Nism update november january 2013

November-January 2013
Volume 4 / Issue 21

or Journalist

Foreword

2 NISM Update November-January 2013

I am happy to inform you that National Institute of Securities Markets (NISM)
organised Financial Literacy Quiz for the first time for the school students in
Mumbai region on January 25, 2013. Eight school teams participated in the Quiz
after short-listing through the process of written test. Three teams were awarded
the cash prizes and trophies. The Programme was aired by one of the TV channels.
More such quiz contests at various levels are expected in the future.

This is one more step taken by NISM to spread financial literacy among school
children. The total number of school teachers trained under Pocket Money
Programme, under which the teachers impart financial literacy to students, has
exceeded 600 and is expected to touch 700 by March 2013, as against 631 in the
previous year.

New test centers have been opened to make it convenient for the candidates to pass certification examinations in
various cities. On the advice of NISM, NSE has opened 47 new test centers. As a result, the examinations are now
available at 151 centers as against 104 earlier. Also, Continuous Professional Education (CPE) is now being conducted
at 75 locations as against 43 earlier.

More than 500 Resource Persons (who impart financial literacy to various segments of society) have already been
trained in various districts in the current financial year as against 168 during 2011-12. Two more training programmes
for such persons are in the pipeline. This would help in providing financial literacy to more and more people in the
country in the future.

A simplified foundation certification examination as well as CPE has been launched for new category of mutual fund
distributors in January 2013. This would help in enhancing the reach of mutual funds to more people in the country.
Certification on compliance of securities markets laws for non-fund category has also been launched. Equity
Derivatives Certification Examination which was recently introduced on voluntary basis has now been made
mandatory for the stock brokers by SEBI. Certifications for merchant bankers, investment advisors and new securities
market professionals - foundation level, are expected to be introduced in March 2013.

Continuous Professional Education (CPE), apart from the existing mode of class room training, would also be
conducted through the computerised mode (e-learning) shortly.

NISM and SEBI organized a workshop on Securities Markets for Journalists on November 24, 2012 at Mumbai. Earlier,
such workshop was conducted in New Delhi. The idea of such workshops is to provide knowledge on various aspects
of securities markets to the journalists enabling them which would help them in their reporting in a professional
manner. Details of other conferences organized by NISM are given in this bulletin.

The first batch of the new course called Certificate in Securities Laws (CSL) was launched in December 2012.
Admission process for the next batch to be started in July 2013 is underway.

NISM has recently started to carry out a study on trends in the performance of the corporate sector and PE ratios on
quarterly basis. An analysis is included in this bulletin.

NISM plans to introduce many short term courses on various subjects in financial sector in the near future.

With Best Wishes

P K Nagpal
Director

NISM Update November-January 2013 3

Regulatory
Changes
INITIATED BY SEBI
Pre-trade Risk Controls (CIR/MRD/DP/34/2012 dated 13-12-2012)

To mitigate disruption of trading at the exchanges SEBI has decided to prescribe a framework of dynamic trade
based price checks.
▪ Value/Quantity Limit per order: Any order with value exceeding `10 crore per order shall not be accepted by the
stock exchange for execution in the normal market.
▪ Cumulative limit on value of unexecuted orders of a stock broker: Stock exchange are directed to ensure that stock
brokers put-in place a mechanism to limit the cumulative value of all unexecuted orders placed from their
terminals to below a threshold limit set by the stock brokers.
▪ Dynamic Price Bands (earlier called Dummy Filters or Operating Range): decided to tighten the initial price
threshold of the dynamic price bands. Stock exchange shall set the dynamic price bands at 10% of the previous
closing price for the following securities;
· Stocks on which derivatives products are available,
· Stocks included in indices on which derivatives products are available,
· Index futures,
· Stock futures.
▪ Risk Reduction Mode: Stock exchanges shall ensure that the stock brokers are mandatorily put in risk-reduction
mode when 90% of the stock broker's collateral available for adjustment against margins gets utilized on account
of trades that fall under a margin system.

