Stock market volatility touches every participant directly/indirectly in the capital market.  General feeling is that the stock markets worldwide have become very fragile in the recent past on account of various developments such as Asian crisis.  Brazil Real fall and Russian debacle.  Many far-reaching stock  reforms have been introduced in the Indian market for the last few years. These reforms, in turn, changed market structure.  Changing market  structure influences nature of stock price behavior.

PRIMARY SECURITIES MARKET

 The primary capital market (PCM) plays an important role in the overall functioning of securities market.  Despite several measures the primary market remained lackluster till recently and the pick up is gradual. According to the SEBI annual report fewer number of issues accessed the primary market during the year and the significantly lower than that of the Previous financial year.  Share of the equity issues, in terms of number and amount Mobilized, however, was higher in this financial year compared to the previous one.  More than three-fourths of the total amount was occupied second and no resourced were in the previous years, banks and financial institutions continued for 84.5% of the resourced mobilized compared to 68.1% in 2001-02.  All other industries shared the remaining portion.

 CAPITAL RAISED DURING 2002-03

 During the financial year 2002-03, primary market witnessed a decrease of 46.0% in the amount raised and also a decrease of 25.7% in the number of issues launched compared to the same period in 2001-02.  A total of 26 issues (14 public issues and 12 rights issues) opened during the financial year 2002-03 raising Rs. 4070.29 crore (Rs. 3638.6 crore through public issues and 431.6 crore through rights issues).  In 2001-02 a total of 35 issues opened for raising Rs. 7543.0 crore (20 public issues – Rs. 6501.8 crore and 15 rights issues – Rs. 1041.2).

 INDUSTRY WISE CAPITAL MOBILIZATION

 Three industries ciz. Banks / Fls, Engineering and Telecommunications accounted for 93.2 per cent of the resourced mobilized in 2001-02.  In the current year, the same three industries accounted for 84.7 per cent of the funds raised.  With the banks and Fls, increasing their share from 68.3 per cent to 84.5 per cent and companies in the Telecommunications sector and raising any resourced.  In 2002-03 the three industries which accounted for 95.3 per cent of the resources where Banking / Fls, Information Technology, Paper and Pulp.

 SECONDARY MARKET

 During 2002-03, performance of Indian Stock market was, by and large, a lackluster one, S&P CNX NIFTY and BSE Sensex both registered

negative returns of 13.4 percent and 12.1 percent respectively over the previous year.  Other board indicators also fell down.

 Fall in the market in not specific too India alone and it appears a global phenomena.  Turnover has been increasing and its reached peak in the month of December 2002.

 DEVELOPMENT IN GOVERNMENT DEBT MARKET

 Government securities market during the past financial year witnesses significant upturns in pries until mid-January 2003 when the trend was reversed.  The pattern of downturn in yields was halted due to the war tensions and consequent uncertainly leading to a heavy selling pressure.  According to the report on Macro Economic and Monetary Developments in 2002-03 published by the RBI Major developments in government securities market in 2002-03 were:

• Introduction of the system of publishing a calendar by RBI that outlines the issue of date government securities every half-year. The calendar for the financial year 2002-03 was issued in March 2003.
   

• Screen based order driven trading in government securities on the stock exchanges introduced on January 16, 2003.
   

•  CSGL account holders permitted to enter into repo transactions in government securities effective from March 3, 2003.
   

• Guidelines for uniform accounting for repo/reverse repo transactions were issued by RBI.
   

• Under the securities lending scheme, the clearing corporation of India limited (CCIL) has government securities from select members.

FII INVESTMENT

 Foreign institutional Investors (FIIS) were net buyers in equities at Rs. 1 56bn on January 07, 2004.  According to data available from the Securities and Exchange Board of India (SEBI) web site, their purchases for the day stood at Rs. 8.0.16bn.

 With this, they have poured in Rs. 15.19bn or US$333.7mn in Indian equities so far in January.  Their cumulative investment in Indian equities in July stood Rs. 23.46bn or US$501.7mn.  They have pumped in a net of Rs. 15.45mn or so far in the 2004.  In the entire 2002, FIIs had poured in a net ot Rs36.77bn, or US$763.5mn.

 The stock markets continue its upward surge.  By the end of the September 2003 the BSE Sensex has added more than 1300 points and climbed up to 4302.  In fact the pick up in stock prices in August 2003 has been the highest over the previous four months of the bull run.  The trend continues into September except for a minor correction in the third week.