5.1 INTRODUCTION 5.2 ENVIRONMENT 5.3 LAND 5.4 SYSTEM OF FINANCIAL MARKET 5.5 FINANCIAL MARKETS 5.6 STOCK EXCHANGE 5.7 MARKET EFFICIENCY 5.8 MEMBERSHIP OF EXCHANGES
5.9 LISTING OF SECURITY 5.10 THE OVER-THE-COUNTER MARKET 5.11 STOCK EXCHANG1-: IN INDIA 5.12 SUMMARY Chapter (V): Indian Financial Market
5.1 INTRODUCTION
This chapter consists o f three segments. Viz, 1) India, 2) System o f Financial
Market, 3) Stock Exchange The researcher first explained the overall view o f India because he is a foreigner India is one of the oldest civilizations m the world with a kaleidosc(^ie^variety and rich cultural heritage, India has come a long way since its independence in 15-August-l947. Its economy has been characterized by a duersified industrial base, a grow'ing. world-class IT and softw'are development sectors and a relatively large and sophisticated ilnancial sectors, with a population of o\er one billion to support.
hidia has become self-sufficient in agricultural production and is now the tenth industrialized country in the world. It has been gradually transforming its economic base from agricultural to industrial and commercial. The agricultural sector accounts for 25%, the industrial sector 34% and services sector 41%> o f GDP. India has made great economic progress under a democratic governmental structure. In the late 1970s, the government began to reduce state control o f the economy, but made very slow progress tow'ards goal. By 1991, the government seriously started taking appropriate steps for liberalization. During the Persian G u lf conflict in 1991, India faced a financial crisis because o f rising oil prices, which stimulated economic reforms. These reforms removed most of the government regulations on investment, including many on foreign investment, and eliminated the quota and tariff system that had kept trade at low levels.
The reforms were good for the economy. G DP grew at an average of more than seven percent through the year 2003. The economy even weathered the Asian financial crisis in 1997-98 with only a slight depreciation o f the rupee and a bit less foreign direct
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investment. The recognition that its institutions were not fully ready for the rigors of
internationally mobile capital was, m retrospect, a great blessmg l^rivate investment has
been the fuel for India's recent economic success Inflows of direct and portfolio
mvestment from abroad are miniscule as compared to those received by China. India has
more work to do to become a truly attractive destination for foreign investments. The
impact o f the dramatic global slowdown m IT-related investment hit India's
software/technology sector-a major exporter to just those markets most affected by the IT
investment depression. India's balance of payments has been characterized by modest
current account deficits and financial account surpluses sufficient to finance the current
account and allow the country to more than double its international reserves to more than
US$57 billion at the end o f 2003. But, what is quite striking about India's trade and
especially its financial flows is how small they are relative to the size of the economy.
The volume o f financial flows into and out o f India is medium in relation to the size of
the economy. Clearly, India's large population and strong democratic institutions give it
outstanding potential for development
5.2 ENVIRONMENT
In terms o f environmental issues, India's major challenges are directly attributable
to its extremely high population density In particular, agricultural activities, such as
overgrazing, short cultivation cycles, slash and burn practices, destructive logging
practices, and deforestation o f timber reserves for fuel, all contribute jointly to the
decimation o f the subcontinent's environmental system. Threats to the marine eco
systems, including the destruction o f coral reefs. Air pollution from industrial effluents
and vehicle emissions, Water pollution from raw sewage and runoff of agricultural
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pesticides, Non-potable water throughout the country, over-population and concomitant strain on natural resources. Energy-related environmental problems. India has taken steps to address the aforementioned energy-related environmental problems Therefore, the government has taken a step o f a joint venture to supply compressed natural gas (CN G) to 231,000 households and 20,000 vehicles in the New Delhi area only.
5.3 LAND
It covers an area of 3,287,263 sq km, extending from the snow- covered
Himalayan heights to tropical rain forests of the south. It is the seventh largest countr>' in the world, bounded by the Great Himalayas in the North. It stretches South wards and the
Tropic of Cancer tapers off into the Indian Ocean between the Bay o f Bengal on the East and the Arabian Sea on the West. It lies entirely in the Northern Hemisphere. The mainland extends between latitudes 8 4' and 37 6’ North, longitudes 687' and 97 25'
East and measures about 3,214 km from North to South between the extreme latitudes and about 2,933 km from East to West between the extreme longitudes.
5.3.1 POPULATION
India's population as on 1 March 2001 stood at 1,027 million (53 1.3 million males and 495.7 million females). India accounts for a meager 2.4 per cent o f the world surface area o f 135.79 million sq km. Yet, it supports and sustains a whopping 16.7 per cent of the world population. Major states and union territories by population size rank is ; Uttar
Pradesh 166,052,859, Maharashtra 96,752,247, Bihar 82,878,796, West Bengal
80,221,171, Andhra Pradesh 75,727,541, Tamil Nadu 62,110,839, Madhya Pradesh
60,385,118, Rajasthan 56,473,122, Karnataka 52,733,958, Gujarat 50,596.992, Orissa
36,706,920, Kerala 31,838,619.
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5.3.2 PUNE
Pune has been known by a plethora o f sobriquets. Popular among them: Oxford of the East, Queen of the Deccan, cultural capital o f Maharashtra and pensioner's paradise.
Pune is one o f the historical cities o f India with a glorious past, an innovative present and a promising future, it has many educational and research institutions apart from other institutions for sports, yoga, ayurveda, culture and social services. The official language is Marathi. Its boundaries extend over four hundred square kilometers and it has a population o f close to four million The present growth and popularity can be attributed to good climate, less pollution, excellent educational facilities and a good standard of living. Pune or Punyanagri as it is called has had a glorious past o f nearly 1000 years.
The city’s historical associations are fast woven with Shivaji Maharaj, the Peshwas and
Lokmanya Tilak.
Down the centuries, Pune has been ruled by several dynasties. The Pune Gazetteer explains the term Pune as Punya, a holy place. In Hindu tradition, a confluence
(sangama) o f two rivers is sacred. Pune has now been recognized as a seat of learning and the Deccan College (1851) led the educational movement in it. The city o f Pune lies between 18 degrees 32 minutes North; 73 degrees 51 minutes East. It has a very pleasant climate. The Temperatures range from 15 ^ to 35 ^ degrees. The best time to visit is
October-March.
