internet trading from the fiscal years and Year Enabled Members* Registered Clients* Internet Trading Volume (Rs. crore) Internet Trading Volume (US $ million) % of total trading volume ,405, , , ,627, , , * At the end of the financial year Note : Figures for IBT turnover and registered clients are as reported by trading members to the Exchange Figures of Turnover are Buy Turnover + Sell turnover. 58

7 On-line IPOs The on-line trading system of NSE is used by companies to make IPOs through book building. It is a fully automated screen based bidding system that allows trading members to enter bids on behalf of their clients. All bids received by the system are numbered, time stamped, and stored in the book till the last day of the book building process and the offer price is determined after the bid closing date. While ensuring efficient price discovery, this system reduces time taken for completion of the issue process. 298 companies have used the on-line IPO system of NSE by the end of March Indices India Index Services and Products Ltd. (IISL), in technical partnership with S&P, have developed and have been maintaining scientifically an array of indices of stock prices on NSE. The popular indices are the S&P CNX Nifty, CNX Nifty Junior, S&P CNX Defty, S&P CNX 500, CNX Midcap, CNX 100, Nifty Midcap 50, S&P CNX Industry indices and CNX segment indices. S&P CNX Nifty, introduced in November 3, 1995, is based on 50 largest and highly liquid stocks. CNX Nifty Junior, introduced in December 1996, is built out of the next 50 large and liquid stocks. These indices are monitored and updated dynamically and are reviewed regularly. The comparative movement of major sectoral indices along with that of S&P CNX Nifty is presented in Chart 4-2. Chart 4-2 : Movement of Sectoral Indices: The S&P CNX Nifty accounted for 65.35% of total market capitalisation as at end March 2009, while the CNX Nifty Junior accounted for 9.894% of market capitalisation (Table 4-8). The compositions of these two indices as at end March 2009 are presented in Table 59

8 4-9 and Table The industry wise weightages of securities included in S&P CNX Nifty are presented in Table The movements in S&P CNX Nifty and CNX Nifty Junior are presented in Table 4-12 and Table 4-13 respectively. The Performance of few of the indices is presented in Table Volatility Index Volatility Index is a measure of market s expectation of volatility over the near term. Volatility is often described as the rate and magnitude of changes in prices and in finance often referred to as risk. Volatility Index is a measure, of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualised volatility, denoted in percentage e.g. 20%) based on the order book of the underlying index options. Volatility Index is a good indicator of the investors perception on how volatile markets are expected to be in the near term. Usually, during periods of market volatility, market moves steeply up or down and the volatility index tends to rise. As volatility subsides, option prices tend to decline, which in turn causes volatility index to decline. India VIX * NSE has been in the forefront of bringing the latest products and services to the Indian capital markets for the benefit of the investors. In another innovation in the Indian markets, NSE launched the India VIX on 08th April, 2008 a volatility index based on the Nifty 50 Options prices. From the best bidask prices of Nifty 50 Options contracts (which are traded on the F&O segment of NSE), a volatility figure (%) is calculated which indicates the expected market volatility over the next 30 calendar days. Higher the implied volatility higher the India VIX value and vice versa. There are some differences between a price index, such as the Nifty 50 and India VIX. Nifty 50 is calculated based on the price movement of the underlying 50 stocks which comprises the index. India VIX is calculated based on the bid-offer prices of the near and mid month Nifty 50 Index Options. Nifty 50 Index is an absolute number, e.g. 4500, 5000 etc., whereas India VIX is a percentage value (eg. 20%, 30% etc.). Whereas Nifty 50 signifies how the markets have moved directionally, India VIX indicates the expected near term volatility and how the volatility is changing from time to time. Uses of Volatility Index Volatility Index offers great advantages in terms of trading, hedging and introducing derivative products on this index. Investors can use volatility index for various purposes as mentioned : * VIX is a trademark of Chicago Board Options Exchange, Incorporated ("CBOE") and Standard & Poor s has granted a license to NSE, with permission from CBOE, to use such mark in the name of the India VIX and for purposes relating to the India VIX. 60

