Evolution of Indian Commodity Market.

Commodities Market History of India
1875	Bombay Cotton Trade Association Ltd. Set up the first organized futures market.
1893	Bombay Cotton Exchange Ltd. Was established following widespread discontent amongst leading cotton mill owners and merchants over the functioning of Bombay Cotton Trade Association.
1900	Futures trading in oilseeds, groundnut, castor seed and cotton started with establishment of Gujrati Vyapari Mandali, Futures’ trading in whear was existent as several places in Punjab and Uttar Pradesh.
1913	Chamber of Commerce set up at Hapur for trading wheat.
1919	Calcutta Hessian Exchange Ltd. Established for futures trading in raw jute and jute goods.
1920	Futures trading in bullion began in Bombay.
1927	Organized futures trading in raw jute began with the establishment of East Indian Jute Association Ltd.
1945	Amalgamation of the two association to form the East Indian Jute and Hessian Ltd.
1952	Forward Contracts (Regulation) Act enacted.
1953	Forwards Markets Commission (FMC) established under the Ministry of Consumer Affairs and Public Distribution.
1963	Futures trading in commodities banned.
2003	Futures trading in commodities allowed again.

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SEBI Regulation of the Indian Securities Market: Major Development

The importance, developments of SEBI on the Indian Capital market and the implication over the time on the various regulations and regimes introduced.

The increasing scams, to regulate such scams a bill was passed in the parliament in 1992, giving birth to Securities Exchange Board of India (SEBI) Act 1992, an autonomous organization for reviewing, regulating the security market by introduction of various rules and regulations for market development.

The major developments can be classified into three important things,

• The New guidelines for Book building, where a shift in fixed price regime to offer price introduced, as the former had an higher risk of failure if there is any market condition changes.
• Introduction of Dematerialization and Electronic Book building.
• Allowing participation of various Institutional Investors, Merchant Banking, registrars to issue, Share transfer agents.

Dematerialization was made compulsory in phased manner by September 2001, for quick and efficient allotment of securities and to avoid the problems of fund blocking.  The introduction of Electronic Trading mechanism has made the whole operational process simple and easier further which has also lead to reduce the manipulation of prices, correct prices for trades, and a complete shift in the fundamental operational working of major stock exchanges. 

The major advantages on introduction of Demat is, 

• lead to reduce no delivery period, 
• a greater liquidity as minimum trading lot sizes requirement are removed, 
• short period of book closure for corporate, which helped them in making further decision like 
• dividend payments, 
• bonus issue decision quick.

"SEBI's Regulation of the Indian Securities Market: A Critical Review of the Major Developments" written by "G Sabarinathan".  

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Major Indian Capital Market Reforms

The major Capital market reforms can be classified into three,

•         Change in the structure and functioning of Stock Exchanges.
•         Automation of Trading and Post trade systems.
•         Introduction of Surveillance and Monitoring systems.

Market Surveillance and Monitoring systems were introduced to detect the Insider trading or market manipulation transactional activities and a protocols were established for investigation of abnormal stock fluctuations and in case of an wrong going to curb the excessive volatility in the market, suspension of stock scrip trade for a period of time in the way of "Circuit breakers" were introduced.

Financial Institutional Investors(FII) under SEBI regulated 1995 governing the regulation of portfolio investment by FII's and allowing the FII to participate by making the investment in the Indian securities market and a proper pricing procedures were made mandatory for the purpose of transparency in the trade execution for e.g., a proper separation in levering the order and brokerage charges. Further a modification of Takeover Code, which comes under play when an acquisition takes places.

Over the years for the proper functioning of Capital market, a collaboration with ICAI and formed National Committee on Accounting standards(NACAS) and made mandatory the presentation of the company's performance report in detailed within equal intervals.  This disclosure clause has given a birth to corporate governance where policies like clear indication of director remuneration, whistle blowing, cash flow and financial statement certification by CEO/CFO has made mandatory and transparency in disclosure of reports for public offering, periodicals and other transaction related. Such move by SEBI has made the capital market function smooth and more reliable on it thus other policies created a trust among the investors.

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What is Stock Market?

 What is Stock Market? How it Works?

Before knowing what Stock Market it, you should know what Share is. Whenever a business is started, the entrepreneurs pool money from his savings, relatives, friends, Financial Institutions (Banks) and from Partners (If any) as an initial investment. Which helps him to start and keep going his business for a while?   But at some point of time the business needs huge funds than the original sources for its growth/development. 

The Medium for a company to pool huge money easily is through Shares.

Now you get a question what is Shares?

The company proposes a capital amount and divides the huge amount into small individual shares, which makes everyone to afford to buy the shares of the company.  Let say for example, the capital amount is $100,000 and it is divided into 10,000 Shares, each share will cost only $10.

The whole process is carried at a Public marketplace which is called “Stock Exchange”. To make a trade in this market the company has to clear the legal procedure from Securities and Exchange Commission (SEC) in United States and Securities Exchange Board of India (SEBI) in India. 

Any company who are issuing the shares for the first time will go through IPO (Initial Public Offering). Any investors want to invest in the company becomes the owner of the company once the shares are bough by him/her, before that investor want to know the history of profitability and the future success outlook and the business products before purchasing any new stock, so it is made compulsory that the company has to publish its previous year’s Balance sheet along with the IPO.

After Shares getting quoted in Stock Exchange?

Once the shares of the company are quoted on the board, it is ready to be traded.  It is continuously updates and generally the prices of the share will be far higher than actual money the investors invested. How?

Why/How does the price of the Share go down and Upside?

In the stock market, when the stock is kept for trading, the investors buy and sell the stock to a view to make Huge Profits.  When the buyer hopes that the company is really doing well and has a great chances of success in future he invest his funds by purchasing the stock. 

Now, the asked price is the intended price which once wants to buy a stock and the bid price is the price, where one would like to sell his holding stocks. The difference between the ask price and the bid price is the profit for the seller. This is termed as “Spread”.

How are shareholder benefited?

A Shareholder not only benefits by trading of the shares. If he holds the shares, the company even pays Dividends (Part of the profits) by which the value of the shares even goes more up and he can make profit by selling in off.  

Article will be updated soon.

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