Oversight of Members (Stock Brokers/Trading Members/Clearing Members of any segment of Stock
Exchanges/ Clearing Corporations) (CIR/MIRSD/13/2012 dated 07-12-2012)

In consultation with Stock Exchanges and the associations of stock brokers, SEBI has decided:
▪ The Stock Exchange or the Clearing Corporation, as the case may be, shall, in consultation with SEBI, formulate a
policy for annual inspection of their members in various segments and follow up action thereon. The policy shall
also cover various kinds of risks posed to the investors and market at large on account of the activities/business
conduct of their members.
▪ The Stock Exchange or the Clearing Corporation, as the case may be, shall conduct inspection of their members in
various segments in terms of the above policy and in case of members who hold multiple memberships of the
exchanges, the Stock Exchanges shall establish an information sharing mechanism with one another on the
important outcome of inspection in order to improve the effectiveness of supervision.

Review of the Securities Lending and Borrowing (SLB) Framework (CIR/MRD/DP/30/2012 dated 22-11-2012)

SEBI has modified the framework for SLB as under:
▪ Any lender or borrower who wishes to extend an existing lent or borrow position shall be permitted to roll-over
such positions. The roll-over shall be conducted as part of the SLB session.
▪ Rollover shall not permit netting of counter positions, i.e. netting between the 'borrowed' and 'lent' positions of a
client.
▪ Liquid Index ETFs shall be eligible for trading in the SLB segment.
▪ An Index ETF shall be deemed 'liquid' provided the Index ETF has traded on at least 80% of the days over the past 6
months and its impact cost over the past 6 months is less than or equal to 1%.

Mini derivative (Futures & Options) contract on Index (Sensex & Nifty)(CIR/DRMNP/4/2012 dated 20-11-2012)

With a view to ensure that small/ retail investors are not attracted towards derivatives segment, SEBI has decided
to discontinue mini derivative contracts on Index (Sensex and Nifty). However, the existing unexpired contracts
may be permitted to trade till expiry and new strikes may also be introduced in the existing contract months.


Participation of Mutual Funds in Credit Default Swaps (CDS) market as Users (“Protection Buyers”) and
in repo, in corporate debt securities (CIR/IMD/DF/ 23 /2012 dated 15-11-2012)

SEBI has decided to permit mutual funds to participate in CDS market, as per the guidelines issued by RBI from time
to time.
▪ Mutual funds shall participate in CDS transactions only as users (protection buyer). Thus, mutual funds are
permitted to buy credit protection only to hedge their credit risk on corporate bonds they hold. They shall not be
allowed to sell protection and hence not permitted to enter into short positions in the CDS contracts.
▪ Mutual funds shall buy CDS only from a market maker approved by the RBI and enter into Master Agreement with
the counterparty as stipulated under RBI Guidelines. Exposure to a single counterparty in CDS transactions shall
not exceed 10% of the net assets of the scheme.
▪ The cumulative gross exposure through credit default swap in corporate bonds along with equity, debt and
derivative positions shall not exceed 100% of the net assets of the scheme.
▪ The total exposure related to premium paid for all derivative positions, including CDS, shall not exceed 20% of the
net assets of the scheme.
▪ In order to encourage growth of the corporate bond market, SEBI has decided that base of eligible securities may
be expanded, for mutual funds to participate in repo in corporate debt securities, from AAA rated to AA and above
rated corporate debt securities.

Arbitration Mechanism in Stock Exchanges (CIR/MRD/ICC/29/2012 dated 07-11-2012)

A client, who has claim/ counter claim up to Rs. 10 lakh and files arbitration reference, shall be exempt from the
deposit. Expenses thus arising with regard to such applications shall be borne by the Stock Exchanges.

Debt allocation Mechanism for FII (CIR/IMD/FIIC/22/2012 dated 07-11-2012)

With a view to provide operational flexibility, beginning January 01, 2014 SEBI has decided that the FIIs/ Sub
Accounts can re-invest during each calendar year to the extent of 50% of their debt holdings at the end of the
previous calendar year.

▪ The time period for utilization of the Government debt limits (for both old and long term limits) allocated through
bidding process shall be 30days while the time period for utilization of the corporate debt limits (for both old and
long term infra limits) allocated though bidding process shall be 60 days.
▪ FII/ Sub-Accounts may avail limits in the corporate debt long term infra category without obtaining SEBI approval
till the overall FII investments reaches 90%, after which the auction mechanism shall be initiated for allocation of
remaining limits. SEBI will put in place a mechanism to monitor the utilization of the limit.

