HIGHLIGHTS OF NSENATIONAL STOCK EXCHANGE OF INDIA LIMITED NEWSLETTER December 2009 ARTICLE What moves stock prices and how?- by Anuradha Guru, NSE The daily movement of stock prices is no less than a conundrum for a layman who is unable to comprehend the reasons behind these gyrations. Apart from company specific factors, there are a number of macroeconomic and political factors affecting daily movements of stock prices. This article attempts to demystify the links between stock market movements and these factors, examining the channels through which they affect stock prices SPOTLIGHT Þ Government has decided that all profitable listed CPSEs should meet the mandatory listing of 10% public ownership; and all unlisted CPSEs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges R E G U L ATO RY C H A N G E S Initiated by SEBI Þ framework for trading on Small and Medium Enterprises (SME) exchange/platform laid down Regulatory Þ to Issue of Capital and Disclosure Requirements, Regulations, 2009 (ICDR) inter-alia, requiring interim disclosure of Amendments balance sheet items by listed entities and permitting pure auctions for qualified institutional investors (QIBs) in follow-on public offerings Þ given to transactions in Mutual Fund schemes through the stock exchange infrastructure Permission Þ Agreement for debt securities further simplified Debt Listing Initiated by RBI Þ Draft guidelines on Over the Counter (OTC) Foreign Exchange Derivatives and Hedging Commodity Price Risk and Freight Risk Overseas, placed on RBI's website for public comments NSE NEWS ÞSEBI initiative, NSE has introduced New Mutual Fund Service System (MFSS) for transaction in mutual fund schemes Following through the stock exchange infrastructure NCFM NEWS Þ three more modules in the list of modules qualifying for Fee Discount Scheme Addition of Þ two more modules in the list of modules qualifying for “NSE Certified Market Professional (NCMP)” certificates Addition of Þ “Equity Derivatives: A Beginner's Module” Launch of I N T E R N AT I O N A L N E W S Þ Exchange's TOPIX Futures to trade on NYSE Liffe from summer 2010 Tokyo Stock Þ Exchange introduces the Respect Index Warsaw Stock Þ Exchange to launch new retail bond market for the UK London Stock HIGHLIGHTS OF NSE NEWSLETTER December 2009 MARKET REVIEW Nifty Movements vis-a-vis other International Indices (Rebased to 100 for March 31, 2009) 170 155 140 125 110 95 80 Mar-09 250 230 210 190 170 150 130 110 90 Mar-09 Performance of select sectors vis-a-vis Nifty (Rebased to 100 for March 31, 2009) Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Apr-09 Nifty May-09 Jun-09 Jul-09 NIKKIE Aug-09 Sep-09 Hang seng Oct-09 Nov-09 Dow Jones Nasdaq CNX IT S&P CNX Finance S&P CNX Pharmaceuticals CNX Infrastructure CNX FMCG INDEX S&P CNX Petrohemicals CNX Bank Nifty S&P CNX Nifty 4000 3000 Trading Value Trading Value 250 200 150 Avg. Daily Trading Value 18000 15000 12000 1000 800 600 9000 6000 3000 Feb-09 Aug-09 Mar-09 Sep-09 Jan-09 Jun-09 Apr-09 Jul-09 Oct-09 May-09 Nov-09 Dec-08 2000 1000 Mar-09 May-09 Nov-09 Aug-09 Jul-09 Dec-08 Feb-09 Sep-09 Jun-09 Oct-09 Jan-09 Apr-09 100 50 400 200 Currency Futures Avg. Daily Trading Value 600 Trading Value Trading Value 800 600 400 200 0 Jan-09 Feb-09 Apr-09 Jun-09 Aug-09 Sep-09 Oct-09 Jul-09 May-09 Nov-09 Dec-08 Mar-09 500 400 300 200 100 0 Feb-09 Jul-09 May-09 Aug-09 Mar-09 Sep-09 Jan-09 Jun-09 Apr-09 Oct-09 Trading Value (Rs. hundred crore) Avg. Daily Trading Value (Rs. hundred crore) NSE MARKET STATISTICS Segments Percentage Average daily Market Turnover (Rs.crore) Change over turnover Capitalisation Oct-09 Oct-09 Nov-09 (Rs. crore) CM WDM F&O CDS(Currency Futures) TOTAL 362,969 43,731 1,510,417 150,843 2,067,961 324,477 64,999 1,661,816 157,554 2,208,846 -10.60 48.63 10.02 4.45 6.81 16,224 3,250 83,091 7,878 5,430,088 3,099,214 NSE's GLOBAL RANKINGS Parameters Single Stock Futures Stock Index Options Stock Index Futures No. of Trades Market Capitalisation Nov-09 Dec-08 Rank rd 3 rd 3 rd 3 th 4 th 12 8,529,302 Source : WFE (Rankings done for the period Jan- Jun 2009).Rankings for single stock futures, stock index options and stock index futures is based on number of contracts traded. Prepared by SBU-EDUCATION National Stock Exchange of India Ltd. Exchange Plaza, Bandra Kurla Complex, Bandra (E) Mumbai - 400051. Tel No: 022-26598163 For detailed NSE Newsletter log on to www.nseindia.com>Press Room>NSE Newsletter. For Market Data, refer to www.nseindia.com>Research>Datazone. Avg. Daily Trading Value 1000 90 80 70 60 50 40 30 20 10 0 700 WDM Segment 35 33 31 29 27 25 23 21 19 17 15 Avg. Daily Trading Value 5000 Capital Market Segment 300 F&O Segment N S E N E W S L E T T E R Dec 2009 1 A R T I C L E S WHAT MOVES STOCK PRICES AND HOW? BY Anuradha Guru* Introduction The daily movement of stock prices is no less than a conundrum for a layman who is unable to comprehend the reasons behind these gyrations. What most amateur market watchers/players understand is that the market price of a particular share is dependent on the demand and supply for that particular scrip. If the market participants are confident about the fundamental strengths of a company which has had a track record of good performance or has the potential to do well in the future, the demand for the shares of the company increases and players are willing to pay higher prices to buy the share. And since the number of shares issued by the company is constant at a given point in time, any increase in demand would only increase the market price. However, there are many other factors not directly related to the company or its sector that have their impact of stock prices. Movements of stock prices are seen to depend on macroeconomic factors; domestic and international economic, social or political events; market sentiments / expectations about future economic growth trajectory or critical budgetary, monetary and fiscal policy announcements etc. The stock market capitalizes the present and future values of growth opportunities while evaluating the growth of all sectors in the economy. In a sense stock markets can really be regarded as the pulse of the economy as they reflect every action taken by the economic and political agents almost instantly. A stock market transaction of buy or sell is actually a purchase or sale of expectations representing market players’ beliefs about the economy. This article attempts to demystify the links between stock market movements and various other factors mentioned above, examining the channels through which they affect stock prices. It also sites some important empirical studies which have tested these linkages and the direction of their effects on stock prices worldwide and in the Indian context, wherever such studies are available. The rest of the paper is organized as follows: section I deals with effects of macroeconomic variables on stock market movements; section II examines the impact of macroeconomic policy announcements on stock market returns and section III looks at the channels through which expectations, sentiments, political developments, international events etc, transmit their impact to stock market volatility. Section I: Macro economic variables and stock market movements The relationship between macro economic factors and stock market movements has dominated the academic and practitioners’ literature since long. Some fundamental macroeconomic variables such as growth rate of the economy, exchange rate, interest rate, industrial output and inflation have been argued to be determinants of stock prices. This has motivated many researchers to investigate the dynamic relationship between them. For example, Fama (1981) documents a strong positive correlation between common stock returns and real economic variables like capital expenditures, industrial production, real GNP, money supply, lagged inflation and interest rates. Chen, Roll and Ross (1986) find that the changes in aggregate production, inflation, short-term interest rates, maturity risk-premium and default risk-premium are the economic factors that explain the changes in stock prices. Below we examine the impact of each of these individual macroeconomic factors on stock prices. Economic growth Stock markets aid economic growth and development through the mobilization and allocation of savings, risk diversification, liquidity creating ability and corporate governance improvement, among others. Improving the efficiency and effectiveness of these functions, through prompt delivery of their services can augment the rate of economic growth. This relationship also works the other way round, viz. economic growth; implying increased economic activity, rising employment, industrial production, wholesale /retail sales and income levels; moves stock prices in the upward direction. 