Indian Stock market: The basics

I am writing this post because two of my friends wanted me to. I will be just dealing with the Secondary market in general and the BSE or SENSEX in particular.
The Financial market in India is broadly divided into
1) Money market- for short term money
2) Capital market- for long term money
Money market consists of the Treasury bills, the call money market etc. I won’t be going more into it. Coming to the capital market, it’s further classified into
1) Primary market
2) Secondary market
The primary market deals with the Initial public offerings (IPO) or sales of shares by companies to the public for the first time. The recent IPO’s that took place in BSE can be viewed here. Once the IPO’s are completed all further transactions of the sold shares take place in the secondary market, more commonly known as stock markets or as bourses (jargon in finance). The major stock exchanges in India are the BSE and the NSE.

The National Stock Exchange or NSE was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. The NSE’s index is known as S&P CNX Nifty which is a 50 stock index which covers almost 25 sectors of the economy.
Bombay Stock Exchange Limited is the oldest stock exchange in Asia. The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The BSE’s index is the SENSEX which is a 30 stock index. The SENSEX is an acronym for Sensitive index of the BSE.

Current scenario
The price of shares/scrips is fixed in the market by the invisible forces of demand and supply. When the purchase price is more than the selling price, the prices of share rise i.e. if A wants to sell a TCS share at Rs 40 but B is willing to buy the share at Rs 45, then automatically the transaction is carried out by the computer, and the price of the share increases.
The regulator of the Indian capital market is the Securities and exchange board of India (SEBI). It makes sure that the small investors are not cheated and ensures transparency of the transactions.
Recently, our markets witnessed a drastic fall, owing to the pull out of the foreign institutional investors (FII). The recent Mumbai blasts have also affected it.

My views
The investors in these markets form consortiums among themselves such that, a group of these investors are able to make changes in the overall market indices. FII’s are one such group. When they think, the time has come to book profits; they take up a selling position. This causes the market to fall and when the market falls, these groups again buy the shares; thus making profits again out of their buying back the shares. This phenomenon is possible only if the group’s transactions can exercise a considerable influence in the concerned market.
Market sentiments play an increasingly important role in the fixing of share prices. News such as decrease in interest rates, good rainfall, etc promotes investment thereby raising the price of the indices in the process. But bad news such as a bomb blast or an earthquake quake the investors see, thereby lowering the indices. The reasons for the markets showing a buoyant face during good news in understood clearly. A reduction in interest rates, promotes cheaper borrowing, thus facilitating more investment. While a good rainfall increases agricultural production, which has an impact on the various industries which make use of agricultural inputs. But, during a bomb blast, what I believe happens is that, investors (very much attached to their money) tend to sell. Game theory helps in explaining how the investors react. The typical example of game theory is that of the prisoner’s dilemma. When an investor hears a bad news, he thinks that other investors will pull out their investment owing to increased need of contingency funds. When all the investors think alike, a large scale selling occurs. I classify it as a typical group phenomenon, arising out of an individualistic tendency.

Some related information
There are other financial instruments in the market known as the Mutual Fund (MF). They are specialised institutional investors who mobilise funds from the public and invest in the capital markets. The people consider investing in such MF’s less risk than shares. It is a booming market but has not utilised its full potential. MF’s are a good option for those investors who do not have time to make a detailed analysis about the economics of the capital market.
Recently investment gurus have been stressing the importance of commodity markets. They are gaining importance in the Indian market.
Some economists and finance analysts believe that when an industry is overvalued, a correction takes place. Say, if the asset prices are increasing but the intrinsic value has remained almost the same, then a bubble is said to occur, which is sure to burst in the near future. Likewise, some believe that the Indian markets were overvalued and the recent crash which occurred was just a correction.

Indicator’
In the previous months, we might all have come across the headline that Indian economy is booming with the stock market touching its record peak of 12,000. The market indices are just indicators of the investor’s confidence levels and the business enthusiasm levels. We should not view the markets in isolation and say that the economy is doing well.

Jargons used
Bear- a selling spree where the prices are falling
Bull-a buying trend with rising prices
short & long position-you can view it here
Bourses-stock market

Hope this post has been of use to my friends and others. If you have liked it, please do let me know in my comments. If you have any questions or clarifications, do let me know.

Author: Alex M Thomas

A passionate student of economics!

