part two: review of trends and operations

31

Part Two: Review of Trends and Operations

1. PRIMARY SECURITIES MARKET

The momentum witnessed in the

primary market since 2005-06 increased

further in 2006-07. Strong macro-economic

fundamentals, favourable investment climate,

encouraging corporate results, and buoyant

secondary market performance supported by

institutional investors encouraged a number

of companies to raise capital from the primary

market. Besides several large companies,

many small and medium-sized corporates

accessed the primary market and mobilised

resources through public and rights issues.

Apart from the conventional modes, Qualified

Institutions’ Placement (QIP) was also used

by many listed companies to meet their

financing requirements.

I. Resource Mobilisation

During 2006-07, 124 companies accessed

the primary market and raised Rs. 33,508

crore through public and rights issues

compared to 139 companies which had raised

Rs. 27,382 crore in 2005-06 (Table 2.1.A). Even

though the number of companies accessing

the primary market was lower, the amount

mobilised was higher in 2006-07 as compared

to the previous year. Of the 85 public issues,

77 were Initial Public Offerings (IPOs) and

eight were Further Public Offerings (FPOs)

(Chart 2.1). Resources raised through IPOs

and FPOs were Rs. 28,504 crore and Rs. 1,293

crore, respectively. The average size of the

public issues increased from Rs. 226 crore in

2005-06 to Rs. 351 crore in 2006-07. The

average size of IPOs increased from Rs. 138

crore to Rs. 370 crore during the same period.

The share of IPOs in the total resource

mobilisation was 85.1 per cent in 2006-07 as

compared to 40.0 per cent in 2005-06. The

amount mobilised through rights issues

declined from Rs. 4,088 crore in 2005-06 to

Rs. 3,711 crore in 2006-07.

Due to introduction of QIP in 2006-07,

the resources raised through FPO route

declined from 45.1 per cent in 2005-06 to 3.9

per cent in 2006-07. As per the data made

available by NSE and BSE, four companies

only at BSE and 21 companies both at NSE

and BSE raised Rs. 4,963 crore at BSE and

Rs. 4,530 crore at NSE through the QIP route

(Table 2.1.B).

PART TWO: REVIEW OF TRENDS AND OPERATIONS

Table 2.1.A: Resource Mobilisation through Public and Rights Issues(Rs. crore)

Particulars 2005-06 2006-07 Percentage Share inTotal Amount

No. Amount No. Amount 2005-06 2006-07

1 2 3 4 5 6 7

Public Issues 103 23,294 85 29,797 85.07 88.93

of which

IPOs 79 10,936 77 28,504 39.94 85.07

FPOs 24 12,358 8 1,293 45.13 3.86

Rights Issues 36 4,088 39 3,711 14.93 11.07

Total 139 27,382 124 33,508 100.00 100.00

Memo Item:

Offer for Sale 3 296 6 587 1.08 1.75

32

Annual Report 2006-07

(a financial company) and Indian Bank.

During 2006-07, 94.7 per cent of total resource

mobilisation was from private sector

compared to 73.8 per cent in previous year

(Chart 2.2). The share of public sector


per cent in 2006-07.

III. Size-wise Resource Mobilisation

The average issue-size was larger in

2006-07 as compared to 2005-06. The average

size of the issues rose from Rs. 197 crore in

2005-06 to Rs. 270 crore in this financial year.

In contrast to the trend in the previous

financial year, substantial amount of fund

mobilisation was through large issues. There

were 11 issues in the above Rs. 500 crore

category, which mobilised Rs. 22,400 crore

and 33 issues were in Rs. 100 crore – Rs. 500

crore category, which mobilised Rs. 7,537

crore (Table 2.3).

Table 2.1.B: Resource Mobilisation

through Qualified

Institutions’ Placement(Rs. crore)

2005-06 2006-07

Particulars No. Amount No. Amount

1 2 3 4 5

QIP at BSE – – 25 4,963

QIP at NSE – – 21 4,530

II. Sector-wise Resource Mobilisation

The private sector companies dominated

the resource mobilisation from the primary

market in 2006-07. There were 122 issues

from the private sector companies and only

two issues from the public sector (Table 2.2).

The private sector and the public sector

raised Rs. 31,728 crore and Rs. 1,779 crore

respectively. The public sector issues were

from Power Finance Corporation Ltd.

33


Table 2.2: Sector-wise Resource Mobilisation(Rs.crore)

2005-06 2006-07Percentage Share

Sectorin the Total Amount


1 2 3 4 5 6 7

Private 131 20,199 122 31,728 73.77 94.69

Public 8 7,183 2 1,799 26.23 5.31

Total 139 27,382 124 33,508 100.00 100.00

Table 2.3: Size-wise Resource Mobilisation(Rs. crore)

2005-06 2006-07Percentage Share

Issue Sizein the Total Amount


1 2 3 4 5 6 7

< Rs.5 crore 6 20 3 10 0.07 0.03

≥ Rs.5 crore & < Rs.10 crore 4 32 6 45 0.12 0.14

≥ Rs.10 crore & < Rs.50 crore 47 1,325 40 1,129 4.84 3.37

≥ Rs.50 crore & < Rs.100 crore 33 2,189 31 2,386 8.00 7.12

≥ Rs.100 crore & < Rs.500 crore 40 8,309 33 7,537 30.35 22.49

≥ Rs.500 crore 9 15,506 11 22,400 56.63 66.85

Total 139 27,382 124 33,508 100.00 100.00

34


Mega Issues

There were 20 mega issues (Rs. 300 crore

and above) in 2006-07. The largest issue was

that of Reliance Petroleum Ltd. (Rs. 8,100

crore), followed by Cairn India Ltd. (Rs. 5,261

crore), Idea Cellular Ltd. (Rs. 2,444 crore) and

Lanco Infratech Ltd. (Rs. 1,067 crore)

(Table 2.4).

IV. Industry-wise Resource

Mobilisation

The largest resource mobilisation was for

telecommunication (Rs. 2,994 crore) followed

by finance (Rs. 2,765 crore), cement and

construction (Rs. 2,747 crore), and banks /

Financial Institutions (FIs) (Rs. 2,190 crore)

(Table 2.5). During 2005-06, banks / FIs had

mopped up Rs. 12,439 crore which was about

45.4 per cent of the total resource mobilisation

compared to Rs. 2,190 crore raised during

2006-07 which was only 6.5 per cent of total

resource mobilisation in the year.

In terms of number of issues, textile

industry (15) dominated the scene followed

by cement & construction industry (13) and

information technology industry (12).

There were five equity issues from

banks/FIs, namely, Power Finance

Table 2.4: Mega Issues in 2006-07*

Name of the Entity Type of Issue Type of Date of Offer Size PercentageInstrument Opening (Rs. crore) Share in the

of Issue Total Amount

1 2 3 4 5 6

Sun TV Ltd IPO Equity 03-Apr-06 603 2.31

Reliance Petroleum Ltd. IPO Equity 13-Apr-06 8,100 31.03

Patel Engineering Ltd. FPO Equity 03-May-06 423 1.62

Deccan Aviation Ltd. IPO Equity 18-May-06 363 1.39

GMR Infrastructure Ltd IPO Equity 31-July-06 801 3.07

Tech Mahindra Ltd. IPO Equity 01-Aug-06 465 1.78

Parsvnath Developers Ltd IPO Equity 06-Nov-06 997 3.82

Lanco Infratech Ltd. IPO Equity 06-Nov-06 1,067 4.09

Tata Teleservices

(Maharashtra) Ltd Rights Equity 21-Nov-06 491 1.88

Sobha Developers Ltd. IPO Equity 23-Nov-06 569 2.18

Tanla Solutions Ltd. FPO Equity 11-Dec-06 420 1.61

Cairn India Ltd IPO Equity 11-Dec-06 5,261 20.15

Bajaj Auto Finance Ltd. Rights Equity 15-Dec-06 409 1.57

Aditya Birla Nuvo Ltd. Rights Equity 26-Dec-06 779 2.98

Akruti Nirman Ltd. IPO Equity 15-Jan-07 362 1.39

House of Pearl Fashions Ltd. IPO Equity 16-Jan-07 329 1.26

First Source Solutions Ltd. IPO Equity 29-Jan-07 444 1.70

Power Finance Corporation Ltd. IPO Equity 31-Jan-07 997 3.82

Indian Bank IPO Equity 05-Feb-07 782 3.00

Idea Cellular Ltd. IPO Equity 12-Feb-07 2,444 9.36

Total 26,107 100.00

* Mega issues relate to issue size of Rs.300 crore and above.

35


Table 2.5: Industry-wise Resource Mobilisation(Rs. crore)

2005-06 2006-07

Percentage Percentage

IndustryNo. Amount

Share inNo. Amount

Share in

the Total the Total

Amount Amount

1 2 3 4 5 6 7

Banks/Fls 12 12,439 45.43 5 2,190 6.53

Cement & Construction 11 1,020 3.72 13 2,747 8.20

Chemical 2 128 0.47 5 147 0.44

Electronics 2 54 0.20 9 480 1.43

Engineering 6 1,124 4.11 2 465 1.39

Entertainment 7 710 2.59 8 1,219 3.64

Finance 7 824 3.01 9 2,765 8.25

Food Processing 9 427 1.56 9 634 1.89

Healthcare 10 651 2.38 2 208 0.62

Information Technology 15 902 3.30 12 2,077 6.20

Paper & Pulp 4 182 0.66 1 15 0.05

Plastic 0 0 0.00 3 106 0.32

Power 6 2,164 7.90 1 30 0.09

Printing 1 43 0.16 2 121 0.36

Telecommunication 0 0 0.00 3 2,994 8.94

Textile 13 771 2.81 15 1,064 3.17

Miscellaneous 34 5,944 21.71 25 16,246 48.49

Total 139 27,382 100.00 124 33,508 100.00

Corporation Ltd. (Rs. 997 crore), Indian Bank

(Rs. 782 crore), Development Credit Bank Ltd.

(Rs. 186 crore), Karur Vysya Bank Ltd.

(Rs. 126 crore) and the Lakshmi Vilas Bank

Ltd. (Rs. 98 crore) during the period 2006-07

(Table 2.6).

2. SECONDARY SECURITIES

MARKET

I. Equity Market in India : An

Overview

The stock market witnessed a mixed

trend during 2006-07. During the year, there

was distinctly upward trend interspersed

with some corrections. The benchmark

indices continued to reach new heights

during 2006-07 amidst major corrections in

May 2006 and February 2007. Strong macro-

economic fundamentals with high GDP

growth rate, healthy corporate results,

optimistic investment scenario, and strong

institutional investor support led the upward

trend in the market. However, towards the

end of the year, a higher than expected

inflation rate coupled with rise in interest

rates somewhat dampened the sentiment.

During 2006-07, the benchmark indices

crossed many milestones. The BSE Sensex

and S&P CNX Nifty recorded gain of 15.9

36


per cent and 12.3 per cent, respectively over

March 31, 2006. The BSE Sensex gained 1792

points during the financial year to close at

13072 on March 31, 2007 from 11280 as on

March 31, 2006. The S&P CNX Nifty added

419 points to close at 3822 at the end of

March 2007 over 3403 recorded at the end of

March 2006 (Chart 2.3).

In the first quarter, stock markets

remained buoyant till May 10, 2006, but

witnessed large correction during the rest of

May 2006. On May 10, 2006 both the BSE

Sensex and the S&P CNX Nifty closed at high

level of 12612 and 3754, respectively.

Beginning from May 11, 2006 indices

declined, mainly, due to net sales by FIIs,

Table 2.6: Resource Mobilisation by Banks and Financial Institutions in 2006-07

Name of the Bank/FI Type of Instru- Date of Offer Size Percentage

Issue ment Opening (Rs.crore) Share in

Total Amount

1 2 3 4 5 6

Development Credit Bank Ltd. Equity Initial Public Offer 29-Sep-06 186 8.49

The Lakshmi Vilas Bank Ltd. Equity Rights 15-Dec-06 98 4.49

Karur Vysya Bank Ltd. Equity Rights 05-Jan-07 126 5.75

Power Finance Corporation Ltd. Equity Initial Public Offer 31-Jan-07 997 45.54

Indian Bank Equity Initial Public Offer 05-Feb-07 782 35.72

Total 2,190 100.00

37


uncertainty in global interest rates, sharp fall

in metal prices, and expected inflationary

pressures. Concerns over an impending

slowdown in the global growth and declining

trend in Asian market accentuated the

downtrend. The BSE Sensex closed at a low

of 8929 on June 14, 2006. During the second

half of June 2006, stock markets recovered on

account of fresh buying by FIIs, onset of the

monsoon, and recovery in major international

stock markets.

In the second quarter of the year, the

stock markets gained buoyancy, despite the

rise in the crude oil prices, on account of

strong performance of the economy in the

first quarter, improved credit rating, and

active support from institutional investors.

In the third quarter, fall in the crude oil

prices led to an upward trend in, both local

and global markets. However, towards the

end of third quarter, in December 2006, the

indices declined once again, on account of

hike in Cash Reserve Ratio (CRR) by RBI, low

growth in manufacturing sector and year-end

profit booking.

In the fourth quarter, there was a

sustained gain in the markets, followed by a

rise in the benchmark indices. The BSE

Sensex closed at an all-time high of 14652 on

February 8, 2007. At this point of time, the

major concern of the economy was rising

inflation which might impact the growth

rates. The high inflation forced RBI to tighten

monetary measures with a rise in CRR, repo

rates, and bank rate.