1 *The author is with NSE. Views expressed in the article are that of the author alone. N S E N E W S L E T T E R Dec 2009 2 Sawhney, Emmanuel and Feridun (2006) examined the long run relationship between economic growth and stock prices for Canada and the United States. Their results reveal that economic growth and stock prices share long run equilibrium relationship for both Canada and the U.S. Further, for the U.S., causality runs from economic growth to stock prices but not vice versa. However for Canada, the results reveal that there is a bi-directional causality between economic growth and stock prices. The effect of GDP releases on equity prices is difficult to predict in part because there are two potentially offsetting effects. Stronger than expected GDP growth implies potentially stronger dividend growth and higher equity prices, however, the accompanying inflation and interest rate concerns tend to have a negative effect on equity prices. Several studies in the macroeconomics and finance literature have examined this question with sufficiently large datasets to allow for more rigorous methods. These studies test for the effect of the surprise component of various macroeconomic releases (i.e. actual less consensus or survey estimates) on asset price movements on that day, or intraday around the time of the release (for example see Bernanke and Kutter (2003), and Fair (2003)) . In general, these studies tend not to find a significant effect of the GDP release news and equity price movements due to the offsetting effects noted above and difficulty measuring the true “news” contained in the data release. Rigobon and Sack (2006) using data from 1994 to 2006, find no significant effect of advance GDP release surprises on equity prices. However, they do find a slightly positive effect that is statistically significant when they use a more advanced econometric method which controls for censoring effects. The coefficient was tiny, so it would take a large surprise to generate even a small movement in stock prices according to their findings. Industrial production The positive relation between industrial production and stock prices is quite apparent. Higher industrial production numbers indicate a healthy economy and induce “feel good” sentiments among stock market investors. Current period’s positive data also increases expectations of better future performance by the industry as well and drives up stock prices in general and prices of stocks of the particular industrial sectors that have performed or are expected to perform better than the average. Fama (1990) shows that monthly, quarterly and annual stock returns are highly correlated with future production growth rates. He argues that the relation between current stock returns and future production growth reflects information about future cash flows that is impounded in stock prices. The same results are also found by Schwert (1990) who uses a larger data period for his study. In a study of Indian stock markets, Agrawalla and Tuteja (2008) examine the causal relationships between the share price index and industrial production. The study reports causality running from economic growth proxied by industrial production to share price index and not the other way round. Interest rates The basic functions of interest rates in an economy, in which individual economic agents take decisions as to whether they should borrow, invest, save and/or consume, can be said to have three aspects, viz. interest rates as return on financial assets serve as incentive to savers, making them defer present consumption to a future date; interest rates being a component of cost of capital affect the demand for and allocation of loanable funds; and the domestic interest rate in conjunction with the rate of return on foreign financial assets and goods are hedged against inflation. These broad roles of interest rates emphasize their significance in the structure of asset prices, stock prices being one such asset. It is the interplay between these three functions of interest rates that can be said to determine the impact of interest rate changes on a company’s stock prices movements. According to the Dividend Discount Model (a model used to determine the price at which a security should sell based on the discounted value of estimated future dividend payments), required rate of return and the share price are inversely related. Thus, returns on stocks would decrease with the increase in the interest rate. One argument substantiating this is that an increase in interest rate will increase the opportunity cost of holding money and investors substitute holdings of fixed income interest bearing securities for shares, hence leading to falling stock prices. Another possible explanation is that interest rate changes can impact equity prices through two conduits: by affecting the rate at which the firm’s expected future cash flows will be capitalized, and by altering expectations about future cash flows. In particular, an increase in interest rates leads to a decrease in expected future cash flows and hence a decline in demand for stocks and a fall in stock prices. 2 N S E N E W S L E T T E R Dec 2009 3 Inflation Irving Fisher, in his treatise, The Theory of Interest (1930), predicted a positive relationship between expected inflation and nominal asset returns. Also, common wisdom indicates that stocks are hedges against inflation so that as inflation increases, demand for stocks increases and so would the stock prices. However, the results of empirical analysis by most researchers indicate a negative relationship between common stock returns and various measures of expected and unexpected inflation appearing to contradict the above. These researchers have then tried to explain the negative relation in various ways. Based on the notion that money demand is procyclical, Fama (1981) theorizes that the inflation-stock return correlation is essentially a proxy for the negative relationship between inflation and real activity. He contends that an increase (decrease) in real activity is expected to coincide with a decrease (increase) in inflation and participants in the stock market anticipate the changes in real activity, so that stock prices appear to move inversely with inflation. Geske and Roll (1983) offer a “reverse causality” explanation to the inverse relation between inflation and stock returns, arguing that a reduction in real activity leads to an increase in fiscal deficits. As the Central Bank monetizes a portion of fiscal deficits the money supply increases, which in turn boosts inflation. Stock market returns reflect the changes in these macroeconomic variables, resulting in an inverse relationship between stock returns and inflation. Another explanation that is offered is that high rates of inflation increase the cost of living and a shift of resources from investments to consumption. This leads to a fall in the demand for market instruments which lead to reduction in the volume of stock traded. Also the monetary policy responds to the increase in the rate of inflation with economic tightening policies, which in turn increases the nominal risk-free rate and hence raises the discount rate in the valuation model and leads to decrease in stock prices. Exchange rate Exchange rate as an indicator of a currency movement is a monetary variable that affect prices of stock in a way similar to the inflation variable. Depreciation of the local currency makes import expensive compared to export. Thus, production