INITIATED BY RBI
External Commercial Borrowings (ECB) Policy – Review of all-in-cost ceiling RBI/2012-2013/338
dated 14-12-2012)

▪ Considering the developments in the global financial markets and the fact that borrowers were
experiencing difficulties in raising ECBs, RBI has decided that the all-in-cost ceiling as specified in A.P.
(DIR Series) Circular No. 99 dated March 30, 2012 will continue to be applicable till March 31, 2013 and
subject to review thereafter.


FIMMDA Code of Conduct for usage of Negotiated Dealing System-Order Matching (NDS-OM) and Over-
The-Counter (OTC) Market (RBI/2012-2013/316 dated 06-12-2012)

▪ In the interest of maintaining integrity and orderly conditions in the government securities market, RBI has decided
that all SGL/CSGL account holders should adhere to the FIMMDA (www.fimmda.org) code of conduct while
executing trades on NDS-OM and in the OTC market.

Bank finance for purchase of gold (RBI/2012-2013/296 dated 19-11-2012)
▪ In the context of significant rise in imports of gold in recent years, RBI has decided that no advances should be
granted by banks for purchase of gold in any form, including primary gold, gold bullion, gold jewellery, gold coins,
units of gold Exchange Traded Funds (ETF) and units of gold Mutual Funds. However, banks can provide finance for
genuine working capital requirements of jewellers.

Corporate Bond Market - Permission to banks for membership in SEBI approved Stock Exchanges (RBI/2012
2013/277 dated 05-11-2012)
▪ In order to enhance transparency, RBI has decided to permit Scheduled Commercial Banks (SCBs) to become
members of SEBI approved stock exchanges for the purpose of undertaking proprietary transactions in the
corporate bond market.

INITIATED BY IRDA
Participation of insurers in Repo/ Reverse Repo transactions in corporate debt securities (IRDA/F&I/CIR/INV/
250/ 12/2012 dated 04-12-2012)

Insurers are permitted to undertake repo transactions in corporate debt securities subject to other provisions in
Insurance Act, 1938 and following conditions:
▪ In case of Life insurance companies, the exposure to reverse repo (lending) transactions in government securities
and corporate debt securities at any point of time shall not exceed 10% of all funds taken together.
▪ In case of Non-Life insurance companies, the exposure to reverse repo and repo transactions in government
securities as well as corporate bond securities shall not exceed 10% of investment assets of the Insurer.
▪ The tenor of repo transactions shall not exceed a period of six months.
▪ The underlying corporate debt security shall be listed and have a minimum rating of AA or equivalent.

To all brokers (IRDA/BRK/MISC/CIR/ 243 /11/2012 dated 07-11-2012)
▪ IRDA is in the process of establishing a system to automate and integrate the functions across all the departments
in order to implement Business Analytics Project. As part of this project and to ensure safety & security of the
data submitted, IRDA directs all brokers (authorised signatories) to obtain digital signatures by 30th November,
2012.

INITIATED BY PFRDA
Change in Central Government Investment Model for the Corporate Sector (PFRDAICIR/1/Corporate-CG/1
dated 18-10-2012)
▪ Under the NPS-Corporate sector model, the corporates have been provided option to select the Central Govt.
invest-ment model if the investment option is exercised by the corporates for their underlying employees.
▪ With effect from 1st November 2012, the private PFMs will be free to decide the Investment Management Fee
within the upper ceiling of 0.25% p.a. prescribed by PFRDA at present.
▪ Due to this differential Fee offered by the PFMs from 1st November 2012, a new scheme called 'Corporate-CG
scheme will be introduced w.e.f. 1st November 2012. The Scheme will follow the Central Govt. investment
guidelines issued from time to time.