5.4 SYSTEM OF FINANCIAL MARKET
This system is great significant from the view point of India. It has several important sections o f the title. It consists o f a variety o f institutions, markets, and instruments that are related. It provides the principal means by which savings are
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transformed into investments. Given its role in the allocation of resources, the efficient functioning o f the financial system is o f critical importance to a modem economy The financial manager negotiates loans from financial institutions, raises resources, and invests surplus funds in financial markets
5.4.1 FUNCTIONS OF THE FINANACIAL SYSTEM
There are some functions which the financial system has to take into consideration for knowing its importance. It performs the following six important interrelated functions that are essential to a modem economy at present:
I) It provides a payment system for the exchange of goods and services.
Depository financial intemiediaries such as banks are the pivot of the payment system.
II) it enables the pooling of funds for undertaking large scale enterprises.
Mechanisms like financial system facilitate the pooling o f household savings for financing business.
III) It provides a mechanism for spatial and temporal transfer of resources. It thus facilitates o f economic resources across time and space.
IV) It provides a way for managing uncertainty and controlling risk. A well developed financial system offers a variety of instruments that enable economic agents to pool, price and exchange risk. The three basic methods for managing risk are:
a) Hedging: It entails moving from a risky asset to a less risk asset. A forward contract for example, is a hedging device.
b) Diversification: It involves pooling and subdividing risks. While this does not eliminate the total risk, it redistributes to diminish the risk faced by each individual.
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c) Insurance: It enables the insured to retain the economic benefits ot' ownership
while lying off the possible losses. O f course, to do this a fee or insurance premium has to be paid.
V) Price information is veP) vital function especially in the process for
decentralized decision making as it generates information that helps in coordinating it.
Apart from the manifest function of facilitating individual and businesses to trade m
financial assets, financial markets are important.
VI) It helps in dealing with the problem of informational asymmetr>. It mainly
arises from the misunderstanding between the two parties. When one party to a
transaction has information that the other does not have then informational asymmetry
exists.
5.4.2 FINANCIAL INSTRUMENTS
There are different financial instruments in a financial market. They play an
important role in the system of India Financial institutions and financial markets are
closely interrelated and it is difficult to separate them. Financial instruments range from
the common (currency notes. Corporate debentures and equity shares) to the more exotic
(futures and options). Financial assets represent claims against the future income and
wealth o f others. Financial liabilities is the counterparts o f financial assets, represent
promises to pay some portion o f prospective income and wealth to others. Financial
assets and liabilities emanate from the basic process o f financing. They distribute the
returns and risks of economic activities to a variety o f participants. The researcher has
explained the important claims and promises in the economy of a country as follows:
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5.4.2.1 Money: Money is issued by the Reserve Bank of India and to a minor extent by the ministry of finance,
5.4.2.2 Demand Deposit: This is a promise to repay a given sum as and when demanded by the holder. It may not carry interest with it.
5.4.2.3 Short term Debt: This is a promise to repay a specified sum along with interest within a period of one year.
5.4.2.4 Intermediate term Debt: This is a promise to repay specified sum along with interest within a period that exceeds one year but is less than five years
5.4.2.5 Long term Debt: This is a promise to repay a stream of interest over a long period of time and then repay the principal in a lump sum or in installments.
5.4.2.6 Equity stock: This represents ownership of capital. Equity shareholders have a residual interest in the income and wealth of the company after all other claims are fultllled.
5.4.3 FINANCIAL INSTITUTIONS
There are several important financial institutions in India. They are regarded as a back bone of an economy. In the organized sector they function under the overall surveillance of RBI.
5.4.3.1 Reserve Bank of India
The researcher tries to explain about RBI because it has a very vital role to play in the overall economic and financial development of India. It has to take all important financial decisions regarding the country. RBI being the central banking authority is at the head of Indian financial market. Established in 1935, it became a government owned institution from 1949 under Reserve Bank Act of 1948. The RBI perforins the following functions of the central banking authority.
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(i) It manages the liquidity reserves of the credit institutions and supervises their
operations.
(ii) It controls payments and receipts for international trade and regulates other
foreign exchange transactions.
(iii) It encourages the extension of the commercial banking system in the rural areas.
5.4.3.2 Commercial Banks These banks are spread throughout the country with many branches in urban and rural areas. The largest commercial banks in India, the SBI was set up in 1955 Fourteen large privately owned commercial banks were nationalized in 1969, for this aims;
i) Reducing the influence of business houses on banks
ii) Preventing misuse of the resources of banks,
iii) Achieving a wider spread of bank credit.
One of the major activities of the commercial banks is to provide working capital and advance to industry.
5.4.3.3 Developmental Financial Institutions:
Since independence a number of developmental financial institutions have been set up to primarily cater to the long term financing needs of the industrial sector. An elaborate structure consists of three all India term lending institutions IDBI, IFCI, and
ICICI. State financial corporations and state Industrial and development corporations have come into being. They have provided the bulk of long tenti industrial capital needs, particularly tor new projects. They help in identifying investment opportunities, encourage competent new entrepreneurs.
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5.4.3.3.1 Insurance Companies: They play an important role in the life of every person because it has some advantages. There are two insurance companies in India: LlC and GIC of India. The LlC, which provides h'fe insurance, has massive resources at its command due to two reasons:
(i) Insurance pohcies usually incorporate a substantial element of savings,
(ii) Insurance premiums are payable in advance.
5.5 FINANCIAL MARKETS
The purpose of linancial markets is to transfer funds from the in\estors to borrowers. A common distinction made by financial market participants is between the
"capital market" and the "money market", with the later term generally referring to borrowing and lending for short periods of two years or less. Where as the capital market deals with long-tenri debt and stock (equity and preference). A financial transaction involves creation or transfer of a financial asset eg : issue of equity stock by a company.
There are three ways in w'hich a company may raise capital in the primary market:
1. Public issue: Public issue which involves sale of securities to members of the public is the most important mode of raising long tenn funds.
2. Rights issue: Right issue is the method of raising further capital from existing shareholders by offering additional securities to them on a pre-emptive basis.
3. Private placement: It is a way of selling securities privately to a small group of investors.
5.5.1 COST OF PREFERENCE CAPITAL
The cost of preference capital is the dividend expected by its shareholders. The rate of dividend is f'ixed in case of preference share capital at the time of issue itself
Preference share is of'ten characterized as a hybrid fonn of equity which lies somewhere
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between debt and equity and has some characteristics of both, though it pays a constant annual dividend. Its clann on income and assets is subordinate to debt, hi addition, the firm pays dividends on prelerence share with after-tax income; making a tax adjustment on preference shares unnecessary.