98 thoughts on “Indian Stock market: The basics”

  1. I want to know some features about
    primary and secondary market.
    What is the diffrence between capital market and share market?
    How one make research on graph?
    Also I want to be a researchist in share market (in capital market segment).How could I approach?
    Please, you help me informing the questions. I will be thankfull to you.

    1. I want to know some features about
      primary and secondary market.
      What is the diffrence between capital market and share market?
      How one make research on graph?
      Also I want to be a researchist in share market (in capital market segment).How could I approach?
      Please, you help me informing the questions. I will be thankfull to you.

  2. In my post, i have mentioned about the main distinguishing feature between the primary and secondary market; which is that only the initial public offerings enter the primary market and all subsequent trades of the company shares are done in the secondary market(stock exchange).
    Share market is one part of the Indian capital market and rather an important one. Indian capital market comprises share markets, Mutual Funds, Venture capital, etc.
    Technical analysis deals with the scientific study of stocks in the bourses.
    To be able to become a trader, you basically need experience in the field. You would also require a certification either from BSE, NSE or AMFI. Doing a?CFA course?would prove to be helpful. ICFAI offers a 2 year programme called MS Finance for those interested in learning about the stock market.

  3. Sowjanya,
    A stock index is an index number which is calulated on the basis of specified stocks for a given day. The stock index is highly volatile. SENSEX is the sensitive index of BSE which computes its index based on 30 scrips/shares.
    An index number calculation requires
    1)Selection of stocks to be included
    2)A base year which has been normal i.e with reduced fluctuations in economic activity
    3)An index number is devoid of any units.
    An index enables the investor to determine the changes in the movement of all the stocks in that particular index.

  4. Sowjanya,
    Small cap refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion.
    Mid cap refers to the stocks of companies having a market capitalization between $2 billion and $10 billion. Shortened form of “middle cap”.
    You can read?about day trading here.

  5. Saneesh,
    SENSEX is the sensitivity index compiled by the BSE. It comprises 30 stocks selected on the masis of their market capitalisation and other variables. When majority of the shares in the 30 share index, rise, the SENSEX tends to rise and vice versa.

    “what are the difference between share market in Private co. and Public Co” -I didnt get the question.

  6. Sanu,
    SEBI is the regulator of the Indian capital market. It is the Securities and exchange board of India. It keeps a check on the trading taking place in the markets so that scams do not occur and the savings of the investory do not decrease. It oversees the bookbuilding processes, clearing services, etc to ensure the smooth running of the Stock markets.

  7. Nice article. Could you please suggest me some basic books to understand the stock market (focussing the Indian Market)?

    Thanks,
    Regards.

  8. Mathew,
    Thanks for your comments. This link will give you the zip file of Securities Market (Basic) Module. You will get all your questions answered, or you have other modules to help you out. This is the most basic one.

  9. Dear Hari,

    The stock brokers are the members of a recognised Stock Exchange who perform the function of buying and selling shares and securities on behalf of the investing public for a commission.

    You need to register with an exchange of your choice.

    For more information on the?stock market jargons?go here.

  10. i feel that indian stock market is slowly withstanding to rumours and absorbing the shocks and we can find the sustainability and rapid growth in indian capital markets

  11. Re:Ramesh

    As long as the major players in a market is affected by shocks and rumours, so will the market. Such fluctuations occur greatly when there is asymmetrical information among the investors mainly.

    Investors try to maximise their returns assuming that they are informed and there are other investors who are uninformed. This drives the informed investors to buy/sell.

  12. Hi Alex

    The information you have provided has been really helpful. Thanks!
    Id like to know more about the current scenario of the stock market. By the way, when someone refers to the stock market’s position,is it usually with reference to the companies listed on the NSE or BSE or both?

  13. Hi thanks for the valuable information it’s prtty clear and understandable to the beginers.I want to know about micro economic priniples and their application in the field of public health.please give me the information regarding this topic.

  14. Intersting to say that FIIs still play the lead role in controlling the market…it basically refers to the fact that Indian markets are still immature as compared to the other developed markets…wht will you say bout the increasing role of retail participants and Mutual funds..we have a huge retail participation in primary as well as secondary markets…and MF’s mop up have been hitting record highs…so is the Indian market still restricted to FIIs??

