SEBI & Capital Markets — Advanced Topics
Market Structure
Stock Exchanges
NSE (National Stock Exchange, 1992) and BSE (Bombay Stock Exchange, 1875) are SEBI-recognised exchanges.
•NSE Nifty 50: Top 50 companies by float-adjusted market cap
•BSE Sensex: 30 companies, oldest index (1979 base)
•GIFT City: International Financial Services Centre (IFSC) — offshore market, different regulatory framework
Clearing and Settlement
•NSCCL (NSE Clearing) and ICCL (BSE Clearing): Act as central counterparty — guarantee settlement
•T+1 settlement (since Jan 2023): Equity delivery settled next business day
•DVP (Delivery vs Payment): Securities and funds exchanged simultaneously — eliminates settlement risk
Depositories
•NSDL (National Securities Depository Limited) and CDSL (Central Depository Services Limited)
•Hold securities in dematerialised (demat) form
•DPs (Depository Participants) are intermediaries between investor and depository
Derivatives Market
Types of Derivatives
| Type | Underlying | Settlement |
|---|
|------|-----------|-----------|
| Equity Futures | Stocks/Indices | Cash settled (index) or delivery (stocks) |
|---|---|---|
| Equity Options | Stocks/Indices | Cash settled (European style for indices) |
| Currency Futures/Options | USD, EUR, GBP, JPY | Cash settled (RBI regulated) |
| Interest Rate Derivatives | G-Secs, MIBOR | OTC + exchange traded |
| Commodity Derivatives | Gold, Silver, Crude, Agri | MCX, NCDEX |
F&O (Futures & Options) Basics
•Lot size: Standardized contract size (e.g., Nifty lot = 25 units from 2023 revision)
•Contract expiry: Last Thursday of month (monthly), weekly expiry for indices (every Thursday)
•Open Interest: Total outstanding contracts (not yet settled) — market sentiment indicator
•PCR (Put-Call Ratio): Put OI / Call OI. >1 = bearish sentiment, <1 = bullish
Mutual Fund Regulation
SEBI's AUM Limits and Caps
•No single stock can exceed 10% of equity fund corpus
•Single sector (except financial services): 25% cap
•Financial services: 35% cap
•Top 10 holdings typically 40-60% (concentration check in factsheet)
Expense Ratios (TER — Total Expense Ratio)
•Direct plans: Lower TER (no distributor commission)
•Regular plans: Higher TER (includes distributor trail commission)
•TER limits: Equity funds max 2.25% (declining slab based on AUM); Debt funds max 2.00%
SIP, SWP, STP
•SIP (Systematic Investment Plan): Regular fixed investment — rupee cost averaging
•SWP (Systematic Withdrawal Plan): Regular redemption — create income stream
•STP (Systematic Transfer Plan): Transfer between funds — gradually deploy lump sum
Takeover Code (SEBI SAST — Substantial Acquisition of Shares and Takeovers)
| Trigger | Requirement |
|---|
|---------|------------|
| Acquire 25%+ stake | Make open offer for additional 26% to public shareholders |
|---|---|
| Acquire 5%+ in a year (when already hold 25-75%) | Creeping acquisition limit: 5% per year allowed, beyond triggers open offer |
| Change of control | Open offer required regardless of percentage |
Open offer price: Highest of: negotiated price, 60-week average market price, or book value.