5.5,2 COST OF EQUITY SHARE CAPITAL
The cost of equity share capital is the most difficult cost to measure. It represents the minimum rate of return that must be earned on that portion of investment financed by equity share capital so that the total market price of the firm's stock will not be affected.
It is the contention of some financial experts that since the payment of dividend is not legally compulsory and the rate of dividend is not predetermined, hence the equity share capital is cost free. This is seldom true The shareholders invest their money in equity shares in anticipation of receiving dividends. The company must earn this expected rale so that the market price of shares remains unchanged. There are four approaches commonly followed for calculation of cost of equity capital. They are as follows.
i) Dividend price approach
ii) Dividend plus growth approach
iii) Earning approach
iv) Realized yield approach
5.5.2.1 Dividend Price (D/P) Approach:
According to this approach, the cost of equity capital is determined on the basis of required rate of return in tenns of the future dividends. The cost of capital (Ke) is defined as the discount rate which equates the proceeds of the sale of a share or the current market price of the share. This approach is based on the dividend valuation model.
Therefore, cost of equity capital is measured as: Ke = DPS / NP, MP
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Where Kc = Cost of Equity Share Capital
DPS = dividend per share
NP, MP = Net proceeds per share/ current market price per share 5.5.2.2 Dividend Price plus Growth (D/P + g) Approach:
Under this approach, the grow^th factor of dividend is given due consideration.
Accordingly, cost of equity capital is detennined on the basis of equity capital which is measured as: Ke= DPS / NP +g Where, g= Growth rate of dividend.
5.5.2.3 Earnings Price (E/P) Approach:
In this approach, the earnings per share is considered for measuring the cost of equity capital. It is argued that the earnings per share is an important criterion for detennination of the market price of the share. The cost of equity capital is equivalent to the rate which must be earned on incremental issues of equity shares so as to maintain the present value of investment unchanged. Thus cost of equity capital is symbolically measured as: Kc = EPS/ NP, This approach is based on the earning model, therefore, recognizes both dividend and retained earning. There is however, difference of opinion regarding the use of current earnings per share or the average rate of earning per share.
5.5.2.4 Realized Yield Approach:
According to this approach, the actual return re. the yield accruing to the investors is taken into consideration for measuring the cost of equity share capital. The part behavior is assumed to occur in future with a reasonable degree of certainty.
5.5.3 COST OF RETAINED EARNINGS
It is a modification of the cost of equity shares. The main idea in calculating the cost of retained earnings is if earning were paid out rather than retained, what rate of return could the investor earn on these funds'^ Obviously the company must earn a rate of
- 179 - Chapter (V): Indian Financial Market return on retained earnings at least equal to the rate that the shareholder could earn elsewhere on these funds to Justify retention. These funds are not without a cost. If the company paid out all its earnings by way of dividends, its shareholders could reinvest these funds in other securities. The return from this alternative use of the funds is the cost of retained earnings. Retained earnings obviate the issue costs of externally raised equity and it could be argued that no dividends should be paid when mvestment opportunities are open to the company that offer returns in excess of shareholders dividend requirements.
From the accounting point of view this is the recovery of cost, while from a
Imancial control point of view, it must also relate to the financing of replacement assets.
In either context, depreciation allowance increases the level of funds rather than being than an expense involving current cash outlays. The cost of returned earnings after making appropriate adjustments for income tax and brokerage cost can be measured with help of the following formula: Kr=Ke (1-T)(1-B)
Where Kr= Cost of retained earnings
Ke= Cost of Equity Share Capital
T == Marginal rate of Income tax applicable to shareholders
B = Brokerage, commission, cost etc. in terms of percentage
5.5.4 CONCEPT OF CAPITAL MARKET
Economic freedom leads to the development of markets. Consumers are free to buy the goods they want. Workers can sell their services in the most advantageous market. Producers are free to buy their raw materials where they will and though probably not as free as consumers, they are relatively free to hire the needed workers in the most advantageous market. The crucial point to most market transactions is that the
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price agreed upon by the buyers and sellers performs an economic service of great
significance. Market prices also have an important bearing on the way in which income is
distributed. The capital markets can be either domestic or international. Domestic: A
domestic capital market is totally within the country's financial system and under the
control and regulations of the national government. International: There is a large and
active market which is outside the control of any one national authority or set of national
regulations but which has its own procedures for self regulation.
5.5.4.1 Indian capital market:
The capital market is defined as "collection of buyers and sellers trading in
medium and long term monetary instruments". This is a part of financial market for
raising the capital. It is the market for financial assets that have long or indefinite
maturity. When a company wishes to raise capital by issuing securities, it goes to the
primary market which is the segment of the capital market. It encompasses term loans
and financial leases, corporate equities and bonds. The funds that comprise the firm’s
capital structure are raised in the capital market. Important elements of the capital market
are the organized security exchanges and the over-the-counter markets. They are tangible entities. They physically occupy space and financial instruments are traded there in. The over-the-counter markets include all security markets except the organized exchanges.
The government has accorded power to the Securities and Exchange Board of
India (SEBI) an autonomous body, to oversee the functioning of the securities market and operations of intermediaries. The capital market in India is one of the emerging and promising one. Several new features have come up since the SEBI was established in
1992.Thus; the capital market ot a country is like barometer of that country’s economy
181 - Chapter (V): Indian Financial Market and provides a mechanism for capital fonnation to I'aciiitate the transfer of funds from the investors. This transfer of funds will be optunum ifthe capital market is efficient.
5.5.4.2 Indian money market:
The Indian money market is a developing market and is still evolving. The main parts of Indian Money Market are RBI, Governments and Financial Intermediaries of the organized system. The other part consists of money lenders, indigenous bankers, chit funds, nidhis and joint stock companies. The institutions operating in these markets are banks, developmental finance institutions like IFCl, iCICl and IDBl, investment finance companies like LlC, UTl and GICI etc. In April 1991, RBI allowed the entry of any institution with bulk lendabie resources. IJC of India, UTl, GICI, NABARD, Mutual
Funds and other institutions has also been permitted to operate.
