GRIEVANCE PROCEDURE

Meaning/Definitions

The concept ‘grievance’ has been defined in several ways by different authorities. Some of the definitions are as follows:

Beach defines a grievance as “any dissatisfaction or feeling of injustice in connection with one’s employment situation that is brought to the notice of the management” , whereas Flippo indicates the grievance as “a type of discontent which must always be expressed . A grievance is usually more formal in character than a complaint. . It can be valid or ridiculous, and must grow out of something connected with company operations or policy. It must involve an interpretation or application of the provisions of the labour contract”.

Jucius defines a grievance a “…..any discontent or dissatisfaction , whether exposed or not, whether valid or not, arising out of anything connected with the company which an employee thinks, believes or even feels to be unfair , unjust or inequitable”.

Need for a Grievance Procedure

Grievance procedure is necessary for any organization due to following reasons:

(1) Most grievances seriously disturb the employees. This may affect their morale,

productivity and their willingness to cooperate with the organization. If an explosive situation develops, this can be promptly attended to if a grievance handling procedure is already in existence.

(2) It is not possible that all the complaints of the employees would be settled by first time supervisors, for these supervisors may not have had a proper training for the purpose, and they may lack authority. Moreover, there may be personality conflicts and other causes as well.

(3) It serves as a check on the arbitrary actions of the management because supervisors know that employees are likely to see to it that their protest does reach the higher management.

(4) It serves as an outlet for employee’s gripes, discontent and frustrations. It acts like a pressure valve on steam boiler. The employees are entitled to legislative,

Executive and judicial protection and they get this protection from the grievance

Redressal procedure, which also acts as a means of upward communication.

The causes of Grievances

The causes of employee grievances include:

· Demands for individual wage adjustment

· Complaints about the incentive system

· Complaints about the job classification

· Complaints against a particular foreman

· Complaints concerning disciplinary measures and procedures

· Objections to the general methods of supervision

· Loose calculation and interpretation of seniority rules and unsatisfactory interpretation of agreement Promotion

· Disciplinary discharge or lay-off

· Transfer for another department or another shift

· Inadequacy of safety and health service/devices

· Non-availability of material in time

· Violation of contracts relating to collective bargaining

· Improper job assignment

· Undesirable or unsatisfactory conditions of work

· Victimization and

· Fines.

Pre-requisites of a Grievance Procedure

The efficiency of a grievance procedure depends upon the fulfillment of certain pre-requisites. These are as follows:

Conformity with Prevailing Legislation

While designing the grievance procedure, due consideration must be given to the existing statutory provisions. In other words , the existing grievance machinery as provided by law may be made use of.

Clarity

There should be clarity regarding each and every aspect of the grievance procedure. An aggrieved employee must be informed about the person to whom a representation can be made, the form of submission , the time limit for the redressal of grievance etc. Similarly, the redressing authority should be very clear about what is expected from him, what measures he can take, the limits within which he should resort to an action etc.

Simplicity

The grievance procedure should be simple. Every employee must understand different stages of the procedure, the forms to be filled up, the witness required etc If there are too many stages in the procedure, too many forms to be filled up, too much going around etc., the very purpose of the procedure is defected. Instead of resorting to the formal procedure, an employee may ignore it.

Promptness

The promptness with which a grievance is processed adds further to the success of the grievance procedure. Since just delayed is justice denied, the procedure should aim at rapid disposal of the grievances.

Training

The success of procedure also depends upon imparting training to the supervisors and union representatives in handling grievances.

Follow-up

The successful working of a grievance procedure depends upon a proper follow-up by the personnel department. The department should periodically review the procedure and introduce the essential structural changes making it more effective.

Steps in the Grievance Procedure

Identify grievances: employee dissatisfaction or grievances should be identified by the management if they are not expressed. If they are ventilated, management has to promptly aacknowledge them.

Define correctly: the management has to define the problem properly and accurately after it is identified/acknowledged.