costs of import companies increase and since all the cost cannot be passed on to the consumers because of the competitiveness of the market, this reduces corporate earning and hence the stock prices. Even firms whose entire operations are domestic may be affected by exchange rates, if their input and output prices are influenced by currency movements. On the other hand, for exporting companies, depreciation of the local currency increases export and hence increases in stock prices. Money supply Money supply in an economy is likely to influence share prices through at least three mechanisms. First, changes in the money supply may be related to unanticipated increases in inflation and future inflation uncertainty and hence negatively related to the share price; second, changes in the money supply may positively influence the share price through its impact on economic activity; and finally, an increase in the money supply leads to a portfolio shift from non-interest bearing money to financial assets including equities. Humpe and Peter (2007) find that money supply, M1 ( a liquid measure of the money supply that contains cash and assets that can quickly be converted to currency), does not contribute significantly to the stock price in the US. This perhaps suggests that the various influences the money supply has on the stock price (discussed above) may ‘cancel’ each other out. Overall importance of macroeconomic variables in explaining stock returns It would be pertinent to see what the overall impact of certain important macroeconomic variable is on the stock returns. Cutler, Porterba, and Summers (1989) estimate the fraction of the variation in aggregate stock returns that can be attributed to various types of economic news. The economic variables considered by them are: real dividend payments on value weighted NYSE portfolio; industrial production; real money supply; nominal long term interest rate; nominal short term interest rate, monthly CPI inflation rate and stock market volatility. The results indicate that macroeconomic news, as defined by variables above, explain only one-fifth of the movement in stock prices. While increase in unexpected real dividend and industrial production led to increase in stock prices; inflation, unanticipated volatility and market volatility had negative and significant impact on market returns. The other variables had less significant impact on share prices. The same result was also found by Fama (1981), whose paper concluded that a substantial fraction of return variation cannot be explained by macroeconomic news. 3 N S E N E W S L E T T E R Dec 2009 4 Thus, let us now look at other factors that may affect stock prices Section II Macroeconomic policies and stock market movements It is believed that government financial policy announcements and macroeconomic events have large influence on general economic activities in an economy including the stock market. Fiscal policy Theoretically, fiscal policy actions (changes in expenditures or taxes resulting in budget deficits or surpluses) play a significant role in the determination of asset prices. For example, increases in taxes, with government spending unchanged, would lower (expected) asset returns (or prices) as they discourage investors from (further) investing in the stock market. Also, increases in government borrowing raise the (short-term) interest rate which, in turn, lowers the discounted cash flow value from an asset (like a share) and thus signals, among other things, a reduction in stock market activity. From the investors’ perspective large budgetary deficits adversely impact stock and bond prices because they increase interest rates. That is because the government, being a large borrower, soaks up large amounts of funds that otherwise would have been available for the private sector, and thus drives up interest rates (that is, it ‘crowds out’ private spending/investment). The increase in interest rates, in turn, will reduce business capital spending as well as consumption expenditures and ultimately undermine real economic activity. These events will affect the financial markets by reducing asset prices and household wealth [Laopodis(_)]. Thus, this conventional analysis suggests that sustained budget deficits have severe implications on interest rates, national saving and the external account. It also entails additional risks to the economy which include a loss in both domestic and foreign investors’ confidence and adverse effects on the exchange rate. Laopodis (2009) examines the extent to which fiscal policy actions affect the stock market's behavior for the US during 1968-2005. His findings are consistent with the hypothesis that past budget deficits negatively affect current stock returns thus suggesting that the market is inefficient with respect to information about future fiscal policy actions. Monetary Policy A change in one of the monetary policy instruments like the money supply or the RBI bank rate leads to changes in market interest rates which compel investors to revalue their equity holdings. In other words, the value of an investor’s wealth, given by the sum of the discounted future cash flows and/or dividends, is affected by an easing or tightening of monetary policy through either the discount rate or expected earnings (or both). Thorbecke (1997) looked at the question whether monetary policy has real effects on stock returns. It measured monetary policy by innovations in the Federal Fund’s rate and non-borrowed reserves and also by an event study of Federal Reserve policy changes. In every case the evidence indicated that expansionary policy increases ex-post stock returns. Bernanke and Kuttner (2003) analyzed the impact of changes in monetary policy on equity prices, with the objectives both of measuring the average reaction of the stock market and also of understanding the economic sources of that reaction. They found that on average, a hypothetical unanticipated 25-basis-point cut in the federal funds rate target was associated with about a one percent increase in broad stock indexes. The results further indicated that the effects of unanticipated monetary policy actions on expected excess returns account for the largest part of the response of stock prices. Section III Expectations and other developments affecting stock prices Not only the actual economic events, but also expectations about these events seem to affect investors’ sentiments and in turn have their impact on the stock markets. There are also quite a few non-economic events, such as those political in nature or seasonal patterns that have a bearing on stock market returns. Some of these are examined below. 4 N S E N E W S L E T T E R Dec 2009 5 Expectations In one way, it can be said that stock markets movements is interplay of “expectations” which are often self fulfilling in nature. An investor buys stocks of a company expecting that the company would perform well in the near or long term future (based on whether he is a short term or long term investor) so that he could sell the stock at an appropriate time to reap a profit on his investments. Suppose this feeling about the particular stock of a company prevails across the market then everyone would want to buy the company’s stock, leading to rising demand and hence higher prices. Expectations may be not only about a company or an industrial sector, but also about the economy as a whole. These could be expectations about policy stance of the government on important issue such as listing of public sector undertakings or direction of monetary policy, viz tight or liberal policy and expectations about announcements in the annual central budgets regarding direction of government policy on financial sector reform agenda or taxation issues having a bearing on the stock markets etc. Each of these impact sentiments of investors and their take on whether to buy or sell in the stock markets. Seasonal patterns/calendar anomalies The weak form Efficient Market Hypothesis (EMH) states that if the market is efficient, then the current stock prices reflect all the information contained in its past prices and thus, follows the random