9 Investors portfolios are exposed to the market volatility. Investors could hedge their portfolios against volatility with an off-setting position in India VIX* futures or options contracts. Volatility index depicts the collective consensus of the market on the expected volatility and being contrarian in nature helps in predicting the direction. Investors therefore could appropriately use this information for taking trading positions. Investors could also use the implied volatility information given by the index, in identifying mis-priced options. Short sale positions could expose investors to directional risk. Derivatives on volatility index could help investors in safeguarding their positions and thus avoid systemic risk for the market Based on the experience gained with the benchmark broad based index, sector specific volatility indices could be constructed to enable hedging by investors in those specific sectors. Mutual Funds and Exchange Traded Funds Table 4-15 (A) & (B) presents the details of the names and volumes of Mutual funds and Exchange traded funds listed on the exchange. At the end of March 2009 a total of 11 Mutual funds and 14 Exchange traded funds were listed on the exchange. Charges Brokerage Charges The maximum brokerage chargeable by trading member in respect of trades effected in the securities admitted to dealing on the CM segment of the Exchange is fixed at 2.5% of the contract price, exclusive of statutory levies like, securities transaction tax, SEBI turnover fee, service tax and stamp duty. However, the brokerage charges as low as 0.10% are also observed in the market. Transaction Charges A member is required to pay the exchange transaction charges at the rate of % (Rs. 3.5 per Rs. 1 lakh) of the turnover. Securities Transaction Tax STT is levied on all transactions of sale and / or purchase of equity shares and units of equity oriented fund and sale of derivatives entered into in a recognised stock exchange. 61

10 The existing rates are as follows :- Sr. Taxable securities transaction Rate (%) Payable by No 1 Purchase of an equity share in a company or a unit of an equity oriented fund, where Purchaser. (a) the transaction of such purchase is entered into in a recognised stock exchange; and (b) the contract for the purchase of such share or unit is settled by the actual delivery or transfer of such share or unit. 2 Sale of an equity share in a company or a unit of an equity Seller. oriented fund, where (a) the transaction of such sale is entered into in a recognised stock exchange; and (b) the contract for the sale of such share or unit is settled by the actual delivery or transfer of such share or unit. 3 Sale of an equity share in a company or a unit of an equity Seller. oriented fund, where (a) the transaction of such sale is entered into in a recognised stock exchange; and (b) the contract for the sale of such share or unit is settled otherwise than by the actual delivery or transfer of such share or unit. Contribution to Investor Protection Fund (CM Segment) The trading members contribute to Investor Protection Fund of CM Segment at the rate Re. 1/- per Rs 100 crores of the traded value (each side) in case of Capital Market segment Clearing & Settlement While NSE provides a platform for trading to its trading members, the National Securities Clearing Corporation Ltd. (NSCCL) determines the funds/securities obligations of the trading members and ensures that trading members meet their obligations. The core processes involved in clearing and settlement are: (a) Trade Recording : The key details about the trades are recorded to provide basis for settlement. These details are automatically recorded in the electronic trading system of the exchanges. (b) Trade Confirmation : The parties to a trade agree upon the terms of trade like security, quantity, price, and settlement date, but not the counterparty which is the NSCCL. The electronic system automatically generates confirmation by direct participants. (c) Determination of Obligation : The next step is determination of what counter-parties owe, and what counter-parties are due to receive on the settlement date. The NSCCL interposes itself as a central counterparty between the counterparties to trades and nets the positions so that a member has security wise net obligation to receive or deliver a security and has to either pay or receive funds. (d) Pay-in of Funds and Securities : The members bring in their funds/securities to the NSCCL. They make available required securities in designated accounts with the 62

11 depositories by the prescribed pay-in time. The depositories move the securities available in the accounts of members to the account of the NSCCL. Likewise members with funds obligations make available required funds in the designated accounts with clearing banks by the prescribed pay-in time. The NSCCL sends electronic instructions to the clearing banks to debit member s accounts to the extent of payment obligations. The banks process these instructions, debit accounts of members and credit accounts of the NSCCL. (e) Pay-out of Funds and Securities : After processing for shortages of funds/securities and arranging for movement of funds from surplus banks to deficit banks through RBI clearing, the NSCCL sends electronic instructions to the depositories/clearing banks to release pay-out of securities/funds. The depositories and clearing banks debit accounts of the NSCCL and credit accounts of members. Settlement is complete upon release of pay-out of funds and securities to custodians/members. (f) Risk Management : A sound risk management system is integral to an efficient settlement system. The NSCCL ensures that trading members obligations are commensurate with their net worth. It has put in place a comprehensive risk management system, which is constantly monitored and upgraded to pre-empt market failures. It monitors the track record and performance of members and their net worth; undertakes online monitoring of members positions and exposure in the market, collects margins from members and automatically disables members if the limits are breached. The risk management methods adopted by NSE have brought the Indian financial market in line with the international markets. Settlement Agencies The NSCCL, with the help of clearing members, custodians, clearing banks and depositories settles the trades executed on exchanges. The roles of each of these entities are explained below: (a) NSCCL : The NSCCL is responsible for post-trade activities of a stock exchange. Clearing and settlement of trades and risk management are its central functions. It clears all trades, determines obligations of members, arranges for pay-in of funds/ securities, receives funds/securities, processes for shortages in funds/securities, arranges for pay-out of funds/securities to members, guarantees settlement, and collects and maintains margins/collateral/base capital/other funds. It is the counterparty to all settlement obligations of the members. (b) Clearing Members : They are responsible for settling their obligations as determined by the NSCCL. They have to make available funds and/or securities in the designated accounts with clearing bank/depositories, as the case may be, to meet their obligations on the settlement day. (c) Custodians : Custodian is a clearing member but not a trading member. They settle trades assigned to them by trading members. They are required to confirm whether they are going to settle a particular trade or not. If it is confirmed, the NSCCL 63