5.6 STOCK EXCHANGE
The Stock Exchange is one of the chief components of the capital market and acts as a weather cock of the economic climate of a country. Its importance has been recognized in every country where government borrowing and joint stock companies are the features of the economy. It serves as a mirror of the investor's state of confidence in the future of the economy. It stimulates capital formation and ensures a constant flow of capital into industry. In a developing country like India, stock exchanges have a crucial role to play in mobilizing savings and channel them into investment outlets.
5.6,1 HISTORY
To trace the origin of the Stock Exchanges in the world, we can refer to Paris
Stock Exchange with its origin in 1138 and only during the course of 19th century; it
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became what it is today. The years from 1850 to the first World War were the golden age
for most of the European markets.
The word "Bourse”, originated in Belgium in the town of Bruyes, durmg the 13th
century which is used with minor changes in many European countries for "Exchange"
The traders coming from the main commercial cities in Europe are said to have met in
front of the house of the family “Van der Bourses” to do their trading. According to the
members of Dutch Stock Exchange, " De Amsterdam effect enheurs ", it is the oldest
stock exchange in the world because the first shares ever to be issued by a company,
those of the Dutch East India company, were traded in Amsterdam as early as 1602
Other companies followed the example and the Amsterdam Stock Exchange prospered
and became the model for many other stock exchanges. It is the only official stock exchange in the Netherlands It is often considered to have the highest standards m
European together with London and it is likely that it would be taken together with
London as a model for the hamionization of Stock Exchange Regulations m the European
Stock Exchange.
Hamburg is the oldest of the present stock exchanges. It was founded in 1558
Until 1921, it was a "freie Barse" (free exchange) which meant that it was open to "all respectable male persons" without costs. Like other European countries, trading expanded in Germany from 18th century. Many stock exchanges opened and at one time there were 21 stock exchanges but during 1970s there were only 8 stock exchanges. The first Belgian Stock Exchange officially started in 1801 and has developed base on the high degree of industrial prosperity experienced by the country. The first stock exchange to be recognized by Italians was inaugurated in Milan in 1808. The Tokyo Stock
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Exchange was established in 1878, following the enactment of Stock Hxchange
Regulation in the same year. At the beginning, it was mostly working on short term fund operation until 1922. With introduction of the short-tenn futures trading system and from
1926 It started in full scale through the increasing use of spot trading. It was reorganized in 1934 as a quasi-govemmental organization and it was closed in 1945 by the time
Second World War terminated and again started its functioning in May 1948 with the basic law regulating the securities market modeled on American legislation. The other important stock exchange is the New York Stock Exchange which started in late 17th century and is now one of the biggest and highly automated exchanges in the world.
5.6.2 SECURITIES EXCHANGES
The organized security exchanges are market places open only to members, most of whom are brokers acting for buyers and sellers of the stocks and bonds pennitted in that market. The corporation and the investment banker can get useful data on pricing new issues by studying market appraisals of old ones. Stockholders who are given the right to subscribe to new issues can sell such rights or the stock itself in the stock market.
5.6.3 SERVICE TO THE INVESTOR
5.6.3.1 Improves marketability:
The marketability of an issue is measured by the speed with which a buyer or seller are found and by the ability of the issue to absorb buying or selling without a large
price movement. An organized exchange increases the bids and the volume of both
buying or selling that can be absorbed with a minimum of price movement and offers
attracted to one central place and increases. The primary factor in marketability is the
issue itself, its size, its distribution and the character of holders. The wider distribution
- 184 - Chapter (V): Indian Financial Market reduces the relative importance of the average person’s holdings and the market is less likely to be upset by big buying or selling order. It broadens the scope of interest in the trading so that major stock issues are difficult to manipulate. The charter of the holding is another factor in marketability. The best single index of the character of the holdings is the volume of trading. Some of the very speculative listed common stocks enjoy excellent marketability. Buyers and sellers are readily found and considerable buying or selling can be absorbed without extreme price movement Some activity, however, may be attributable not to speculative motives but to use by investors for liquidity purposes.
Certain short term issues of the government which are exceptionally stable in price as well as unusually marketable, are purchased by commercial banks to provide a liquid investment. Security buyers are interested in marketability because they wish to be able to dispose of their purchases should be earnings, the dividend policy or management of the company prove unsatisfactory.
5.6.3.2 Furnishes collateral value:
Although marketability does not insure a stable price, listed securities make the most satisfactory collateral. Investors appreciate the value of being able to borrow on their securities to meet temporary needs because there is a risk of losing part of the principal of resale in attempted on short notice. Such loans can be repaid out of income so that an investment list can go undisturbed and taxes upon capital gains may sometimes be avoided.
5.6.3.3 Publishes prices:
Published “bid and asked” prices represent, respectively, the prices at which buyers are willing to take and sellers willing to offer a given security. Such reported
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prices are accurate in the case of active, high-grade bonds but they may be nominal and unrehable m the case of inactive common stocks and other speculative securities In this way attempts to execute a sale at “nommal” prices may be unsuccessful. In the case of
inactive securities and in the absence of published quotation material such as exists for the slock exchange, the dealer may extract an exorbitant profit
5.6.3.4 Publicizes corporate affairs:
One of the requirements for listing is that the corporation agrees to publish at
regular intervals infonnation about its financial condition and earnings. This publicity
feature which is now reinforced by the regulatory powers of the SEC, is especially
important for the ovvTier of second-grade bonds and of stocks Without such knowledge it
IS impossible to evaluate securities.
5.6.3.5 Exchange brokers:
He does not have the assurance that is enjoyed in dealing with the members of an
organized exchange where standards of financial responsibility and of business conduct
are enforced The exchange lays dowTi rules of conduct which ensure equitable dealing
and prevents practices which might place the broker’s interest in opposition to that of the
customer for whom he acts as agent.
5.6.4 SERVICE TO THE CORPORATION
5.6.4.1 Facilitates financing:
Listing on an organized exchange facilitates the sale of securities. All classes with
a potential interest are attracted. For the corporation, this tendency means that both the
cost of selling securities and the return which must be offered as an inducement to obtain
funds are lowered.
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5.6.4.2 Advertises and widens distribution:
As a result of the widespread publicity gi\en to the price quotations and the activities on the exchanges, listed issues are given what amounts to free advertising. The corporation that is doing well and requires financing for its growth commonly attracts attention through this medium. Market familiarity also facilitates the sale of new issues.