walk. The presence of seasonality or calendar anomalies in stock returns violates the weak form of market efficiency because equity prices are no longer random and can be predicted based on past pattern. Seasonality in stock returns is said to exist if the average returns were not same in all periods. The month-ofthe-year effect would be present when returns in some months are higher than other months. In the USA and some other countries, the year-end month (December) is the tax month. Based on this fact, a number of empirical studies have found the ‘year-end’ effect and the ‘January effect’ in stock returns consistent with the ‘tax-loss selling’ hypothesis. It is argued that investors, towards the end of the year, sell shares whose values have declined to book losses in order to reduce their taxes. This lowers stock returns by putting a downward pressure on the stock prices. As soon as the tax year ends, investors start buying shares and stock prices bounce back. This causes higher returns in the beginning of the year, that is, in the month of January. While some researchers on the Indian markets have found evidence of December effect, others upheld the taxloss-selling hypothesis in the Indian market explaining the presence of abnormal returns in April (India’s tax year ends in March). Pandey (2002) reported the existence of seasonal effect in monthly stock returns of BSE Sensex in India and confirmed the January effect. Kumari and Mahendra (2006) studied the day of the week effect using data from 1979 to 1998 on BSE and NSE. They reported negative returns on Tuesday in the Indian stock market. Moreover, they found returns on Monday were higher compared to the returns of other days in BSE and NSE. A latest study by Chakrabathi and Sen (2007) found the November effect at the market level. They explain this effect as happening in the month of November perhaps because during the festive season or when the festive seasons are just over, people generally have access to more cash and/or better access to liquid cash. The optimism regarding market behaviour along with availability of liquid cash in the hands of investors to take advantage of the opportunity of market movements have probably made November the month of significant returns in India in recent years, according to them. Political developments Political instability generally propels investors into a selling spree. A fragmented election result usually indicates the formation of an unstable coalition government. Investors perceive this as leading to uncertainty on decisions for any major financial sector reform agenda or on the take of the government on fiscal or monetary policy etc. On the other hand, if election results bring back a stable and strong government to power, both domestic and foreign investors feel secure about investing in a stable financial sector policy regime. Also, a political development – inside or outside the country - may have bearing on share price. Usually this factor affects all the shares irrespective of the sector classification. Beaulieu et al. (2003), in a study done on Canadian stock markets, defined political risk as “risks to a firm’s profitability that are principally the results of forces external to the industry and which involve some sort of government action or, occasionally, inaction”. These government actions which could change the business environment of firms are expropriation, policy shifts in taxation or regulation, imposition of capital and foreign exchange controls. 5 N S E N E W S L E T T E R Dec 2009 6 They affirmed that the impact of political risk on the volatility of stock returns could be explained by the fact that value of a firm is equal to the present value of its expected cash flows, whereas the discount rate represents investors’ required rate of return. If there is uncertainty, the range of realizations for expected cash flows and discount rates should be wider and the variance of firms’ returns should grow accordingly. In interesting paper on the Indian markets, Kakani and Ghalke (2006), using data of two market indices (BSE Sensex and NSE Nifty) for a period of more than 14 years (1991 to 2005), found that the Parliament Sessions have a significant relation to the stock market returns. Returns are lower and market volatility is higher when Parliament is in-session. Further evidence indicated that the average market returns (for NSE) when the Parliament is in recess is almost 10 times the average returns obtained when the Parliament is in-session. They also found that this Parliament Session Effect was not related to two important influencers of Indian capital markets, namely, the foreign institutional investments and the global equity markets (especially for new economy). Integration of financial markets worldwide Globalization has had a profound effect on financial market integration across the world financial markets, following which linkages between returns of various individual local markets have generally been observed. A number of empirical studies have documented transmission of volatility from one market to another and dynamics of the linkages of these markets. For example, the effects of stock market crash of October 1987 and the Asian financial crisis in 1997 were widely felt in the whole world. More recently ripples of the sub-prime crisis in the US and Europe has been felt across the financial markets of various countries. The effect of one market largely spreads to another through foreign institutional investors (FII) who simultaneously track different market indices and continuously move funds between markets. Their confidence levels in a particular market and strategies have now become increasingly important. If they perceive the stock markets of a particular country as a good bet for investment, they move their investments into that economy and move out in case of negative sentiments. The gain of one market is generally loss of another, considering that the stock of FII funds is constant in the short term. Thus, FII investments play a key role in synthesizing markets across a region. Also, stocks of companies are listed on more than one exchange, spread across nations so that their movements in one markets impact their prices in other markets where they are listed and traded. In the Indian context, the linkages between Indian markets and international stock markets can also be explained by investments through the ADR/GDR route, whereby Indian shares are listed and traded on the US and other international stock exchanges. Bose and Mukherjee (2005) look at the integration of the Indian stock market with many of the Asian markets and the US stock market for the period January, 1999 to June, 2004. They find that post-Asian crisis up to mid-2004 the Indian stock market did not function in relative isolation from the rest of Asia and the US. On a daily basis the Indian index is most highly correlated with the Singapore STI index, and is also very highly correlated with the stock indices of Malaysia, South Korea, Taiwan and Thailand, while, the least correlation is observed with the US S&P500 index. More importantly, during the period of the study, returns on the Indian BSE Sensex, was also seen to exert considerable influence on stock returns in Japan and Korea, along with Taiwan and to an extent Malaysia, though with a low probability. Mukherjee and Mishra (2008) examined the return and volatility spillover among Indian stock market and 12 other developed and emerging Asian countries over a period from November 1997 to April 2008. They find that the contemporaneous intraday return spillover among India and almost all the sample countries are positively significant and bi-directional. More specifically, Hong Kong, Korea, Singapore and Thailand are found to be the four Asian markets from where there is a significant flow of information in India. Similarly, among others, stock markets in Pakistan and Sri Lanka are found to be strongly influenced by movements in Indian market. In conclusion This paper has attempted to put at one place a set of important factors that are commonly seen to drive prices in stock markets. However, a caveat is appropriate here. There are still random forces – “the Great Unknowns” – combined with the known factors that transmit their impact to stock prices through the laws of supply and demand. Thus, the above mentioned factors affecting stock market movements are, by no means, the only factors that can influence stock returns. It is interesting to note what John Maynard Keynes, British economist whose ideas have been a central influence on modern macroeconomics, had to say about stock markets. 