Collect data: complete information should be collected from all parties relating to the grievance. Information should be classified as facts, data, opinions etc.

Analyse and solve: the information should be analyse , alternative solutions to the problem should be developed and the best solution should be selected.

Prompt redressal: the grievances should be redressed by implementing the solution.

Implement and follow up: implementation of the solution must be followed up at every stage in order to ensure effective and speedy implementation.

Model Grievance Procedure

The Model Grievance Procedure suggested by the National Commission on Labour involves six successive time-bound steps each leading to the next, in case of dissatisfaction. The aggrieved worker in the first instance will approach the foreman and tell him of his grievance orally. The foreman has to redress his grievance and if the worker is not satisfied with this redressal , he can approach the supervisor .the supervisor has to provide an answer within 48hours. At this stage the worker approaches the Head of the Department who has to give an answer within 3days. If the Departmental Head fails to give an answer or if the worker is not satisfied with his answer, the worker may appeal to the Grievances Committee, consisting of the representatives of the employer and employees. The recommendations of this committee should be communicated to the Manager within seven days from the date of the grievance reaching it. Unanimous decisions, if any , of the committee shall be implemented by the management . If there is no unanimity, the views of the members of the committee shall be placed before the manager for his decision. The manger has to take a decision and inform the worker within 3 days.

A union official may accompany the worker to the manager for discussion and if no decision is arrived at this stage, both the union and management may refer the grievance to voluntary arbitration within a week of the receipt of the managements decision. The worker in actual practice, may not resort to all the above mentioned steps.

Model Grievance Procedure

Procedure	Time frame
Appeal against within a week Manager Grievance committee HOD Supervisor Foreman Worker	3 days 7 days unanimous 3days 48hours

Guidelines for handling Grievance

The following guidelines may help a supervisor while dealing with grievances. He need not follow all these steps in every case. It is sufficient to keep these views in mind while handling grievances

· Treat each case as important and get the grievance in writing.

· Talk to the employee directly. Encourage him to speak the truth. Give him a patient hearing.

· Discuss in a private place. Ensure confidentiality, if necessary.

· Handle each case within a time frame.

· Examine company provisions in each case. Identify violations, if any. Do not hold back the remedy if the company is wrong. Inform your superior about all grievances.

· Get all relevant facts about the grievance. Examine the personal record of the aggrieved worker. See whether any witnesses are available. Visit the work area. The idea is to find where things have gone wrong and who is at fault.

· Gather information from the union representative, what he has to say, what he wants, etc. give short replies, uncovering the truth as well as provisions. Treat him properly.

· Control your emotions, your remarks and behavior.

· Maintain proper records and follow up the action taken in each case.

· Be proactive, if possible. Companies like VSP, NALCO actually invite workers to ventilate the grievances freely, listen to the other side patiently, explain the reasons why the problems arose and redress the grievances promptly.

Disciplinary Procedure

Meaning and Definition

Discipline refers to a condition or attitude, prevailing among the employees, with respect to rules and regulation of an organization. Discipline in the broadest sense means “orderliness, the opposite confusion. It does mean a strict and technical observance of rigid rules and regulation. It simply means working, cooperating and behaving in a normal and orderly way, as any responsible person build expect an employee to do.

Discipline is defined as” a force that prompts individuals or group to observe the rules, regulation and procedures which are deemed to be necessary for the effective functioning of an organization”.

According to Ordway Tead , discipline is ”the orderly conduct of affairs by the member of an organization, who adhere to do necessary regulations because they desire to cooperate harmoniously forwarding the end which group has in view, and willingly recognize that. To do this, their wishes must be brought into a reasonable union with the requirements of groups in action”.