12 assigns that obligation to that custodian and the custodian is required to settle it on the settlement day. (d) Clearing Banks : Every clearing member is required to open a dedicated clearing account with one of the clearing banks. Based on his obligation as determined through clearing, the clearing member makes funds available in the clearing account for the pay-in and receives funds in case of a pay-out. (e) Depositories : Depositories help in the settlement of the dematerialised securities. Each custodian/clearing member is required to maintain a clearing pool account with the depositories. He is required to make available the required securities in the designated account on settlement day. The depository runs an electronic file to transfer the securities from accounts of the custodians/clearing member to that of NSCCL. As per the schedule of allocation of securities determined by the NSCCL, the depositories transfer the securities on the pay-out day from the account of the NSCCL to those of members/custodians. (f) Professional Clearing Member : NSCCL admits special category of members namely, professional clearing members. Professional Clearing Member (PCM) may clear and settle trades executed for their clients (individuals, institutions etc.). In such an event, the functions and responsibilities of the PCM would be similar to Custodians. PCMs may also undertake clearing and settlement responsibility for trading members. In such a case, the PCM would settle the trades carried out by the trading members connected to them. A PCM has no trading rights but has only clearing rights, i.e. he clears the trades of his associate trading members and institutional clients. Settlement Cycles NSCCL clears and settles trades as per well-defined settlement cycles, as presented in Table Since the beginning of the financial year 2003, all securities are being traded and settled under T+2 rolling settlement. The NSCCL notifies the consummated trade details to clearing members/custodians on the trade day. The custodians affirm back the trades to NSCCL by T+1 day. Based on the affirmation, NSCCL nets the positions of counterparties to determine their obligations. A clearing member has to pay-in/pay-out funds and/or securities. A member has a security-wise net obligation to receive/deliver a security. The obligations are netted for a member across all securities to determine his fund obligations and he has to either pay or receive funds. Members pay-in/pay-out obligations are determined latest by T+1 day and are forwarded to them on the same day so that they can settle their obligations on T+2 day. The securities/funds are paidin/paid-out on T+2 day and the settlement is complete in 3 days from the end of the trading day. Settlement Statistics The settlement statistics of the CM segment is presented in Table During , NSCCL settled trades for Rs. 2,749,450 crore (US $ 539,637 million.) of which 22.44% were settled by delivery. However, these deliveries include only the net deliveries made by the trading members to the clearing corporation. Of total delivery, nearly 100% of 64