Activities at
Nism
SCHOOL FOR INVESTOR EDUCATION AND FINANCIAL LITERACY (SIEFL)
SEBI Financial Education Resource Persons Programme

During October-December 2012, NISM has conducted three empanelment programs for SEBI Financial Education
Resource Persons Program, at Chennai, Kolkata and at Bengaluru. The program at Chennai could cover 76
candidates, all of them were trained and empanelled as SEBI Financial Education Resource Persons. The
empanelment interview for Chennai centre was conducted on 25th August 2012 and after an interaction by SEBI
and NISM officials, 76 candidates were found eligible and suitable for empanelment. The workshop for these
candidates was held during 26th August to 1st September 2012. The workshop could cover all the topics under
Financial Education and examination was conducted towards the end of the workshop. All the candidates could
pass the examination and certified as SEBI Financial Education Resource Persons.

Participants of the SEBI Financial Education Workshop held at Chennai

The program at Kolkata centre was held during September 22-29, 2012 and 54 candidates were enrolled as
Resource Persons. The empanelment interview was conducted on 22nd September 2012 and the workshop during
September 23-29, 2012. The Kolkata programme was attended by representatives from Assam, Mizoram, West
Bengal, Odisha, Jharkhand, Bihar, Madhya Pradesh, Kerala, Karnataka, Andhra Pradesh and Tamilnadu.

The programme at Bengaluru was held during December 8-12, 2012. A total of 63 candidates were enrolled as
Resource Persons during the process. This includes 20 candidates from Andhra Pradesh, 17 candidates from
Tamilnadu, 16 candidates from Karnataka, and 10 candidates from Kerala.


Participants of the SEBI Resource Persons Workshop held at Bengaluru

Financial Literacy Quiz for School Children

NISM, through School for Investor Education and Financial Literacy (SIEFL), conducted the semi-final and final
rounds of the Financial Literacy Quiz Programme for Schools in Mumbai on 25th January 2013. The Quiz programme
was open to students studying in class IX and X in any of the recognised schools in Mumbai.

The preliminary round of the programme was held on 5th January 2013 at NISM premises and various schools in
Mumbai, Navi Mumbai and Thane region participated. Based on the scores obtained in the preliminary round, eight
school teams were shortlisted for the semi final round.

The programme was inaugurated by Mr. Ashok Kumar Sharma, IPS, Police Commissioner, Navi Mumbai and
attended by Mr. P K Nagpal, Director, NISM and Executive Director, SEBI, Mr. G P garg, Registrar, NISM, Mr. N
Hariharan, Chief General Manager, SEBI.

January 25, 2013 | Navi Mumbai


Ms. Ragini Sreenath and Abhijat Singh of Delhi Public School, Nerul bagged the first position, receiving a cash prize
of ` 30,000/- and trophy for the school followed by Mr. Jay Shukla and Abhinav Agarwal of Kendriya Vidyalaya,
Panvel in the second position receiving a cash prize of ` 20,000/- and trophy for the school. The third position went
to Sulochana Devi Singhania School, Thane represented by Mr. Ankit Upadhyay and Chinmay Mahatme who
received a cash prize of ` 10,000/- and trophy for the school.

SCHOOL FOR CERTIFICATION OF INTERMEDIARIES (SCI)
Examination Update

1. Launch of NISM-Series-I: Currency Derivatives Certification Examination in Hindi and Gujarati
Languages
NISM-Series-I: Currency Derivatives Certification Examination is now available in Hindi and Gujarati languages
in addition to the earlier offering in English language. These localized exams are made available to the candidates
from November 1, 2012. Candidates can take these Hindi and Gujarati examinations of Currency Derivatives
certification through all NISM, NSE and MCX-SX Test Centers.

2. Launch of NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund) Certification Examina-
tion
NISM has launched the NISM-Series-III-A: Securities Intermediaries Compliance (Non-Fund) Certification
Examination on January 28, 2013. The examination seeks to create a common minimum knowledge benchmark
for all persons engaged in compliance function with any intermediary registered as Stock Brokers, Sub-brokers,
Depository Participants, Merchant Bankers, Underwriters, Bankers to the Issue, Debenture Trustees and Credit
Rating Agencies. This examination is made available through all NISM, NSE, BSE and MCX-SX Test Centers. For
further details of the revised examination, please visit www.nism.ac.in.