Aspects of Discipline:

The two aspects of discipline are dealt in details below:

1) Positive Aspect:

Employees believe in and support discipline and adhere to the rules, regulation and desired standards of behavior. Discipline takes the forms of positive support and enforcement for approved actions and its aim is to help the individual in moulding his behavior and developing him in a corrective and supportive manner. This type of approach is called positive approach or constructive discipline or self-discipline.

2) Negative Aspect:

Employees sometimes do not believe in and support discipline. As such they do not adhere to rules , regulations and desired standard of behavior . as such a disciplinary programme forces and constraints the employees to obey orders and functions in accordance with the rules and regulations through warnings penalties and other forms of punishment. This approach is called negative approach , corrective approach or punitive approach.

Objectives of discipline:

The objectives of discipline are:

· To obtain a willing acceptance of the rules, regulations and procedures of an organization so that organization goals may be attained ;

· To impart and element of certainty despite several difference in informal behavior pattern and other relater changes in an organization;

· To develop amount the employees a spirit of tolerance and desire to make adjustments.

· To give and seek direction and responsibility

· To create and atmosphere of respect for the human personality and human relation and

· To increase the working efficiency and morale of the employees so that their productivity stepped up and the cost of production improved.

The Red Hot Stove Rule:

Without the continual support and regard of the subordinates, no manger can get the things done. But disciplinary action against a delinquvnt employee is painful and generates resentment on its part. Hence, a question arises as to how to impose discipline without generating resentment? This is possible through what Douglas McGregor called the “ Red Hot Stove Rules” ,which draws analogy between touching the hot stove undergoing discipline and –

· The burn is immediate.

· He had a warning. When the stove was red hot, he knew what would happen if he touched it.

· The effect is consistent. Everyone who touches red hot stove gets burnt.

· The effect is impersonal. A person is burnt not because of who he is but because he touched the hot stove.

The same thing is true with discipline. The disciplinary procedure should start immediately after an omission is noticed. It should give a clear cut warning regarding the extent of punishment for an offence. The same punishment should be consistently given for the same type of offence

Indiscipline

Indiscipline means disorderliness, insubordination and not following the rules and regulations of an organisation. The symptoms of indiscipline are change in the normal behaviour ,absenteeism ,apathy ,go slow at work ,increase in number and severity of grievances ,persistent and continuous demand for overtime allowance ,lack of concern for performance etc.

Causes of Indiscipline:

The common causes of indiscipline are:

(1)Absence of effective leadership: Absence of effective leadership results in poor management in the areas of direction, guidance, instructions etc., this, in turn, leads to indiscipline.

(2)Unfair management practices: Management sometimes indulges in unfair practices like wage discrimination, defective handling of grievances, payment of low wages, delay in payment of wages, creating low quality work life, etc., these unfair management practices gradually result in indiscipline.

(3) Communication Barriers: Communication barriers along with the absence of upward communication, absence of humane and understanding approach on the part of superiors result in frustration and leads to indiscipline.

(4) Non- uniform Disciplinary Action: Management has to treat all cases of indiscipline in a fair and equitable way. But management may undertake disciplinary actions in a discriminating way, leading to violent protests from various quarters.

(5) Divide and rule policy: Managers may often divide the employees into groups, get the information from different groups about others and encourage the spying activity.

(6) Inadequate attention to personnel problems and delay in solving personal problems create frustration among individual workers.

(7) Victimization and excessive pressure on the work of the subordinate may also lead to indiscipline.

Domestic Enquiry

When the management of the company finds that an act of misconduct committed by an employee, warrants disciplinary procedure should be conducted in order conclude whether the act committed by the employees is a misconduct or not. Management can arrange to conduct the disciplinary procedure from within the company or by the officers from outside the company. Enquiry conducted from within the company by the internal officers is called domestic enquiry.

Management appoints the company officers as domestic enquiry officers. Sometimes, the personnel manager in charge of discipline may act as enquiry officer.

The domestic enquiry officer enquiries into the issue by:

· Calling the employee for explanation.

· Considering the explanation of the employee.

