CHAPTER I

INTRODUCTION

1.1 INTRODUCTION

1.1.1 FOREIGN INSTITUTIONAL INVESTORS

FII is defined as an institution organized outside of India for the purpose of making investments into the Indian securities market under the regulations prescribed by SEBI.

‘FII’ include “Overseas pension funds, mutual funds, investment trust, asset management company, nominee company, bank, institutional portfolio manager, university funds, endowments, foundations, charitable trusts, charitable societies, a trustee or power of attorney holder incorporated or established outside India proposing to make proprietary investments or investments on behalf of a broad-based fund. FIIs can invest their own funds as well as invest on behalf of their overseas clients registered as such with SEBI. These client accounts that the FII manages are known as ‘sub-accounts’. A domestic portfolio manager can also register itself as an FII to manage the. funds of sub-accounts

Foreign institutional investor means an entity established or incorporated outside India which proposes to make investment in India. Positive tidings about the Indian economy combined with a fast-growing market have made India an attractive destination for foreign institutional investors. FII is defined as an institution organized outside of India for the purpose of making investments into the Indian securities market under the regulations prescribed by SEBI.

Entry Options For FII

A foreign company planning to set up business operations in India has the following options:

Incorporated Entity

By incorporating a company under the Companies Act,1956 through

• Joint Ventures; or

• Wholly Owned Subsidiaries

Foreign equity in such Indian companies can be up to 100% depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment (FDI) policy.

1.1.2 Important terms to know about FIIs:

Sub-account :

Sub-account includes those foreign corporations, foreign individuals, and institutions, funds or portfolios established or incorporated outside India on whose behalf investments are proposed to be made in India by a FII.

Designated Bank:

Designated Bank means any bank in India which has been authorized by the Reserve Bank of India to act as a banker to FII.

Domestic Custodian:

Domestic Custodian means any entity registered with SEBI to carry on the activity of providing custodial services in respect of securities.

Broad Based Fund:

Broad Based Fund means a fund established or incorporated outside India, which has at least twenty investors with no single individual investor holding more than 10% shares or units of the fund. Provided that if the fund has institutional investor(s) it shall not be necessary for the fund to have twenty investors.

If the fund has an institutional investor holding more than 10% of shares or units in the fund, then the institutional investor must itself be broad based fund.

1.1.3 FOREIGN INSTITUTIONAL INVESTORS REGISTRATION

Following entities / funds are eligible to get registered as FII:

• Pension Funds

• Mutual Funds

• Investment Trust

• Insurance or reinsurance companies

• Endowments

• University Funds

• Foundations

• Charitable Trusts or Charitable Societies

Further, following entities proposing to invest on behalf of broad based funds, are also eligible to be registered as FIIs:

• Asset Management Companies

• Institutional Portfolio Managers

• Trustees

• Power of Attorney Holders.

The eligibility criteria for applicant seeking FII registration

As per Regulation 6 of SEBI (FII) Regulations,1995, Foreign Institutional Investors are required to fulfill the following conditions to qualify for grant of registration:

• Applicant should have track record, professional competence, financial soundness, experience, general reputation of fairness and integrity.

• The applicant should be regulated by an appropriate foreign regulatory authority in the same capacity/category where registration is sought from SEBI. Registration with authorities, which are responsible for incorporation, is not adequate to qualify as Foreign Institutional Investor.

• The applicant is required to have the permission under the provisions of the Foreign Exchange Management Act, 1999 from the Reserve Bank of India.

• Applicant must be legally permitted to invest in securities outside the country or its in-corporation / establishment.

• The applicant must be a fit and proper person.

• The applicant has to appoint a local custodian and enter into an agreement with the custodian. Besides it also has to appoint a designated bank to route its transactions.

• Payment of registration fee of US $ 5,000.00

Form A as prescribed in SEBI (FII) Regulations, 1995 is to be filled before applying for FII registration.

Supporting documents required are:

• Application in Form A duly signed by the authorized signatory of the applicant.

• Certified copy of the relevant clauses or articles of the Memorandum and Articles of Association or the agreement authorizing the applicant to invest on behalf of its clients

• Audited financial statements and annual reports for the last one year. provided that the period covered shall not be less than twelve months.

• A declaration by the applicant with registration number and other particulars in support of its registration or regulation by a Securities Commission or Self Regulatory Organisation or any other appropriate regulatory authority with whom the applicant is registered in its home country.