13 securities were delivered in demat form in Short deliveries averaged around 0.21 % of total delivery in Risk Management System There have been a number of experiments with different risk containment measures in the recent pasts. NSE being aware of the importance of the risk containment measures has a dedicated Risk Group which looks into aspects relating to the risk management. These measures have been repeatedly reviewed and revised. The risk containment measures in vogue are described below: Capital Adequacy The capital adequacy requirements stipulated by the NSE are substantially in excess of the minimum statutory requirements as also in comparison to those stipulated by other stock exchanges. A person seeking membership in the CM and F&O segment is required to have a net worth of Rs. 1 crore, and keep an interest free security deposit of Rs crore and collateral security deposit of Rs crore with the Exchange/NSCCL. The deposits kept with the Exchange as part of the membership requirement may be used towards the margin requirement of the member. Additional capital may be provided by the member for taking additional exposure. On-Line Monitoring NSCCL has put in place an on-line monitoring and surveillance system, whereby exposure of the members is monitored on a real time basis. A system of alerts has been built in so that both the member and the NSCCL are alerted as per pre-set levels (reaching 70%, 85%, 90%, 95% and 100%) as and when the members approach these limits. The system enables NSSCL to further check the micro-details of members positions, if required and take pro-active action. The on-line surveillance mechanism also generates alerts/reports on any price/volume movement of securities not in line with past trends/patterns. Open positions of securities are also analyzed. For this purpose the exchange maintains various databases to generate alerts. These alerts are scrutinized and if necessary taken up for follow up action. Besides this, rumors in the print media are tracked and where they are found to be price sensitive, companies are approached to verify the same. This is then informed to the members and the public. Surveillance, Inspection and Investigation As the securities transactions are prone to a variety of manipulations, the Exchange has instituted a strong surveillance mechanism to protect market integrity. Surveillance mechanism includes monitoring of orders and trades data, open positions and corporate information that flow into the market to identify possible market abuse practices. Various on-line and off-line alerts/reports are generated, on any price/volume movement of 65

14 securities not in line with past trends/patterns. Besides, rumors in the print media are tracked and where they are price sensitive, companies are contacted for verification. Replies received are informed to the members and the public. The investigation is based on various alerts which require further analysis. If further analysis suggests any possible irregular activity which deviates from the past trends/ patterns and concentration of trading at NSE at the client level, then a more detailed investigation is undertaken. If the detailed investigation establishes any irregular activity, then disciplinary action is initiated against the member. If the investigation suggests possible irregular activity across exchanges and/or possible involvement of clients, then the same is informed to SEBI. As per regulatory requirement, a minimum of 20% of the active trading members in the Capital Market segment and 50 % of active trading members in the derivatives segment are to be inspected every year to verify the level of compliance with various rules, byelaws and regulations of the Exchange. Usually, inspection of more members than the regulatory requirement is undertaken every year. The inspection randomly verifies if investor interests are being compromised in the conduct of business by the members. Margin Requirements NSCCL imposes stringent margin requirements as a part of its risk containment measures. The categorization of stocks for imposition of margins has the structure as given below; The Stocks which have traded atleast 80% of the days for the previous six months constitute the Group I and Group II. Out of the scrips identified for Group I & II category, the scrips having mean impact cost of less than or equal to 1% are categorized under Group I and the scrips where the impact cost is more than 1, are categorized under Group II. The remaining stocks are classified into Group III. The impact cost is calculated on the 15th of each month on a rolling basis considering the order book snapshots of the previous six months. On the basis of the impact cost so calculated, the scrips move from one group to another group from the 1st of the next month. For securities that have been listed for less than six months, the trading frequency and the impact cost is computed using the entire trading history of the security Categorisation of newly listed securities For the first month and till the time of monthly review a newly listed security is categorised in that Group where the market capitalization of the newly listed security exceeds or equals the market capitalization of 80% of the securities in that particular group. Subsequently, after one month, whenever the next monthly review is carried out, the actual trading frequency and impact cost of the security is computed, to determine the liquidity categorization of the security. 66

15 In case any corporate action results in a change in ISIN, then the securities bearing the new ISIN shall be treated as newly listed security for group categorization. Daily margin, comprises of VaR margin, Extreme Loss margin and Mark to Market margin. 1) Value at Risk Margin : All securities are classified into three groups for the purpose of VaR margin For the securities listed in Group I, scrip wise daily volatility calculated using the exponentially weighted moving average methodology is applied to daily returns in the same manner as in the derivatives market. The scrip wise daily VaR would be 3.5 times the volatility so calculated subject to a minimum of 7.5%. For the securities listed in Group II, the VaR margin is higher of scrip VaR (3.5 sigma) or three times the index VaR, and it is scaled up by root 3. For the securities listed in Group III, the VaR margin is equal to five times the index VaR and scaled up by root 3. The index VaR, for the purpose, would be the higher of the daily Index VaR based on NSE Nifty 50 or BSE Sensex. The index VaR would be subject to a minimum of 5%. Security specific Margin: NSCCL may stipulate security specific margins for the securities from time to time. The VaR margin rate computed as mentioned above will be charged on the net outstanding position (buy value-sell value) of the respective clients on the respective securities across all open settlements. There would be no netting off of positions across different settlements. The VaR margin shall be collected on an upfront basis by adjusting against the total liquid assets of the member at the time of trade. The VaR margin so collected shall be released on completion of pay-in of the settlement The VaR numbers are recomputed six times during the day taking into account price and volatilities at various time intervals and are provided on the website of the Exchange. 2) Extreme Loss Margin The Extreme Loss Margin for any security is be higher of 5%, or 1.5 times the standard deviation of daily logarithmic returns of the security price in the last six months. The Extreme Loss Margin is be collected/ adjusted against the total liquid assets of the member on a real time basis 3) Mark to Market Margin Mark to market loss is calculated by marking each transaction in security to the closing price of the security at the end of trading. In case the security has not been traded on a particular day, the latest available closing price at the NSE is considered 67