· Issuing a show- cause notice.

· Holding a full- fledged enquiry.

· Considering the witness reports, documents, events etc.,

· Considering the enquiring reports.

After the enquiry is over, the domestic enquiry officer submits his final report to the management. Management implements the report if it is satisfied with the enquiry. Otherwise, management may order for an external enquiry.

Disciplinary Procedure

Disciplinary procedure in Indian industries comprise of following stages

Issuing a letter of charge to the employee calling upon him for explanation: When the management of the establishment comes to the conclusion that an act of misconduct committed by an employee warrants disciplinary action, the concerned employee should be issued a charge sheet. The charge sheet should indicate the charges of indiscipline or misconduct clearly and precisely. Explanation should also be called from the delinquent employee and for that sufficient time should be given to the employee. Sending of the charge sheet either by personally or by post.

Consideration of explanation: When the delinquent employee admits in an unqualified manner, about his misconduct, there is no need for conducting any enquiry further. Besides when the employer is satisfied with the explanation given by the delinquent action. On the contrary management is not satisfied with the employee’s explanation, there is a need for serving show-cause notice.

Show-cause notice: In the show cause notice, the employer provides another chance to the employee to explain his conduct and rebut the charges made against him. This notice is issued by the manager, who decides to punish the employee. Besides, a notice of enquiry sent to the employee and this should indicate clearly the name of the enquiring officer, time, date and place of enquiry into the misconduct of the employee.

Holding of a Full-fledged enquiry:

The enquiry should be conformity with the principles of natural justice, that is, delinquent employee must be given a reasonable opportunity of being heard. The enquiry officer should record the findings in the process of an enquiry. He may also suggest the nature of disciplinary action to be taken.

Considering the Enquiry Proceedings and Findings and Making Final Order of Punishment: When the misconduct of an employee is proved , the manager may take disciplinary action against him. While doing so he may give consideration to the employee’s previous record, precedents effects of this action on other employees etc. have to be considered. No inherent right to appeal has been provided unless the law provides it. In case the employee- the enquiry not proper and action unjustified. He must be given a chance to make an appeal.

Follow-up: After taking disciplinary action, there should be proper follow-up. The disciplinary action should not make the employee repeat his mistake. And the consequences of the implementation of disciplinary action should be noted and taken care of.

Types of punishment

Different types of punishments resulting from various types of omissions or misconduct are as follows:

1. Oral warnings: Whenever an employee commits minor omissions, he may be given oral warning by the superior concerned. In such cases superior should enlighten the employee as to prevent their recurrence.

2. Written warnings: whenever oral warnings fails to achieve the desired behavior on the part of the employee, written warnings, which are the first formal state of progressive discipline, may be resorted to. Written warnings are also referred to as ‘pink slips’ which indicate that certain rights would be withdrawn incase the employee continues his misconduct or omission.

3. Loss of privileges and fines: if an employee leaves the work without taking permission of the superior, he may not be allowed to select the good tools and machines for himself to move freely in the company. If the contract of employment provides for imposition by the employee on the delinquent employee, the employer may resort to them.

4. Punitive suspension: under punitive suspension, the employer prohibits the employee from performing the tasks assigned to him and the wages are withheld or withdrawn during the period of such prohibition.

5. Withholding of increment: There is a major punishment under this method the employer withholds the annual increment of the delinquent employee in a graded scale.

6. Demotion: under this type, the employee is reduced to a lower grade enjoyed by him earlier. Normally this method is resorted to when an employee is promoted mistake and he is not able to perform the job.

7. Termination: The employees service is terminated in the following forms a) discharge implicate b) discharge c) dismissal.

Conclusion:

Management and trade unions try to provide benefits to the workers but , still workers feel dissatisfaction. Workers ‘dissatisfaction are dealt through grievance procedure. Workers may not discharge the duties as per their company requirements. Disciplinary procedure deals this issue. Disciplinary rules regulate the behavior of employees in an organization as the law regulates the behavior of people in the society.