  15. FIIs have huge buying power and they are continuing to see emerging markets as a cheap bargain. I don’t see their influence will ever decrease in the foreseeable future. Institutional investors always have more influence on the market than retail. Domestic retail wont be any match for FIIs .. Hopefully as more domestic institutional investors increase, FII’s grip on Indian market will gradually decrease. But what the heck? we are in a global market place anyway..

  16. Hiten,
    As far as i know PE ratio calculated for companies is as follows.
    The formula applied is [market value per share] divided by [earnings per share].
    Say, the market value of TCS is Rs100 and the EPS(earnings per share) over the last one year is Rs10, then the PE ratio would be 10.
    Say,the PE ratio of the Sensex is around 16. This means that if we add up the price of all the 30 Sensex companies and divide it by their Earnings Per Share, the result would be 16. [Rediff.com]

  17. are the same 30 companies used to build up the index or do they keep changing? are all these companies generally large cap companies ? is sensex a simple aggregate of the market values of the shares of these companies ?

  18. Paddy,
    The BSE has got a history of replacements in its SENSEX.
    SENSEX is not an aggregate, but an index number.
    The company stocks/scrips are selected based on a few parameters like listed history, trading frequency etc.
    For detailed explanations go here.

  19. Hi,

    any one can brief me about the following scenario.

    If Local exchange(Ahmedabad,Pune,Bombay)is there then why nse is there.

    could u pls relate this both and importance and details about such scenario.

    If i have company xyz and i register in regional exchange then why should i register with nse.

    plese email me this explanation on mayank.master@gmail.com

    Thanks

  20. Hi,
    iam totally new share market,i want to know about it,how to buy a share and how to pay and some tips of share market,iam indian working in abored…,pls some can help me and i will be thankful to u

  21. hi,
    i am thai student and i am doing a report about Indian’s Finance.
    but i’ve got some problems about” Financial markets of India and foreign portfolio investment of India” would you mind to explain to me?
    i hope you will never mind and assit me, please!!!
    please send your description to my e-mail
    (linkin_mayii@hotmail.com)
    thank you very much.

  22. thank you very much for your kindness.
    i mean i would like to know about:
    1 brief description of financial markets of India
    2 foreign portfolio investment in India ( explain in general)
    3 forecast of exchange rate movement of india in the future and why(tell me the reason)
    thank you again.

  23. May,

    These are very general questions. You can get information on them by googling them. I can help you only by finding information for you. And i think, you will be able to do that by yourself. If you have any doubts regarding it or if you think something is not right, you can ask me.

  24. Hi,

    I am doing a project on the ” Assessment of the day trading market” in the indian stock market.

    I would appreciate if you could let me know what the
    # total size of the indian market would be.
    # and out of these how many would you quantify as day traders.

    thank you very much

  25. @Shibu, what you are asking for is very difficult to calculate! I don’t know if anyone keep track of such data.
    About the size of indian market, the most recent figure that i found in google is $450 billion, as of september 2005. Now it could be double that amount! who knows?

    About day traders, first of all what is your definition of day trader? In U.S, NYSE and NASDAQ rules define a day trader as one who execute 4 or more day trades within 5 business days. I don’t know if india has any such day trading definition/regulation. Evenstill, it is imposible to quantify day traders since exchange trades are or can be executed anonymously. But it is possible someone might have done a randomly sampled survey.
    Good luck on your research. let us know if you find something.

  26. great page i hav found after a lot of search.i am a new investor n want to know if i want to do daily trading(though not intraday but on cash),which few parameters i shud keep track of to determine which stock is safe n will giv 2-3% profit atleast in a day? i want to make fast cash..i am an MBA student currently.

  27. Hi alex..

    i enjoyed your articles.i’m pretty new into the scene and would like to know what factors would determine hot scenes in investing in stock market. as a starter i would like to know which factors to keep track of in order to know whether my investment is safe. i would really appreciate any guidance into the matter

  28. Dear Alex, I think you have done a great job of communicating the complexities of stock market in such simplistic terms. I have been for a long time wanting to have information on this subject but was not sure how to begin in a structured manner. Right now, I would be obliged if you answer my undernoted queries pls:-

    1) There are several factors which control the market movements as u said, bomb blasts, interest rates, rainfall…….these lead to a surge or a crash………..but what about the daily minor fluctuations that we witness in sharprices????………..how is that controlled??? why the share proces fall or rise by some paisa or even one or two rupee???