• A declaration by the applicant that it has entered into a custodian agreement with a domestic custodian together with particulatrs of the domestic custodian.

• A signed declaration statement that appears at the end of the Form.

• Declaration regarding fit & proper entity.

The fee for registration as FII is US $ 5,000. The mode of payment is Demand Draft in favour of Securities and Exchange Board of India payable at New York”.

SEBI generally takes 7 working days in granting FII registration. However, in cases where the information furnished by the applicants is incomplete, seven days shall be counted from the days when all necessary information sought, reaches SEBI.

In cases where the applicant is bank and subsidiary of a bank, SEBI seeks comments from the Reserve Bank of India (RBI). In such cases, 7 working days would be counted from the day no objection is received from RBI.

The FII registration is valid for 5 years. After expiry of 5 years, the registration needs to be renewed.

Same as initial registration, Along with Form A and all the relevant documents, the applicants are required to fill in additional form (Annexure 1) while applying for renewal. US $ 5,000 needs to be paid for renewal of FII registration.

The application for renewal should be submitted three months before expiry of the FII registration. 100 % debt FIIs are debt dedicated FIIs which invest in debt securities only. The procedure for registration of FII/sub-account, under 100% debt route is similar to that of normal funds besides a clear statement by the applicant that it wishes to be registered as FII/sub-account under 100% debt route.

The FII registration application should be sent to:

Securities and Exchange Board of India

Division of FII & Custodian

Mittal Court B Wing, First Floor

224, Nariman Point

Mumbai 400 021

India.

1.1.4 SUB-ACCOUNT REGISTRATION

a) Institution or funds or portfolios established outside India, whether incorporated or not.

b) Proprietary fund of FII.

c) Foreign Corporates

d) Foreign Individuals.

The FII should apply on the behalf of the Sub-account. Both the FII and the Sub-account are required to sign the Sub-account application form.

Annexure B to Form A (FII application form) needs to be filled when applying for sub-account registration. No document is needed to be sent with annexure B. The fee for sub-account registration is US$ 1,000. The fee is to be submitted at the time of submitting the application. The mode of payment is Demand Draft in the name of Securities and Exchange Board of India payable at New York. SEBI generally takes three working days in granting FII registration. However, in cases where the information furnished by the applicants is incomplete, three days shall be counted from the days when all necessary information sought, reaches SEBI. The validity of sub-account registration is co-terminus with the FII registration under which it is registered. The process of renewal of sub-account is same as initial registration. Renewal fee in this case is US $ 1,000. OCBs / NRIs are not permitted to get registered as FII/sub-account.

1.1..5 POST-REGISTRATION PROCESSES:

If a registered FII/sub-account undergoes name change, then the FII need to promptly inform SEBI about the change. It should also mention the reasons for the name change and give an undertaking that there has been no change in beneficiary ownership.

In case of name change of FII, the request should be accompanied with documents from home regulator and registrar of the company evidencing approval of name change, and the original FII registration certificate issued by SEBI should be sent back for necessary amendment.

Procedure for transferring a sub-account from one FII to another:

The FII to whom the Sub-account is proposed to be transferred has to send a request along with a declaration that it is authorized to invest on behalf of the Sub-account. The transferor FII should also submit a No-objection certificate.

The FII should send a request, along with no-objection certificate from existing domestic custodian, for change in domestic custodian.

The FII would be required to send a request for cancellation of its registration or registration of its Sub-account/s clearly mentioning the name and registration number of the entity. The FII should ensure that it / Sub-account has nil cash / securities holdings.

Procedure for change of local custodian:

In case of change of the local custodian of the FII / sub-account, the change should be intimated to SEBI by the FII. On receipt of no objection from the existing custodian and acceptance from the proposed custodian, the change of custodian would be approved — by SEBI.

Procedure for registration as FII/sub account under 100% debt route:

The procedure for registration of FII/sub account under 100% debt route is similar to that of normal funds besides a clear statement by the applicant that it wishes to be registered as FII/sub account under 100% debt route. However, Government of India allocates the overall investment limit for 100% debt funds annually. The grant of investment limit for individual 100% debt funds is within this overall limit. The funds have to seek further investment limit in case the limit allotted to them is exhausted and they wish to invest further.

A Foreign Institutional Investor having an account with one custodian can open accounts with different custodians for its different sub-accounts. However, one sub-account cannot be custodial with more than one custodian.