BIBLIOGRAPHY

PERSONNEL AND HUMAN RESOURCE MANAGEMENT

- P. SUBBA RAO

HUMAN RESOURCE MANAGEMENT

- V. S. P RAO

Secondary Market

Introduction

The market where existing securities are traded is referred to as the secondary market or stock market. In a stock market, purchases and sales of securities whether of Government or Semi-Government bodies or other public bodies and also shares and debentures issued by joint stock companies are affected. The securities of government are traded in the stock market as a separate component, called guilt edged market. Government securities are traded outside the trading wing in the form of over the counter sales or purchases. Another component of the stock market deals with trading in shares and debentures of limited companies.

Control over Secondary Market

For the effective functioning of secondary market, proper control must be exercised. At present, control is exercised through the following three important processes:

a) Recognition of Stock Exchanges

b) Listing of Securities

c) Registration of Brokers.

a) Recognition of Stock Exchanges

Stock exchanges are the important ingredient of the capital market. They are the citadel of capital and fortress of finance. They are the theatres of trading in securities and as such they assist and control the buying and selling of securities. Thus, according to Husband and Dockeray “securities or stock exchanges are privately organized markets which are used to facilities trading in securities.” However, at present stock exchanges need not necessarily be privately organized once.

As per the securities Contacts Regulation Act, 1956 a stock exchange has been defined as follows: “It is an association, organization or body of individuals whether incorporated or not, established for the purpose of assisting, regulating and controlling business in buying, selling and dealing in securities.” In brief, stocks exchanges constitute a market where securities issued by the central and state governments, public bodies and joint stock companies are traded.

b. Listing of securities

Listing of securities means that the securities are admitted for trading on a recognized stock exchange. Transactions in the securities of any company cannot be conducted on stock exchanges unless they are listed by them. Hence, listing is the very basis on stock exchange operations. It is the green signal given to selected securities to get the trading privileges of the stock exchange concerned. Securities become eligible for trading only through listing.

Listing is compulsory for those companies which intend to offer shares/debentures to the public for subscription by means of issuing a prospectus. Moreover, the SEBI insists on listing for granting permission to a new issue by a public limited company. Again, financial institutions do insist on listing for underwriting new issues. Thus, listing becomes an unavoidable one today.

The companies which have got their shares/debentures listed in one or more recognized stock exchanges must submit themselves to the various regulatory measures of the stock exchange concerned as well as the SEBI. They must maintain necessary books; documents etc. and disclose any information which the stock exchange may call for.

C. Registration of Brokers.

A broker is none other than a commission agent who transacts business in securities on behalf of his clients who are non-members of a stock exchange. Thus, a non-member can purchase and sell securities only through a broker who is the member of the stock exchange. To deal in securities on recognized stock exchanges, the broker should register his name as a broker with the SEBI. A stock broker must possess the following qualification to register as a broker:

(a) He must be an Indian citizen with 21 years of age.

(b) He should neither be a bankrupt nor compounded with creditors.

(c) He should not have been convicted for any offence, fraud etc.

(d) He should not have engaged in any other business other than that of a broker in securities.

(e) He should not be a defaulter of any stock exchange.

(f) He should have completed 12 std examinations.

Functions of stock exchange

Stock market performs pivotal position in the financial system. It performs several economic functions and renders invaluable service to the investors, and to the economy as a whole

1. Liquidity and marketability of securities

Stock exchanges provide liquidity to securities since securities can be converted to cash at any time according to the discretion of the investor by selling them at the listed prices. They facilitate buying and selling of securities at listed prices by providing continuous marketability to the investors in respect of securities they hold or intend to hold. Thus, they create a ready outlet for dealing in securities

2. Safety of funds

Stock exchanges ensure safety of funds invested because they have to function under strict rules and regulations and bye-laws are meant to ensure safety of investible funds. Over- trading, illegitimate speculation etc. are prevented through carefully designed set of rules. This would strengthen the investor’s confidence and promote larger investment.