6 N S E N E W S L E T T E R Dec 2009 7 In his treatise, “The General Theory”, he decried the failure of investors in stocks to consider long term values and opined that stock market is a “casino” dominated by professionals “concerned not with what an investment is really worth to a man who buys it “for keeps” but with what the market will value it at, under the influence of mass psychology, three months or a year hence (The General Theory, Vol. 7, pp 154-55 ). Thus, he argued that investors are guided by short-run speculative motives and are not interested in assessing the present value of future cash flows from their investment. The individual investors tend to conform to the behavior of the majority or the average. Stock markets, according to him, can be subject to positive and negative sentiment even though no basis exists for such sentiments and hence movement of prices cannot be really understood. These observations of Keynes, made in the 1930s seem to hold true even today when one finds that no amount of fundamental of technical analysis is able to fully explain the movement of stock prices or determine its future course. References 1. Agrawalla Raman K. and Tuteja S. K (2008), “Share Prices and Macroeconomic Variables in India: An Approach to Investigate the Relationship Between Stock Markets and Economic Growth”, Journal of Management Research Volume : 8, Issue : 3. 2. 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Ross Levine; Sara Zervos (1998), “Stock Markets, Banks, and Economic Growth”, The American Economic Review, Vol. 88, No. 3, pp. 537-558. 24. Rigobon, Roberto and Sack, Brian (2006)."Noisy Macroeconomic Announcements, Monetary Policy, and Asset Prices," NBER Working Papers 12420, National Bureau of Economic Research, August. 25. Shanmugam, K.R. and Misra, Biswa Swarup, (2009), Stock Returns-Inflation Relation in India, 1980-2004, Applied Econometrics and International Development, 9, no1. 26. Sawhney Bansi, Emmanuel Anoruo and Feridun, Mete (2006), “Long-Run Relationship between Economic Growth and Stock Returns: An Empirical Investigation on Canada and the United States”. Ekonomicky Casopis, Journal of Economics, Vol. 54, No. 6, pp. 584-596. 27. Schwart William G. (1990), “Stock Returns and Real Activity: A Century of Evidence”, Journal of Finance, Vol 45, No. 4. 28. Thorbecke, W., (1997), “On stock market returns and monetary policy”, Journal of Finance 52(2), 635-654. 8 N S E N E W S L E T T E R Dec 2009 9 S P O T L I G H T Government has decided that all profitable listed CPSEs should meet the mandatory listing of 10% public ownership; and all unlisted CPSEs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges The President’s Address to Joint Session of Parliament on 4th June 2009 and Finance Minister’s Budget Speech on 6th July, 2009, articulated the intention of the Government to encourage people participation in the disinvestment programme. It had been mentioned that public sector undertakings are the wealth of the nation, and part of this wealth should rest in the hands of the people while retaining at least 51% Government equity in our enterprises. Now, Government, in a press release dated 5th November, 2009, decided: (i) all profitable listed CPSEs should meet the mandatory listing of 10% public ownership; and (ii) all unlisted CPSEs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges. The disinvestment proceeds would be channelized into the National Investment Fund (NIF). The corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes determined by Planning Commission and Department of Expenditure. The status quo ante of NIF will be restored from April 2012. 9 N S E N E W S L E T T E R Dec 2009 10 R E G U L A T O R Y Initiated by SEBI 1. down C H A N G E S Regulatory framework for trading on Small and Medium Enterprises (SME) exchange/platform laid The SEBI Board, at its meeting held on 9th November 2009, decided on the following regulatory framework for trading on SME exchange or platform: ⇒ Companies listed on the SME exchanges would be exempted from the eligibility norms applicable for IPOs and FPOs prescribed in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR). ⇒ In order to have informed, financially sound and well-researched investors with a certain risk taking ability, a minimum IPO application size of Rs. 1 lakh would be prescribed. ⇒ The minimum trading lot would be Rs. 1 lakh. ⇒ An upper limit of Rs. 25 crore paid up capital would be prescribed in order for a company to be listed on the SME platform/exchange and a minimum paid up capital of Rs.10 crore would be prescribed for listing on the main boards of NSE and BSE. ⇒ The offer document will have to be filed with SEBI and the exchange. No observations would be issued by SEBI on the offer documents filed by the Merchant Bankers (MBs). ⇒ The MB to the issue will bear the responsibility for market making for a minimum period of three years. MBs would be allowed to do market making along with a disclosed nominated investor (like PE, VC, HNI and QIB). Under this arrangement, all the stock being bought and sold as part of market making will ultimately get transferred to the disclosed nominated investor with whom the Merchant Banker has a contractual agreement. Merchant Banker would have to disclose their intention of this arrangement and have it approved by stock exchanges where the issuer SME is listed. ⇒ Certain well capitalized registered entities like Venture Capitalists may be allowed to have a contractual agreement with the Merchant Banker to share the burden of devolvement of underwriting obligation. ⇒ During the compulsory market making period, promoters/acquirers will be allowed to dilute their shareholding only through offer for sale or to an acquirer and not to a market maker. ⇒ SEBI regulations on Takeover (Substantial Acquisition of Shares and Takeovers Regulations) will not be applicable to acquisition of shares through Merchant Banker /Market Maker provided that the Merchant Banker/ Market Maker does not have the intention of taking over the management and there is no change in control (direct /indirect) of the company. ⇒ Merchant Bankers who have the responsibility of market making and have a firm allotment made in IPO for purpose of market making may, at their option, be represented on the board of directors of the company in view of the commitment of market making subject to agreement of the issuer. However this will not be mandatory on the Merchant Banker. ⇒ No separate category of Merchant Bankers will be created. ⇒ Merchant Bankers will be required to ensure that the issue is 100% underwritten. However only a minimum percentage (15%) of the issue size will be mandated to be compulsorily underwritten by the Merchant Banker itself. ⇒ A minimum number of investors (say 50) shall be specified for the IPO only. There shall be no continuing requirement of maintaining the minimum number of investors. However, compliance with the requirements of Companies Act, 1956 needs to be ensured at all times. 