In tandem with the rise in the equity

market, there was a rise in the market

capitalisation and turnover in 2006-07 (Table

2.7). The turnover in the cash segment of NSE

and BSE rose by 23.9 per cent and 17.2 per

cent, respectively in 2006-07 over the previous

year. The increase in turnover at the

derivatives segment of NSE was 52.3 per cent

during the same period. At BSE too, the

volumes in the derivatives segment picked

up during the financial year. Market

capitalisation of BSE and NSE also witnessed

a rise of 17.3 per cent and 19.7 per cent

during 2006-07 over the previous year. By the

end of the financial year, the P/E ratio of

Indian indices declined from the historical

highs. P/E ratio of Indian indices was the

highest, in the emerging markets, in

November 2006. As on March 31, 2007, the

P/E ratio of BSE Sensex and S&P CNX Nifty

was 20.3 and 18.4 respectively. In comparison

to the previous years, volatility of the indices

was higher on account of wide fluctuations

in markets. The annualised volatility of BSE

Sensex and S&P CNX Nifty was 27.8 per cent

and 28.0 per cent, respectively in 2006-07.

Rising international oil prices and a

strong economic growth rate amplified the

inflationary pressure in the global scenario

during the first half of 2006. Earlier in May

2006, there was a major correction across the

equity markets in emerging economies. But

the pressure eased after August 2006 on

account of monetary tightening measures

adopted by the major central banks and

softening of oil prices. There was buoyancy

across the financial markets during the

second half of 2006. But since February 2007,

there was a rise in volatility due to correction

in the asset prices. In spite of correction, the

international equity markets were at their

peak on account of expected robust earnings.

The correction in May-June 2006 was

mostly limited to emerging markets. Contrary

to this, February-March 2007 correction was

broad-based. The uncertainty in US economic

outlook with an impending recession led to a

fall in the equity prices in US, Japan and

European equity markets. Equity prices in

emerging markets fell mostly due to the

unwinding of Yen carry trades. This was

worsened by the deterioration in the US sub

prime mortgage market and subsequent

38


Table 2.7: Major Indicators of Indian Stock Markets


Item 2005-06 2006-07 Variation Variation

2005-06 2006-07

1 2 3 4 5

A. Indices

BSE Sensex

Year-end 11280 13072 73.72 15.89

Average 8280 12273 44.23 48.27

S&P CNX Nifty

Year-end 3403 3822 67.14 12.31

Average 2513 3572 39.15 42.14

S&P CNX 500

Year-end 2910 3145 64.13 8.08

Average 2197 2972 43.59 35.28

B. Annualised Volatility *(per cent)

BSE Sensex 16.26 27.57 – –

S&P CNX Nifty 16.43 28.03 – –

C. Total Turnover (Rs. crore)

Cash Segment (All-India) 23,90,103 29,03,057 43.39 21.46

Of which

BSE 8,16,074 9,56,185 57.33 17.17

NSE 15,69,558 19,45,287 37.67 23.94

Derivatives Segment 48,24,259 74,15,278 88.21 53.71

Of which

BSE 9 59,007 -99.94 655471.00

NSE 48,24,250 73,56,271 89.41 52.49

D. Market Capitalisation (Rs.crore) @

BSE 30,22,190 35,45,041 77.94 17.30

NSE 28,13,201 33,67,350 77.42 19.70

E. P/E Ratio @

BSE Sensex 20.92 20.33 – –

S&P CNX Nifty 20.26 18.40 – –

S&P CNX 500 21.81 17.11 – –

* Annualised volatility is measured in terms of standard deviation of returns on index multiplied by the squareroot of the number of trading days.

@ As on March 31 of the respective year.

Source: Various Stock Exchanges.

widening of the spreads on underlying

mortages.

During 2006-07, annual return was the

highest for China SHCOMP index (145.2 per

cent) followed by Mexican Bolsa index

MEXBOL (49.2 per cent), Indonesia JCI index

(38.4 per cent) and Malaysia KLCI index (34.6

per cent). Return on BSE Sensex was at the

fourteenth position and S&P CNX Nifty was

at the sixteenth position recording a gain of

15.9 per cent and 12.3 per cent respectively

(Chart 2.4).

II. Performance of Sectoral Indices

Sectoral indices witnessed a mixed trend

in 2006-07. All the broad-based indices

39


performed well in 2006-07. But uptrend in

these indices was not as high as in the

previous financial year. BSE 100, BSE 200, and

BSE 500 rose by 11.6 per cent, 10.2 per cent

and 9.7 per cent, respectively in 2006-07

(Table 2.8). The S&P CNX 500 and the CNX

Nifty Junior also recorded a gain of 8.1 per

cent and 7.3 per cent, respectively in 2006-07

(Table 2.9). The small cap stocks which

performed well in 2005-06 witnessed a

decline of 1.8 per cent in 2006-07. Among the

sectoral indices, the maximum gain was

recorded by BSE Oil and Gas index (30.5 per

cent), followed by BSE Teck index (30.1 per

cent), and BSE Bankex index (24.3 per cent)

(Chart 2.5). The highest decline was for BSE

FMCG index (21.4 per cent), followed by BSE

Auto index (8.5 per cent), BSE Metal index

(4.3 per cent), and BSE Small cap index (1.8

per cent).

III. Turnover in Indian Stock Market

During 2006-07, turnover of all stock

exchanges in the cash segment was

Rs. 29,03,057 crore compared to Rs. 23,90,103

crore in the previous year- a rise of 21.46 per

cent over the year (Table 2.10). The share of

BSE and NSE in the total turnover was more

than 99.0 per cent. NSE had the largest share

of 67.0 per cent in the total turnover. The

regional stock exchanges had hardly any

share in the total turnover in the market.

The turnover at BSE and NSE rose by

57.3 per cent and 37.7 per cent, respectively

in 2006-07 over the levels recorded in 2005-

06 (Table 2.11). Month-wise, BSE recorded the

highest turnover in November 2006, followed

by May 2006, and February 2007. At NSE,

the maximum turnover was recorded in May

2006, followed by November 2006, and

February 2007.

40


Table 2.8: Major Stock Indices and their Returns

Year/ BSEPercent-

BSEPercent- S&P Percent- CNX Percent- S&P Percent-

Month Sensexage

100age CNX age Mid age CNX age

Variation Variation Nifty Variation Cap Variation 500 Variation

1 2 3 4 5 6 7 8 9 10 11

2003-04 5591 83.37 2966 97.60 1772 81.18 2165 NA 1458 107.98

2004-05 6493 16.13 3482 17.39 2036 14.90 2927 35.20 1773 21.60

2005-06 11280 73.73 5904 69.56 3403 67.14 4787 63.55 2910 64.13

2006-07 13072 15.89 6587 11.57 3822 12.31 4850 1.32 3145 8.09

Apr-06 12043 6.76 6251 5.88 3558 4.56 5141 7.39 3065 5.30

May-06 10399 -13.65 5385 -13.86 3071 -13.68 4400 -14.42 2635 -14.01

Jun-06 10609 2.03 5382 -0.06 3128 1.86 3945 -10.34 2563 -2.76

Jul-06 10744 1.27 5422 0.75 3143 0.48 3878 -1.69 2563 0.00

Aug-06 11699 8.89 5934 9.43 3414 8.61 4307 11.07 2808 9.58

Sep-06 12454 6.46 6328 6.65 3588 5.11 4692 8.93 2988 6.42

Oct-06 12962 4.07 6604 4.35 3744 4.34 4835 3.05 3115 4.23

Nov-06 13696 5.67 6931 4.96 3955 5.62 5069 4.85 3280 5.33

Dec-06 13787 0.66 6983 0.74 3966 0.30 5200 2.58 3295 0.45

Jan-07 14091 2.20 7146 3.32 4083 2.93 5280 1.53 3393 2.98

Feb-07 12938 -8.18 6527 -9.52 3745 -8.26 4877 -7.62 3108 -8.41

Mar-07 13072 1.04 6587 0.92 3822 2.04 4850 -0.56 3145 1.21

Note: Indices relate to closing values as on the last trading day of the respective year/month.

Source: NSE, BSE.

Table 2.9: Sectoral Stock Indices and their Returns

Year/Percent-

CNXPercent-

CNXPercent- BSE Percent-

BSEPercent-

MonthCNX IT age

Bankage

PSEage Oil and age

FMCGage

Variation Variation Variation Gas Variation Variation

1 2 3 4 5 6 7 8 9 10 11

2003-04 1937 29.39 2814 NA 1684 147.65 3200 133.92 718 31.48

2004-05 2923 50.90 3537 25.69 1726 2.49 3054 -4.58 1053 11.55

2005-06 4353 48.92 4662 31.79 2554 47.97 4919 61.07 2211 110.07

2006-07 5181 19.01 5309 13.87 2484 -2.73 6419 30.50 1739 -21.38

Apr-06 4342 -0.26 4550 -2.41 2588 1.34 5688 15.63 2312 4.56

May-06 3870 -10.88 4124 -9.37 2176 -15.95 5085 4.56 1890 -18.28

Jun-06 3958 2.27 3709 -10.06 2105 -3.23 5293 4.09 1950 3.19

Jul-06 4114 3.94 4079 9.97 2118 0.60 5050 -4.60 1881 -3.55

Aug-06 4446 8.07 4595 12.65 2301 8.63 5662 12.12 2030 7.92

Sep-06 4541 2.13 5276 14.83 2344 1.89 5803 2.50 2066 1.78

Oct-06 4889 7.67 5589 5.92 2405 2.61 6046 4.17 2049 -0.82

Nov-06 5268 7.75 6198 10.91 2470 2.69 6078 0.54 2019 -1.48

Dec-06 5432 3.12 6009 -3.06 2426 -1.78 6180 1.67 1934 -4.18

Jan-07 5535 1.89 5954 -0.91 2596 7.00 6631 7.31 1906 -1.45

Feb-07 5130 -7.32 5240 -11.99 2360 -9.06 6298 -5.03 1786 -6.31

Mar-07 5181 1.00 5309 1.30 2484 5.25 6419 1.93 1739 -2.62

Note: Indices relate to closing values as on the last trading day of the respective year/month.

Source: NSE, BSE.

41


Table 2.10: Exchange-wise Cash Segment Turnover(Rs. crore)

Stock Exchange 2005-06 2006-07Percentage Share

(2006-07)

1 2 3 4

Ahmedabad Nil Nil Nil

BSE 8,16,074 9,56,185 32.94

Bangalore Nil Nil Nil

Bhubaneswar Nil Nil Nil

Cochin Nil Nil Nil

Coimbatore Nil Nil Nil

Delhi Nil Nil Nil

Gauhati Nil Nil Nil

Hyderabad 89 92 0.003

ISE Nil Nil Nil

Kolkata 2,800 694 0.02

Ludhiana Nil Nil Nil

Madras 5 1.2 0.00

Magadh 91 Nil Nil

MPSE Nil Nil Nil

NSE 15,69,558 19,45,285 67.01

OTCEI 0.01 Nil Nil

Pune Nil Nil Nil

SKSE Nil Nil Nil

UPSE 1,486 799 0.03

Vadodara Nil Nil Nil

Total 23,90,103 29,03,057 100.00


42


Table 2.11: Turnover at BSE and NSE: Cash Segment(Rs. crore)

BSE NSE

Year / MonthTurnover

PercentageTurnover

PercentageTotal

Variation* Variation*Turnover

1 2 3 4 5 6

2003-04 5,03,053 60.17 10,99,534 77.92 16,02,587

2004-05 5,18,717 3.11 11,40,071 3.68 16,58,788

2005-06 8,16,074 57.33 15,69,558 37.67 23,85,632

2006-07 9,56,185 17.17 19,45,285 23.94 29,01,471

Apr-06 87,487 -26.34 1,77,372 -15.29 2,64,859

May-06 95,820 9.52 2,01,409 13.55 2,97,229

Jun-06 72,013 -24.85 1,51,050 -25.00 2,23,063

Jul-06 54,698 -24.04 1,18,698 -21.42 1,73,396

Aug-06 63,084 15.33 1,30,796 10.19 1,93,880

Sep-06 71,629 13.55 1,44,339 10.35 2,15,968

Oct-06 69,627 -2.79 1,38,382 -4.13 2,08,009

Nov-06 1,01,840 46.27 1,89,863 37.20 2,91,703

Dec-06 85,512 -16.03 1,70,105 -10.41 2,55,617

Jan-07 87,604 2.45 1,75,147 2.96 2,62,751

Feb-07 88,844 1.42 1,80,170 2.87 2,69,014

Mar-07 78,028 -12.17 1,67,954 -6.78 2,45,982

* Over Previous period

Source: NSE, BSE.

The geographical reach of the stock

market can be gauged from the city-wise

distribution of turnover of NSE and BSE.

Mumbai/Thane was the top city accounting

for 63.7 per cent of the total turnover (Table

2.12). The share of Delhi in the total turnover

was 10.2 per cent followed by Kolkata (7.5

per cent), Ahmedabad (2.9 per cent) and

Chennai (1.6 per cent). The share of top five

cities in the total value of shares traded was

85.9 per cent in 2006-07.

IV. Market Capitalisation

Market capitalisation is a leading

indicator of the health of the stock market. The

market capitalisation of an exchange is a

summation of market capitalisation of all the

individual stocks listed on the exchange. As

such, market capitalisation of BSE has been

higher than that of NSE due to larger number

of shares being listed at BSE. The market

capitalisation of BSE increased by 17.3 per cent

to Rs. 35,45,041 crore in 2006- 07 from

Rs. 30,22,190 crore at the end of 2005-06 (Table

2.13). Whereas, the market capitalisation of

NSE rose by 19.7 per cent to Rs. 33,67,350 crore

at the end of 2006-07 from Rs. 28,13,201 crore

at the end of 2005-06 (Table 2.14).