3. Supply of long term funds

The securities traded in the stock market are negotiable and transferable in character and as such they can be transferred with minimum of formalities from one hand to another. so, when a security is transacted, one investor is substituted by another, but company is assured of long term availability of funds

4. Flow of capital to profitable ventures

The profitable and popularity of companies are reflected in stock prices. The prices quoted indicate the relative profitability and performance of companies. Funds tend to be attracted towards securities of profitable companies and this facilitates the flow of capital into profitable channels. In the words of husband dockeray ‘’ stock exchanges function like traffic signal, indicating a green light when certain fields offer the necessary inducement to attract and blazing a red light when the outlook for new investment is not attractive

5. Motivation for improved performance

The performance of a company is reflected on the prices quoted in the stock market. These prices are more visible in the eyes of the public. Stock market provides room for this price quotation for these securities listed by it. This public exposure makes a company conscious of its status in the market and it acts as a motivation to improve its performance further

6. Promotion of investment

Stock exchanges mobilize the savings of the public and promote investment through capital formation. But for these Stock exchanges, surplus funds available with individuals and institutions would not have gone for productive and remunerative ventures

7. Reflection of business cycle

The changing business conditions in the economy are immediately reflected on the stock exchanges. Booms and depressions can be identified through the dealings on the Stock exchanges and suitable monetary and fiscal policies can be taken by the government. Thus a Stock market portrays the prevailing economic situation instantly to all concerned so that suitable actions can be taken.

8. Marketing of new issues

If the new issues are listed, they are readily acceptable to the public, since listing presupposes their evaluation by concerned stock exchange authorities. Costs of underwriting such issues would be less. Public response to such new issues would be relatively high. Thus, a stock market helps in the marketing of new issues also

9. Miscellaneous services

Stock exchange supplies securities of different kinds with different maturities and yields. It enables the investors to diversify their risks by a wider portfolio of investment. It also inculcates saving habits among the community and paves the way for capital formation. It guides the investors in choosing securities by supplying the daily quotation of listed securities and by disclosing the trends of dealings on the Stock exchange. It enables companies and the government to raise resources by providing a ready market for their securities.

FEATURES OF SECONDARY MARKET

· The market where securities are traded after they are initially offered in the primary market. Most trading is done in the secondary market.

· In Secondary market share are traded between two investors.

· In secondary market there is no issuing of the fresh securities but trading of the already issued securities

· In secondary market both buying and selling can take place

· It has a special and fixed place known as stock exchange. However, it must be noted that it is not essential that all the buying and selling of securities will be done only through stock exchange. Two individuals can buy or sell them manually. This will also be called a transaction of the secondary market. Generally, most of the transactions are made through the medium of stock exchange.

Example are the New York Stock Exchange (NYSE), Bombay Stock Exchange (BSE),National Stock Exchange NSE, bond markets, over-the-counter markets, residential mortgage loans, governmental guaranteed loans etc.

· The prices of securities in secondary market are determined by demand and supply.

· Only investors do the trading among themselves in secondary market.

· The trading of securities does not take place first. A security can be traded in the secondary market only if issued in the primary market.

· Secondary market creates liquidity, hence, indirectly promotes capital formation.

· It creates liquidity in securities. Liquidity means immediate conversion of securities into cash. This job is performed by the secondary market.

· Secondary market comes after primary market. New securities are first sold in the primary market and thereafter it is the turn of the secondary market.

SEBI Guidelines:

Though badla transactions have the effect of expanding the market and providing liquidity to the market, very often they lead to high speculative activity and larger volatility in the stock market. Hence, it was banned by the SEBI since December 1993. However, it has announced a modified forward trading system which is effective from October 9, 1995. The important features of the revised Forward Trading System are the following:

1. Each individual broker must have a capital adequacy norm of 3 percent and it is 6 percent for each institutional broker. This must be complied with April 1, 1996.