3. Launch of NISM-Series-V-B: Mutual Fund Foundation Certification Examination
NISM has launched the NISM-Series-V-B: Mutual Fund Foundation Certification Examination on January 14,
2013. The examination aims to impart basic knowledge about the Mutual Fund industry and allowed products for
the new cadre of Mutual Fund Distributors, as per the SEBI Circular CIR/IMD/DF/21/2012 dated September 13,
2012 and various rules and regulations governing the same. The certification aims to enhance the minimum
knowledge benchmark for the new cadre of distributors and also to enhance the quality of advisory. This
examination is made available through all NISM, NSE, BSE and MCX-SX Test Centers. For further details of the
revised examination, please visit www.nism.ac.in.

4. Launch of Revised Certification Examinations
NISM periodically reviews its certification examinations and takes steps to update these examinations to reflect
the recent market and regulatory changes.

a) Revision of NISM-Series-V-A: Mutual Fund Distributors Certification Examination
NISM has launched the revised NISM-Series-V-A: Mutual Fund Distributors Certification Examination on
November 5, 2012. The revised examination is available through all NISM, NSE, BSE and MCX-SX Test Centers.
For further details, please visit www.nism.ac.in.

b)Revision of NISM-Series-II-B: Registrars to an Issue and Share Transfer Agents - Mutual Funds
Certification Examination
NISM has launched the revised NISM-Series-II-B: Registrars to an Issue and Share Transfer Agents - Mutual
Funds Certification Examination on January 3, 2013. The revised examination will be available through all NISM,
NSE, BSE and MCX-SX Test Centers. For further details, please visit www.nism.ac.in.


Continuing Professional Education (CPE) Update

1. CPE Requirements for Securities Operations & Risk Management Certification Examination
NISM launched the two day CPE programs for the NISM-Series-VII: Securities Operations & Risk Management
Certification Examination. NISM specified the CPE requirements for associated persons i.e., persons associated
with a registered stock-broker/trading member/clearing member in recognized stock exchanges, who are
involved in, or deal with, any of the activities as given below (mentioned in the SEBI Notification No. LAD-
NRO/GN/2010 11/21/29390 - dated December 10, 2010):
a) Assets or funds of investors or clients,
b) Redressal of investor grievances,
c) Internal control or risk management, and
d) Activities having a bearing on operational risk.
The CPE Program for Securities Operations & Risk Management has been made available from December 7,
2012.

2. CPE Requirements for Mutual Fund Foundation Certification Examination
NISM has launched the CPE program for the NISM-Series-V-B: Mutual Fund Foundation Certification
Examination. NISM has specified the CPE requirements for the new cadre of distributors who are allowed to sell
units of simple and performing mutual fund schemes as per the SEBI Circular CIR/IMD/DF/21/2012 dated
September 13, 2012, such as postal agents, retired government and semi-government officials (class III and
above or equivalent) with a service of at least 10 years, retired teachers with a service of at least 10 years, retired
bank officers with a service of at least 10 years, and other similar persons (such as Bank correspondents) as may
be notified by AMFI/AMC from time to time. The CPE program for Mutual Fund Foundation has been made
available from January 14, 2013.

CII's Financial Distribution Summit (supported by NISM)

Confederation of Indian Industry (CII) organized the Financial Distribution Summit on December 19, 2012 at
Mumbai. National Institute of Securities Markets (NISM) supported this national initiative of CII.

The Summit was a pioneering attempt to bring together cross currents of opinions, views and ideas, inherent to the
Financial Distribution Community, as it prepares to meet new challenges and imperatives.

Focusing on the theme “Financial Inclusion: The Untapped Potential”, the Financial Distribution Summit 2012
covered topics such as best practices, global perspective, case studies from BFSI view point and core issues/needs
of the players, thereby creating a roadmap for the positive development of the financial distribution community and
stakeholders.

Leading industry players also participated in an exclusive Thinktank Panel Discussion: 'Key Regulatory Drivers for
Financial Distribution Growth' and discussed on the following aspects:
▪ Striking a balance between regulations and sustained profitable business models
▪ Regulations to work as a catalyst and drive momentum to the financial distribution growth
▪ Global regulatory trends: Bringing out the Indian perspective
▪ Key developments across global economies
▪ Developing confidence - Is it possible only through regulations?

The Summit was addressed by eminent speakers and witnessed participation of CMDs, MDs and CEOs along with
cross functional professionals from the financial services industry.