16 as the closing price. In case the net outstanding position in any security is nil, the difference between the buy and sell values is considered as notional loss for the purpose of calculating the mark to market margin payable. The mark to market margin (MTM) is collected from the member before the start of the trading of the next day. The MTM margin is also collected/adjusted from/ against the cash/cash equivalent component of the liquid net worth deposited with the Exchange. The MTM margin so collected is be released on completion of pay-in of the settlement. Close Out Facility An online facility to close out open positions of members in the capital market segment whose trading facility is withdrawn for any reason, has been provided with effect from June 13, 2007, On disablement, the trading members will be allowed to place close-out orders through this facility. Only orders which result in reduction of existing open positions at the client level would be accepted through the close-out facility in the normal market. Members would not be allowed to create any fresh position when in the close-out mode, to place close out orders with custodial participant code and to close out open positions of securities in trade for trade segment. Index-based Market-wide Circuit Breakers a. An index based market-wide circuit breaker system applies at three stages of the index movement either way at 10%, 15% and 20%. These circuit breakers bring about a coordinated trading halt in trading on all equity and equity derivatives markets across the country. The breakers are triggered by movements in either Nifty 50 or Sensex, whichever is breached earlier. In case of a 10% movement in either of these indices, there would be a one-hour market halt if the movement takes place before 1:00 p.m. In case the movement takes place at or after 1:00 p.m. but before 2:30 p.m. there would be trading halt for ½ hour. In case movement takes place at or after 2:30 p.m. there will be no trading halt at the 10% level and market would continue trading. In case of a 15% movement of either index, there should be a two-hour halt if the movement takes place before 1 p.m. If the 15% trigger is reached on or after 1:00 p.m. but before 2:00 p.m., there should be a one-hour halt. If the 15% trigger is reached on or after 2:00 p.m. the trading should halt for remainder of the day. In case of a 20% movement of the index, trading should be halted for the remainder of the day. NSE may suo moto cancel the orders in the absence of any immediate confirmation from the members that these orders are genuine or for any other reason as it may deem 68

17 fit. The Exchange views entries of non-genuine orders with utmost seriousness as this has market wide repercussion. As an additional measure of safety, individual scrip-wise price bands have been fixed as below: Daily price bands of 2% (either way) on a set of specified securities Daily price bands of 5% (either way) on a set of specified securities Daily price bands of 10% (either way) on a set of specified securities Price bands of 20% (either way) on all the remaining securities (including debentures, warrants, preference shares etc. which are traded on CM segment of NSE), No price bands are applicable on scrip on which derivative products are available or scrips included in indices on which derivative products are available. However in order to prevent members from entering orders at non-genuine prices in such securities, the Exchange has fixed operating range of 20% for such securities. The price bands for the securities in the Limited Physical Market are the same as those applicable for the securities in the Normal Market. For Auction market the price bands of 20% are applicable. Settlement Guarantee Fund The Settlement Guarantee Fund provides a cushion for any residual risk and operates like a self-insurance mechanism wherein members themselves contribute to the fund. In the event of a trading member failing to meet his settlement obligation, then the fund is utilized to the extent required for successful completion of the settlement. This has eliminated counter-party risk of trading on the Exchange. The market has full confidence that settlement shall take place in time and shall be completed irrespective of default by isolated trading members. 69

