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18th January, 2011

The next remarkable industrial visit for ISME Navi Mumbai following the visit to The Indian Express was, the visit to NSE, situated in Bandra Kurla Complex, Mumbai. Taking into account the words like globalisation and emerging markets, preferable to India, being talked about at a high degree of importance, the visit was planned by the faculty members of ISME Navi Mumbai to enable the students enhance their knowledge about the overall working of a major stock exchange. The visit included four lectures by four respective speakers in the concerned stream. The first lecturer gave the brief but clear idea about the role of any stock exchange in India, and also an overview of NSE. NSE came out to provide nationwide facility to trade. It serves across 4 major market segments: Debt, which involves trading into government securities, Equity, which involves trading into company warrants, debentures, shares, mutual funds, etc, Derivatives, which involves trading into Futures & Options, Currency Derivatives, which has been newly arrived, and which involves trading in currencies. The speaker brushed through the importance of NSE in India, its brief history, etc. The second speaker, essentially being associated with the cash segment, gave the insights on the normal trading done by any retail investor or a high net worth individual in this segment. The students were also shown the live market screen, on the basis of which the trading is done by the investors and the brokers, which indicated the actual movement of share prices shown rapidly volatile, as the figures kept on changing within every fraction of a second. The screen clearly showed various things like the order rankings, the top 5 buy order and sell order quotes, which fluctuated at a very rapid speed. Ideally, the buy orders were ranked sequentially, having the highest buy quote given the first rank, and the lowest selling quote being given the first rank. The screen also showed the matches and the mismatches of the buy and the sell price. The next speaker from the derivative segment, gave great insights on trading in Futures & Options. Being a segment traded in heavy amounts per volume, it is desirable to only high net worth individuals and the institutional investors. The speaker clearly specified the meaning of DERIVATIVE, which means the future value that can be derived based on the historical records of the same. Hence, F&O, dealing in future probable prices of stocks can be fairly termed as derivatives. Futures is defined as an agreement between 2 parties involving a promise to deliver a specific asset (mainly a financial security) on a specified future date for a predetermined price to be paid on the delivery date or later. Options is in a way similar to Futures, but the only difference is that the buyer of the OPTION (not the security) has the option to whether or not exercise his right to buy/sell the security. The speaker gave many further insights on this, clearing certain concepts like open interest, stop loss, etc. Moreover, the live market screen showing the live trading happening in F&O was also shown to avail an understanding of the actual happening of such trading. The last speaker spoke about the Currency Derivatives, which is new to India and NSE, but is the highest traded in the world among all other segments. He threw light on the probable future of this segment. Thus, the entire session broken into 4 parts developed a real world picture of the actual operating and the essence of the stock market that plays a vital role in any economy, which could be probably only heard by most of us.

The author of the article is Sonali Bhatia – student ISME, Navi Mumbai