Consolidated Status Report [ period: As On December 30,2012 ]
NISM Certification Examination

Sr Total Candidates Total Candidates Total Candidates Pass
NISM Examination
No. Enrolled Appeared Passed Percentage

01 Currency Derivatives
49631 45867 18976 41%
(Launched on 15/05/2009)
02 RTA - Corporate
2124 1927 1389 72%
03 RTA - Mutual Funds
5376 4997 3030 61%
04 Interest Rate Derivatives
602 428 79 18%
05 Mutual Fund Distributors
115105 106409 42625 40%
06 Mutual Fund Distributors - Gujarati
555 455 80 18%
07 Mutual Fund Distributors - Hindi
786 641 103 16%
08 Depositories Operation
18324 16769 8124 48%
09 Securities Operations and Risk Management
10573 9936 7774 78%
10 Equity Derivatives
208 180 136 76%
Total 203284 187609 82316

NISM Continuing Professional Education

Sr Total Candidates Appeared
NISM Continuing Professional Education
No. through NISM & CPE Providers

01 NISM Mutual Fund Distributors CPE ( 1 Day Programme)
16039
(Launched on 01/06/2010 and upto 31/05/2012)
02 NISM Mutual Fund Distributors CPE (Day 1)
7110
03 NISM Mutual Fund Distributors CPE (Day 2)
7101
04 NISM RTA Corporate CPE (Day 1)
137
05 NISM RTA Corporate CPE (Day 2)
137
06 NISM Currency Derivatives CPE (Day 1)
1313
07 NISM Currency Derivatives CPE (Day 2)
1310
08 NISM Depository Operations Certification Examination CPE (Day 1)
88
09 NISM Depository Operations Certification Examination CPE (Day 2)
88


SCHOOL FOR REGULATORY STUDIES AND SUPERVISION (SRSS)

Workshop on Securities Markets for Journalists

SEBI and NISM organized a Workshop on Securities Markets for Journalists on “Reporting on Securities Markets -
Issues and Challenges” on November 24, 2012 at Mumbai.

The event started with Mr. N. Hariharan, Chief General Manager, SEBI welcoming the panel members on the dais. In
his brief remark he emphasized on the role of media in educating the investors. The panel included Mr. U. K. Sinha,
Chairman, SEBI, Mr. Raghav Bahl, Group Editor, Network 18 and Mr. Tamal Bandyopadhyay, Deputy Managing
Editor, Mint.

In his opening remarks, Mr. Sinha mentioned that the idea of this event was to provide a forum for interaction
between the media community and SEBI on various issues.

Mr. Sinha pointed out that the SEBI's job is very technical in nature and hence, capital market reporting has some
added responsibilities. He said if a news is reported without proper appreciation of the larger repercussions, it can
do unintended harm to the larger investor community.

While emphasizing on the need for better understanding of SEBI's activities, Mr. Sinha also complimented the role
played by the media in certain areas in being critical of SEBI.

Following the introduction by Mr. Sinha, Mr. Raghav Bahl shared his thoughts on the subject. “In today's time,
reporting on securities markets is a technical matter. If you are reporting on regulatory bodies like SEBI, your level of
understanding of issues has to be virtually that of an expert”, he said. Mr. Bahl opined that often principles of
journalism conflict with the principles of a regulator. Hence, he advised the media community to exercise a lot of
judgment.

In his address Mr. Bandyopadhyay said that the entire matrix of reporting has changed since his days as a reporter.
He urged the media community to give more importance to the accuracy of a story than the speed. “Miss two
stories, I don't care, but do not write a wrong story,” Mr. Bandyopadhyay said.

After the panel shared their thoughts, the forum was open for questions from attending journalists. There were a lot
of questions from the participants which were answered by the panel. The question answer session was followed
by a series of technical sessions on the working of SEBI. These sessions were conducted by senior officials of SEBI.


SCHOOL FOR SECURITIES EDUCATION (SSE)

India Securitization Summit 2012

The 3rd India Securitization Summit was conducted by NISM at the Hotel Grand Hyatt, Mumbai on Wednesday,
October 17, 2012. Mr. U. K. Sinha, Chairman - SEBI and NISM, inaugurated the event. In his address, while providing
an overview of the securitization issuances across the world he emphasized that protection of investors’ interest is
paramount. Guidelines and regulations pertaining to securitization, particularly minimum holding period, minimum
retention standards, disclosures, due diligence review processes, are all crucial aspects of investors' protection. He
also mentioned that the removal of the uncertainty of taxation on issuer-SPV is needed to facilitate an environment
for securitization.