10 N S E N E W S L E T T E R Dec 2009 11 R E G U L A T O R Y C H A N G E S ( c o n t d … ) ⇒ Companies listed on the SME exchange/ platform of an existing exchange may send to their shareholders a statement containing the salient features of all the documents as prescribed in section 219 (1) (b) (iv) of Companies Act, 1956. This information shall also be displayed on the website of the exchange. Further the Company shall compulsorily maintain a website on which this information can be displayed. ⇒ Investors with holdings of value less than Rs. 1,00,000 (such reduction in the holding may have been due to fall in prices or his having offloaded a part of the holdings previously), are allowed to off load their holding to the Market Maker in that scrip. (provided that the investor sells his entire holding in that scrip in one lot). Market Makers will be authorised to buy these shares from such investors. ⇒ Preparation and submission of financial results (as mandated in the listing agreement) on a “half yearly basis” for SMEs, instead of “quarterly basis”. ⇒ All the provisions of clause 49 (corporate governance) need to be complied with. 2. Amendments to Issue of Capital and Disclosure Requirements, Regulations, 2009 (ICDR) interalia, requiring interim disclosure of balance sheet items by listed entities and permitting pure auctions for qualified institutional investors (QIBs) in follow-on public offerings SEBI, at its Board meeting held on 9th November, 2009, decided to amend the ICDR Regulations/ Listing Agreement, as follows: ⇒ QIB Status to insurance funds set up by armed forces: The Board decided to accord QIB status to insurance funds set up by armed forces such as Army Group Insurance Fund. ⇒ Reservation to employees: The Board decided to put a ceiling of Rs.1 lakh on the value of allotment that can be made to an employee under employee reservation category and to permit reservation upto 5% of the post issued capital instead of 10% of issue size. The Board also decided to extend reservation to employees along with rights issue. The ICDR Regulations also provide for discount upto 10% of issue price to retail individual investors and shareholders but not to employees. The Board decided to allow discount of not more than 10 percent to employees also under the reserved category only in public issues for application size upto Rs.1,00,000/-. ⇒ Voluntary adoption of IFRS by listed entities having subsidiaries: The Board, decided to provide an option to all listed entities with subsidiaries to submit their consolidated financial statements as per IFRS. However, such entities shall continue to file their stand alone financials as per Indian GAAP in line with the Companies Act requirements. ⇒ Interim disclosure of Balance Sheet items by listed entities: Taking note that internationally most jurisdictions require disclosure of Balance Sheet items on an interim basis whereas in India companies disclose only interim financial results, the Board decided to mandate half-yearly disclosure of Balance Sheet items with audited figures or un-audited figures with limited review. ⇒ Timelines for submission of financial results by listed entities: The Board decided to make it mandatory to disclose only limited review or audited results within 45 days of the end of the quarter. The Board also decided to reduce timeline for disclosure of audited annual results from 90 days to 60 days to those companies which opt to submit their annual audited results on a stand-alone basis in lieu of the last quarter un-audited financial results. ⇒ Requirements for Fast Track Issues: SEBI Board on a review decided to relax certain requirements of Fast Track Issues (FTIs_ such as reducing the average market capitalization of public shareholding of the issuer to five thousand crore rupees from ten thousand crore rupees, pegging the annualized trading turnover to free float for companies whose public shareholding is less than 15 percent of the issued capital. The Board also decided that incase the clause relating to composition of Board of Directors has not been complied with in one or more quarters, it need not be deemed as non compliance, provided the company is in compliance in this regard at the time of filing the offer document with stock ex11 N S E N E W S L E T T E R Dec 2009 12 R E G U L A T O R Y C H A N G E S ( c o n t d . . ) ⇒ Relaxation from restatement of financial statements: The Board decided that the requirement for disclosure of financials in FPOs of identical instruments quoted on a stock exchange may be brought on par with rights issues, to start with for companies that are eligible to make an issue under fast track, subject to certain conditions. ⇒ Introduction of pure auction as an additional book building mechanism: The Board decided to introduce an additional method of book building, to start with, for FPOs, in which the bidders would be free to bid at any price above the floor price and allotment would be on price priority basis and at differential prices. However, retail individual investors in such cases would be allotted shares at the floor price. The Board further decided that if the issuer desires to place a cap either in terms of number of shares or percentage to issued capital of the company in order that a single bidder does not garner all shares on offer and there is wider distribution, the same may be permitted. 3. ture Permission given to transactions in Mutual Fund schemes through the stock exchange infrastruc- SEBI, in a recent circular said that the need for enhancing the reach of mutual fund schemes to more towns and cities has been aired through various forums/ channels. To address this issue, various models have been debated and discussed. The infrastructure that already exists for the secondary market transactions through the Stock exchanges with its reach to over 1500 towns and cities, through over 200,000 Stock Exchange terminals can be used for facilitating transactions in mutual fund schemes. The Stock Exchange mechanism would also extend the present convenience available to secondary market investors to mutual fund investors. Hence, SEBI has decided that units of mutual fund schemes may be permitted to be transacted through registered stock brokers of recognized stock exchanges and such stock brokers will be eligible to be considered as official points of acceptance as per SEBI Circular dated October 11, 2006. 4. Debt Listing Agreement for debt securities further simplified SEBI had, vide its circular dated May 11, 2009 put in place the Simplified Listing Agreement for Debt Securities. Pursuant to suggestions from various market participants received subsequently, SEBI had amended the said Listing Agreement vide its circular dated November 26, 2009. The amendments are briefly summarized as under: ⇒ 100% Asset Cover: To align the Listing Agreement with the provisions of the Companies Act, 1956, the amended Listing Agreement requires issuers to maintain 100% asset cover sufficient to discharge the principal amount at all times for the debt securities issued. Further, to provide more information to investors, the periodic disclosures to the stock exchange shall now require disclosure of the extent and nature of security created and maintained. ⇒ Submission of certificate on maintenance of security: As against half-yearly certifications on security cover in respect of listed secured debt securities, the amended Listing Agreement provides for submission of such certificates regarding maintenance of 100% asset cover, and the time limit of submission in respect of the last half year has been aligned with the option provided for submission of annual audited results at a later date. In addition to Banks and NBFCs being exempt from submitting such certificates, issuers of Government guaranteed bonds shall also be exempt. ⇒ Statement on Use of Issue Proceeds: In order to enhance the quality of disclosures made to investors, issuers shall be required to furnish a statement of deviations in use of issue proceeds, if any, to the stock exchange on a half yearly basis. Also, the same is required to be published in the newspapers simultaneously with the half-yearly financial results. ⇒ Deposit of 1% of issue proceeds: So as to ensure that the interest of investors investing in public issues of debt securities is protected, the issuer shall be required to deposit an amount calculated at 1% of the amount of debt securities offered for subscription to the public. It is refundable or forfeitable in the man12 ner stated in the Rules, Bye-laws and Regulations of the Exchange. N S E N E W S L E T T E R Dec 2009 13 R E G U L A T O R Y C H A N G E S ( c o n t d . . ) ⇒ Submission/ publication of Financial Statements: The time-lines for disclosure of financial statements have been aligned with the proposed changes to the Equity Listing