18 Month & Year No. of Trading Days No. of companies Traded No. of Trades Traded Quantity Table 4-1 : Business Growth of CM Segment Trading Value Average Daily Trading Value Turnover Ratio Demat Traded Quantity Demat Trading Value Market Capitalisation (Rs. lakh) (lakh) (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ (%) (Rs. lakh) (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) mn.) (Nov.-Mar.) ,391 1, , ,912 67, , , ,503 1, , , ,193 1, , , ,474 97,683 1, ,542 23,818 5, , , , , ,353 3, , , ,159 1,020, , ,201 1, ,536 1,339, ,202 5,337 1, ,222 1,264, , , , ,019 1, , , ,157 2, , , , , , , , , ,103 2, , , , , , , ,300 1,099, ,407 4, ,300 1,099, ,407 1,120, , , ,685 1,140, ,588 4,506 1, ,685 1,140, ,588 1,585, , , ,486 1,569, ,840 6,253 1, ,486 1,569, ,840 2,813, , ,114 7, ,456 1,945, ,269 7,812 1, ,456 1,945, ,269 3,367, ,505 Apr , , ,567 42,173 8,428 2,109 77, ,567 42,173 3,650, ,277 May , , ,585 51,935 9,885 2,473 97, ,585 51,935 3,898, ,251 Jun , , ,648 48,448 9,221 2,307 79, ,648 48,448 3,978, ,342 Jul , , ,227 66,857 12,147 3, , ,227 66,857 4,317,571 1,080,203 Aug , , ,241 57,854 10,511 2, , ,241 57,854 4,296,994 1,075,055 Sep , , ,050 66,562 13,302 3, , ,050 66,562 4,886,561 1,222,557 Oct ,176 1, , , ,983 20,709 5, , , ,983 5,722,227 1,431,630 Contd... 70

19 Contd... Month & Year No. of Trading Days No. of companies Traded No. of Trades Traded Quantity Trading Value Average Daily Trading Value Turnover Ratio Demat Traded Quantity Demat Trading Value Market Capitalisation (Rs. lakh) (lakh) (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ (%) (Rs. lakh) (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) mn.) Nov ,189 1, , , ,683 18,837 4, , , ,683 5,876,742 1,470,288 Dec ,202 1, , ,385 91,665 19,283 4, , ,385 91,665 6,543,272 1,637,046 Jan ,210 1, , , ,868 19,441 4, , , ,868 5,295,387 1,324,840 Feb ,226 1, , ,176 70,097 13,342 3, , ,176 70,097 5,419,942 1,356,003 Mar , , ,012 63,301 14,056 3, , ,012 63,301 4,858,122 1,215, ,244 11,727 1,498,469 3,551, ,426 14,148 3, ,498,469 3,551, ,426 4,858,122 1,215,442 Apr ,240 1, , ,227 53,234 13,561 2, , ,227 53,234 5,442,780 1,068,259 May ,246 1, , ,923 54,548 13,896 2, , ,923 54,548 5,098,873 1,000,760 Jun ,256 1, , ,428 51,900 12,592 2, , ,428 51,900 4,103, ,427 Jul ,267 1, , ,816 58,060 12,862 2, , ,816 58,060 4,432, ,956 Aug ,274 1, , ,251 45,977 11,713 2, , ,251 45,977 4,472, ,814 Sep ,275 1, , ,261 51,474 12,489 2, , ,261 51,474 3,900, ,493 Oct ,277 1, , ,198 42,433 10,810 2, , ,198 42,433 2,820, ,560 Nov ,282 1, , ,123 33,979 9,618 1, , ,123 33,979 2,653, ,762 Dec ,282 1, , ,956 41,797 10,141 1, , ,956 41,797 2,916, ,477 Jan ,281 1, , ,184 37,524 9,559 1, , ,184 37,524 2,798, ,305 Feb , , ,857 29,413 7,887 1, , ,857 29,413 2,675, ,147 Mar ,283 1, , ,799 39,803 10,140 1, , ,799 39,803 2,896, , ,277 13,650 1,426,355 2,752, ,142 11,325 2, ,426,355 2,752, ,142 2,896, ,439 71

20 Table 4-2 : Percentage Share of Top N Securities/Member in Turnover No. of Securities/Members Year Securities (Nov.-Mar.) Members (Nov.-Mar.)