The rise of market capitalisation of

frontline and the sectoral indices at BSE and

NSE was lower in 2006-07 compared to 2005-

06. The market capitalisation of BSE Sensex

rose by 20.2 per cent in 2006-07 against 96.3

per cent in 2005-06. The market capitalisation

of BSE Teck index and Bankex index rose by

53.1 per cent and 16.9 per cent, respectively

in 2006-07. The decline in market

capitalisation of BSE PSU index was 3.5 per

cent in 2006-07 in contrast to a rise of 45.0

per cent in 2005-06. Market capitalisation of

S&P CNX Nifty rose by 19.7 per cent during

2006-07 compared to 67.1 per cent in 2005-06

(Table 2.14).

43


Table 2.12: City-wise Turnover of Top 10 Cities in Cash Segment: BSE and NSE Combined

(Rs. crore)

2005-06 2006-07


City Turnover Share in City Turnover Share in

All-India All-India

Turnover Turnover

1 2 3 4 5 6

Mumbai / Thane 14,36,940 60.12 Mumbai / Thane 18,50,119 63.73

Delhi/Ghaziabad 2,40,647 10.07 Delhi/Ghaziabad 2,94,771 10.15

Kolkata / Howrah 1,89,929 7.95 Kolkata / Howrah 2,16,243 7.45

Ahmedabad 70,730 2.96 Ahmedabad 85,207 2.94

Chennai 47,710 2.00 Chennai 47,283 1.63

Hyderabad/ Bangalore 32,501 1.12

Secunderabad/ Hyderabad/

Kukatpally 32,878 1.38 Secunderabad/

Bangalore 33,385 1.40 Kukatpally 26,925 0.93

Jaipur 24,219 1.01 Baroda 25,884 0.89

Baroda 20,555 0.86 Jaipur 24,310 0.84

Indore 17,317 0.72 Indore 20,380 0.70

Source: NSE, BSE.

Table 2.13: Market Capitalisation at BSE (Rs. crore)

Year/All Percen-

BSEPercen- BSE- Percen-

BANKEXPercen-

BSE PSUPercen-

MonthListed tage

Sensextage TECK tage tage tage

Companies Variation Variation Variation Variation Variation

1 2 3 4 5 6 7 8 9 10 11

2003-04 12,01,206 109.9 6,25,173 148.93 1,45,053 63.47 1,13,094 151.09 4,11,532 158.75

2004-05 16,98,428 41.39 7,25,553 16.06 2,82,425 94.70 1,54,048 36.21 5,16,365 25.47

2005-06 30,22,190 77.94 14,24,112 96.28 4,68,278 65.81 2,19,894 42.74 7,48,614 44.98

2006-07 35,45,041 17.30 17,11,241 20.16 7,17,127 53.14 2,57,026 16.89 7,22,517 -3.49

Apr-06 32,55,565 7.72 14,99,822 5.32 4,72,542 0.91 2,17,176 -1.24 7,52,585 0.53

May-06 28,42,049 -12.70 12,92,241 -13.84 4,18,267 -11.49 1,98,272 -8.70 6,41,069 -14.82

Jun-06 27,21,677 -4.24 13,38,055 3.55 4,26,028 1.86 1,78,697 -9.87 6,06,059 -5.46

Jul-06 27,12,143 -0.35 13,61,372 1.74 4,77,664 12.12 1,96,637 10.04 6,15,974 1.64

Aug-06 29,93,779 10.38 14,76,960 8.49 5,18,690 8.59 2,20,797 12.29 6,77,442 9.98

Sep-06 31,85,679 6.41 15,55,101 5.29 5,45,229 5.12 2,51,354 13.84 7,09,238 4.69

Oct-06 33,70,675 5.81 16,42,242 5.60 6,21,844 14.05 2,66,829 6.16 7,27,371 2.56

Nov-06 35,77,307 6.13 17,53,745 6.79 6,85,493 10.24 2,94,388 10.33 7,55,032 3.80

Dec-06 36,24,356 1.32 17,58,866 0.29 7,04,338 2.75 2,87,709 -2.27 7,35,712 -2.56

Jan-07 37,79,741 4.29 18,06,201 2.69 7,48,214 6.23 2,85,708 -0.70 7,80,293 6.06

Feb-07 34,89,213 -7.69 16,70,852 -7.49 6,94,527 -7.18 2,52,376 -11.67 7,07,665 -9.31

Mar-07 35,45,041 1.60 17,11,241 2.42 7,17,127 3.25 2,57,026 1.84 7,22,517 2.10

Source: BSE.

44


Table 2.14: Market Capitalisation at NSE(Rs. crore)

All Percen-S&P

Percen-CNX

Percen- Percen- Percen-S&P

Percen-Year/ Listed tage

CNX tage

Midtage CNX tage CNX tage

CNX tage

Month Com- Varia-Nifty

Varia-Cap

Varia- IT Varia- Bank Varia-Pharma

Varia-panies tion tion tion tion tion tion

1 2 3 4 5 6 7 8 9 10 11 12 13

2003-04 11,20,976 108.7 6,38,599 NA 81,280 -1.32 1,03,168 39.52 1,01,928 NA 68,831 83.69

2004-05 15,85,585 41.44 9,51,672 49.02 1,48,019 82.11 2,27,191 120.2 1,36,921 34.33 93,126 35.30

2005-06 28,13,201 77.42 15,90,155 67.09 3,38,927 128.98 3,48,096 53.22 2,00,503 46.44 1,47,124 57.98

2006-07 33,67,350 19.70 19,09,448 20.08 3,41,869 0.87 4,20,814 20.89 2,29,084 14.25 1,46,394 -0.50

Apr-06 29,90,200 6.29 16,63,860 4.64 3,64,694 7.60 3,47,575 -0.15 1,95,727 -2.38 1,51,322 2.85

May-06 26,12,639 -12.63 14,37,366 -13.61 3,14,442 -13.78 3,10,190 -10.76 1,77,466 -9.33 1,31,592 -13.04

Jun-06 25,24,659 -3.37 14,95,329 4.03 2,82,645 -10.11 3,18,189 2.58 1,59,729 -9.99 1,22,089 -7.22

Jul-06 25,14,261 -0.41 15,03,314 0.53 2,78,554 -1.45 3,30,893 3.99 1,75,612 9.94 1,24,553 2.02

Aug-06 27,77,401 10.47 16,33,200 8.64 3,10,540 11.48 3,57,695 8.10 1,97,881 12.68 1,37,424 10.33

Sep-06 29,94,132 7.80 17,81,134 9.06 3,26,474 5.13 3,65,885 2.29 2,27,284 14.86 1,42,097 3.40

Oct-06 31,38,319 4.82 18,60,568 4.46 3,36,475 3.06 3,94,852 7.92 2,40,812 5.95 1,41,375 -0.51

Nov-06 33,73,652 7.50 19,68,913 5.82 3,51,287 4.40 4,25,709 7.81 2,67,142 10.93 1,46,222 3.43

Dec-06 34,26,236 1.56 19,75,603 0.34 3,62,332 3.14 4,39,187 3.17 2,59,056 -3.03 1,49,994 2.58

Jan-07 35,71,487 4.24 20,36,797 3.10 3,68,357 1.66 4,48,204 2.05 2,56,750 -0.89 1,52,038 1.36

Feb-07 32,96,931 -7.69 18,69,473 -8.22 3,40,880 -7.46 4,15,479 -7.30 2,26,048 -11.96 1,40,071 -7.87

Mar-07 33,67,350 2.14 19,09,448 2.14 3,41,869 0.29 4,20,814 1.28 2,29,084 1.34 1,46,394 4.51

Source: NSE.

V. Stock Market Indicators

Market capitalisation to GDP ratio is a

good indicator of the health of stock market

of an economy. Leading economies of the

world have market capitalisation far in excess

of their gross domestic product (GDP). This

indicates not only the investor confidence, but

also the strength of their economies. The

market capitalisation to GDP ratio of Indian

stock market increased over the last four

years. It rose from 23.2 per cent of GDP in

2002-03 to 85.9 per cent in 2006-07. At the

end of 2005-06, it was 84.7 per cent (Table

2.15).

Liquidity of the stock market indicates

the ease with which stocks can be traded.

One way to gauge the liquidity is to look at

the ratio of value of shares traded to GDP at

current market prices. This ratio increased

from 67.0 per cent in 2005-06 to 70.4 per cent

in 2006-07. The traded value-GDP ratio for

the derivatives segment rose from 135.2 per

cent in 2005-06 to 178.3 per cent in 2006-07.

Other important indicators are: price/

earnings (P/E) ratio and price-book (P/B)

value ratio. P/E ratio is a widely used

indicator. It is also known as PE multiple. The

P/E ratios of Indian indices, even though

lower compared to previous year, were still

at the sixth (BSE Sensex) and ninth (S&P CNX

Nifty), highest position among the emerging

markets (Chart 2.6).

The highest P/E ratio was for SHCOMP

index of China followed by Nikkei index of

Japan, NASDAQ composite of USA, JCI

index of Indonesia, and IPSA index of Chile.

At the end of March 2007, the P/E ratios of

BSE Sensex and S&P CNX Nifty were 20.3

and 18.4 respectively (Table 2.16).

There was a moderation in the P/E ratios

of indices towards the end of the financial

year. Month-wise data shows that P/E ratios of

indices rose considerably in the third quarter,

45


Table 2.15: Select Ratios Relating to Capital Market(Per cent)

Year BSE Market NSE Market Total Turnover to GDP Ratio

Capitalisation to Capitalisation to

GDP Ratio GDP Ratio Cash Segment Derivatives Segment

(All India) (BSE & NSE)

1 2 3 4 5

2002-03 23.23 21.93 39.33 17.95

2003-04 43.52 40.61 58.71 77.64

2004-05 54.41 50.80 53.40 82.12

2005-06 84.72 78.86 67.00 135.24

2006-07 85.93 81.62 70.36 178.30

Sources: Central Statistical Organisation; and Various Stock Exchanges.

with a peak in December 2006. The P/E ratios

of all the indices peaked in the third quarter,

after which it declined by the end of 2006-07.

CNX IT had the highest P/E ratio among host

of sectoral and mid-cap indices.

The price to book value (P/B) ratio

measures the returns left for the shareholders

after deducting the total liabilities. In effect,

the P/B ratio of an index shows the asset

quality of the companies included in the

index. The P/B ratio was the highest for CNX

IT index, followed by BSE Sensex and BSE 100

(Table 2.17).

46


Table 2.17: Price to Book-Value Ratio*

Year/ BSE BSE S&P CNX CNX CNX CNX

Month Sensex 100 CNX Nifty Mid Cap IT Bank PSE

1 2 3 4 5 6 7 8

2003-04 3.50 3.09 3.50 1.49 5.70 2.07 2.87

2004-05 3.72 3.23 3.82 2.40 11.28 2.31 2.55

2005-06 5.13 4.37 5.15 4.39 11.96 2.58 3.12

2006-07 5.07 4.43 4.87 3.06 11.68 2.24 2.70

Apr-06 5.40 4.57 5.39 4.00 11.94 2.52 3.16

May-06 4.61 3.90 4.57 4.00 10.65 2.25 2.66

Jun-06 4.38 3.83 4.66 3.42 10.34 1.82 2.57

Jul-06 4.45 3.85 4.29 3.09 9.37 1.72 2.59

Aug-06 4.56 4.01 4.55 3.38 9.75 1.93 2.78

Sep-06 4.61 4.06 4.76 3.16 9.99 2.22 2.79

Oct-06 4.86 4.28 4.84 3.18 10.92 2.35 2.67

Nov-06 5.19 4.48 5.08 3.32 11.77 2.61 2.72

Dec-06 5.21 4.47 5.07 3.41 12.16 2.53 2.67

Jan-07 5.35 4.75 5.20 3.43 12.33 2.51 2.82

Feb-07 4.95 4.35 4.77 3.16 11.43 2.21 2.56

Mar-07 5.07 4.43 4.87 3.06 11.68 2.24 2.70

* As on the last trading day of the period.

Note: CNX Bank Index was launched with effect from September 15, 2003.

Source: NSE, BSE.

Table 2.16: Price-Earnings Ratio*

Year/ BSE BSE S&P CNX CNX CNX CNX

Month Sensex 100 CNX Nifty Mid Cap IT Bank PSE

1 2 3 4 5 6 7 8

2003-04 18.57 16.11 20.70 17.15 28.77 9.84 12.37

2004-05 15.61 13.30 14.60 21.93 51.14 10.79 10.57

2005-06 20.92 20.08 20.26 23.09 46.47 15.31 13.66

2006-07 20.33 17.64 18.40 15.58 32.35 14.15 10.61

Apr-06 21.28 20.56 20.31 21.00 34.90 12.79 15.38

May-06 18.27 17.27 17.46 18.00 31.00 11.92 12.05

Jun-06 19.40 18.14 18.44 16.94 31.79 10.73 12.33

Jul-06 18.74 17.65 17.64 16.68 29.83 11.99 11.56

Aug-06 20.26 18.88 19.15 18.48 32.20 13.51 12.50

Sep-06 21.34 19.97 20.92 18.30 32.94 15.52 12.76

Oct-06 21.25 20.25 20.37 17.63 32.21 15.63 12.00

Nov-06 22.69 20.11 21.18 18.36 33.35 17.34 11.96

Dec-06 22.76 20.21 21.26 18.92 34.40 16.82 11.75

Jan-07 21.85 20.24 19.85 17.24 33.01 15.92 11.17

Feb-07 19.85 17.30 18.01 15.79 30.38 13.96 10.08

Mar-07 20.33 17.64 18.40 15.58 32.35 14.15 10.61

* As on the last trading day of the period.