    2)what is the meaning of market capitalization?

    3)You say SENSEX is an index number. But how is it calculated. For eg., I say, market closed at 12000 points yesterday. which market am I referring to (I guess BSE, correct me if am wrong) & how we arrived at the index number of 12000.

    Kindly reply. Many thanks & can I have your mail ID in case you decide to stop answering on this forum.

  29. Archana,

    1)The daily fluctuations in prices can be caused by any of the facts mentioned earlier or by the simple matching of demand and supply. As long as the demand and supply prices fluctuate, the equilibrium prices fluctuate too.

    2)Market capitalization refers to the total vloume of shares traded in a particular market. (BSE, NSE etc)

    3)SENSEX: The company stocks/scrips are selected based on a few parameters like listed history, trading frequency etc.
    For detailed explanations go here.

    Archana, This is not a forum. 🙂 This a blog. My email address is alexmthomas@gmail.com

  30. Dear Alex,

    thanks a ton………….& oops, am sorry for wrongly writing it as a forum………..

    regards

    – archana

  31. Alex…..,
    Who are Gureilla Traders????…..Why they called so???
    Can we trade like them as Gureillas an StockMarkets????
    ajesh.

  32. hi Sir,
    I am a student of bba(cam)and i am doing project on VOLATILITY IN INDIAN STOCK MARKET. I am a beginner. and i dnt knw what approach should be taken for this project.i want to know what volatility stands in indian market.i ll be oblige if u help me in this regard.sir I think you have done a great job.I have been for a long time wanting to have information on this subject. Right now, I would be obliged if you answer my undernoted queries pls:- (shilpi14u@yahoo.co.in)

  33. Shilpi,

    First of all, i am not a ‘sir’. I am a student of Economics.

    Volatility refers to the degree of (typically short-term) unpredictable change over time of a certain variable. [Wikipedia]

    In this case, the variable is a share which is traded in the stock market. You need to study the price movements of a share over a period of time- over a day, a month or even a year. You can also find out the reasons for such ‘volatility’ by reading up on the related news and events pertaining to that particular period.

  34. @Ajesh, my understanding is that Gureilla Traders are someone who holds positions for only a few seconds or minutes before closing their trades. Like Market Makers, they attempts to make money from the small difference between the bid price and ask price of a security.
    I would assume these trades need to be very sophiticated and should be using complex data analyzing systems..

  35. hi alex
    iam junaid ullah persuing bba(cam) i have taken a project on INSIDER TRADING in stock market and i just wanna know the approach to work upon it and i ll be obliged if u gonna help me in this regard .Great page i hav found after a lot of search. alex i hp u will reply me as soon as possible.

  36. hi alex

    thanx for reply .and i was not aware of tht u r student of economics. this is something gr8 tht being a student u hv done a gr8 job .alex can u give me u mail id so i can mail u on tht.hp u will not mind. alex i just wanna knw the price flucations happend in the past era so wht would be the step for taking this .can u suggest me .thanx again
    have a nice day !!!!!!!!!!!

  37. hi, i am doing a 100marks project on PORTFOLIO MANAGEMENT SERVICE. i donot have complete information on this topic, so if u could help me out and tell me the topics i should cover in this project it would be of real help.

  38. hmm thats ohk , but can u tell me how does one calculate the performance of a particular portfolio….can u suggest me any books that i can refer for the same

  39. Hi Alex… Amazing!!

    So many of my unanswered questions got answers in on click..

    Thanks for all the info.. Jus a qoute I remembered: “If you read something you ll remember it. If you do it you wont forget it .. But if u teach it you will remember it forever”

    So Clever Student.. So I am not going to tell you thanks..

    Joiking dude Thank alot

  40. Hi Alex ,

    First lemme congratulate u on ur amazing effort…gr8 work….I m a prolific net surfer but had never b4 stumbled accross ne blog which had made complex business of investing/trading so simple.

    & getting back to the question somebody asked about ‘Market Capitalization’…lemme add few things to what Alex had already explained..Technically….
    ‘Market Capitalization’ = ( Price of each share of that company that specfic day * number of outstanding shares of that company)

    Please keep up the gud work Alex..