2. The limit of 25 percent of the turnover imposed on carry forward deals has been removed due to the implementation of capital adequacy norms.

3. Transactions can be carried forward for a maximum period of 90 days. But, squaring off is permitted up to a maximum of five settlement only(for each settlement 15 days and altogether 75 days only).Beyond this stipulated period, transactions have to be settle by actual delivery or payment as the case may be.

4. The graded margin of 20 to 50% of carry forward position has been dispensed with. Instead, a flat margin 15% marked to market has been fixed on a weekly basis as recommended by the Patel Committee.

5. This margin foe carry forward transaction can vary according to market sentiments .For example, a higher margin can be insisted upon if the price of the securities goes up and vice versa. In the case of volatile scrips, the margin can go upto 100%.

6. Brokers are allowed self-certification on their status on settlement subject to re-check by the SEBI. There is no monthly audit as recommended by the Patel Committee.

7. There is no need to publish the carry forward position of each broker scrip-wise before the commencement of each carry forward session.

8. Stock exchange can allow carry forward transaction only after getting necessary permission from the SEBI. Permission will be generally granted only if the stock exchange concerned has screen based trading, and other infrastructural facilities.

Meanwhile, the Government of India appointed another committee under the chairmanship of J.S.Varma to go into the question of carry forward system in July 1997. This committee has made the following recommendation:

1. Capital adequacy norms and other prudential safeguards with regard to carry forward s should be strictly enforced.

2. Scrips chosen for carry forward must be having sufficient floating stock.

3. The maximum period of 90 days allowed for carry forwards shall be eliminated.

4. Similarly, the maximum period of 75 days allowed for squaring off shall be eliminated.

5. The limit of 10 corers fixed on the financier funding shall be relaxed.

6. Instead of a flat margin of 15% a uniform margin of 10% of the gross position with a daily marking to market prices shall be maintained.

7. The segregation of carry forward trades and delivery trades shall be abolished.

Principal weaknesses of Indian stock market

While in terms of number of stock exchanges, listed companies, daily turnover, market capitalisation & investor population, the Indian stock market has witnessed growth over the last four decades.

a) Rampant speculation: stock exchanges have witnessed spells of unprecedented booms & crashes. While cost has been experiencing 4-5% rate of growth, share prices have shown high volatility this shows that speculative activities have been rampant. The distinction Keynes made in 1929 in Wall Street journal between speculators operating on the basis of forecasting the psychology market and investor trying to forecast prospective yield of assets over whole life has almost vary in India ‘s market condition.

b) Insider trading: Means operation information which is price sensitive and not available to public. It’s thus trading from a position of privilege in respect of price sensitive information. It is decried because it violates level playing; a state where equal opportunity to information is available to all participants in the market.

c) Oligopolistic: the Indian stock market cannot be truly competitive. Its highly dominated by large financial & institutional big brokers, operators & thus oligopolistic

d) Limited forward trading: there can be three types of transactions undertaken spot delivery, hand delivery & forward delivery. Trading in share for clearing or forward trading was common banned in India in 1969. It had an adverse effect on share prices. The situation was further aggravated in 1974 restrictions put on dividend by companies as part of anti-inflationary measures adopted by Government. From 1974 onwards under a scheme first evolved by BSE & thereafter accepted Calcutta, Delhi, & Ahmedabad, a certain informal type of forward trading was revived. This was done by carrying forward the delivery contract beyond 14 days in an informal manner, by concluding earlier contract and entering into a new contract without actual delivery, but merely payment of balance between country price and market price. This system had been continued for selected securities called cleared securities. A certain volume of forward trade useful for providing liquidity and avoiding payment arises, speculation runs riot and actual price transfer of securities lies far behind, there will inevitably be a payment crisis.