Source: NSE, BSE.

47


Table 2.18: Average Daily Volatility of Benchmark Indices*(Per cent)

2006-07 BSE Sensex S&P CNX Nifty BSE Mid-Cap BSE Small-Cap BSE 500

1 2 3 4 5 6

April 1.64 1.67 1.53 1.38 1.49

May 2.55 2.77 2.65 2.85 2.62

June 3.25 3.22 3.36 3.88 3.39

July 1.97 1.93 1.83 1.58 1.77

August 0.67 0.72 0.70 1.06 0.72

September 1.06 1.06 1.07 1.02 1.05

October 0.94 0.93 0.83 0.88 0.79

November 0.58 0.61 0.64 0.93 0.65

December 1.48 1.51 1.56 1.59 1.54

January 1.16 1.15 1.07 0.86 1.02

February 1.54 1.56 1.59 1.86 1.57

March 1.95 2.00 1.88 1.84 1.83

* Volatility is measured in terms of standard deviation and is computed from the returns based on closingvalues of indices as on the last date of the month.

Source: NSE, BSE.

VI. Volatility in Stock Markets

The average daily volatility was the

highest for BSE Sensex and S&P CNX Nifty

in June 2006, coinciding with the correction

witnessed during the month (Table 2.18). It

was the highest for BSE 200, BSE Small Cap

and BSE 500 index also in June 2006. The

lowest average daily volatility for BSE Sensex

and S&P CNX Nifty was recorded during

November 2006.

The annualised volatility for BSE Sensex

and S&P CNX Nifty was higher in 2006-07

as compared to 2005-06 (Table 2.19). The

annualised volatility of BSE Sensex rose to

27.6 per cent in 2006-07 from 16.3 per cent in

2005-06. For S&P CNX Nifty, the annualised

volatility was 28.0 per cent in 2006-07 as

compared to 16.4 per cent in 2005-06.

The stock markets of emerging

economies were more volatile as compared

to developed markets during the financial

year. Among the emerging markets,

Colombia displayed the highest volatility

(37.9 per cent) followed by Russia (35.9 per

cent) and India (27.6 per cent) (Chart 2.7).

Volatility of the international markets was

higher in 2006-07 compared to 2005-06. Japan

was the most volatile (18.0 per cent) among

developed markets followed by South Korea

(17.0 per cent), Hong Kong and Singapore

(16.5 per cent) (Table 2.19).

Annual return, on a point-to-point basis,

was the highest for China in 2006-07. The

correlation co-efficient between volatility and

annual returns in 2006-07 was 0.61, which

was positive and significant for 26 indices

studied across countries. In tandem with

spiralling asset prices, P/E ratios of most

indices witnessed an upward trend. The P/E

ratio was the highest for China (40.5)

followed by Japan (37.4), Indonesia (21.4) and

Chile (21.3) (Table 2.20).

48


Annua-lisedVolati-lity

Table 2.19: Trends in Daily and Annualised Volatility* of International Stock Market

Indices during 2006-07(Per cent)

Country Index Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

DEVELOPED MARKETS

USA DJIA 0.57 0.80 0.92 0.93 0.48 0.48 0.39 0.50 0.40 0.44 0.85 0.75 10.25

USA NASDAQ 0.72 0.94 1.36 1.24 0.81 0.85 0.77 0.79 0.61 0.79 1.06 0.99 14.66

UK FTSE 100 0.58 1.53 1.11 0.92 0.66 0.73 0.48 0.58 0.43 0.68 0.86 1.02 13.38

France CAC 0.74 1.54 1.40 1.09 0.88 0.76 0.54 0.77 0.75 0.78 0.91 1.10 15.46

Germany DAX 0.83 1.55 1.39 1.30 0.91 0.72 0.47 0.75 0.70 0.73 0.92 1.18 15.87

Australia AS 30 0.71 1.05 1.27 0.90 0.81 0.79 0.60 0.74 0.57 0.75 0.80 1.03 13.50

Japan NKY 1.08 1.30 1.88 1.41 1.08 1.04 0.89 0.96 0.51 0.79 0.94 1.38 17.99

Hong Kong HSI 0.89 1.32 1.32 0.85 0.84 0.73 0.59 0.95 1.00 1.27 1.17 1.43 16.54

Singapore STI 0.44 1.40 1.40 0.97 0.59 0.61 0.80 0.84 0.88 0.97 1.51 1.46 16.49

EMERGING MARKETS

Taiwan TWSE 0.63 0.99 1.93 1.10 1.02 0.91 0.84 0.57 0.76 0.89 0.71 1.27 16.39

Russia CRTX 1.57 4.22 4.23 2.02 1.68 2.14 1.54 1.15 0.85 1.87 1.79 1.76 35.85

Malaysia KLCI 0.38 0.61 0.60 0.60 0.25 0.38 0.39 0.66 0.84 0.70 1.39 1.66 12.61

South Korea KOSPI 1.05 1.47 1.82 1.26 0.88 0.80 0.87 0.60 0.86 0.91 1.03 1.07 17.04

Thailand SET 1.04 1.32 1.52 1.20 0.82 0.86 0.72 0.68 4.57 1.49 0.88 0.54 24.98

China SHCOMP 1.07 2.16 1.70 1.64 1.12 0.77 1.05 1.02 1.78 2.72 3.34 1.35 26.90

S. Africa JALSH 0.79 1.75 2.86 1.41 1.10 1.12 0.64 0.87 0.75 0.95 1.10 1.21 20.92

Brazil IBOV 1.28 2.09 2.39 1.74 1.11 1.42 1.20 1.15 1.04 1.59 2.02 2.05 25.54

Colombia IGBC 1.04 3.95 5.99 2.42 1.09 1.57 0.79 1.21 0.89 1.74 1.32 1.28 37.93

Hungary BUX 1.19 2.16 2.46 1.45 1.07 1.65 1.03 1.27 1.26 0.98 0.97 0.97 22.87

Egypt HERMES 1.88 2.68 2.00 2.41 1.18 0.96 1.06 1.10 1.08 1.18 1.15 1.05 25.15

Indonesia JCI 1.02 2.55 2.01 1.07 0.98 0.83 0.51 0.97 1.16 1.48 0.87 1.28 21.13

Argentina IBG 1.38 2.48 2.00 1.51 0.98 1.05 0.83 1.12 0.90 1.08 1.73 1.51 23.05

Chile IPSA 0.59 0.93 1.50 0.74 0.49 0.45 0.50 0.87 0.49 0.78 1.85 1.00 14.73

Mexico MEXBOL 0.94 1.78 2.56 2.35 0.85 0.94 1.22 0.90 0.77 1.11 1.56 1.39 23.33

India BSE 1.64 2.55 3.25 1.97 0.67 1.06 0.94 0.58 1.48 1.16 1.54 1.95 27.57

SENSEX

India S&P CNX 1.67 2.77 3.22 1.93 0.72 1.06 0.93 0.61 1.51 1.15 1.56 2.00 28.03

NIFTY

* Annualised volatility is calculated by multiplying the standard deviation of the logarithmic returns with the

square root of the number of trading days for the period. Mathematically σ = σ t .

Source: Bloomberg Financial Services.

VII. Trading Frequency

The frequency of trading of listed stocks

at BSE and NSE is another important

indicator of the liquidity in the stock market.

During 2006-07, the total number of stocks

traded at BSE was 3,097 as compared to 3,049

in 2005-06. The total number of traded stocks

at NSE was 1,121 in 2006-07 compared to 956

49


Table 2.20: P/E Ratio, Return, and Volatility of Select International Indices during 2006-07

P/E Ratio P/E Ratio Year-on-Year Annualised

Country Index End-March End-March Index Return Volatility

2006 2007 (Per cent) (Per cent)

1 2 3 4 5 6

DEVELOPED MARKETS

USA DJIA 21.08 17.10 11.21 10.25

UK FTSE 100 16.58 16.79 5.76 13.38

France CAC 13.45 15.02 7.92 15.46

Germany DAX 14.53 14.60 15.86 15.87

Australia AS 30 18.73 17.76 17.53 13.50

Japan NKY 40.41 37.35 1.34 17.99

Hong Kong HSI 12.28 15.63 25.28 16.54

Singapore STI 13.46 14.00 27.55 16.49

EMERGING MARKETS

Taiwan TWSE 18.18 20.09 19.21 16.39

Russia CRTX 12.57 12.00 18.57 35.85

Malaysia KLCI 16.58 17.50 34.56 12.61

South Korea KOSPI 10.94 13.00 6.84 17.04

Thailand SET 11.01 11.50 -8.12 24.98

China SHCOMP 21.83 40.50 145.24 26.90

S. Africa JALSH 10.80 10.12 33.98 20.92

Brazil IBOV 11.03 12.42 20.69 25.54

Colombia IGBC 21.67 12.16 -3.68 37.93

Hungary BUX 11.36 9.37 1.55 22.87

Egypt HERMES 17.64 18.12 9.71 25.15

Indonesia JCI 17.02 21.41 38.39 21.13

Argentina IBG 10.72 19.50 30.11 23.05

Chile IPSA 18.32 21.32 34.24 14.73

Mexico MEXBOL 14.38 16.74 49.16 23.33

India BSE SENSEX 20.92 20.33 15.89 27.57

India S&P CNX NIFTY 20.26 18.40 12.31 28.03

Source: Bloomberg Financial Services.

in 2005-06 (Table 2.21). The trading frequency

improved considerably in the financial year

on both the exchanges as the number of

stocks that traded for more than 100 days

was higher for 2006-07 as compared to

2005-06.

Of the total traded stocks, the number of

stocks that traded above 100 days at BSE was

86.3 per cent in 2006-07. At NSE, there was a

decline in this group of shares from 91.7 per

cent in the previous financial year to 87.5 per

cent in 2006-07. About 4.8 per cent of traded

stocks of BSE were traded for under 10 days in

the year compared to 1.2 per cent on NSE.

VIII. Activities of the Regional Stock

Exchanges

The turnover at NSE and BSE

accounted for more than 99.0 per cent of the

total turnover of all the stock exchanges in

50


Table 2.21: Trading Frequency of Listed Stocks

2005-06 2006-07

Trading BSE NSE BSE NSEFrequency(Range of No. of Percentage No. of Percentage No. of Percentage No. of PercentageDays) Scrips of Scrips of Scrips of Scrips of

Traded Total Traded Total Traded Total Traded Total

1 2 3 4 5 6 7 8 9

Above 100 2,630 86.26 877 91.74 2,673 86.31 981 87.51

91-100 22 0.72 3 0.31 30 0.97 3 0.27

81-90 19 0.62 5 0.52 25 0.81 12 1.07

71-80 21 0.69 8 0.84 31 1.00 8 0.71

61-70 27 0.89 5 0.63 35 1.13 25 2.23

51-60 30 0.98 6 0.63 30 0.97 18 1.61

41-50 25 0.82 4 0.42 22 0.71 13 1.16

31-40 32 1.05 5 0.52 22 0.71 17 1.52

21-30 43 1.41 10 1.05 30 0.97 14 1.25

11-20 52 1.71 19 1.99 50 1.61 17 1.52

1-10 148 4.85 14 1.46 149 4.81 13 1.16

Total 3,049 100.00 956 100.00 3,097 100.00 1,121 100.00

Source: NSE, BSE.

51


2006-07. Only four regional exchanges viz.

Calcutta, Hyderabad, Madras and UPSE

recorded some transactions (Table 2.22).

There was virtually no trading in the

remaining 16 exchanges. The activities in the

regional exchanges are carried out mainly

through subsidiaries which, in turn, have

taken up membership of the BSE and NSE.

Among the subsidiaries, the highest growth

in turnover (84.7 per cent) was recorded by

DSE Financial Services Ltd., the subsidiary

of Delhi Stock Exchange Association Ltd.

(Table 2.23).

During 2006-07, NSE had the largest

number of stock brokers followed by

Calcutta, BSE and ISE (Table 2.24). Active

stock brokers as percentage of total stock

brokers were negligible in many exchanges.

The active stock brokers were nil in ten

regional stock exchanges. At NSE the

percentage of active stock brokers to total

number of stock brokers declined in 2006-07

over the previous financial year whereas at

BSE, during the same period the number of

active stock brokers as percentage to total

number of stock brokers increased.