21 Table 4-3 : 50 Most Active Securities during in Terms of Trading Value Rank Name of Security & Industry Trading Value % Share in Total Trading Value Market Capitalisation as on March 31,2009 (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) % Share in Total Market Capitalisation 1 Reliance Industries Ltd-- 198,440 38, ,965 47, Petrochemicals 2 ICICI Bank Ltd.--Banks 118,915 23, ,034 7, Reliance Capital Limited--Finance 4 Bharti Airtel Limited-- Telecommunication 5 State Bank Of India-- Banks 6 Larsen & Toubro Ltd.-- Engineering 7 Infosys Technologies Ltd--Information Technology 8 Reliance Infrastructure Ltd--Infrastructure 9 Housing Development Finance Corporation Ltd.--Finance 10 DLF Limited-- Infrastructure 11 Bharat Heavy Electricals Ltd-- Manufacturing 12 Reliance Communications Limited-- Telecommunication 13 Satyam Computer Services Ltd-- Information Technology 14 Reliance Natural Resources Limited-- Manufacturing 15 Reliance Petroleum Limited--Petrochemicals 16 Tata Steel Limited-- Manufacturing 17 Jaiprakash Associates Limited--Infrastructure 18 Axis Bank Limited-- Banks 99,308 19, ,682 1, ,260 14, ,782 23, ,639 14, ,748 13, ,991 14, ,316 7, ,397 13, ,837 14, ,355 13, ,743 2, ,914 12, ,171 7, ,493 12, ,395 5, ,234 12, ,944 14, ,372 10, ,090 7, ,476 9, , ,831 9, ,325 1, ,592 9, ,795 8, ,236 8, ,047 2, ,968 8, ,956 1, ,853 8, ,897 2, Contd... 73

22 Contd... Rank Name of Security & Industry 19 Oil & Natural Gas Corpn Ltd-- Petrochemicals Trading Value % Share in Total Trading Value Market Capitalisation as on March 31,2009 (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) % Share in Total Market Capitalisation 41,681 8, ,875 32, HDFC Bank Ltd--Banks 39,775 7, ,406 8, Suzlon Energy Limited- -Manufacturing 22 Housing Development And Infrastructure Limited-- Infrastructure 23 Unitech Ltd-- Infrastructure 24 Educomp Solutions Limited --Information Technology 25 Steel Authority Of India Ltd.-- Manufacturing 37,557 7, ,345 1, ,260 7, , ,082 7, ,666 1, ,471 6, , ,898 6, ,838 7, Cairn India Limited-- 28,547 5, ,918 6, Petrochemicals 27 NTPC Limited-- 28,149 5, ,295 29, Infrastructure 28 IFCI Limited--Finance 27,195 5, , Ranbaxy Laboratories Ltd--Pharmaceuticals 30 Tata Consultancy Services Limited-- Information Technology 31 Indiabulls Real Estate Limited--Infrastructure 32 Sterlite Industries ( India ) Limited-- Manufacturing 26,974 5, ,966 1, ,268 4, ,703 10, ,175 4, , ,141 4, ,335 4, Sesa Goa Ltd.-- 22,887 4, ,841 1, Manufacturing 34 ITC Ltd.--FMCG 22,655 4, ,770 13, Reliance Power Limited--Infrastructure 36 Punj Lloyd Limited-- Infrastructure 37 Jindal Steel & Power Ltd.--Manufacturing 22,307 4, ,531 4, ,775 4, , ,541 4, ,644 3, Contd... 74

23 Contd... Rank Name of Security & Industry 38 Chambal Fertilizers & Chemicals Ltd-- Petrochemicals Trading Value % Share in Total Trading Value Market Capitalisation as on March 31,2009 (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) % Share in Total Market Capitalisation 20,135 3, , Kotak Mahindra Bank 19,072 3, ,755 1, Limited--Banks 40 Hindustan Unilever 18,411 3, ,770 10, Limited--FMCG 41 Essar Oil Limited-- 18,357 3, ,717 1, Petrochemicals 42 United Spirits Limited- 16,627 3, ,500 1, FMCG 43 Tata Power Co. Ltd.-- 16,559 3, ,019 3, Infrastructure 44 Bank Of India--Banks 15,524 3, ,522 2, Infrastructure Development Finance Company Limited--Finance 15,524 3, ,007 1, Maruti Suzuki India 15,311 3, ,531 4, Limited--Manufacturing 47 Aban Offshore Ltd.-- 14,674 2, , Petrochemicals 48 GMR Infrastructure 14,095 2, ,269 3, Limited--Infrastructure 49 Akruti City Limited-- 13,614 2, ,716 1, Infrastructure 50 Shree Renuka Sugars 13,033 2, , Limited--Manufacturing Total 2,054, , ,695, ,