Mr. Sinha also released a Draft Report on Covered Bonds prepared by National Housing Bank (NHB), in the presence
of Mr. R V Verma, Chairman-NHB. He complimented the authors of the report.

Following the inaugural address, three panel discussions were held on 'Taxation of Issuer Special Purpose Vehicles
(SPVs)', 'Guidelines on Securitization' and 'Market making'. The panelists were able to provide different
perspectives i.e. the stock exchange perspective, market participants' perspective as well as international practice
perspective, on the debated issues.

There was a lively interaction with the high-quality audience. Apart from the faculties and students of NISM, over
135 professionals from banks, NBFCs, rating agencies, law firms, corporations, financial institutions, finance
professionals, debenture trustees etc. attended the event. The Event Partners were BSE, India Ratings (Fitch
Group), I-Peritus, L&T Finance and National Housing Bank.

Round Table on Recent Reforms in Primary Market

A Round Table on Recent Reforms in Primary Market was conducted on December 4, 2012 at BKC, Mumbai. It was
attended by over 30 participants, including issuers, merchant bankers, stock exchanges and legal professionals.
Over the past 37 years, across 7 cycles, the market has witnessed IPOs of Rs.60 lakhs upto Rs.10,000 crores and
beyond. The range of issues debated upon were Retail Investors, e-IPOs, ASBA, Safety Net Mechanism,
Disclosures, Rejection of Offer Documents, Due Diligence Review, Monitoring, Eligibility of New Issuers,
Promoters' Shareholding and Merchant Bankers' Track Record. The discussions were varied and vibrant, and the
views of participants were taken note of.

Round Table on Corporate Bonds: Issuers' Issues

A Round Table on Corporate Bonds: Issuers' Issues was organized on January 22, 2013 New Delhi. It was attended
by over 65 participants. It has been 8 years since the RH Patil Committee made its recommendations for the
development of a corporate bond market in India. Some progress has been made on the implementation these
recommendations, while some other constraints remain. This Round Table provided an interactive forum for
understanding the factors that constrain issuers of corporate bonds, with the objective of creating an enabling
environment. The forum included regulators, government officials, investors and market intermediaries. Aspects
covered included the perspectives of the Government, SEBI, RBI, Issuers, Investors, Intermediaries, Bank-loans
versus Bonds, Taxation and the Companies Act. Based on the discussions, matters that can be addressed in the
short-term need to be highlighted and prioritized.


Research at NISM

Trends in the Performance of the Corporate Sector

Quarterly Corporate Results are one of the indicators of economic activity in the country. A study on Quarterly
Earnings of 100 companies (Nifty 50 companies and Nifty Junior 50 companies) is carried out with a view to obtain
broad trends in the performance of companies and various sectors for Quarter June-September 2012 as compared
to June-September 2011.

Across All 100 companies, PAT (Profit after Tax) has grown 40% over the corresponding Quarter in the previous
year. This is achieved with the help of 16% growth in Sales, 36% growth in Other Income and control in operating
expenses. These 100 companies are classified into 12 sectors. Out of 12 sectors, 10 sectors have reported an
increase in PAT, significant observations are Pharma (144%), PSE (114%) and Energy (87%). Out of 12 sectors, 2
sectors have reported a decline in PAT, i.e. Realty (-80%) and Media (-43%).

Nifty P/E ratio increased to 19.17 from 17.05 a year back. This could imply that Nifty companies attracted more
investments on a perception of improved earnings prospects. As against the Nifty P/E of 19.17, the P/E of Pharma
was the highest (53.24) and the P/E of PSU Banks was the lowest (7.53). Nifty P/E is lower and more attractive as
compared to Singapore, Japan and Brazil.

ARTICLES
An Evaluation of Indian Economy in 2012

Ms. Shobana Balakrishnan, Academic Associate, NISM
2012 has been a difficult year for the Indian Economy with high inflation, low growth, high fiscal and current account
deficit and much delayed capital market reforms. This article analyzes the macroeconomic conditions on the basis
of inflation, growth, fiscal and current account deficit and capital markets.