Table 2.22: Trading Statistics of Stock Exchanges

Shares Traded Shares Delivered Value of Shares DeliverdStock (Lakh) (Lakh) (Rs. crore)

Exchange2005-06 2006-07 2005-06 2006-07 2005-06 2006-07

1 2 3 4 5 6 7

Ahmedabad Nil Nil Nil Nil Nil Nil

BSE 6,64,467 5,60,780 3,00,653 2,29,685 2,71,227 2,97,660(44.72) (39.72) (56.88) (49.04) (39.83) (35.38)

Bangalore Nil Nil Nil Nil Nil Nil

Bhubaneswar Nil Nil Nil Nil Nil Nil

Calcutta 2,602 453 1,463 341 1,689 541(0.18) (0.03) (0.28) (0.07) (0.25) (0.06)

Cochin Nil Nil Nil Nil Nil Nil

Coimbatore Nil Nil Nil Nil Nil Nil

Delhi Nil Nil Nil Nil Nil Nil

Gauhati Nil Nil Nil Nil Nil Nil

Hyderabad 75 40 72 40 85 92(0.005) (0.003) (0.01) (0.01) (0.01) (0.01)

ISE Nil Nil Nil Nil Nil Nil

Jaipur Nil Nil Nil Nil Nil Nil

Ludhiana Nil Nil Nil Nil Nil Nil

Madras 6.05 5.55 6.05 5.55 4.89 1.46

Magadh 2.41 Nil Nil Nil Nil Nil

MPSE Nil Nil Nil Nil Nil Nil

NSE 8,18,438 8,50,515 2,26,346 2,38,305 4,07,976 5,43,048 (55.08) (60.24) (42.82) (50.88) (59.91) (64.54)

OTCEI 0.01 Nil 0.01 Nil 0.01 Nil

Pune Nil Nil Nil Nil Nil Nil

SKSE Nil Nil Nil Nil Nil Nil

UPSE 357 151 1 0.05 42 0.61(0.02) (0.01) (0.006)

Vadodara Nil Nil Nil Nil Nil Nil

Total 14,85,947 14,11,945 5,28,542 4,68,376 6,81,025 8,41,343

Note: Figures in parantheses indicate percentage to total.

Source: Various Stock Exchanges

52


IX. Dematerialisation

Introduction of dematerialisation by

SEBI in 1996 was a major policy initiative

towards the improvement of market

microstructure of Indian stock market to

improve operational efficiency.

Dematerialisation is a process by which

physical certificates of a company are

converted to an equivalent number of

Table 2.23: Turnover of Subsidiaries of Stock Exchanges

Stock No. of Name of the Subsidiary Turnover of Subsidiary PercentageExchange Subsi- (Rs. crore) Variation

diary/ies 2005-06 2006-07

1 2 3 4 5 6

Ahmedabad 1 ASE Capital Markets Ltd. 17,633 19,536 10.79

BSE Nil Nil Nil Nil Nil

Bangalore 1 BgSE Financials Ltd. 25,111 18,604 -25.91

Bhubaneswar 1 Bhubaneswar Shares and Securities Ltd. Nil Nil Nil

Calcutta Nil Nil Nil Nil Nil

Cochin 1 Cochin Stock Brokers Ltd. 3,800 4,153 9.29

Coimbatore 1 CSX Securities Ltd. Nil Nil Nil

Delhi 1 DSE Financial Services Ltd. 1,445 2,668 84.64

Gauhati Nil Nil Nil Nil Nil

Hyderabad 1 HSE Securities Ltd. 9,037 8,691 -3.83

ISE 1 ISE Securities and Services Ltd. 40,606 37,827 -6.84

Jaipur 1 JSEL Securities Ltd. 8,271 8,378 1.29

Ludhiana 1 LSE Securities Ltd. 40,326 61,342 52.12

Madras 1 MSE Financial Services Ltd. 1,569 1,517 -3.31

Magadh 1 MSEA Securities Ltd. Nil Nil Nil

MPSE 1 MPSE Securities Ltd. 3,660 2,911 -20.46

NSE Nil Nil Nil Nil Nil

OTCEI 1 OTCEI Securities Ltd. 1,709 1,284 -24.87

Pune 1 PSE Securities Ltd. 5,461 5,806 6.32

SKSE 1 SKSE Securities Ltd. 10,775 9,435 -12.44

UPSE 1 UPSE Securities Ltd. 1,813 2,178 20.13

Vadodara 1 VSE Stock Services Ltd. 12,183 13,785 13.15

Total 1,83,399 1,98,115 8.02

Percentage Share in the Total Turnover (Cash+F&O)of All Exchanges 2.54 1.92


securities in electronic form and credited to

the investor’s account maintained with their

depository participant (DP). There are two

depositories in India, namely National

Securities Depository Limited (NSDL) and

Central Depository Services (India) Limited

(CDSL). Currently, almost 99 per cent of the

trades in India are settled in demat mode.

These depositories have set up nation wide

53


Table 2.24: Status of Stock Brokers with Stock Exchanges

Total Number of Number of Active Active Stock Brokers asStock Exchange Stock Brokers Stock Brokers Percentage to Total

Number of Stock Brokers

2005-06 2006-07 2005-06 2006-07 2005-06 2006-07

1 2 3 4 5 6 7

Ahmedabad 334 334 0 0 0.00 0.00

Bangalore 243 242 0 0 0.00 0.00

BSE 874 925 663 721 75.86 77.95

Bhubaneswar 202 197 9 10 4.46 5.08

Calcutta 945 942 94 24 9.95 2.55

Cochin 412 412 86 80 20.87 19.42

Coimbatore 133 133 0 0 0.00 0.00

Delhi 375 0 0 0 0.00 0.00

Gauhati 59 58 12 14 20.34 24.14

Hyderabad 281 299 45 51 16.01 17.06

ISE 748 828 292 462 39.04 55.80

Jaipur 492 479 0 0 0.00 0.00

Ludhiana 294 293 112 126 38.10 43.00

MPSE 178 178 0 0 0.00 0.00

Madras 158 158 8 2 5.06 1.27

Magadh 192 192 0 0 0.00 0.00

NSE 954 1,017 861 914 90.25 89.87

OTCEI 806 790 107 101 13.28 12.78

Pune 183 179 0 0 0.00 0.00

SKSE 415 399 0 0 0.00 0.00

UPSE 540 540 130 127 24.07 23.52

Vadodara 290 290 0 0 0.00 0.00


infrastructure of international standards. This

infrastructure handles most of the securities

held and settled in dematerialised form, in

the Indian stock market. Infrastructure

includes state-of-the-art technology and

advanced computing and security and

storage systems which manage a massive

database. Inconvenience of physical custody

and transfer, hassle of intimating change of

address, problems related to delivery of

shares, and the risks of forgery and frauds

have virtually disappeared from the Indian

stock markets.

The number of companies signed up for

dematerialisation with NSDL rose from 6,022

in 2005-06 to 6,483 in 2006-07 (Table 2.25.A).

In CDSL also, the number of companies

signed up increased from 5, 479 in 2005-06

to 5,589 in 2006-07.

The number of dematerialised shares

with NSDL went up by 16.01 per cent to

20,27,013 lakh in 2006-07 from 17,47,221 lakh

in 2005-06. With CDSL, the number of

dematerialised shares rose by 14.8 per cent

to 3,12,500 lakh in 2006-07 from 2,72,200 lakh

54


in 2005-06. The total value of shares settled

through demat mode on NSDL rose by 28.2

per cent to Rs. 8,30,513 crore in 2006-07 from

Rs. 6,47,717 crore in 2005-06. The total value

of shares settled through demat mode in

CDSL rose from Rs. 1,67,198 crore in 2005-06

to Rs. 1,97,050 crore in 2005-06, indicating a

rise of 17.9 per cent.

Apart from equity shares,

dematerialisation trend continued in other

instruments like commercial papers, and

bonds, as well. The total demat value of the

commercial papers at CDSL increased to

Rs. 1,020 crore in 2006-07 from Rs. 882 crore

in 2005-06, while at NSDL it increased in

2006-07 to Rs. 20,293 crore from Rs. 12,171

crore in 2005-06. The total value of demat

bonds in NSDL increased to Rs. 3,86,902 crore

in 2006-07 from Rs. 3,36,685 crore in 2005-06,

while at CDSL the same declined to Rs. 6,090

crore in 2006-07 from Rs. 6,496 crore in 2005-

06 (Table 2.25.B).

The geographical coverage of DPs of

NSDL and CDSL widened considerably in

2006-07. The DPs of NSDL were available in

707 cities in 2006-07 compared to 364 cities

in 2005-06. The DPs of CDSL were spread

over 529 cities in 2006-07 compared to 438

cities in 2005-06. In terms of absolute

numbers, the coverage of DPs of NSDL and

Table 2.25.A: Depository Statistics: Equity Shares*

NSDL CDSLParticulars

2005-06 2006-07 2005-06 2006-07

1 2 3 4 5

Companies Signed up (Nos.) 6,022 6,483 5,479 5,589

Companies Available for Demat (Nos.) 6,022 6,483 5,479 5,589

Demat: Quantity of Shares (lakh) 17,47,221 20,27,013 2,72,200 3,12,500

Total No. of Shares Settled in Demat (lakh) 4,75,720 4,52,450 2,24,499 1,70,899

Total Value of Shares Settled in Demat (Rs. crore) 6,47,717 8,30,513 1,67,198 1,97,050

Market Capitalisation of Companies in

Demat (Rs. crore) 30,05,067 35,98,842 29,52,743 33,89,445

* As on March 31 of respective year.

Source: NSDL, CDSL.

Table 2.25.B: Depository Statistics: Debentures / Bonds and Commercial Papers*

Debentures / Bonds Commercial Papers

Particulars 2005-06 2006-07 2005-06 2006-07

NSDL CDSL NSDL CDSL NSDL CDSL NSDL CDSL

1 2 3 4 5 6 7 8 9

No. of Issuers 652 346 669 367 379 78 386 78

No. of ActiveInstruments 6,926 4,325 6,849 4,389 328 106 352 80

Demat Value(Rs. crore) 3,36,685 6,496 3,86,902 6,090 12,171 882 20,293 1,020


Source: NSDL, CDSL.

55


Table 2.26: Depositories: Geographical Spread

NSDL CDSL

No. of DP Locations 2005-06 2006-07 2005-06 2006-07

1 2 3 4 5

1-10 316 621 410 467

11-20 30 43 16 33

21-50 9 27 8 16

51-100 3 8 2 6

> 100 6 8 2 7

Total 364 707 438 529

Source: NSDL, CDSL.

CDSL has risen substantially in 2006-07

compared to 2005-06 (Table 2.26).

X. Derivatives Market in India

The launch of exchange traded

derivative products was one of the major

product innovations in Indian stock markets.

Trading in derivatives began in India with

the introduction of index futures in June 2000,

followed by index options and stock options

in June 2001 and July 2001, respectively.

Single stock futures, though a late entrant,

in November 2001, is the dominant product

today in Indian derivatives market. The

trading in interest rate futures, started in June

2003, has not picked up so far. Trading of

derivative contracts takes place on NSE and

BSE and settlement take place through their

respective clearing corporations. Almost 99.0

per cent of derivatives trading took place at

NSE. Since the second half of 2006-07, BSE

started recording some volumes in index

futures and single stock futures category.

The combined turnover of BSE and NSE

in derivatives segment rose by 53.7 per cent

to Rs. 74,15,278 crore in 2006-07 compared

Rs. 48,24,259 crore in 2005-06 (Table 2.27). The

turnover in derivatives segment was 381.1 per

cent of the cash market turnover at NSE and

255.6 per cent of the combined cash market

turnover at BSE and NSE (Chart 2.8). In fact,

the total turnover in the derivatives segment

surpassed the combined cash market

turnover of both BSE and NSE in 2004 itself.

Month-wise, the decline in turnover was

the highest at 25.0 per cent in the month of

June 2006 due to a correction in the equity

market in May 2006. The fall in turnover

continued in July and August. Fall was also

witnessed in October, January, and March.

The highest turnover in this segment was

recorded in May 2006. The percentage rise

in turnover over the previous month was the

highest for November 2006 at 28.5 per cent.

The average daily turnover in 2006-07 rose

by 54.9 per cent to Rs. 29,780 crore from Rs.

19,220 crore in 2005-06. The open interest at

NSE increased by 0.6 per cent to Rs. 38,710

crore at the end of March 2007, from

Rs. 38,469 crore as on March 31, 2006. The

open interest was the highest in January 2007

(Rs. 51,000 crore).

The total number of contracts traded in

the derivatives segment on NSE rose by 37.6

per cent to 21,68,83,573 in 2006-07 from

15,76,19,271 in 2005-06. The daily average

number of derivatives contracts traded rose

from 6.3 lakh in 2005-06 to 8.6 lakh in

2006-07.

56


Table 2.27: Trends in Turnover and Open Interest in Derivatives at NSE and BSE

Total Open Interest at the End of the Year / Month

No. of Contracts Turnover No. of Contracts Notional Turnover

Year/ Month (Rs. crore) (Rs. crore)

NSE BSE NSE BSE NSE BSE NSE BSE

1 2 3 4 5 6 7 8 9

2003-04 5,68,86,776 3,82,258 21,30,649 12,452 2,35,792 35 7,187 1

2004-05 7,70,17,185 5,31,719 25,47,053 16,112 5,92,646 0 21,052 0

2005-06 15,76,19,271 203 48,24,250 9 10,28,003 0 38,469 0

2006-07 21,68,83,573 17,81,220 73,56,271 59,007 17,91,387 408 38,710 13

Apr-06 1,78,18,153 24 7,37,839 1 10,73,728 – 43,095 –

May-06 1,87,64,064 – 7,42,401 0 8,01,578 – 26,580 –

Jun-06 1,68,54,514 346 5,56,804 18 5,80,877 – 18,826 –

Jul-06 1,37,84,858 996 4,77,255 26 7,81,861 1 22,579 0

Aug-06 1,48,24,058 2,362 4,69,666 69 7,62,210 17 23,785 0

Sep-06 1,57,57,466 8,902 5,22,946 265 9,53,627 32 32,303 1

Oct-06 1,43,13,726 6,170 5,05,658 196 11,27,460 88 39,510 3

Nov-06 1,72,84,519 2,36,051 6,49,829 7,986 11,09,841 540 40,702 19

Dec-06 1,75,16,726 2,77,888 6,69,162 9,504 11,26,624 1,450 41,559 50

Jan-07 1,62,32,446 3,09,320 6,27,456 10,953 13,68,453 1,526 51,000 54

Feb-07 2,08,21,144 3,92,670 7,03,492 13,189 23,07,054 1,608 48,833 51

Mar-07 3,29,11,899 5,46,491 6,93,763 16,800 17,91,387 408 38,710 13

Source: NSE, BSE.