Agreement. Accordingly, issuers would now have to publish/ furnish to the Exchange, either audited half yearly financial statements or unaudited half yearly financial statements subject to a limited review within 45 days from the end of the half year. In case of the last half year, issuers may opt to submit their annual audited results in lieu of the unaudited financial results for the period, within 60 days from the end of the financial year. Initiated by RBI 1. Draft guidelines on Over the Counter (OTC) Foreign Exchange Derivatives and Hedging Commodity Price Risk and Freight Risk Overseas, placed on RBI’s website for public comments The Reserve Bank of India has, on 12th November, 2009, placed on its website the draft guidelines on OTC Foreign Exchange Derivatives and Hedging Commodity Price Risk and Freight Risk overseas for public comments. Presently, Foreign Exchange Derivative Contracts are governed by Regulations notified vide Notification No. FEMA 25/2000-RB dated May 3, 2000 [viz. Foreign Exchange Management (Derivative Contracts) Regulations, 2000], directions issued by the Reserve Bank from time to time and the comprehensive guidelines on derivatives issued by the Department of Banking Operations and Development vide their circular dated April 20, 2007. In light of the developments in the domestic and international financial markets and based on the feedback received from banks, market participants, industry associations and others, the existing guidelines on foreign exchange and commodity and freight derivatives overseas were reviewed by an Internal Group of the RBI. Based on this review, the draft guidelines have been placed on the website for wider comments / views from the market participants / users of foreign exchange derivatives. The important changes proposed in the draft guidelines are as follows: ⇒ Importers and exporters having foreign currency exposures in trade transactions are being permitted to write covered call and put options both in foreign currency-rupee and cross currency and also receive premia. ⇒ AD Category I banks are being permitted to offer plain vanilla cross currency options to persons residents in India (other than AD Category- I banks), who transform their rupee liability to a foreign currency liability. ⇒ Since importers and exporters are being permitted to write covered call and put options both in foreign currency- rupee and cross currency and also receive premia, the facility of zero cost structures/cost reduction structures is being withdrawn. NSE NEWS 1.Following SEBI initiative, NSE has introduced New Mutual Fund Service System (MFSS) for transaction in mutual fund schemes through the stock exchange infrastructure SEBI vide its circular dated November 13, 2009 issued guidelines for facilitating transaction in Mutual Fund schemes through the Stock Exchange infrastructure. In view of the same the NSEIL introduced the new Mutual Fund Service System (New MFSS). This system was operationalised on 30th November, 2009. In order to participate in the New MFSS, NSE requires trading members to comply with the documentation requirements as specified in its Circular dated 24th November, 2009. The circular provides: 13 N S E N E W S L E T T E R Dec 2009 14 N S E N E W S ( c o n t d … ) ⇒ All trading members of the Exchange who are registered with Association of Mutual Funds of India (AMFI) as Mutual Fund Advisors and who have signed up with the specific Asset Management Company (AMC) of a Mutual Fund are eligible to participate in the New MFSS. For this purpose, trading members shall have to register with NSEIL as Participants by submitting an Undertaking as per the specified format. ⇒ Participants shall abide by the operating guidelines and terms & conditions of this circular and the circulars issued from time to time with regard to New MFSS by NSEIL and such other requirements as prescribed by SEBI, Association of Mutual Funds in India (AMFI) or any other regulatory authority for market intermediaries in the business of mutual fund units. ⇒ Further, the Participants shall ensure that the investors desirous of participating in the New MFSS register with the Participant as a client have to submit the letter as per the format specified in Annexure to this circular. All clients shall undertake to abide by the operating guidelines and terms & conditions of this circular and the circulars issued from time to time by NSEIL with regards to New MFSS. ⇒ The existing Mutual Fund Scheme (which was introduced vide NSE’s circular dated December 14, 2000) will be discontinued and substituted with the New MFSS. NCFM News 1. Addition of three more modules in the list of modules qualifying for Fee Discount Scheme NSE introduced a Fee Discount Scheme for candidates appearing for various NCFM modules’ tests, vide its circular dated 29th September, 2009. Under the Scheme started for a period of one year (from October 01, 2009 to September 30, 2010), after taking two tests in specified modules between October 01, 2009 and March 31, 2010 (both days inclusive), a candidate would qualify for availing 50 percent discount on all the subsequent tests provided such tests are: (a) for modules included in the scheme, and (b) taken by September 30, 2010. In continuation to the circular dated September 29, 2009, the following three modules have since been added to the list of modules qualifying for fee discount: 1. NSDL - Depository Operations Module 2. Commodities Market Module 3. Information Security Auditor's Module Part-1 Information Security Auditor's Module Part-2 The updated list of Qualifying Modules for Fee Discount Scheme is given below: Sr. No. Name of Module 1 Capital Market (Dealers) Module 2 Derivatives Market (Dealers) Module 3 FIMMDA-NSE Debt Market (Basic) Module 4 Securities Market (Basic) Module 5 Surveillance in Stock Exchanges Module 6 Compliance Officers (Brokers) Module 7 Compliance Officers (Corporates) Module 8 Options Trading Strategies Module 9 NSDL - Depository Operations Module 10 Commodities Market Module 11 Information Security Auditor's Module Part-1 Information Security Auditor's Module Part-2 Circulars regarding Fee discount Scheme NSE/NCFM/13146 dated September 29, 2009 and NSE/NCFM/13457 dated November 13,2009 14 N S E N E W S L E T T E R Dec 2009 15 NCFM News (condt..) 2. Addition of two more modules in the list of modules qualifying for “NSE Certified Market Professional (NCMP) certificates With effect from August 17, 2009, NSE started to offer “NSE Certified Market Professional (NCMP)” certificates to those who have cleared specified NCFM modules) as per the following eligibility criteria: NCMP Level 1 : 3 – 4 modules NCMP Level 2 : 5 – 6 modules NCMP Level 3 : 7 – 8 modules NCMP Level 4 : 9 or more modules In continuation to the above, the following two modules have since been added to the list of modules qualifying for NCMP certification: 1. Currency Derivatives: A Beginner’s Module 2. Equity Derivatives: A Beginner's Module Updated list of modules qualifying for NCMP certification: Sr. No. 1 2 3 4 5 6 7 8 9 10 11 Name of Module Capital Market (Dealers) Module Commodities Market Module Derivatives Market (Dealers) Module FIMMDA-NSE Debt Market (Basic) Module Financial Markets: A Beginners’ Module Mutual Funds : A Beginners' Module NSDL–Depository Operations Module Options Trading Strategies Module Securities Market (Basic) Module Currency Derivatives: A Beginner’s Module Equity Derivatives: A Beginner's Module Circular regarding NCMP certification NSE/NCFM/12900 dated August 17, 2009 Introduction of NCMP certificates. 3. 3. Launch of “Equity Derivatives: A Beginner’s Module” “Equity Derivatives: A Beginner’s Module” has been launched under NCFM with a view to equip candidates to obtain basic but essential information and concepts regarding the exchange traded Equity Derivatives markets. The “Equity Derivatives: A Beginner’s Module” test would contain 50 questions to be answered in 60 minutes. The passing percentage would be 50%. There would be no negative marking. The fees for the module would be Rs. 750/- per test. Further this module would be considered as one of the qualifying modules for NCMP certification (refer NSE’s circular dated August 17, 2009). 