e) Outdated share trading system: This system followed in Indian Stock Exchanges, when matched an international prospectus is thoroughly outdated and inefficient. The major problem areas include settlement period, margin system and carry for (badla) system. Settlement period is 14 days in most Indian Stock Exchanges whereas most countries are moving towards a rolling 3 days. Apart from encouraging rise of shops outside the stock exchange system, such a lengthy settlement period increases the risk to exposed market participants due to price movements. Avoidance of margin payment under margin system is a problem area. Margin system is the deposit which members maintain with clearing house stock exchange. The deposit is a certain percentage of value of security which is being traded by them. Under margin system if a member buys or sells securities marketed for margin above free limit, a spot amount per share has to be deposited in clearing house. Margin trading means that a customer buys a shar3e by paying portion of purchase price. Ex: a customer purchases shares worth 1 lakh market value by paying 60,000, he’s in trade paying a margin of 60%. In this case, the balance is being lent by broker & securities bought are collateral for the loan & have to be left with the broker.

f) Lack of single market: Due to inability of various stock exchanges to function cohesively, the growth in business in any one exchange or region has not been transmitted to other exchanges. The limited inter market operations have resulted in increased costs & risk of investors in smaller towns. This problem is further aggravated by lack of cohesion among exchanges in terms of legal structure, trading practices, settlement procedures & jobbing.

g) Problem of interface between primary & secondary markets: The recent upsurge of primary market has created serious problems of interfacing with secondary market, viz. the stock exchanges which still, by & large, continue with the same old infrastructure & ways of long which suited the very narrow base of capital market in yester years but are totally out of tune with fast market & desired tempo of work at present. Unless secondary market is re-oriented so as to take charge of new responsibilities cast on it by recent developments, this will act as a drag on future preface serious problems while trying to buy or sell scrips.

h) Inadequacy of investor service: it’s commonly felt that smaller exchanges, have been unable to service investors adequately, & have been able to make only limited contribution to spread of equity cult in their region. Level of computerisation across stock exchanges has been inadequate, resulting in lower operational flexibility of stock exchanges & leaving brokers unable to handle sudden surges in volumes. The absence of computer linkage between stock exchanges & its members has hampered effective inter market operations, monitoring of trading & trading operations, as well as free flow of information on an intra & inter-exchange basis. The inadequate structure & ineffective trading practices\ settlements have also resulted in lack of NRI confidence in capital market.

Major Indian corporate today needs to diversify their sources of capital & seek direct recitation of foreign investors. Up gradation of existing stock exchanges has to be viewed as an integral component of increasing globalisation of Indian economy.

Difference between primary and secondary market

BASIS OF DIFFERENCES	PRIMARY MARKET	SECONDARY MARKET
1) ISSUES	Market for new issues of securities	Deals with existing securities
2) LOCATION	No fixed geographical location needed.	Needs a fixed place to house the secondary market activities, viz, trading .
3) TRASFER OF SECURITIES	Securities are created and transferred from corporate to investors for the first time	Securities are transferred from one investor to another through the stock exchange mechanism.
4) ENTRY	All companies can enter NIM and fresh issue of securities.	For the securities to enter the portals of stock exchanges for the purpose of trading, listing is mandatory.
5) ADMINISTRATION	Has no tangible form of administrative set-up	Has a definite administrative set-up that facilitates trading in securities
6) REGULATION	Subject to regulations mostly from outside the company-SEBI, stock exchanges, companies act, etc	Subject to regulation both from within and outside the stock exchange framework.
7) AIM	Creating long-term instruments for borrowings.	Providing liquidity through marketability of those instruments.
8) PRICE MOVEMENT	Stock price movement in secondary market influences pricing of new issue	Both macro and micro factors influence the stock price movement.
9) DEPTH	Depends on number and the volume of issue.	Depth depends upon the activities of the primary market as it brings into the fore more corporate entities and more instruments to raise funds