57


Single stock futures continued to account

for a sizeable proportion of total derivatives

turnover. About 52.1 per cent of total

derivatives segment turnover was contributed

by single stock futures. However,

considerable monthly variation was noted in

the composition. In March 2006, index futures

turnover (41.9 per cent) surpassed the stock

futures turnover (40.0 per cent). In June 2006,

index futures and stock futures constituted

an equal 44.0 per cent of total turnover

(Table 2.28).

On the whole, during 2006-07 index

futures turnover was 34.5 per cent of total

derivatives turnover compared to 31.4 per

cent in 2005-06. The share of index options

and stock options was 10.8 per cent and 2.6

per cent, respectively. In fact, the share of

index options has grown progressively from

4.8 per cent in 2004-05 to 7.0 per cent in 2005-

06, and to 10.8 per cent in 2006-07 (Chart 2.9).

On a monthly basis, the share of single

stock futures in the total turnover was the

Table 2.28: Product-wise Derivatives Turnover at NSE(Per cent)

Year / Month Index Futures Index OptionsSingle Stock Single Stock

TotalOptions Futures

1 2 3 4 5 6

2003-04 26.02 2.48 10.19 61.29 100.0

2004-05 30.32 4.79 6.63 58.27 100.0

2005-06 31.38 7.02 3.74 57.87 100.0

2006-07 34.52 10.77 2.63 52.08 100.0

Apr-06 27.68 7.10 2.80 62.42 100.0

May-06 34.66 7.92 2.27 55.15 100.0

Jun-06 43.74 10.41 2.03 43.81 100.0

Jul-06 39.13 11.46 2.78 46.63 100.0

Aug-06 36.91 11.31 2.99 48.80 100.0

Sep-06 33.95 10.26 3.13 52.67 100.0

Oct-06 33.02 9.84 3.25 53.89 100.0

Nov-06 27.82 9.24 3.11 59.83 100.0

Dec-06 33.67 11.91 2.45 51.97 100.0

Jan-07 30.38 10.62 3.09 55.91 100.0

Feb-07 34.43 13.05 2.39 50.13 100.0

Mar-07 41.94 16.33 1.74 39.98 100.0

Source: NSE.

highest in April 2006 (62.4 per cent), followed

by November 2006 (59.8 per cent), January

2007 (55.9 per cent), and May 2006 (55.1 per

cent). The turnover of index futures was the

highest in June 2006 (43.7 per cent), followed

by March 2007 (41.9 per cent), and July 2006

(39.1 per cent). The share of index options

was the highest in March 2007 (16.3 per cent),

followed by February 2007 (13.1 per cent),

and December 2006 (11.9 per cent).

The open interest in the derivatives

segment of NSE rose to Rs. 38,670 crore as

on March 31, 2007 from Rs. 38,469 crore as

on March 31, 2006. Product-wise share in the

open interest shows that the notional value

of outstanding contracts was the highest for

stock futures (Rs. 18,513 crore) followed by

index futures (Rs. 12,453 crore), index options

(Rs. 7,297 crore), and stock options (Rs. 447

crore) as on March 31, 2007. The Table 2.29

to Table 2.32 show product-wise trends in the

derivatives market in India during the recent

years.

58


Table 2.29: Trends in Index Futures at NSE and BSE

Open Interest at the End ofYear /

No. of ContractsTurnover the Year / Month

Month (Rs. crore)No. of Contracts

Notional Turnover(Rs. crore)


1 2 3 4 5 6 7 8 9

2003-04 1,71,91,668 2,46,443 5,54,463 6,572 37,495 17 1,305 0.48

2004-05 2,16,35,449 3,08,950 7,72,174 13,600 93,468 0 3,791 0.00

2005-06 5,85,37,886 89 15,13,791 5 2,46,281 0 8,397 0.00

2006-07 8,14,87,424 16,38,779 25,39,575 55,491 6,50,893 402 12,453 13

Apr-06 58,47,035 24 2,04,238 1 2,47,555 – 8,822 –

May-06 76,66,525 – 2,57,328 – 2,37,218 – 7,301 –

Jun-06 84,37,382 346 2,43,571 18 1,95,246 – 6,110 –

Jul-06 61,03,483 979 1,86,758 26 2,26,572 – 7,127 –

Aug-06 52,50,973 2,357 1,73,333 68 2,08,286 16 7,120 0

Sep-06 50,81,055 8,902 1,77,518 265 2,44,725 31 8,801 1

Oct-06 45,56,984 6,166 1,66,974 196 2,28,129 85 8,569 3

Nov-06 46,44,632 2,36,049 1,80,781 7,986 2,41,100 540 9,559 19

Dec-06 57,98,118 2,71,796 2,25,288 9,270 3,07,761 1,423 12,226 49

Jan-07 47,16,781 2,83,781 1,90,592 9,932 3,35,684 1,469 13,728 52

Feb-07 77,35,651 3,41,721 2,42,237 12,116 7,58,978 1,525 14,236 49

Mar-07 1,56,48,805 4,86,658 2,90,957 15,612 6,50,893 402 12,453 13

Source: NSE, BSE.

Table 2.30: Trends in Single Stock Futures at NSE and BSE






1 2 3 4 5 6 7 8 9

2003-04 3,23,68,842 1,28,193 13,05,949 5,171 1,53,854 18 4,492 0.58

2004-05 4,70,43,066 6,725 14,84,067 213 3,14,806 46 10,366 0.00

2005-06 8,09,05,493 12 27,91,721 0.48 6,25,926 0 24,670 0.00

2006-07 10,49,55,401 1,42,433 38,30,972 3,516 7,39,380 6 18,513 0.14

Apr-06 1,00,21,529 – 4,60,554 – 6,91,122 – 29,214 –

May-06 90,82,184 – 4,09,403 – 4,40,711 – 15,381 –

Jun-06 62,41,247 – 2,43,954 – 2,92,079 – 9,702 –

Jul-06 56,14,044 9 2,22,538 0.23 4,14,260 1 11,114 0.03

Aug-06 75,30,310 5 2,29,182 0.11 4,41,388 1 12,889 0.02

Sep-06 86,44,137 – 2,75,430 – 5,63,971 1 18,397 0.02

Oct-06 79,29,018 4 2,72,516 0.10 6,54,956 3 21,949 0.07

Nov-06 1,05,39,507 2 3,88,800 0.07 6,87,249 0 24,072 –

Dec-06 92,61,984 6,092 3,47,747 234 6,42,395 27 22,465 1.02

Jan-07 93,64,321 25,539 3,50,817 1,020 7,63,984 57 26,580 1.90

Feb-07 98,53,884 50,949 3,52,653 1,073 9,11,622 83 22,441 1.72

Mar-07 1,08,73,236 59,833 2,77,378 1,188 7,39,380 6 18,513 0.14

Source: NSE, BSE.

59


Table 2.31: Trends in Index Options at NSE and BSE






1 2 3 4 5 6 7 8 9

2003-04 17,32,414 1 52,823 0.03 14,664 0 519 0.00

2004-05 32,93,558 75,275 1,21,954 2,297 91,875 0 3,741 0.00

2005-06 1,29,35,116 100 3,38,469 3.20 1,28,688 0 4,379 0.00

2006-07 2,51,57,438 2 7,91,913 0.06 3,81,910 – 7,297 –

Apr-06 14,89,104 – 52,421 – 1,02,073 – 3,631 –

May-06 16,55,677 – 58,790 – 99,494 – 3,056 –

Jun-06 19,11,398 – 57,972 – 81,049 – 2,536 –

Jul-06 17,50,455 2 54,711 0.06 1,16,190 – 3,652 –

Aug-06 15,96,255 – 53,106 – 96,765 – 3,303 –

Sep-06 15,24,721 – 53,647 – 1,18,983 – 4,270 –

Oct-06 13,52,788 – 49,744 – 2,01,443 – 7,542 –

Nov-06 15,46,642 – 60,018 – 1,62,785 – 6,437 –

Dec-06 20,21,995 – 79,719 – 1,54,919 – 6,145 –

Jan-07 16,41,585 – 66,646 – 2,28,157 – 9,315 –

Feb-07 27,72,972 – 91,817 – 5,75,735 – 10,782 –

Mar-07 58,93,846 – 1,13,322 – 3,81,910 – 7,297 –

Source: NSE, BSE.

Table 2.32: Trends in Stock Options at NSE and BSE






1 2 3 4 5 6 7 8 9

2003-04 55,83,071 7,621 2,17,212 332 29,779 0 871 0

2004-05 50,45,112 89 1,68,858 3 92,497 0 3,154 0

2005-06 52,40,776 2 1,80,270 0.1 27,108 0 1,024 0

2006-07 52,83,310 6 1,93,811 0.19 19,204 – 447 –

Apr-06 4,60,485 – 20,625 – 32,978 – 1,428 –

May-06 3,59,678 – 16,881 – 24,155 – 843 –

Jun-06 2,64,487 – 11,308 – 12,503 – 478 –

Jul-06 3,16,876 6 13,247 0.19 24,839 – 685 –

Aug-06 4,46,520 – 14,045 – 15,771 – 474 –

Sep-06 5,07,553 – 16,351 – 25,948 – 835 –

Oct-06 4,74,936 – 16,425 – 42,932 – 1,450 –

Nov-06 5,53,738 – 20,229 – 18,707 – 634 –

Dec-06 4,34,629 – 16,408 – 21,549 – 723 –

Jan-07 5,09,759 – 19,401 – 40,628 – 1,378 –

Feb-07 4,58,637 – 16,785 – 60,719 – 1,374 –

Mar-07 4,96,012 – 12,106 – 19,204 – 447 –

Source: NSE, BSE.

60


The total number of members in the

derivatives segment of NSE increased from

801 in 2005-06 to 882 in 2006-07 (Table 2.33).

Table 2.33: Category of Members at

Derivatives Segment of NSE

and BSE*

Type of Members BSE NSE

1 2 3

Trading Members 240 491(215) (470)

Professional Clearing 4 19Members (4) (20)

Trading-cum-Clearing 71 176Members (57) (165)

Trading-cum-Self-Clearing 9 196Members (4) (146)

Total 324 882(280) (801)


Note: Figures in Parentheses relate to 2005-06.

Source: BSE, NSE.

At the end of March 31, 2007, there were 491

trading members and 196 trading-cum-self-

clearing members. The number of trading

cum-clearing members was 176 as on March

31, 2007. At BSE, there were 324 members as

on March 31, 2007 as against 280 at the end

of 2005-06. Of the total 324 members, 240

were trading members and 71 were trading-

cum-clearing members. Trading-cum-clearing

members were the most active participants,

in terms of turnover. At the end of 2006-07,

their transactions constituted 53.6 per cent of

the gross turnover (Table 2.34).

3. MUTUAL FUNDS

Household savings play an important

role in domestic capital formation. Only a

small part of the household savings in India

is channelised to the capital market.

Attracting more households to the capital

61


Table 2.34: Various Classes of Traders / Investors in F&O Turnover at NSE

Turnover (Rs. crore) Percentage Share

Trading Trading Trading TradingMonth Trading cum cum Self Trading cum cum Self

Members Clearing Clearing Total Members Clearing ClearingMembers Members Members Members

1 2 3 4 5 6 7 8

2004-05 24,94,557 49,80,025 21,73,918 96,48,501 25.85 51.61 22.53

2006-07 30,08,409 78,85,602 38,18,532 1,47,12,543 20.45 53.60 25.95

Apr-06 3,51,567 7,59,796 3,64,315 14,75,678 23.82 51.49 24.69

May-06 3,42,373 7,77,574 3,64,855 14,84,803 23.06 52.37 24.57

Jun-06 2,33,600 5,75,363 3,04,645 11,13,644 20.98 51.67 27.36

Jul-06 2,05,848 5,01,315 2,47,346 9,54,510 21.57 52.52 25.91

Aug-06 1,98,361 4,94,126 2,46,844 9,39,332 21.13 52.60 26.28

Sep-06 2,19,696 5,48,259 2,77,938 10,45,893 21.03 52.42 26.57

Oct-06 2,07,779 5,42,155 2,61,383 10,11,317 20.55 53.61 25.85

Nov-06 2,60,595 6,91,741 3,47,322 12,99,657 20.05 53.22 26.72

Dec-06 2,44,396 7,31,562 3,62,366 13,38,324 18.26 54.66 27.08

Jan-07 2,29,917 6,92,244 3,32,752 12,54,913 18.32 55.16 26.52

Feb-07 2,57,914 7,55,681 3,93,389 14,06,984 18.33 53.71 27.96

Mar-07 2,56,363 8,15,786 3,15,377 13,87,526 18.48 58.79 22.73

Source: NSE.

market requires efficient intermediation. The

mutual funds have emerged as one of the

important class of financial intermediaries

which cater to the needs of retail investors.

As a traditional investment vehicle, the

mutual funds pool resources from those who

save and allocate them to various investment

opportunities.