The investor or speculator searching for opportunities may receive this information either directly or indirectly through investment services, brokers or dealers
5.6.4.3 Rights:
When the stock is listed and moderately active, stockholders can easily sell their rights to others and the extra stock is thus taken by the general market. To the extent that the organized market is successful in absorbing such selling and keeping the price up in a reasonable alignment with other securities, it perfomis a valuable function and reduces the cost to the corporation of obtaining its new funds Issues of bonds and preferred
stocks that are convertible into common slock are also offered through subscription
rights. Such a conversion that may be effected is listed.
5.6.4.4 Underwriting costs:
When new issues are sold, the commissions charged for underwriting issues of
seasoned and listed companies are lower than advertised issues.
5.6.4.5 Advantage in merger:
When listing has improved marketability and made a company’s securities more
attractive to investors, the market price will tend to rise m relation to earnings, dividends
and property values. Even if cash is being offered, a company whose issues are enjoying
a favorable market can raise funds cheaply to buy issues that are not. Such deal can be
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mutually advantageous. The owners of the small property may obtam a better price than the mvestment market would pay directly for their securities and the purchasing corporation may get a property that increases its earnings and assets by a greater
percentage than the increase in its outstanding capitalization.
5.6.5 DISADVANTAGES
5.6.5. / Adverse credit influence:
When prices are falling widely published quotations may injure the credit
standing of a company even though the decline may have a short-term speculative
reaction. The importance of such a reaction depends upon how intimately creditors are
acquainted with the actual condition of the corporation and how far they are influenced
by rumors and opinions. Corporations which depend upon public confidence, fear that it
will be impaired should a period of widespread liquidation bring on an advertised
collapse in the price of their shares.
5.6.5.2 Control of the corporation:
The possible loss of control is a risk only for management, however, not for the
corporation or its stockholders, unless it leads to the ousting of skillful operating officials.
5.6.5.3 Danger of stock manipulation:
Well informed speculators buy as they believe a security is undervalued and that
short tenn holding will net them appreciation profits perform a useful function in
producing fairer prices for stocks. Uninfonned speculators who depend on tips, rumors
and hunches, however, can actually cause price fluctuation to be more violent. Erratic
fluctuations in the market price of a stock are chiefly the concern of the investing public
but the corporation may also find an unreasonably depressed price a handicap when it is
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trying to sell stock or to exchange its stock in a merger When a few stockholders o w t i
important blocks of stock, they may check extreme movements by suitably timed buying and selling. Even the largest stockholders are likely to own small proportion of stock as
to be unable to influence the market. Officers and directors also have come to fear that
any efforts on their part might be tenned manipulation.
5.6.5.4 Diversion o f managerial interest:
This argument has been advanced that listing may cause a company’s officials to
lake an undue interest in stock prices. They may even come to ignore their relation to the
stockholders and attempt to use their advance knowledge of conditions to speculate in the
company’s stock. A more insidious market mfiuence arises from the fact that
management may hesitate or fail to put into effect policies which, though desirable for
them, may cause the market price to decline
5.6.5.5 Harmful disclosure:
Listing on a registered exchange may require the disclosure of information in
financial statements or proxy statements that management may deem harmful to the
business. They may prefer to avoid publishing information on sales volume, gross and net
profit margins and the remuneration of officers, so that it will not be available to
competitors and labor unions. There is opposition to proposals to extend the disclosure
principle to unlisted, unregistered corporations that are publicly owned.
5.6.5.6 Additional expense: In addition to the initial and sometimes annual listing fees required by the
exchange, the corporation must pay for preparing the required reports to the exchange
and the financial and proxy statements standards for engraving certificates are high and
adequate transfer facilities are required.
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5.7 MARKET EFFICIENCY
According lo Hugene F. Fama, Chicago finance professor, who coined the tenn efficient market hypothesis, an efficient mari
“random walk” an intrinsically unpredictable pattern. In the world of the strong fonn efficient market hypothesis, trying to beat the market becomes a game of chance not skill.
A central challenge to the eff'icient market hypothesis is the e.xistence of market anomalies; reliable, w'idely known and inexplicable patterns in returns, such as the
“January elTect”. In reality, markets are neither of a certain degree but some more than others.
5.7.1 CAPITAL MARKET EFFICIENCY
The efficiency of a capital market is often defined in tenns of its ability to reflect the impact of all relevant information in the prices of the stocks. It is one which ensures that the prices of the stock quickly adjust to new' information and reflect it in the market price of the stock. The infbmiation is reflected in share prices with such speed that there are no opportunities for investors to profit from publicly available information. In an efficient capital market there is no reason to believe that the current price is too low' or too high. It directly afTects mobilization and efficient channeling of sa\ings of the
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household sector into productive enterprises by offering attractive rewards in the fonn of returns and capital appreciation. If the capital market is efficient, it will truly and immediately retlect the effect.
5.7.2 VARIOUS TYPES OF EFFICIENCY
Three forms of capital market efficiency have been suggested as below;
5.7.2.1 Weak Form of Efficiency:
This form of market stales that the stock prices fully reflect the past information of the company. Therefore, the stock prices are determined by the inflow of news which enters into the market randomly.
5.7.2.2 Semi-strong Form of Efficiency:
In this tonn oi efficiency, the market is able to adjust rapidly to all the publicly available information. Therefore, no investor will be able to out perfomi the market.
5.7.2.3 Strong Form of Efficiency:
In this fonn, the stock prices in the market reflect all the information whether published or unpublished or even private information. In other words, it maintains that the stock prices retlect all the infonnation that can be known about a company including privileged inside information that might be available to only select few insiders.
5.8 MEMBERSHIP OF EXCHANGES
Trading on the floor of the stock exchange is limited to individuals who have become members by acquiring a “seat”. Such membership is obtained by purchase from a retiring member and by passing the scrutiny of admissions committee that checks upon character, capital and experience. The cost of a seat fluctuates with market activity. If the potential commissions are large, as on the New York Stock Exchange, the cost will
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usually be high. On the lesser exchanges where trading is light, the cost may be hardly more than that of joining an exclusive social club. The member of an exchange is organized as a voluntary association, which enables the governing body to discipline members more rigidly than would be possible under incorporation. Although most members are primarily interested in acting as commission brokers for others, they may also deal or trade for their own accounts. Members are required to place the interests of their customers first. He must attempt execution at a better price on the exchange before a member can trade for his own account with a customer. He must also disclose the capacity, whether as dealer or broker in which he is acting for his customer A specialist operating on the floor for other brokers must execute orders left with him at a given price before trading for his own account
5.9 LISTING OF SECURITY
The securities that are admitted to trading must be passed upon by the exchange authorities. Formal listing is a privilege extended after an application has been made by the corporation which may list all or only certain of its capital issues. The function of an organized exchange is not to guarantee the quality of its listed securities but merely to provide a free and open market for legitimate securities ranging from the highest-grade government bonds to speculative common stocks. Some securities traded on certain exchanges have an unlisted trading privilege. The exchange grants the pri\ ilege without any action by the issuing corporation The chief requirements of listing are as follows:
1. Certified copies of the charter of bylaws.
2. Financial and historical facts of investment import must be disclosed. 3. The distribution of the issue must be described.