24 Table 4-4 : Top 50 Companies by Market Capitalisation as on March 31, 2009 Rank Name of Security & Industry 1 Reliance Industries Ltd-- Petrochemicals 2 Oil & Natural Gas Corpn Ltd--Petrochemicals 3 NTPC Limited-- Infrastructure 4 Bharti Airtel Limited-- Telecommunication 5 Infosys Technologies Ltd-- Information Technology 6 Bharat Heavy Electricals Ltd--Manufacturing Market Capitalisation % Share in Total Market Capitalisation Trading Volume During (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) % Share in Total Trading Volume 239,965 47, ,440 38, ,875 32, ,681 8, ,295 29, ,149 5, ,782 23, ,260 14, ,837 14, ,397 13, ,944 14, ,234 12, ITCLtd.--FMCG 69,770 13, ,655 4, State Bank Of India--Banks 67,748 13, ,639 14, NMDC Ltd. Manufacturing 10 Tata Consultancy Services Limited-- Information Technology 11 Hindustan Unilever Limited--FMCG 12 Indian Oil Corporation Ltd- Petrochemicals 13 Reliance Petroleum Limited--Petrochemicals 61,770 12, ,703 10, ,268 4, ,770 10, ,411 3, ,240 9, , ,795 8, ,592 9, HDFC Bank Ltd--Banks 41,406 8, ,775 7, Power Grid Corporation of India Limited- Infrastructure 16 Housing Development Finance Corporation Ltd.--Finance 17 Steel Authority Of India Ltd.--Manufacturing 18 Larsen & Toubro Ltd.-- Engineering 40,237 7, ,472 1, ,171 7, ,914 12, ,838 7, ,898 6, ,316 7, ,991 14, ICICI Bank Ltd.--Banks 37,034 7, ,915 23, Reliance Communications Limited-- Telecommunication 36,090 7, ,372 10, Contd... 76

25 Contd... Rank Name of Security & Industry 21 Wipro Ltd- Information Technology 22 Cairn India Limited-- Petrochemicals 23 GAIL (India) Limited- Manufacturing 24 DLF Limited-- Infrastructure 25 Sterlite Industries ( India ) Limited--Manufacturing 26 Reliance Power Limited-- Infrastructure 27 Sun Pharmaceuticals Industries Ltd- Pharmaceuticals 28 Maruti Suzuki India Limited--Manufacturing 29 Hero Honda Motors Ltd.- Manufacturing 30 Hindustan Zinc Ltd.- Manufacturing 31 Jindal Steel & Power Ltd.-- Manufacturing 32 GMR Infrastructure Limited--Infrastructure 33 Cipla Ltd.- Pharmaceuticals 34 Tata Power Co. Ltd.-- Infrastructure 35 Power Finance Corporation Limited- Finance 36 Idea Cellular Limited- Telecommunication 37 Tata Steel Limited-- Manufacturing Market Capitalisation % Share in Total Market Capitalisation Trading Volume During (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) % Share in Total Trading Volume 35,999 7, ,034 2, ,918 6, ,547 5, ,154 6, ,910 2, ,395 5, ,493 12, ,335 4, ,141 4, ,531 4, ,307 4, ,020 4, ,887 1, ,531 4, ,311 3, ,390 4, ,997 1, ,063 3, , ,644 3, ,541 4, ,269 3, ,095 2, ,104 3, ,045 1, ,019 3, ,559 3, ,597 3, , ,531 3, ,418 2, ,047 2, ,236 8, Axis Bank Limited--Banks 14,897 2, ,853 8, Tata Communications Limited- Telecommunication 40 Grasim Industries Ltd.- Manufacturing 14,773 2, , ,504 2, ,219 1, Contd... 77

26 Contd... Rank Name of Security & Industry 41 Neyveli Lignite Corporation Limited- Infrastructure 42 National Aluminium Company Limited- Manufacturing 43 Bharat Petroleum Corpn. Ltd- Petrochemicals 44 Punjab National Bank- Banks 45 Mundra Port and Special Economic Zone Limitedservices 46 Reliance InfrastructureLtd- -Infrastructure Market Capitalisation % Share in Total Market Capitalisation Trading Volume During (Rs. cr.) (US $ mn.) (Rs. cr.) (US $ mn.) % Share in Total Trading Volume 14,076 2, , ,830 2, , ,596 2, ,560 1, ,973 2, ,942 2, ,954 2, ,771 1, ,743 2, ,355 13, Bank Of India--Banks 11,522 2, ,524 3, ACC Limited- Manufacturing 49 Ambuja Cements Ltd.- Manufacturing 50 Mahindra & Mahindra Ltd.- Manufacturing 10,781 2, ,517 1, ,750 2, , ,697 2, ,707 1, Total 2,041, , ,545, ,