    Regards,
    PRM

  41. Hi Alex.

    Your presentation is good & informative, thanks for the same.

    say for example, a seller/broker is selling good no of TCS shares at Rs.45 per share which he bought at Rs.40. Because of this transaction how the company TCS is getting benefitted? and what will be the price per share after this transaction?

  42. Sathya, TCS would not directly benefit from that transaction particularly. Share market is a secondary market ( think of it as a used car market, so just like Tata or Toyota don’t make any money from the used car sales, TCS is not going to get any money).
    But in long term, this is a good thing for TCS as their share price is going up . so if they want to issue brand new stocks again in the futures they will get more money from the public than they got in the past.
    Also, as share price increases, market capitalization for TCS also increases. Financially, this means better credit standing and increased buying power for the company.. It makes it easier for TCS to buy other companies since the company itself worth more.

    Answer to your second question depends on how much is the good number of shares being sold and other market conditions and average daily volume of the stock. small transactions would not have any impact on the market price…

  43. Thank you for this nice post.Please visit http://www.indiansharemarket.net/which discribes how to start trading, A series of articles, tips, trading strategies and advice to help the Indian investor or trader get a better insight to trading and investing in,
    stock technical analysis, stock mutual funds, indian share market, indian ipo information, indian ipo guide, indian sharemarket. The indian stock market portal to give tips on Indian stock markets,
    website for learning and help oneself to make profits in stock markets, by understanding the basics in becoming a better Investor.

  44. Hi Alex,

    I want to know how the shares of a company will raise and fall in a day at stock exchange. Daily we’ll see in newspapers that some XYZ company is in loss due to shares selling and buying. Can u please clear this .

  45. i m under graduate.i want to learn technical analysis of stock market of india. i want to study in Ahmedabad. is there any institute or any other way to learn technical analysis in Ahmedabad.

  46. i want to learn technical analysis of stock market in india (Gujarat) (Ahmedabad). In Ahmedabad is there any course or any institute which i can use to learn technicle analysis. i m under graguate.

  47. i am a student of economics honours. i would like to know more about the current stock market fluctuations and its possible link to the US sub prime lending market.

  48. dude [alex],
    can u explain more about game theory?
    naqu
    When they think, the time has come to book profits; they take up a selling position. This causes the market to fall and when the market falls, these groups again buy the shares; thus making profits again out of their buying back the shares. This phenomenon is possible only if the group?s transactions can exercise a considerable influence in the concerned market.

    from this line [view]
    can u elaborate in to trend makers?
    is it a new phenomenon ? naqu

  49. Hi,
    I want weeking n monthy charts on all the indices i.e. NSE/BSE/small caps/big caps/medium caps/bankex/metals etc. Is there any co supplying these charts on a regular basis. If so kindly send me the adress or tel number. My email is afozdar@hotmail.com
    Regards
    Ashok

  50. Hi!
    I would like to discuss the links between the sub-prime crisis in the USA and the buoyancy in our stock markets. This is what I think is happening:(1) those segments of the population which are less credit-worthy are called sub-prime borrowers in the USA.(2) These people were given loans by banks based there for buying houses; the borrowers also lapped up these loans because they thought that since house prices keep rising, they would be making a wise investment decision by taing loans and investing in houses. (3)the banks that had originated these loans then securitised these loans and sold the same to other investors (among them were various Eropean banks)(4) in due course, the low credit worthiness of the ultimate borrowers (sub-prime class)started affecting repayments. There was a rising spectre of defaults. (5) Banks and other investors that had lent money (either directly to sub-prime class or indirectly through securitised instruments) became seized with anxiety, wanting to sell off the securities as soon as possible. (6) This led to massive no. of sellers in the market and few buyers. Clearly, some of the lenders were to be it hard. Many banks etc also did not know which other banks/entities were faced with the crisis and hence could’nt be trusted as a counterparty for deals.(7) All this led to a general mood of gloom and doom in the bond/debt markets and subsequently in other asset markets.(For example, banks that were going to lend funds to the Tatas for the Corus deal backed out although the Tatas’ credibility is not so low)Interest rates threatened to increase sharply. (8) To counter the gloom, central bank of the USA reduced interest rates so that cost of capital is reduced for entrepreneurs. (9) money from the developed markets started coming to other markets like India because:these markets were relatively unscathed by sub-prime crisis & interest rates are higher here (capital flight).Hence, the buoyancy in the stock markets. Hence also the strengthing Rupee.
    Pls correct me if I am wrong.