15 N S E N E W S L E T T E R Dec 2009 16 I N T E R N A T I O N A L N E W S 1. Tokyo Stock Exchange’s TOPIX Futures to trade on NYSE Liffe from summer 2010 Tokyo Stock Exchange, Inc ("TSE") and NYSE Liffe announced that TOPIX Futures will be listed on the NYSE Liffe market from summer 2010. The TOPIX index futures contract is the benchmark Japanese stock price index already traded on the TSE. The Tokyo Stock Exchange's TOPIX Futures are already actively traded by investors worldwide, who use the instrument as a way to invest in Japan's largest stocks. Listing the contracts on NYSE Liffe will increase the number of customers who can trade the contract, and enable trading in the TOPIX Future while the Tokyo market is closed. The contract specifications for TOPIX Futures traded on NYSE Liffe will be fundamentally the same as those traded on TSE. Both exchanges are currently working together to establish a position transfer scheme where all TOPIX open positions in NYSE Liffe at the end of each day will be automatically transferred to TSE. This will allow investors to enjoy the convenience of simpler position management. Both exchanges are now discussing about the details of this working scheme so that it can be applicable to other products in addition to TOPIX Futures. A full scale outline will be announced as soon as plans are finalized. 2. Warsaw Stock Exchange introduces the Respect Index On 19 November 2009, the Warsaw Stock Exchange announced the Respect Rating – a ranking of socially responsible WSE-listed companies – and started publishing the Respect Index. The Respect Index measures the performance of companies that were classified as socially responsible in a survey conducting by the exchange. It is an income index, taking into account corporate actions such as dividends and rights issues. Sixteen companies that received the highest rating in the survey were included in the composition of the Index. Through this index, the exchange aims to promote responsible management in WSE-listed companies and measuring it through a special-purpose index. 3. London Stock Exchange to launch new retail bond market for the UK The London Stock Exchange announced that it will introduce a new order-driven trading service for bonds. This new electronic order book will be available for a select number of gilts and UK corporate bonds and will offer private investors with an on-screen secondary market in London-listed debt securities for the first time. This new service is expected to go live in February next year. The main characteristics of the new trading service are: • An electronic order-driven model, with retail-friendly order sizes, and continuous two-way trading provided by market makers. Two new segments for electronically tradable gilt-edged securities (UK Gilts) and electronically tradable UK fixed interest securities (UK Corporates) will be introduced on London Stock Exchange Group's TradElect trading system. The trading day will be made up of an initial opening auction phase followed by continuous trading until market close. There will be no closing auction. • • The new trading service is not expected to impact existing wholesale bond or gilt trading and trade reporting arrangements and does not aim to change established practices in the institutional fixed income markets. 16 N S E N E W S L E T T E R Dec 2009 17 MANAGERIAL PERSONNEL OF NSEIL NAME Mr. Ravi Narain Ms. Chitra Ramkrishna Mr. J Ravichandran Mr . Ravi Apte Mr. R Sundararaman Mr. Yatrik R Vin Ms . Kamala Director Chief Technology Officer Sr. Vice President Sr. Vice President Vice President NSCCL Finance & Accounts Compliance, Inspection, Membership, Arbitration, Defaulters Section & Investor Service Cell SBU - Education NSCCL - Development & NCCL, NOW, Web Team Investigation, Surveillance & Inspection Trade (Capital Market, Currency Derivatives, F&O & WDM), Development & Marketing New Products & Six Sigma Inititiatives SBU - Education Inspection & Compliance Investor Service Cell Listing & Corporate Communications Premises NOW, Dotex International Ltd. Development Investigation Secretarial NSCCL - Securities & Data Supply Legal Trade - (Capital Market, F&O, Currency Derivatives & WDM) India Index Services & Products Ltd. & Dotex Int'l DESIGNATION DEPARTMENT Managing Director and CEO Jt. Managing Director Finance & Accounts, Legal & Secretarial Mr . Nirmal Mohanty Mr. R Nanda Kumar Mr. Ravi Varanasi Ms. T. S. Jagadharini Head - SBU EDU Vice President Vice President Vice President Mr . Vidhu Shekhar Mr. Arup Mukherjee Mr. C. N. Upadhyay Mr. Dhruvkumar Patil Mr. Hari K Mr. Mahesh Haldipur Mr. Mayur Sindhwad Mr . Nilesh Tinaikar Ms. Nisha Subhash Mr. R Jayakumar Ms . Rana Usman Mr. Ravindra Mohan Bathula Mr. Suprabhat Lala Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Asst. Vice President Mr. Suresh Narayan Asst. Vice President 17 N S E N E W S L E T T E R Dec 2009 18 MANAGERIAL PERSONNEL OF NSEIL NAME Mr. T Venkat Rao Mr. Ajith Kumar V Ms. Aparna Bhat Mr . Amit Bhobe Mr. Amol Mahajan Ms. Anuradha Guru Mr . Arvind Goyal Mr . Avinash Kharkar Mr . Bireshwar Chatterjee Ms. Himabindu Vakkalanka Mr . Huzefa Mahuvawala Mr . Janardhan Gujaran Ms. Jayna Gandhi Mr . Johnson Joseph Chiriyath Mr . Kiran Dusane Mr . Kiran Sawant Ms. Pareezad Deboo Mr . Prashanto Banerjee Mr . Ram Surve Ms . Rehana D'Souza Mr . Sandeep Dandapat Mr . Sandeep Manoharan Mr . Shekhar Rao Ms. Sonali Karnik Mr . Sunil Gawde Ms. Sunitha Anand Ms . Sushama Bhagchandani Mr . Vinayak Shenoy DESIGNATION Branch In-charge Manager Manager Manager Manager Officer on Special Duty Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Branch In-charge Manager Manager Manager Manager Branch In-charge Manager Manager DEPARTMENT Regional Office - Delhi Administration & Development NSCCL -Risk Management NCCL Finance & Accounts SBU - EDUCATION Currency Derivatives - Trade Listing Investigation Development NSCCL -Risk Management F&O - Trade Finance & Accounts Investor Service Cell Premises NSCCL - Collaterals NSCCL - Currency Derivatives Marketing Human Resources Membership Regional Office - Kolkata NSCCL - Development Finance & Accounts Surveillance Capital Market - Trade Regional Office - Chennai & Hyderabad Finance & Accounts Finance & Accounts 18 N S E N E W S L E T T E R Dec 2009 19 MANAGERIAL PERSONNEL OF NSE INFOTECH SERVICES LTD NAME Mr.N Muralidaran Mr.G. M. Shenoy Mr.M. R. Krishnan Ms.Hema Iyer Mr.Mahesh Soparkar Mr.P. R. Visvas Ms.Mamatha Rangaprasd Mr.Mahesh Basrur Mr.Hemant Patade Mr.Deviprasad Singh Ms.Smrati Kaushik Mr.Viral Mody Mr.Hitesh Shah Mr.Sujoy Das Mr.Sudhir Sawant Mr.Pranav Gupta Mr.Rajanish Nagwekar Mr.Nipun Dave Mr.Bineet Jha Ms.Geeta Mathew Mr.Mathew Joseph K Mr.Benny Sebastian Mr.Manoj Joshi Ms.Anuja Joshi Mr.Suresh Chandani Mr.Shibu Tomy Ms.Pranali Taskar Mr.Umesh Agroya Mr.Joy John Mr.Narayan Neelakanthan Ms.Bernadine Swamy Mr.Mahesh Dere Mr.Anoop Kumar Rawat Mr.Nitin Gupte Mr.Sandeep Kumar Gupta Mr.Tushar H. Kulkarni Mr.Prasad Addagatla DESIGNATION CEO Senior Vice President Vice President Vice President Group Head Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Assistant Vice President Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Consultant Manager Manager Manager Manager DEPARTMENT Projects Projects Infrastructure Risk Management Projects, DBA/SysAdmin Internal Systems - Listing, DWH Trade FOCASS, NCSS BCP Telecom Trade Trade DBA /Sys Admin PRISM / TAP Project Management Office Risk Management Index / Neat Plus Architecture HWARE SUPPORT ASG / Operations NCSS Membership Projects BCP Trade NFA/FAMS Telecom Telecom BCP - Chennai Telecom HRD Membership DBA Telecom ASG C2N SysAdmin 19 N S E N E W S L E T T E R Dec 2009 20 MANAGERIAL PERSONNEL OF NSE INFOTECH SERVICES LTD NAME Mr.Suraj P Bangera Mr.Manoj Kumar Singh Mr.Sagar Joshi Mr.Shreekantha Velankar Mr. Balakrishnan M Mr.Aditya Agarwal Ms.Meena Hajare Mr.Nishant Jha Ms.Veena Khilnani Mr.Vinit Naik Ms.Vishakha Shenoy DESIGNATION Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager Manager DEPARTMENT Web TECH - Delhi Project Management Office DWH FOCASS Architecture Listing OPMS DBA Survellience PRISM 20