Procedure if an existing sub-account wants to get registered as a Foreign Institutional Investor:

In case if a registered sub-account wishes to get itself registered as a Foreign Institutional Investor, then it will have to apply in Form A to SEBI for the same and has to satisfy all the eligibility criteria norms mentioned in SEBI (Foreign Institutional Investor) Regulations, 1995. It should also submit a letter from the old FII indicating its ‘No-objection’ to such registration.

Procedure for renewal of FII/Sub-Account registration:

They have to apply before 3 months of the expiry of registration in Form A. Circular No FITTC/CUST/09/2000 dated September 21, 2000 may be referred.

If the FII does not renew its/sub-account’s registration:

The registration of the FII / Sub-account would get expired at due date and it would not be allowed to trade in Indian securities markets. If it is not interested in renewal but has certain residual assets, it can apply for disinvestment in terms of Circular No. FITTC/CUST/12/2001 dated June 04, 2001 and abides by the guidelines specified in this regard.

1.1.6 Scope of Investments under the Portfolio Investment Scheme.

FIIs, under the Portfolio Investment Scheme, are permitted to make both primary and secondary investments in the India capital markets. Unlike an investor which relies solely on FDI regulations, a foreign investor which registers as a FII would be allowed to buy and sell securities over Indian stock exchanges. In addition, FIIs are entitled to effect transactions in a broader category of securities than an investor relying on FDI regulations alone. FIIs are permitted to purchase equity securities (both listed and unlisted), units of schemes floated by the Unit Trust of India and other domestic municipal funds, warrants, debentures, bonds, governmental securities and derivative instruments which are traded on a recognized stock exchange. There is no limit on the amount that FIIs may invest in the Indian market, and no lock-up periods apply to investments made by FIIs.

Exchange Controls

FIIs are required to open up one or more bank accounts with certain designated banks and must also appoint a domestic custodian for custody of investment made by the FII. Through the designated accounts, FIIs are authorized to freely transfer funds from foreign currency accounts to Rupee accounts and vice versa; make Rupee denominated investments in Indian companies; freely transfer after-tax proceeds from Rupee accounts to foreign currency accounts, and repatriate capital, capital gain, dividends interest income and other gains, subject to deduction for applicable withholding taxes. So long as FIIs execute purchases and sales on a recognized Indian stock exchange, they are not required to obtain transaction specific approval from the Reserve Bank. FIIs are also entitled to effect transactions using their own proprietary funds, or the funds of their sub accounts.

Investment Restrictions.

Certain limitations apply to investments by FIIs into India. First, FIIs’ and their sub- accounts’ investment in an Indian company can not exceed ten percent (10%) of the total issued share capital of the Indian company (five percent if the subaccount is a foreign corporation or individual). In addition, the aggregate investment of all FIIs in an Indian company may not exceed twenty four percent (24%) of its total issued share capital, without the express approval of its board of directors and shareholders. Even with board of director and shareholder approval, the same sectoral limits which apply to foreign direct investment would continue to apply. FIIs may register with SEBI as a debt fund or an equity fund. FIIs which are registered as equity funds, are required to invest at least seventy percent (70%) of their funds in equity and equity-related securities. A FII registered as a debt fund, on the other hand, must invest one hundred percent (100%) of its funds in debt instruments. Foreign corporations and individuals are not eligible subaccounts of a FII that is registered as a debt fund. FIIs are not permitted to engage in short selling, other than in respect of derivative securities traded over a recognized exchange, and must effect transactions through a registered stock broker. Sector investment prohibitions and caps which apply to foreign direct investment also apply to investments by FIIs, and FII investments must also comply with the pricing requirements applicable to foreign direct investment. In addition, FIIs are not permitted to invest

in print media.

1.1.7 Trend of FIIs with the help of economic figures:

• In 2004, FII investments crossed $9 billion, the highest in the history of Indian capital markets.

• The total net investment for the year up to December 29 stood at US$9,072 million while foreign investors pumped in about US$2,113 million in December.

• Korea and Taiwan have always been the biggest recipients of FII money. It was only in 2004 that India managed to receive the second highest FII inflow at over $8.5bn.

• In 2005 FIIs invested more in Indian equities than in Korean or Taiwanese equities.

• On 9th March 2009, India’s exceptional growth story and its booming economy have made the country a favourite destination with foreign institutional investors (FIIs). It has continued to attract investment despite the Satyam non-governance issue and the global economic contagion impact on Indian markets.

• According to Mr Gautam Chand, CEO of Instanex, said FIIs are the largest institutional investors in India with holdings valued at over US$ 751.14 billion as on December 31, 2008.