    Gautam

  51. Hi Guatham, I agree with your assessment for the most part. As a general theme what we are
    witnessing these days is the strong influence of Foreign institutional Investors in the Indian market and via them our interlinkage to the world financial market.

    Some of these FII’s are HUGE(which is an understatement!). There are fund companies in US that has more assets under management than the value of entire Indian GDP! For these funds and FII’s in general Indian equity (or emerging market) is still dirt cheap compare to their buying power. So what we are seeing now in the current bull market over the past 4,5 years is the adjustment of indian equities to the buying power of the FIIs. As buyers with deep pocket enter the market, the prices for product will shoot up and what is especially bullish is FII inflow is growing day by day. From what i heard, these days FII’s account to half of the inflows to Indian capital market.
    Now what happens is that lets say some these FII made significant loss in any world market (Sub prime issue for example), then they would have to readjust their portfolio and will be forced to liquidate part of their positions in other market like India eventhough there is no direct connection to the original issue(subprime for ex) to those markets.

  52. Naquash,

    Game Theory has been touched upon, in this post and Gametheory.net will provide useful information.

    You could call them ‘trend makers’ but i would call them speculators because it is this group of individuals that book the maximum profits from share market or any volatile activity. Usually, such trend makers cannot thrive in the open due to the eyes of SEBI, the regulating agency which looks into the interest of all the investors.

  53. sir
    i want a brief about the growth and sustainability of the Indian stock market. so that i can graduate my self for the next level, and my investment becomes bit easy

  54. sir,
    i want to know how many sector’s are there in indian share market and also which is the most important companies or more active companies in that sector. who is the regulator of the price. and what are the reason’s for increase or decrease in the value nifty and sensex and how is it caculate. plese do answer

    thanking you,

    vinod misra

  55. want to know some features about
    primary and secondary market.
    What is the diffrence between capital market and share market?
    How one make research on graph?
    Also I want to be a researchist in share market (in capital market segment).How could I approach?
    Please, you help me informing the questions. I will be thankfull to you.

  56. Hi Alex.
    I am an Engineer,but i understand all your topics at a first glance only..Great work..
    But still nobody mentioned about P note.
    so tell something about p note,how it will affect market?
    & why SEBI restricts P note few days before?

  57. Chetan you can see a list of BSE Indicies in Yahoo finance under the following yahoo finance link “http://in.finance.yahoo.com/indices?e=bse”

    Chintan,from what i understand , P-Note is a derivative instrument that allow a foreign investor to invest in Indian equities. For example, if a U.S citizen from New York want to buy Reliance share, he will need to go to his U.S stock broker . The Indian branch of his US Broker will buy the stock for him and issue a P-note to the U.S branch. The value of P-note is based 100% on the underlying stock they bought. This foreign buyer is technically holder of the P-Note, not the actual Indian stock but holder a p-note is in substance holder of the stock!
    This workaround is necessary because of SEBI’ restrictions on foreign investors to invest directly in Indian market without getting registered with SEBI.

  58. hi Alex
    i would like to know about some basic things about the shares like:-
    1) how the shares of a company will raise and fall in a day at stock exchange. Every day we observed that company’s yearly profit is good but still their shares price is falling.
    2) why the selling price and buying price of shares is difference.
    3) the same 30 companies used to build up the index or do they keep changing? are all these companies generally large cap companies ? is sensex a simple aggregate of the market values of the shares of these companies ?
    please help me to informing the question
    thanking you
    Ratna Sinha

  59. hi.. im an final mba student… i need a project on finance topic in share market… a study on overall performance evaluation of the company listed in cnx 500 through IPO. please anyone help me

  60. P-Note is a derivative instrument that allow a foreign investor to invest in Indian equities. For example, if a U.S citizen from New York want to buy Reliance share, he will need to go to his U.S stock broker . The Indian branch of his US Broker will buy the stock for him and issue a P-note to the U.S branch. The value of P-note is based 100% on the underlying stock they bought. This foreign buyer is technically holder of the P-Note, not the actual Indian stock but holder a p-note is in substance holder of the stock!

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