The gross mobilisation of resources by

all mutual funds during 2006-07 stood at

Rs. 19,38,493 crore compared to Rs. 10,98,149

crore during the previous year – an increase

of 76.5 per cent over the year (Table 2.35).

Redemption also rose by 76.4 per cent to Rs.

18,44,508 crore in 2006-07 from Rs. 10,45,370

crore in 2005-06. The net mobilisation of

Table 2.35: Mobilisation of Resources by Mutual Funds(Rs. crore)

Period Gross Mobilisation Redemption Net InflowAssets at the

End of Period

1 2 3 4 5

1999-00 61,241 42,271 18,970 1,07,946

2000-01 92,957 83,829 9,128 90,587

2001-02 1,64,523 1,57,348 7,175 1,00,594

2002-03 3,14,706 3,10,510 4,196 1,09,299

2003-04 5,90,190 5,43,381 46,808 1,39,616

2004-05 8,39,708 8,37,508 2,200 1,49,600

2005-06 10,98,149 10,45,370 52,779 2,31,862

2006-07 19,38,493 18,44,508 93,985 3,26,292

62


resources by all mutual funds stood at

Rs. 93,985 crore in 2006-07. It was the highest

ever in a single year. Reflecting large

mobilisation of resources, the assets under

management by all mutual funds increased

to Rs. 3,26,292 crore at the end of March 2007

from Rs. 2,31,862 crore a year ago.

Like the earlier years, the bulk of resource

mobilisation was by the private sector mutual

funds. Their share in the net resource

mobilisation stood at 84.1 per cent in 2006-07

as against 81.4 per cent in the previous

financial year (Chart 2.10). Net amount raised

by UTI mutual fund and other public sector

mutual funds constituted 7.8 per cent and 8.1

per cent of the total fund mobilisation. But as

a percentage of gross mobilisation, the share of

private sector mutual funds declined to 82.5

per cent in 2006-07 from 83.3 per cent in 2005-

06. The share of public sector mutual funds

and UTI mutual fund, in gross mobilisation

was 10.1 per cent and 7.3 per cent respectively

(Table 2.36).

The pattern of funds raised on a scheme-

wise basis gives a different picture in 2006-

07. Unlike last financial year, when equity

oriented mutual funds dominated the

mobilisation efforts, it was the debt oriented

funds which dominated in 2006-07 (Table

2.37). The net inflow of funds by income /

debt oriented schemes was Rs. 64,067 crore

constituting 68.2 per cent of the net fund

mobilised. The equity oriented schemes

mobilised Rs. 28,206 crore compared to

Rs. 35,231 crore in 2005-06. The net amount

raised by the balanced schemes was Rs. 1,711

crore as against Rs. 927 crore in 2005-06. The

net amount mobilised by close-ended mutual

funds outweighed that of open-ended mutual

funds in 2006-07 (Chart 2.11). The share of

close-ended schemes in the private sector

mutual fund, public sector mutual fund and

UTI mutual fund was 74.6 per cent, 66.9 per

cent and 82.0 per cent respectively during

2006-07.

As on March 31, 2007 there were 755

63


Table 2.36: Sector-wise Resource Mobilisation by Mutual Funds during 2006-07 (Rs. crore)

Private Sector MFs Public Sector MFs UTI MF*Grand

Particulars Open- Close-Total

Open- Close-Total

Open- Close-Total Total

ended ended ended ended ended ended

1 2 3 4 5 6 7 8 9 10 11

Mobilisation 14,82,588 1,17,286 15,99,874 1,85,500 10,840 1,96,340 1,32,070 10,210 1,42,280 19,38,493

of Funds (8,75,917) (38,786) (9,14,703) (1,10,142) (176) (1,10,319) (71,058) (2,069) (73,127) (10,98,149)

Repur- 14,62,528 58,308 15,20,836 1,82,981 5,738 1,88,719 1,30,749 4,204 1,34,954 18,44,508

chases / (8,59,367) (12,360) (8,71,727) (1,03,580) (360) (1,03,940) (68,387) (1,316) (69,704) (10,45,370)

Redemption

Amount

Net Inflow / 20,060 58,978 79,038 2,519 5,102 7,621 1,321 6,005 7,326 93,985

Outflow of (16,550) (26,426) (42,977) (6,562) (-183) (6,379) (2,671) (753) (3,424) (52,779)

Funds

Notes : Figures in parentheses relate to 2005-06.

* Net Assets of Rs. 2,214.67 crore pertaining to Fund of Funds schemes are not included in the above data.

Table 2.37: Scheme-wise Resource Mobilisation and Assets under Management of Mutual

Funds during 2006-07

Cumulative Percentage

Gross Net Inflow/ Asset under Variation

Schemes No. of Funds Repurchase/ Outflow of Management over

Schemes Mobilised Redemption Funds as on March March 31,

(Rs. crore) (Rs. crore) (Rs. crore) 31, 2007 2006

(Rs. crore)

1 2 3 4 5 6 7

A. : Income / Debt 450 18,39,668 17,75,601 64,067 1,93,585 54.98Oriented Schemes (325) (10,08,129) (9,91,508) (16,622) (1,24,913) (17.57)

of which

i. Liquid/MoneyMarket 55 16,26,790 16,21,805 4,985 72,006 17.08

ii. Gilt 28 1,853 2,816 -964 2,257 -28.01

iii. Debt 367 2,11,026 1,50,980 60,046 1,19,322 97.95

B : Growth / Equity 267 94,351 66,145 28,206 1,23,597 24.27Oriented Schemes (231) (86,014) (50,783) (35,231) (99,456) (158.43)

of which

i. Equity LinkedSaving Scheme 40 4,669 216 4,453 10,212 54.99

ii. Others 227 89,683 65,929 23,753 1,13,386 22.10

C : Balanced 38 4,473 2,762 1,711 9,110 21.58Schemes (36) (4,006) (3,079) (927) (7,493) (53.96)

TOTAL (A+B+C) 755 19,38,493 18,44,508 93,985 3,26,292 40.73(592) (10,98,149) (10,45,370) (52,779) (2,31,862) (54.99)

Note: Figures in parentheses relate to 2005-06.

mutual fund schemes, of which, 450 were

income/debt oriented schemes, 267 equity/

growth oriented schemes and 38 balanced

schemes. During the financial year, 163

schemes were added, of which 125 were

income/debt oriented schemes.

64


As on March 31, 2007, there were 485

open-ended schemes and 270 close-ended

schemes (Table 2.38). The number of close-

ended schemes rose substantially from 47 in

2004-05 to 129 in 2005-06, and further to 270

in 2006-07. There were 234 close-ended debt

oriented schemes in 2006-07 as against 112

in 2005-06. The number of equity oriented

schemes which were open-ended and close-

ended was 235 and 32 respectively.

The total assets under management

(AUM) of all mutual funds rose by 40.7 per

cent to Rs. 3,26,292 crore as on March 31, 2007

from Rs. 2,31,862 crore a year ago. The net

assets of all categories of mutual fund

schemes witnessed a rise in 2006-07 over the

previous year. The rise in AUM was the

highest for debt oriented schemes at 55.0 per

cent. This was commensurate with spurt in

resource mobilisation by the debt oriented

schemes. A rise of 24.3 per cent was seen in

the AUM of equity oriented schemes. A

negative growth of 28.1 per cent was

recorded for AUM of gilt schemes.

The mutual funds have traditionally

been the active participants in the debt

segment of Indian stock market. The

heightened activity of mutual funds in the

equity segment in 2005-06 did not continue

at the same pace in 2006-07 save a few

months of the financial year. In the first two

months of the financial year, however, their

inflow into the equity segment was higher,

after which it declined. During 2006-07, the

combined investment in debt and equity was

Rs. 61,606 crore compared to Rs. 51,103 crore

in 2005-06, indicating a rise of 20.6 per cent

(Table 2.39). Bulk of this investment was in

the debt segment. Their total inflow into the

debt segment was Rs. 52,543 crore as against

65


Table 2.38: Number of Schemes by Investment Objectives*

Schemes Open-ended Close-ended Total

1 2 3 4

A. : Income / Debt Oriented Schemes 216 234 450(213) (112) (325)

i. Liquid/Money Market 55 0 55

ii. Gilt 28 0 28

iii. Debt (other than assured return) 133 234 367

iv. Debt (assured return) 0 0 0

B : Growth / Equity Oriented Schemes 235 32 267(216) (15) (231)

i. Equity Linked Saving Scheme 29 11 40

ii. Others 206 21 227

C : Balanced Schemes 34 4 38(34) (2) (36)

TOTAL (A+B+C) 485 270 755(463) (129) (592)



Table 2.39: Trends in Transactions on Stock Exchanges by Mutual Funds

(Rs. crore)

Equity Debts Total

Net Net NetYear / Gross Gross Pur- Gross Gross Pur- Gross Gross Pur-Month Purchase Sales chase/ Purchase Sales chase/ Purchase Sales chase/

Sales Sales Sales

1 2 3 4 5 6 7 8 9 10

2004-05 45,045 44,597 448 62,186 45,199 16,987 1,07,232 89,796 17,435

2005-06 1,00,436 86,134 14,302 1,09,805 73,004 36,801 2,10,241 1,59,137 51,103

2006-07 1,35,948 1,26,886 9,062 1,53,733 1,01,190 52,543 2,89,681 2,28,075 61,606

Apr-06 12,752 9,632 3,121 11,228 6,800 4,428 23,980 16,432 7,548

May-06 18,345 10,452 7,893 15,386 7,774 7,612 33,732 18,226 15,506

Jun-06 7,844 9,820 -1,977 14,236 8,907 5,329 22,079 18,727 3,352

Jul-06 7,552 7,634 -82 15,983 8,266 7,716 23,535 15,900 7,635

Aug-06 8,852 8,425 426 16,169 11,853 4,316 25,021 20,278 4,743

Sep-06 10,345 9,006 1,340 12,879 9,591 3,287 23,224 18,597 4,627

Oct-06 9,944 9,948 -4 10,314 7,930 2,385 20,259 17,877 2,381

Nov-06 12,675 12,700 -25 13,297 6,962 6,335 25,972 19,662 6,310

Dec-06 13,181 11,554 1,627 7,585 6,256 1,329 20,766 17,811 2,956

Jan-07 11,644 12,986 -1,342 10,831 8,427 2,403 22,474 21,413 1,061

Feb-07 12,697 12,971 -274 10,352 7,683 2,669 23,049 20,654 2,395

Mar-07 10,116 11,757 -1,641 15,474 10,740 4,734 25,590 22,497 3,093

66


Rs. 36,801 crore in 2005-06. Month-wise, their

inflow into the debt segment was the highest

for July 2006 (Rs. 7,716 crore) followed by

May 2006 (Rs. 7,612 crore) and November

2006 (Rs. 6,335 crore). The mutual fund

inflow into the equity segment was the

highest for May 2006 (Rs. 7,893 crore)

followed by April 2006 (Rs. 3,121 crore) and

December 2006 (Rs. 1,627 crore).

4. FOREIGN INSTITUTIONAL

INVESTMENT

Foreign institutional investment (FII) is

one of the main channels of foreign

investment in India. Foreign institutional

investors (FIIs) were permitted to invest in

Indian securities market in 1993. Since then,

their investments into Indian equity market

have grown by leaps and bounds. In fact,

FIIs, as a class of institutional investors, have

assumed a major role in mature and

emerging market economies, in recent years.

The FII in the Indian equity markets has

risen steadily since 2003-04 (Table 2.40 and

Chart 2.12). The gross purchases of debt and

equity together by FIIs increased by 50.0 per

cent to Rs. 5,20,508 crore in 2006-07 from

Rs. 3,46,978 crore in 2005-06. The gross sales

by FIIs also rose by 60.3 per cent to

Rs. 4,89,667 crore from Rs. 3,05,512 crore

during the same period. However, the net

investment by FIIs in 2006-07 declined by 25.6

per cent to Rs. 30,840 crore in 2006-07 from

Rs. 41,467 crore in 2005-06 mainly due to

large net outflows from the equity segment.

But the cumulative net investment by FIIs in

Indian stock market (since 1993) crossed USD

50 billion at the end of March 2007. As on

March 31, 2007, the cumulative net

investment by FIIs was USD 52 billion. The

Table 2.40: Investment by Foreign Institutional Investors

Gross Gross Net Net CumulativeYear Purchase Sales Investment Investment Net

(Rs. crore) (Rs. crore) (Rs. crore) (US $ mn.) Investment(US $ mn.)

1 2 3 4 5 6

1992-93 17 4 13 4 4

1993-94 5,593 466 5,126 1,634 1,638

1994-95 7,631 2,835 4,796 1,528 3,167

1995-96 9,694 2,752 6,942 2,036 5,202

1996-97 15,554 6,979 8,574 2,432 7,634

1997-98 18,695 12,737 5,957 1,650 9,284

1998-99 16,115 17,699 -1,584 -386 8,898

1999-00 56,856 46,734 10,122 2,339 11,237

2000-01 74,051 64,116 9,934 2,159 13,396

2001-02 49,920 41,165 8,755 1,846 15,242

2002-03 47,061 44,373 2,689 562 15,805

2003-04 1,44,858 99,094 45,765 9,950 25,755

2004-05 2,16,953 1,71,072 45,881 10,172 35,927

2005-06 3,46,978 3,05,512 41,467 9,332 45,259

2006-07 5,20,508 4,89,667 30,840 6,708 51,967

67


cumulative net investment by FIIs at

acquisition cost, which was USD 15.8 billion

at the end of March 2003, had risen to USD

45.3 billion at the end of March 2006

(Chart 2.13).

The FII in equity, which was high in the

previous years, declined in 2006-07. During

2006-07, FIIs reduced their investment, in

both equities as well as debt securities

(Table 2.41). The net FII investment in equity

during 2006-07 was Rs. 25,236 crore, at its

lowest in past three years. This was mainly

due to large net sales in some months of

2006-07.

Month-wise, FII was negative in the

months of May 2006, December 2006 and

March 2007 (Chart 2.14). However, during the

remaining months of the financial year, there

was positive net equity investment by FIIs,

particularly in middle of 2006-07, which

drove the benchmark indices to historic

highs. The net FII in November 2006 was the

highest for 2006-07, followed by October

2006, and February 2007. Unlike last year

when FII in debt segment was negative for

all the months, in 2006-07 the same was

positive for all months except for January

2007. Their total net investment in the debt

segment in 2006-07 was Rs. 5,605 crore.

Reflecting the congenial investment

climate, total number of FIIs registered with

SEBI rose to 997 as on March 31, 2007

compared to 882 a year ago. A distinctive

feature of the profile of the newly registered

FIIs was the rise in registration from the

unconventional countries like Slovenia,

Brussels, Guernsey, Cyprus, Oman, Sweden,

and Japan etc. other than the traditional

investors from USA, United Kingdom,

Singapore, Malaysia, Hong Kong,

Luxembourg and others.

68


Table 2.41: Investments by Mutual Funds and Foreign Institutional Investors(Rs. crore)

Net Investment by Mutual Funds Net Investment by FIIs

Year / Month Equity Debt Total Equity Debt Total

1 2 3 4 5 6 7

2003-04 1,308 22,701 24,009 39,960 5,805 45,765

2004-05 448 16,987 17,435 44,123 1,759 45,881

2005-06 14,303 36,801 51,104 48,801 -7,334 41,467

2006-07 9,062 52,543 61,607 25,236 5,605 30,840

Apr-06 3,121 4,428 7,548 522 249 770

May-06 7,893 7,612 15,506 -7,354 707 -6,647

Jun-06 -1,977 5,329 3,352 480 396 875

Jul-06 -82 7,716 7,635 1,145 152 1,297

Aug-06 426 4,316 4,743 4,643 805 5,448

Sep-06 1,340 3,287 4,627 5,425 709 6,133

Oct-06 -4 2,385 2,381 8,013 657 8,670

Nov-06 -25 6,335 6,310 9,380 806 10,187

Dec-06 1,627 1,329 2,956 -3,667 901 -2,766

Jan-07 -1,342 2,403 1,061 492 -2,174 -1,682

Feb-07 -274 2,669 2,395 7,240 956 8,195

Mar-07 -1,641 4,734 3,093 -1,082 1,443 361

69


The FIIs were permitted to trade in the

derivatives market since February 2002. The

cumulative FII in derivatives was Rs. 2,25,278

crore as on March 31, 2007. Open interest

position of FIIs in index futures was the

highest at 45.6 per cent by end-March 2007,

followed by stock futures (42.5 per cent). The

share of index options was 11.9 per cent

while the lowest open positions were in stock

options (0.003 per cent) (Table 2.42).

Table 2.42: Notional Value of Open Interest of Foreign Institutional lnvestors in Derivatives

(Rs. crore)

Items Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07

1 2 3 4 5 6 7 8 9 10 11 12 13

IndexFuture 9,827 7,780 6,360 7,629 9,516 8,001 6,556 9,727 10,515 11,961 13,900 13,476

IndexOptions 1,444 1,426 813 1,426 3,206 1,270 3,124 7,442 2,766 5,237 5,059 3,518

StockFutures 21,438 12,267 6,492 7,108 9,893 10,930 13,269 17,455 12,593 15,795 15,664 12,554

StockOptions 135 37 15 25 152 6 122 269 3 12 49 1

Total 32,844 21,509 13,681 16,187 22,767 20,207 23,071 34,893 25,877 33,005 34,672 29,550

Change inOpenPosition 5,026 -11,334 -7,829 2,507 6,579 -2,559 2,864 11822.4 -9,016 7,128 1,666 -5,122

% Change 18.07 -34.51 -36.40 18.32 40.64 -11.24 14.17 51.24 -25.84 27.55 5.05 -14.77

CumulativeFll Invest-ment 1,95,208 1,88,560 1,89,436 1,90,733 1,96,180 2,02,313 2,10,983 2,21,169 2,18,403 2,16,722 2,24,917 2,25,278

Change inCumulativeFll Invest-ment 771 -6,647 876 1,297 5,447 6,133 8,670 10,186 -2,766 -1,682 8,195 361

% Change 0.40 -3.41 0.46 0.68 2.86 3.13 4.29 4.83 -1.25 -0.77 3.78 0.16

70


Table 2.43: Private Placement Reported to BSE and NSE

BSE NSE TotalMonth/Year No. of Amount No. of Amount No. of Amount

Issues (Rs. crore) Issues (Rs. crore) Issues (Rs. crore)

1 2 3 4 5 6 7

2006-07 198 35,859 438 74,659 588 1,04,974

(308) (21,142) (365) (64,087) (667) (83,827)

Apr-06 2 545 20 3,351 22 3,896

(26) (3,431) (29) (2,833) (55) (6,264)

May-06 19 1,307 36 7,031 55 8,338

(44) (1,774) (18) (5,670) (62) (7,444)

Jun-06 27 5,743 11 4,426 38 10,169

(41) (1,873) (31) (4,872) (72) (6,745)

Jul-06 12 1,243 36 4,301 47* 5,244*

(13) (1,549) (58) (5,502) (71) (7,051)

Aug-06 17 3,149 18 5,863 35 9,012

(18) (724) (22) (3,111) (40) (3,835)

Sep-06 9 7,276 51 13,537 60 20,813

(27) (1,710) (25) (3,081) (52) (4,791)

Oct-06 13 3,868 24 5,184 37 9,052

(27) (2,021) (26) (3,922) (53) (5,943)

Nov-06 10 3,504 57 7,305 67 10,809

(19) (666) (31) (3,738) (50) (4,404)

Dec-06 12 2,065 45 7,519 57 9,584

(22) (988) (20) (7,274) (42) (8,262)

Jan-07 9 1,405 32 2,386 41 3,791

(16) (1,830) (46) (10,700) (61) (12,369)

Feb-07 25 1,277 31 5,128 56 6,405

(2) (45) (9) (1,039) (11) (1,084)

Mar-07 43 4,477 77 8,628 120 13,105

(53) (4,531) (50) (12,345) (99) (15,888)

* Data adjusted as one issue of HDFC Bank of Rs. 300 crore was reported to both BSE and NSE in July 2006.


Source: NSE and BSE.

5. DEVELOPMENTS IN THE BOND

MARKET

I. Private Placement

As per the extant SEBI Guidelines,

corporates are required to report details of

resources raised through private placements

to the stock exchanges. Majority of the

resources mobilised through private

placements were reported to NSE and BSE.

During 2006-07, the amount mobilised

through private placements stood at

Rs. 1,04,974 crore which was substantially

higher than that of Rs. 83,827 crore garnered

during the same period of last year. Of the

total amount reported, the share of NSE was

71.1 per cent during 2006-07 (Table 2.43).

71


II. Indian Wholesale Debt Market

The Wholesale debt market (WDM)

analysed in this section pertains to NSE. The

net traded value declined by 53.9 per cent to

Rs. 2,19,106 crore in 2006-07 from Rs. 4,75,523

crore in 2005-06 (Table 2.44). The net traded

value was the highest in November 2006 at

Rs. 29,339 crore. Compared to 2005-06, the net

traded value was lower for every month in

2006-07 except November 2006. It was at the

lowest in June 2006 at Rs. 11,790 crore.

Average daily traded value in the WDM

segment of NSE declined from Rs. 1,755 crore

in 2005-06 to Rs. 899 crore in 2006-07. The

total number of trades in the WDM segment

also declined from 61,891 in 2005-06 to 19,575

in 2006-07.

Instrument-wise share of securities

traded in the WDM segment of NSE shows

that government securities continued to

dominate the WDM segment in 2006-07,

followed by Treasury Bills (Table 2.45). The

share of G-sec in the total traded value


per cent in 2006-07. However, there was a rise

in the share of T-bills from 22.1 per cent in

2005-06 to 23.7 per cent in 2006-07.

Trading members had a share of 30.9 per

cent in the turnover (Table 2.46). The share

of Indian banks and foreign banks in the

turnover of WDM segment constituted 26.0

per cent and 20.6 per cent respectively, in

2006-07. In fact the foreign banks increased

their share from 14.1 per cent in 2005-06 to

20.57 per cent in 2006-07 while the share of

Indian banks declined from 28.1 per cent in

2005-06 to 26.0 per cent in 2006-07.

Table 2.44: Business Growth on the Wholesale Debt Market Segment of NSE

2005-06 2006-07

MonthNet Average Number Net Average Number

Traded Daily Traded of Traded Daily Traded of

Value Value Trades Value Value Trades

(Rs. crore) (Rs. crore) (Rs. crore) (Rs. crore)

1 2 3 4 5 6 7

April 54,616 2,483 6,079 23,184 1,364 1,962

May 70,113 2,805 9,376 17,986 818 1,755

Jun. 96,108 3,696 14,213 11,790 536 950

July 52,309 2,092 8,042 12,710 605 1,169

Aug. 44,717 1,789 5,361 23,561 1,071 2,341

Sep. 31,960 1,278 4,127 23,396 1,114 2,336

Oct. 25,387 1,209 2,987 15,810 832 1,676

Nov. 24,360 1,218 2,822 29,339 1,334 2,938

Dec. 20,771 944 2,505 14,868 708 1,244

Jan. 21,607 1,080 2,572 18,026 901 1,332

Feb. 16,485 868 2,075 14,245 791 920

Mar. 17,089 814 1,732 14,192 710 952

Total 4,75,523 1,755 61,891 2,19,106 899 19,575

Source : NSE.

72


Table 2.45: Instrument-wise Share of Securities Traded in the Wholesale Debt Market Segment

of NSE (Per cent)

2006-07

Month Govt. DatedTreasury Bills

PSU/InstitutionalOthers

Securities Bonds

1 2 3 4 5

April 66.87 29.03 2.21 1.89 (56.02) (39.82) (1.87) (2.29)

May 71.43 19.25 2.79 6.53 (73.20) (22.71) (1.42) (2.67)

June 54.41 36.45 4.26 4.88 (90.06) (6.46) (1.86) (1.62)

July 55.05 35.69 2.78 6.48 (86.73) (8.54) (2.32) (2.41)

August 63.67 32.00 0.85 3.48 (60.06) (32.95) (3.40) (3.59)

September 74.75 20.65 1.55 3.05 (69.49) (21.66) (4.52) (4.33)

October 72.37 23.29 1.44 2.89 (59.85) (33.38) (4.21) (2.56)

November 78.27 18.11 1.35 2.27 (68.08) (28.10) (2.32) (1.50)

December 75.40 19.37 1.16 4.07 (64.38) (28.88) (3.31) (3.43)

January 73.69 18.56 2.63 5.12 (65.68) (26.88) (3.38) (4.06)

February 71.48 20.1 2.04 6.38 (75.51) (19.79) (1.13) (3.56)

March 70.72 17.41 3.02 8.85 (63.65) (28.27) (5.57) (2.51)

Average 70.00 23.71 2.02 4.27 (72.67) (22.13) (2.56) (2.64)

Note : Figures in Parentheses relate to 2005-06.

Source : NSE.

73


Table 2.46: Share of Participants in Turnover of Wholesale Debt Market Segment of NSE

(Per cent)

2006-07

Month Trading Fls / MFs / Primary Indian ForeignMembers Corporates Dealers Banks Banks

1 2 3 4 5 6

April 26.13 2.31 23.05 29.11 19.40(31.34) (4.28) (17.15) (31.77) (15.46)

May 30.34 2.58 22.11 28.21 16.76(31.72) (4.29) (23.11) (28.21) (12.67)

June 29.40 3.18 24.39 29.24 13.79(30.05) (3.72) (22.71) (29.07) (14.45)

July 28.54 2.45 22.55 27.96 18.50(30.93) (2.43) (26.42) (25.71) (14.51)

August 26.44 2.93 17.69 29.68 23.26(34.44) (3.81) (19.56) (27.82) (14.37)

September 32.27 2.48 19.48 29.80 15.97(35.57) (5.83) (18.74) (31.77) (8.09)

October 31.93 1.47 22.08 27.31 17.22(35.34) (2.66) (21.77) (27.15) (13.08)

November 28.53 2.79 19.04 29.07 20.56(29.18) (4.99) (21.29) (29.98) (14.56)

December 33.32 3.18 17.59 23.48 22.43(34.37) (4.40) (18.84) (30.90) (11.49)

January 31.91 2.41 24.81 21.18 19.69(29.92) (3.32) (24.79) (22.11) (19.86)

February 42.33 3.16 12.44 17.10 24.97(31.84) (3.71) (26.57) (21.17) (16.71)

March 35.13 4.43 13.70 14.91 31.83(35.76) (4.16) (22.10) (20.47) (17.51)

Average 30.88 2.69 19.82 26.03 20.57(32.01) (3.92) (21.89) (28.07) (14.11)

Note: Figures in Parentheses relate to 2005-06.

Source: NSE.

part two: review of trends and operations

Documents