• They are also the most successful portfolio investors in India with 102 per cent appreciation since September 30, 2003.

• As per SEBI, number of registered FIIs stood at 1626 and number of registered sub-accounts stood at 4972 as on March 17, 2009.

Future Prospects of Foreign Institutional Investments:

Sustaining the growth momentum and achieving an annual average growth of 9-10 % in the next five years.

Simplifying procedures and relaxing entry barriers for business activities and Providing investor friendly laws and tax system.

Checking the growth of population; India is the second highest populated country in the world after China. However in terms of density India exceeds China, as India’s land area is almost half of China’s total land. Due to a high population growth, GNI per capita remains very poor. It was only $ 2880 in 2003 (World Bank figures).

Boosting agricultural growth through diversification and development of agro processing.

Expanding industry fast, by at least 10% per year to integrate not only the surplus labour in agriculture but also the unprecedented number of women and teenagers joining the labour force every year.

Developing world-class infrastructure for sustaining growth in all the sectors of the economy

Allowing foreign investment in more areas.

Effecting fiscal consolidation and eliminating the revenue deficit through revenue enhancement and expenditure management.

Global corporations are responsible for global warming, the depletion of natural resources, and the production of harmful chemicals and the destruction of organic agriculture.

The government should reduce its budget deficit through proper pricing mechanisms and better direction of subsidies. It should develop infrastructure with what Finance Minister P Chidambaram International Research Journal of Finance and Economics — Issue 5 (2006) 171 of India called “ruthless efficiency” and reduce bureaucracy by streamlining government procedures to make them more transparent and effective.

Empowering the population through universal education and health care, India must maximize the benefits of its youthful demographics and turn itself into the knowledge hub of the world through the application of information and communications technology (ICT) in all aspects of Indian life although, the government is committed to furthering economic reforms and developing basic infrastructure to improve lives of the rural poor and boost economic performance. Government had reduced its controls on foreign trade and investment in some areas and has indicated more liberalization in civil aviation, telecom and insurance sector in the future.

1.2.1 OBJECTIVES OF THE STUDY:

Following are the objectives of the study:

• To study the scope and trading mechanism of Foreign Instititutional investors in India.

• To find the relationship between the FIIs equity investment pattern and Indian stock indices.

• To analyze the impact of FIIs equity investment on specific industrial sector (FMCG, Consumer Durables, Auto, Banking, Real Estate) indices.

1.2.2 SCOPE AND NEED OF STUDY:

Scope of the study is very broader and covers both the stock indices and its comparison with foreign institutional investments. But, study is only going to cover foreign investments in form of equity. The time period is limited from January 2007 to December 2008 as it will give exact impact in both the bullish and bearish trend.

The study will provide a very clear picture of the impact of foreign institutional investors on Indian stock indices. It will also describe the market trends due to FIIs inflow and outflow.

The study would be helpful for further descriptive studies on the ideas that will be explored. Moreover, it would be beneficial to gain knowledge regarding foreign institutional investments, their process of registration and their impact on Indian stock market.

1.2.3 RESEARCH METHODOLOGY:

Research methodology is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. Research methodology is the conceptual structure within which research is conducted. It constitutes the blueprint for the collection measurement and analysis of the data.

The research methodology here includes:

• Research problem

• Research design

• Sampling design

• Sampling technique

• Data collection method

Research Problem

An adage says “a problem well defined is half solved”. The project deals with the “Impact of Foreign Institutional Investors on Indian Stock Market”. This research project studies the relationship between FIIs investment and stock indices. For this purpose India’s two major indices i.e. Sensex and S&P CNX Nifty are selected. These two indices, in a way, represent the picture of India’s stock markets. Five indices of BSE i.e. BSE Auto, BSE Bankex, BSE Consumer Durables, BSE FMCG, BSE Realty are also selected so as to further observe the effect of FII in particular industry. So this project reveals the impact of FII on the Indian capital market.

There may be many other factors on which a stock index may depend i.e. Government policies, budgets, bullion market, inflation, economic and political condition of the country, FDI, Re./Dollar exchange rate etc. But for this study I have selected only one independent variable i.e. FII. This study uses the concept of correlation and regression to study the relationship between FII and stock index. The FII started investing in Indian capital market from September 1992when the Indian economy was opened up in the same year. Their investments include equity only. The sample data of FIIs investments consists of monthly average from January 2007 to December 2008.