4. Transfer facilities must be maintained.
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5.9.1 IMPORTANCE OF THE EXCHANGE
New stocks are not sold directly on the exchange but by investment bankers. The exchange does help, however, in the distribution of new stock issues by providing a market for the subscription rights. The first important measure in the frequent and timely
is release of significant infonnation Such facts have news value and serve to advertise the corporation because of public interest in listed securities. An ever increasing number of corporations are realizing quarterly earnings reports New property purchases, construction ol new plants and new products or models are announced. Even adverse
news has its useful side although it discourages the short-tenn speculator and lowers security prices. The second measure policy is the maximum economic employment of common stock in the capital structure. The greater use of common stock enlarges the size ot the outstanding issue which tends to make the issue more active and so more marketable. A third measure is the division of the share capital into a suitable number of units, so that per share price will be attractive. A market-wise management is very likely to divide up the shares whenever market price per share raises much above the popular price range. On the other hand, stocks selling below are likely to be considered “too cheap to be sound.”
5.9.2 SERVICE TO THE ECONOMY
A good market tor securities is one of the basic factors that will induce businessmen and investors either to make the original investment or to reinvest earnings.
Their value to the economy is sometimes underrated because these markets are for existing securities rather than new financing Persons of middle class and lower income brackets acquire securities. They are likely to regard marketability as limiting their
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personal risk and permitting them to pass any business risi
They are willing to assume the market risk provided they regard is as a balanced or exceeded by the hope of appreciation.
The market also provides a valuation and liquidity that make even common stocks more suitable for collateral should investors have to borrow to meet temporary needs.
Finally, the securities markets indirectly widen the sources of funds for new' ventures.
The stock markets increase immensely the ability of the economic community to mobilize resources for new investment lixisting investment is substantially fixed in existing enterprises but the ability of security owners to shift their portfolios through the market widens the potential supply of funds for the seeker of funds.
5.9.3 ECONOMIC HAZARDS
Economic losses are those that arise from the great tidal waves in the security market which run over periods of years and parallel the rise and fall of economic activity through the business cycle. Great speculative cycles can occur without security markets as in real estate. These major changes m market value endanger the solvency of a banking system that makes collateral loans. They upset government budgets by producing capital losses that shrink the tax base whether the tax is levied upon income or property values.
Such broad movements in security prices contribute to the difficulties of an unstable economic mechanism Ready marketability attracts a large following both amateur and professional speculators whose interest is centered in short run price changes and who lack both knowledge of and interest in the more fundamental long run factors. They may exaggerate price swings by carrying a large volume of stock in feverish boom periods and dumping it in depression Even over shorter period, their inexpertness may contribute to
- 194 - Chapter (V): Indian Financial Market shorter-term fluctuations. Not only such measures are likely to restrict the very liquidity that makes the market a valuable instrument but they also curb the use of margin trading by small speculators, who are likely as a class, to be the least expert and the least able to bear losses.
5.10 THE OVER-THE-COUNTER MARKET
The over-the-counter market supplements the markets on organized exchanges and in some sectors greatly exceeds them in importance. Although government bonds are
listed, virtually all of their trading as well as that of the usually unlisted state and
municipal bonds is over-the-counter. Most transactions in corporation bonds typically
small lot are also taken place there, even though many major issues are listed. In over- the-counter trading there are dealers who act as pnncipals, buying and selling for their
own account with customers and other dealers. Actually the dealer may not acquire the
security for his own account or on his own risk but may only execute purchases and sales
when they can be executed simultaneously and at a sufficient spread between the two to
yield him his desires profit margin. Tliey are said to "make a market” in the more
important issues by standing ready to buy and sell at bid and asked prices. There is no
systematic reporting of prices for over-the-counter transactions. The dealer’s
compensation is varying, spread between the price at which he negotiates a purchase and
a sale. Dealer firms specialize in certain types of securities, commercial banks,
investment bankers, bond houses and stock exchange members who operate over-the-
counter departments along with their brokerage business.
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5.11 STOCK EXCHANGE IN INDIA
5.11.1 HISTORY The word "Stock Exchange" means any body of individuals, whether
incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. The origin of the stock market, therefore, goes back to the time when securities representing this property or promises to pay were first issued and made transferable from one person to another. The earliest records in India go back to securities transacted by the East India Company and then in
1830s when there was an increase in the volume of business, not only in loans but also in corporate stocks and shares.
Bank managers all of a sudden discovered that they were a nuisance to their
customers and ordered the hamals to clear their steps and the policy drove them from
pillar to post. They had to shift from place to place and w'herever they w'ent through sheer
habit, they overflowed into the streets. In 1874 a street that is now' appropriately called as
Dalai Street in Bombay after their name, found a place where they could convenienUy
assemble on that place stood once the office of the Advocate of India.
It was in those troubled times bctw'een 1868 and 1875 that brokers organized an
infomnal association. Finally, recited in the indenture constituting the Articles of
Association of the Bombay Stock Exchange, on 9th July 1875. A few native brokers
doing brokerage business in shares and stocks resolved upon forming in Bombay an
association for protecting the character, status and interest of native share, stock brokers
and for providing a hall or a building for the use of the members of such an association.
At a meeting held in the Brokers hall on the 5th Februar>' 1887, it was resolved to execute
a formal Deed of Association, to constitute the first managing committee and appoint the
- 196 - Chapter (V): Indian Financial Market first trustees. Accordingly, an indenture was executed on the 3rd December, 1887. The
Stock Exchange was thus fonnally estabhshed in Bombay "as a society to be called the
Native Share and Stock Brokers Association ",
The Association is now also known alternatively as "The Stock Exchange" The w'ord "native" in the original title which still survives marked no distinction from a parallel foreign association for none existed. It w'as a sign of exclusiveness and pride.