Inflation: Reserve Bank of India (RBI)'s long battle with inflation continued for the major part of the year. Headline
Wholesale Price Index (WPI) has remained sticky throughout the year at 7.5 percent. India remains an outlier as the
global inflation conditions ease. Let us further examine the reasons for high inflation in India-
a) Supply constraints- Deficiency of monsoon this year further aggravated the inflationary pressure o food prices.
Poor storage facilities and inability to increase the production has added to inflation
b) Fuel price- Inflation in oil and fuel prices remained in double digits throughout the year. Deregulation of petrol
prices and revision of diesel prices led upward pressure on inflation.
c) Demand side push- Increase in the both rural and urban wages has contributed significantly to the increasing
demand for both. Increase in rural wages in the recent years could have added to the cost of the production.
Further, expectations of high inflation in future have led to demand for wage increase.
d) Fiscal deficit- Further, high fiscal deficit has also contributed to high inflation.
Inflation may remain at this rate until structural changes in terms of improving supply side constraints, enhancing
productivity are brought about. Deregulation of fuel prices may temporarily lead to inflationary pressure; however
it's a step towards fiscal consolidation.

Low growth: Economic slowdown continued in 2012 which averaged around 5.4% in last two quarters. Falling
savings and investment, high fiscal deficit have added to the dim outlook for the following year too. Tight domestic
monetary conditions and global financial crisis have weakened the business sentiments; however, recent policy
actions and expectations of lowering of interest rates in the near future have refurnished hope.


High fiscal and current account deficit: India's fiscal deficit at 5.3% of GDP in 2012 is highest among the emerging
economies due to spending on subsidies like food, fuel and fertilizers. Policy actions such as deregulation of fuel and
LPG prices, lift of bar on FDI investment in retail and airline were few steps taken to reduce the deficit. On the current
account front, reduced demand for exports added to the deficit woes. Weaker global demands can be attributed to a
possible “fiscal cliff” and a sharp consolidation in U.S. Service trade surplus was also lower. These factors led to
widening of current account deficit.

Capital markets: After witnessing a dull phase in the initial part of the year, secondary market gained momentum in
the later part of the year. BSE Sensex was 19,426.71 (as on 31st December, 2012), an increase by 25.7% on y-o-y
basis, similarly, NSE Nifty 50 was up by 27.70%. This surge can be attributed to global liquidity conditions, FII
inflows and recent policy measures. However, the IPO markets remained sluggish as the number of issues which
came through and amount raised remained low during the year. Private placements picked up during the year.

With a tough year in 2012, focus on improving macroeconomic conditions by lowering deficits and policy reforms
would be key to push growth in 2013. Global conditions may not be very conducive; this may further necessitate
removal of structural bottlenecks.


Bouquet of Programmes

POST GRADUATE PROGRAMME IN SECURITIES MARKETS (PGPSM)
PGPSM is a one-year full-time post-graduate programme. This flagship programme was
launched in 2010-11 and currently, the third batch is underway. Students of first batch
2013-2014 are working in the securities industry in various entities including credit rating agencies,
banks, brokerages, intermediaries and analytic firms.

CERTIFICATE IN FINANCIAL ENGINEERING AND RISK MANAGEMENT (CFERM)
CFERM is a nine-month week-end programme for working executives for equipping skills
and nuances of advanced financial engineering aspects. It is a highly quantitative-
2013-2014 oriented programme aimed at grooming risk management professionals. NISM launched
this programme in 2009-10, and the third batch of CFERM is currently underway. CFERM
is offered in two formats - weekend as well as on a residential, modular basis.

CERTIFICATE IN SECURITIES LAW (CSL)
CSL is a six-month week-end programme for working executives and students of other post-
graduate and professional programmes in Finance or Law. It equips participants to
understand and apply securities laws and regulations in compliance, investment banking and
other functions in the securities markets.

NISM Bhavan, Plot No. 82, Sector 17, Vashi, Navi Mumbai - 400 703
Phone: 022 66735100-05 | Fax: 022 66735110
www.nism.ac.in

Nism update november january 2013

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