RESEARCH DESIGN

Null Hypothesis (Ho): The various BSE indices and S&P CNX Nifty index does not rise with the increase in FIIs investment.

Alternate Hypothesis (Ha): The various BSE indices and S&P CNX Nifty index rises with the increase in FIIs investment.

Exploratory Research

As an exploratory study is conducted with an objective to gain familiarity with the phenomenon or to achieve new insight into it, this study aims to find the new insights in terms of finding the relationship between FII’S and Indian Stock Indices.

SAMPLING DESIGN

• Universe

In this study the universe is finite and will take into the consideration related news and events that have happened in last few year.

• Sampling Unit: -

As this study revolves around the foreign institutional investment and Indian stock market. So for the sampling unit is confined to only the Indian stock market.

SAMPLING TECHNIQUE: -

Convenient Sampling: Study conducted on the basis of availability of the Data and requirement of the project. Study requires the events that have impact on the Indian stock market.

Data collection Method

Secondary data: For the secondary data various literatures, books, journals, magazines, web links are used. As there are not possibilities of collecting data personally so no questionnaire is made.

RESEARCH ANALYSIS TOOLS

Regression analysis and Correlation analysis:

Regression Analysis: We can analyze how a single dependent variable is affected by the values of one or more independent variables — for example, how an athlete’s performance is affected by such factors as age, height, and weight. We can apportion shares in the performance measure to each of these three factors, based on a set of performance data, and then use the results to predict the performance of a new, untested athlete.

Correlation: This analysis tool and its formulas measure the relationship between two data sets that are scaled to be independent of the unit of measurement. The population correlation calculation returns the covariance of two data sets divided by the product of their standard deviations. We can use the Correlation tool to determine whether two ranges of data move together — that is, whether large values of one set are associated with large values of the other (positive correlation), whether small values of one set are associated with large values of the other (negative correlation), or whether values in both sets are unrelated (correlation near zero).

CHAPTER II

INTRODUCTION TO INDIAN

STOCK MARKET

2.1 OVERVIEW OF INDIAN STOCK MARKET

The working of stock exchanges in India started in 1875. BSE is the oldest stock market in India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association, which we now know by the name Bombay Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the Government of India. National Stock Exchange comes second to BSE in terms of popularity. BSE and NSE represent themselves as synonyms of Indian stock market. The history of Indian stock market is almost the same as the history of BSE.

The 30 stock sensitive index or Sensex was first compiled in 1986. The Sensex is compiled based on the performance of the stocks of 30 financially sound benchmark companies. In 1990 the BSE crossed the 1000 mark for the first time. It crossed 2000, 3000 and 4000 figures in 1992. The reason for such huge surge in the stock market was the liberal financial policies announced by the then financial minister Dr. Man Mohan Singh.

The up-beat mood of the market was suddenly lost with Harshad Mehta scam. It came to public knowledge that Mr. Mehta, also known as the big-bull of Indian stock market diverted huge funds from banks through fraudulent means. He played with 270 million shares of about 90 companies. Millions of small-scale investors became victims to the fraud as the Sensex fell flat shedding 570 points.

To prevent such frauds, the Government formed The Securities and Exchange Board of India, through an Act in 1992. SEBI is the statutory body that controls and regulates the functioning of stock exchanges, brokers, sub-brokers, portfolio managers investment advisors etc. SEBI oblige several rigid measures to protect the interest of investors. Now with the inception of online trading and daily settlements the chances for a fraud is nil, says top officials of SEBI.

Sensex crossed the 5000 mark in 1999 and the 6000 mark in 2000. The 7000 mark was crossed in June and the 8000 mark on September 8 in 2005. Many foreign institutional investors (FII) are investing in Indian stock markets on a very large scale. The liberal economic policies pursued by successive Governments attracted foreign institutional investors to a large scale. Experts now believe the sensex can soar past 14000 mark before 2010.

The unpredictable behavior of the market gave it a tag – ‘a volatile market.’ The factors that affected the market in the past were good monsoon, Bharatiya Janatha Party’s rise to power etc. The result of a cricket match between India and Pakistan also affected the movements in Indian stock market. The National Democratic Alliance led by BJP, during 2004 public elections unsuccessfully tried to ride on the market sentiments to power. NDA was voted out of power and the sensex recorded the biggest fall in a day amidst fears that the Congress-Communist coalition would stall economic reforms. Later prime minister Man Mohan Singh’s assurance of ‘reforms with a human face’ cast off the fears and market reacted sharply to touch the highest ever mark of 8500.