Article of Association specifically declared "that no other person except natives of India shall be admitted as member of the said Association", The Articles of Association so adopted by the Exchange fonn the basis of its government to this day.
In India, a comparable body, namely SEBl (Securities and Exchange Board of
India) was constituted by the government in April 1988 as a supervisory body to regulate and promote the securities market. Another institution set up for toning up of the stock and capital markets is the SHCIL (stock handling corporation of India ltd.) to facilitate quicker share transfers with other investors, members of stock exchange etc. The other
institution with the objective of rating the debt obligations of Indian companies on a
voluntary basis with a view to providing the investors a guide as to the risk of timely
payment of interest and principal by the company is CRISIL (credit rating and
mfomiation services of India Ltd.). In addition to these institutions, each stock exchange
has got its board to handle business according to its memorandum and articles of
association.
The following table shows how the stock exchanges in different cities were
established along with their years of commencement.
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Table 5.1; Date of Established Stock Exchange
1 Mumbai 1875
2 Calcutta 1908
3 Madras 1908
4 Indore 1930
5 Hydrabad 1943
6 Delhi 1947
7 Banglore 1957
8 Cochin 1978
9 Kanpur 1982
10 Pune 1982
11 Ludhiana 1983
12 Ahmadabad 1984
13 Gauhati 1984
14 Jaipur 1984
15 Kanara 1985
16 Magadh 1986
17 Bhubaneshwar 1989
18 Saurashtra 1989
19 OTC 1989
20 Baroda 1990
5.11.2 PUNE STOCK EXCHANGE
5.11.2.1 Establishment Before the establishment of Pune Stock Exchange in September 1982, security dealing business was conducted by few members of Bombay Stock Exchange through sub-brokers in Pune. The Marattha Chambers of Commerce and Industries took the lead
- 198 - Chapter (V): Indian Financial Market for setting up of the Pune Stock Exchange and its recognition by the Central Government under the Companies Act 1956 as a Limited Company.
The Pune Stock Exchange has a very large potential market in the Southern,
Northern and Eastern part of Maharashtra. Maharashtra was the only state to have two stock exchanges. Now it has got a third stock exchange namely, the Over the Counter
Exchange of India and the fourth. National Stock Exchange is expected to commence operation in the near future. Though Pune Stock Exchange is not in a position to compete
in a serious way with Bombay Stock Exchange, it can nonetheless help in collection of
funds and in increasing market capitalization through its members and brokers offering easier and more convenient procedures. Trading instruments are delimited to Shares and
Debentures. The turnover of Pune Stock Exchange which was of a few hundred
thousands rupees in 1992-93, was Rs.5750 million in 2001-2002 and increased to
Rs.7520 million in 2002-2003 .
5.11.2.2 Registered office
The registered office of Pune Stock Exchange is in Shivleela Chambers, No. 752,
Sadashiv Peth, R.B.Kumthekar Marg, Pune - 411 030 with its 14000 sq. ft. premises
which has a trading ring space of 2000 sq.ft. It is partly computerized and has smooth
settlement system.
5.11.2.3 Membership
Any individual who meets the stipulated eligibility criteria can become a member
of Pune Stock Exchange from the financial year 2002-2003. By the amendments in the
Articles of Association, the corporate bodies enable to become member of Pune Stock
Exchange. Till March 1987 the number of members was 68 who were selected as the
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registered brokers of the Exchange. After 3 years 90 additional members were granted the membership of the Exchange to cater to the growing needs of the investors. In June 1995 the Exchange has inducted 20 new members. As on December 1998 there are 185 members registered with PSE. Besides the above brokers, 150 sub-brokers are registered with SEBl through the principal brokers of PSE.
5.11.2.4 Protection fund
The Pune Stock Exchange offers an Investors Protection Fund which is registered under the Bombay Public Trust Act to safeguard the interest of the clients in case of default by any member. There is also Brokers Protection Fund as well which has got the same amount as Investors Protection Fund.
5.11.2.5 Prospective developments
The Council of Management has prepared development plan for Pune Stock
Exchange which includes various activities such as purchase of plot for the new building, library for investors and investors' education etc. Two committees have also been appointed, a Building Committee to process the development work for the new building and other committee for full computerization of Pune Stock Exchange.
5.11.2.6 Future plans
At present the trading is being done through LAN i.e. Local Area Network and
WAN i.e.. Wide Area Network System. The exchange is also planning to commence
Investors Service Centers in Satara, Sangli and Kolhapur to provide services relating to
Capital Market to the investors in these cities and around. In the first phase, PSE will be offering connectivity to our trading system from all over Pune City. The main purpose on going on WAN is to reduce the expenditure incurred by the Exchange on the rent
- 200- Chapter (V): Indian Financial Market account, create a platfomi for expanding the trading base for serving more investors and
for being at par with the rapidly changing technology in the l.T. field. In the next phase
PSE will offer connectivity to eight district places in Western Maharashtra. The cities
covered will be Satara, Sangli, Kolhapur, Solapur, Ahmednagar, Nashik, Aurangabad
along with Mumbai.
5.11.3 MUMBAI STOCK EXCHANGE
5.11.3.1 Introduction:
In its travel through the Iasi 129 years of its existence, the Bombay Stock
Exchange, the first to be established in Asia, has weathered many a crisis emerging
stronger at every juncture. The Stock Exchange of Mumbai, popularly know'n as "BSE"
was established in 1875 as "The Native Share and Stock Brokers Association". It is the
oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in
1878. The exchange was granted recognition under the Bombay Securities Contracts
Control Act, 1925 in May, 1927 It is a voluntary' non-profit making Association of
Persons (AOP) and is currently engaged in the process of converting itself into corporate
entity. It has evolved over the years into its present status as the premier Stock Exchange
in the country. It is the first Stock Exchange in the country to have obtained pemianent
recognition in 1956 from the Govt, of India under the Securities Contracts (Regulation)
Act on 31-8-1957.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives, upholds the interests of the investors and ensures
readressal of their grievances whether against the companies or its own member-brokers.
It also strives to educate and enlighten the investors by conducting investor education
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programme and making available to them necessar>' informative mputs. Governing Board
having 20 directors is the apex body, which decides the policies and regulates the affairs
of the Exchange. The Governing Board consists of 9 elected directors, who are from the
broking community three SEBI nominees, six public representatives, an Executive
Director as Chief Executive Ofilcer and a Chief Operating Officer. The Executive
Director as the Chief Executive Officer is responsible for the day-to-day administration
of the Exchange and he is assisted by the Chief Operating Officer and other Heads of
Departments. The Exchange has inserted new Rule No. 126 A in its Rules, Bye-laws and
Regulations pertaining to constitution of the Executive Committee of the Exchange. The
Committee considers judicial and quasi matters in which the Governing Board has
powers as an Appellate Authority, matters regarding annulment of transactions,
admission, continuance and suspension of member brokers, declaration of a member
broker as defaulter, norms, procedures and other matters relating to arbitration, fees,
deposits, margins and other monies payable by the member-brokers to the Exchange.
Following the recommendations of a World Bank team in 1961, the Exchange
decided to construct a new building the foundation of which was laid in 1969. The
building complex comprises of 28 storeys, Phiroze Jeejeebhoy Towers, which is among the tallest buildings in Mumbai.
5.11.3.2 Turnover
The average daily turnover of the Exchange during the financial year 2000-2001
(April-March) was Rs.3984.19 crores and the average number of daily trades was 5.69 lakhs. The average daily turnover ol the Exchange in the subsequent tw'o financial years.
>02- Chapter (V): Indian Financial Market
i.e., 2001-02 and 2002-03, has declined considerably lo Rs 1248.15 crores and Rs.
1251.29 crores respectively The average number ofdaily trades recorded during 2001-02 and 2002-03 numbered 5.17 lakhs and 5.63 lakhs respectively The reasons for a considerable decline in the average daily turnover at the Exchange as reflected in above statistics are as, the ban on all deferral products like Borrowing and Lending of Securities
Scheme and Automated Lending and Borrowing Mechanism in the Indian capital markets by SEBl w e f July 2, 2001, abolition of account period settlements, introduction of
Compulsory Rolling Settlements in all scrip’s traded on the Exchanges w e.f December
31, 2001, etc have adversely impacted the liquidity in the market
5.12 SUMMARY
The researcher is interested to know about financial market in India For this purpose he divided this chapter in three segments. The first segment deals with India. He has chosen this countr>' in particular because today it is one of the most developing countries in the world with a strong democratic background and especially in the field of
IT, Commerce, Agriculture and Industry. It is the tenth industrialized country Different religions, customs, traditions are the symbol of India with rich culture It became independent in 1947
The government decided to reduce the state control of the economy and gradually followed the policies of liberalization from I99I. India is growing at a fast pace because of this policy. This can be seen from the growth in GDP. A part from this, the section also referees to certain points such as Environment, Land, Population and lastly some infonnation about Pune in brief because it has a stock exchange It also has some famous
- 203 - Chapter (V): Indian Financial Market industries (Telco, Bajaj). It is an important educational center. It is known as the Oxford of Bast and recently has become as IT center also. The second segment is about system of financial market. It is very vital from the Indian view point because it has a variety of financial institutions and different types of markets. It is important to the modem economy.
The researcher had explained six major functions of the financial system, along with financial mstruments and institutions. The famous of all is RBI. The next subject on which the researcher is interested to discuss is different financial markets, which are capital and money market. If company wants to increase its capital in the market it includes rate of return. He has explained about different costs for capital as: a) Cost of preference capital, b) Cost of equity capital and c) Cost of retained earnings. Out of these costs, the cost of equity is very important and has four approaches for calculating with the help of formula. This chapter includes concept of capital market. Money market is a next part of financial market. It deals in short term debt w'hile the capital market deals in long tenn debt and stock.
The third or the last vital segment is related to Stock Exchange because the place of research was BSE and PSE. At first the researcher explained about the meaning and history of Stock Exchange by giving examples of some countries of the world. Today
Stock Exchange is like a weather cock of the economy climate of the country because it stimulates capital formation. It plays a crucial role in mobilizing investments, it performs some important services to investors and corporations also.
Market Efficiency is next important subject. It means a market where there is large number of rational, profit-maximizes actively competing with each trying to predict
- 204 - Chapter (V): Indian Financial Market future market values of individual securities. Important current infonnation is almost freely available to all participants. The “efficient market hypothesis” says that at any given time, asset prices fully reflect all available infonnation that price movements do not follow any patterns or trends. Random Walk is a vital efficient market hypothesis. It removes the doubt that at any time asset prices reflect all relevant infonnation which the price movements do not follow any patterns. It means that the past price movements cannot be a base for forecasting the future price. Three forms of efficiency have been stated:
1- Weak form of efficiency: It relates to the prices which fully reflect the past
infonnation of the company.
2- Semi-strong form of efficiency: This means the public mformation is adjusted by
the market.
3- Strong fonn of efficiency; Here published, unpublished and private information
were reflected.
This also includes over the counter market. The tenn over-the-counter is applied to trading in new issues of existing securities outside the organized exchanges. Trading in old issues in the over-the-counter market is statistically important because it includes the bulk of bond trading, including government and corporate obligations, some of which are listed. Many utility preferred stocks and almost all state and municipal bonds, bank and insurance stocks, real estate issues and the securities of small corporations are unlisted.
Stock Exchange has the responsibility of service to the economy e.g. for businessmen, investors, persons of middle and lower class income brackets. There are some economic hazards mentioned in this chapter. Indeed the growth of the securities has been one of the
- 205 - Chapter (V): Indian l-'inancial Market significant economic processes of the decade in the countr\' By the end of the decade, the security market in India had witnessed a spectacular growth, both in terms of ability to mobilize resources and to allocate it with some efficiency. The corporate sector came to rely on the securities market increasingly, to finance its long tenn requirement of funds and it competed almost on equal terms wdth the tenn lending institutions which were hitherto the sole purveyors of long term finance.
Though India has a long history of stock exchanges with the Bombay Stock
Exchange having been set up as early as in 1887, the securities market really emerged from the periphery into the main stream of the countPy^'s financial system only since the beginning of the decade of the I980's. Stock Exchange is a place which provides for the purchase and sale of securities. The earliest rewards can be found during the East India
Company. This chapter also contains the history of BSE and PSE. BSE has a long history of 129 years It was established in 1875 as an association. It obtained a permanent recognition in 1956, PSE was established in September 1982. It has a potential market in the Southern, Northern and Eastern part of Maharashtra. The researcher had explained about BSE and PSE at the end of this chapter.
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