SECONDARY SECURITIES MARKET

Price behaviour in the secondary securities markets in 1996-97

The Indian stock markets witnessed high price volatility during 1996-97. The 30 stock Sensitive Index of The Stock Exchange, Mumbai, dropped marginally from 3,366.61 on March 29, 1996 to 3,360.89 on March 31, 1997, a decline of 5.72 points. The broad based BSE 100 index, which represents 100 scrips, decreased from 1,549.25 to 1,463.69, a decline of 85.56 points.

 

The early part of the year witnessed a sustained upward trend in the prices, in tandem with the positive expectations from the Budget of the year 1996-97 and also increased investments by FIIs. The Sensex peaked at 4,069.26 on June 18, 1996 and dropped to 2,745 on December 4, 1996. This was also a three year low of the Sensex. Tight liquidity conditions, high interest rates and poor results of the corporate sector were some of the main reasons of the depressed sentiment in the stock markets.

The markets however, improved after touching the lowest of the year and remained steady till the Budget for 1997-98. The favourable announcements for the capital market in the Budget of 1997-98, boosted market sentiment, and the Sensex again touched an intra-day high level of 4,000. On March 31, 1997, prices fell sharply and the Sensex fell to 3,360.89 (a decline of 302 points) as political developments endangered the implementation of the proposed Budget. Table 7 below gives details of movement in equity prices in 1996-97.

Table 7: Movement of Various Share Indices During the Period


Index	29-Mar-96	31-Mar-97	Change	% Change
BSE Sensex BSE 100 NSE 50 CRISIL 500 CRISIL 200	3366.61 1549 985 700 560	3360.89 1463.69 968.3 631.42 413.42	-5.72 -85.31 -16.7 -68.58 -146.58	-0.17 -5.5 -1.69 -9.79 -26.17

 

Table 7 indicates that the fall in the prices of shares represented by broad based indices such as the BSE 100, CRISIL 500 and CRISIL 200 was greater than the fall in Sensex or the NSE 50 indicating that stock prices of mid capitalisation companies declined more sharply. Figure 2 plots the movements in the daily closing level of the BSE Sensex for 1996-97.

 

Volume of Business on the Stock Exchanges

The turnover on the stock exchanges increased significantly during 1996-97. This increase in turnover was facilitated and supported by the screen based trading systems that were implemented and expanded by the stock exchanges. In 1996-97, the total single sided turnover on the stock exchanges in India was Rs. 646,116 crore, compared to Rs. 227,368 crore in 1995-96, reflecting an increase of 184.17%. Table 8 below gives details of the turnover on stock exchanges. Figure 3 gives a break up of the turnover of the top five exchanges ranked by turnover in 1996-97, for the years 1995-96 and 1996-97. The share of the National, Mumbai, Calcutta, Delhi and Ahmedabad stock exchanges rose from 87.61% in 1995-96 to 91.87% in 1996-97.

Listed Companies and Market Capitalisation

As on March 31, 1997, 9,890 companies were listed on stock exchange in India, compared to 9,100 companies listed at the end of 1995-96. The total market capitalisation of all companies listed on stock exchanges in India was Rs. 488,270 crore at the end of 1996-97, a decline of 3.75% from its 1995-96 level of Rs.507,272 crore. Figures 4 and 5 illustrate the distribution of listed companies and market capitalisation across exchanges. Table 9 gives details of the same.

Trading, Clearing and Settlement of Debt Securities

At present, only the capital market segment of the NSE and the National Securities Clearing Corporation Limited (NSCCL), which acts as the clearing corporation for securities traded on the capital market segment of the NSE are integrated with the depository. Only trades which are executed on the dematerialised securities trading segment on the NSE can be cleared by NSCCL for settlement by electronic book entry within NSDL. As transfers in the case of debentures have not yet been exempted from the payment of stamp duty, settlement of debentures is not possible by electronic book entry within NSDL.