India, after United States hosts the largest number of listed companies. Global investors now ardently seek India as their preferred location for investment. Once viewed with skepticism, stock market now appeals to middle class Indians also. Many Indians working in foreign countries now divert their savings to stocks. This recent phenomenon is the result of opening up of online trading and diminished interest rates from banks. The stockbrokers based in India are opening offices in different countries mainly to cater the needs of Non Resident Indians. The time factor also works for the NRIs. They can buy or sell stock online after returning from their work places.

The recent incidents that led to growing interest among Indian middle class are the initial public offers announced by Tata Consultancy Services, Maruti Udyog Limited, ONGC and big names like that. Good monsoons always raise the market sentiments. A good monsoon means improved agricultural produce and more spending capacity among rural folk.

The bullish run of the stock market can be associated with a steady growth of around 6% in GDP, the growth of Indian companies to MNCs, large potential of growth in the fields of telecommunication, mass media, education, tourism and IT sectors backed by economic reforms ensure that Indian stock market continues its bull run.

2.2 History of the Indian Stock Market — The Origin

Stock markets refer to a market place where investors can buy and sell stocks. The price at which each buying and selling transaction takes is determined by the market forces (i.e. demand and supply for a particular stock.

Let us take an example for a better understanding of how market forces determine stock prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an upward movement in its stock price. More and more people would want to buy this stock (i.e. high demand) and very few people will want to sell this stock at current market price (i.e. less supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd. in the market, its price will fall down.

In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction but now with the dawn of IT, most of the operations are done electronically and the stock markets have become almost paperless. Now investors don’t have to gather at the Exchanges, and can trade freely from their home or office over the phone or through Internet.

One of the oldest stock markets in Asia, the Indian Stock Markets has a 200 years old history.

18th Century East India Company was the dominant institution and by end of the century, busuness in its loan securities gained full momentum

1830’s Business on corporate stocks and shares in Bank and Cotton presses started in Bombay. Trading list by the end of 1839 got broader

1840’s Recognition from banks and merchants to about half a dozen brokers

1850’s Rapid development of commercial enterprise saw brokerage business attracting more people into the business

1860’s The number of brokers increased to 60

1860-61 The American Civil War broke out which caused a stoppage of cotton supply from United States of America; marking the beginning of the Share Mania in India

1862-63 The number of brokers increased to about 200 to 250

1865 A disastrous slump began at the end of the American Civil War (as an example, Bank of Bombay Share which had touched Rs. 2850 could only be sold at Rs. 87)

2.3 ACHIEVEMENTS AND MILESTONES

Pre-Independance Scenario — Establishment of Different Stock Exchanges

1874 With the rapidly developing share trading business, brokers used to gather at a street (now well known as Dalal Street) for the purpose of transacting business.

1875 The Native Share and Stock Brokers’ Association (also known as The Bombay Stock Exchange) was established in Bombay

1880’s Development of cotton mills industry and set up of many others

1894 Establishment of The Ahmedabad Share and Stock Brokers’ Association

1880 — 90’s Sharp increase in share prices of jute industries in 1870’s was followed by a boom in tea stocks and coal

1908 The Calcutta Stock Exchange Association was formed

1920 Madras witnessed boom and business at The Madras Stock Exchange was transacted with 100 brokers.

1923 When recession followed, number of brokers came down to 3 and the Exchange was closed down

1934 Establishment of the Lahore Stock Exchange

1936 Merger of the Lahoe Stock Exchange with the Punjab Stock Exchange

1937 Re-organisation and set up of the Madras Stock Exchange Limited (Pvt.) Limited led by improvement in stock market activities in South India with establishment of new textile mills and plantation companies

1940 Uttar Pradesh Stock Exchange Limited and Nagpur Stock Exchange Limited was established

1944 Establishment of The Hyderabad Stock Exchange Limited

1947 Delhi Stock and Share Brokers’ Association Limited and The Delhi Stocks and Shares Exchange Limited were established and later on merged into The Delhi Stock Exchange Association Limited

Post Independance Scenario

The depression witnessed after the Independance led to closure of a lot of exchanges in the country. Lahore Estock Exchange was closed down after the partition of India, and later on merged with the Delhi Stock Exchange. Bnagalore Stock Exchange Limited was registered in 1957 and got recognition only by 1963. Most of the other Exchanges were in a miserable state till 1957 when they applied for recognition under Securities Contracts (Regulations) Act, 1956. The Exchanges that were recognized under the Act were: