KARVY

1 M.P.BIRLA INSTITUTE OF MANAGEMENT

A REPORT ON

ORGANIZATIONAL STUDY

AT

KARVY CONSULTANT PVT LTD

Submitted in partial fulfillment of the requirements of

The M.B.A Degree Course of Bangalore University

Submitted By

G.R.Balaji

(REGD.NO:04XQCM6012)

Under the Guidance and Supervision

Of

Dr K.V. PRABHAKAR

Professor

M.P.BIRLA INSTITUTE OF MANAGEMENT

Associate Bharatiya Vidya Bhavan

# 43, Race Course Road, Bangalore-560001

August – September 2005


CERTIFICATE

This to certify that this report titled “ AN ORGANIZATIONAL STUDY at

KARVY CONSULTANT PRIVATE LTD has been prepared by Mr.

G.R.Balaji bearing the registration no. 04XQCM6012 under the

guidance and supervision of Dr K.V. Prabhakar , Professor, MPBIM,

Bangalore.

Place: Bangalore (Dr.N.S.Malavalli)

Date: 30-09-2005


CERTIFICATE

This is to certify that the internship Project Report entitled

“ORGANIZATIONAL STUDY at KARVY CONSULTANT PRIVATE LTD” ,

done by G.R.Balaji bearing Registration No.04XQCM6012 is a bonafide

work done carried under my guidance during the academic year 2004-06

in a partial fulfillment of the requirement for the award of MBA degree by

Bangalore University. To the best of my knowledge this report has not

formed the basis for the award of any other degree.

Place: Bangalore Dr K.V. Prabhakar

Date : 30-09-2005 (Professor )


ACKNOWLEDGEMENTS

I am thankful to Dr.N.S.Malavalli, Principal, M.P.Birla institute of

management, Bangalore, who has given his valuable support during my

project.

I am extremely thankful to Mr. K.V Prabhakar, Professor, M.P.Birla

institute of Management, Bangalore, who has guided me to do this

project by giving valuable suggestions and advice.

I profusely thank Mr. Vasu, Marketing Manager KARVY CONSULTANT

PRIVATE LTD –CHENNAI, for all the support and guidance extended for

this project.

I equally thank all the Employees and Executives of KARVY

CONSULTANT PRIVATE LTD -Chennai have extended their suggestions

and helped me learn a lot about mutualfund.

Finally, I express my sincere gratitude to all my friends and well wishers

who helped me to do this project.


CONTENTS

S.No PARTICULARS pg.no

1. EXECUTIVE SUMMARY 1

2. PROFILE OF THE INDUSTRY 1

3 COMPANY PROFILE 4

4. ORGANIZATIONAL STRUCTURE 18

5. PRODUCT PROFILE 21

6. SWOT ANALYSIS 62

7. FINDINGS 63

8. SUGGESTION 64

9. CONCLUSION 65


EXECUTIVE SUMMARY The MBA course offered by the Bangalore University has its own unique syllabus

which requires its MBA students to undertake an internship with any of the

leading business houses for a period ranging from 6 weeks to 8 weeks during the

second semester. The purpose of this internship is to enable the students to

appreciate and understand the nuances of the practical world vis-à-vis the

theoretical input administered during regular academic sessions. This helps in

creating Managers who are equipped with the experience of linking the theoretical

inputs with those of practical exposure and come out with creative solutions /

ideas in enhancing the business. In partial fulfillment of MBA degree of Bangalore

University I took up this organizational study. Experience and knowledge that I

gained from karvy consultant pvt Limited are elaborated in the following pages.

Investment is making the money work for you. Idle saved money will be eroded of

its value by reduction in purchasing power. Investing smartly makes money grow.

In other words one must involve funds available in such avenues that may counter

balance the reduction of real value. Assets whose value increases over time must

be chosen for such purpose. The investments must offer maximum advantages to

the investor. Now there are a number of investments avenues available to

common man. Recently all financial products investment opportunities come with

some or other innovations. It is at the behest of the consumer the investor

depending on the advantages in the investment is chosen.


INDUSTRYPROFILE


INDUSTRY PROFILE

The Indian middle class is large and growing; wages are low; many workers are well

educated and speak English; investors are optimistic and local stocks are up. Despite

political turmoil, the country presses on with economic reforms. The only cause of worry

that India could face is Infrastructural hassles.

The rapid economic growth of the last few years has put heavy stress on India's

infrastructural facilities. The projections of further expansion in key areas could snap the

already strained lines of transportation unless massive programs of expansion and

modernization are put in place. Problems include power demand shortfall, port traffic

capacity mismatch, poor road conditions (only half of the country's roads are surfaced),

low telephone penetration

(1.4% of population).

Indian Bureaucracy

Although the Indian government is well aware of the need for reform and is pushing

ahead in this area, business still has to deal with an inefficient and sometimes still slow-

moving bureaucracy.

Diverse Market

The Indian market is widely diverse. The country has 17 official languages, 6 major

religions, and ethnic diversity as wide as all of Europe. Thus, tastes and preferences differ

greatly among sections of consumers. Therefore, it is advisable to develop a good

understanding of the Indian market and overall economy before taking the plunge.

Research firms in India can provide the information to determine how, when and where

to enter the market. There are also companies which can guide the foreign firm through

the entry process from beginning to end --performing the requisite research, assisting

with configuration of the project, helping develop Indian partners and financing, finding

the land or ready premises, and pushing through the paperwork required.


Check on Economic Policies

The general economic direction in India is toward liberalization and globalization. But

the process is slow. Before jumping into the market, it is necessary to discover whether

government policies exist relating to the particular area of business and if there are

political concerns which should be taken into account.

There are several good reasons for investing in India:

1. One of the largest economies in the world.

2. Strategic location - access to the vast domestic and South Asian market.

3. A large and rapidly growing consumer market up to 300 million people, constitute the

market for branded consumer goods – estimated to be growing at 8% per annum.

Demand for several consumer products is growing at over 12% per annum.

4. Foreign investment is welcome; approval is required but is automatic in sixty

categories of Industries.

5. Skilled man-power and professional managers are available at competitive cost.

6. One of the largest manufacturing sectors in the world, spanning almost all areas of

manufacturing activities.

7. One of the largest pools of scientists, engineers, technicians and managers in the world.

8. Rich base of mineral and agricultural resources.

9. Long history of market economy infrastructure

10. Sophisticated financial sector.

11. Vibrant capital market with over 9,000 listed companies and market capitalisation of

US$ 154 billion (March, 1996)

12. Well developed R&D infrastructure and technical and marketing services.

13. Policy environment that provides freedom of entry, investment, location, choice of

technology, production, import and export.

14. Well balanced package of fiscal incentives.

15. A sophisticated legal and accounting system.

16. English is widely spoken and understood.

17. Rupee is convertible on Current Account at market determined rate.

18. Free and full repatriation of capital, technical fee, royalty and dividends.

19. Foreign brand names are freely used.


20. No income tax on profits derived from export of goods.

21. Complete exemption from Customs Duty on industrial inputs and Corporate Tax

Holiday for five years for 100 per cent Export Oriented units and units in Export

Processing Zones.

22. Corporate Tax applicable to the foreign companies of a country, with which

agreement for avoidance of Double Taxation exists, can be one which is lower between

the rates prevailing in any one of the two countries and the treaty rate.

23. A long history of stable parliamentary democracy.


COMPANYPROFILE


COMPANY PROFILE

KARVY, is a premier integrated financial services provider, and ranked among the

top five in the country in all its business segments, services over 16 million individual

investors in various capacities, and provides investor services to over 300 corporates,

comprising the who is who of Corporate India. KARVY covers the entire spectrum of

financial services such as Stock broking, Depository Participants, Distribution of

financial products - mutual funds, bonds, fixed deposit, equities, Insurance Broking,

Commodities Broking, Personal Finance Advisory Services, Merchant Banking &

Corporate Finance, placement of equity, IPO’s, among others. Karvy has a professional

management team and ranks among the best in technology, operations and research of

various industrial segments.|

Karvy early days:

The birth of Karvy was on a modest scale in 1981. It began with the vision and enterprise of a

small group of practicing Chartered Accountants who founded the flagship company …Karvy

Consultants Limited. We started with consulting and financial accounting automation, and carved

inroads into the field of registry and share accounting by 1985. Since then, we have utilized our

experience and superlative expertise to go from strength to strength…to better our services, to

provide new ones, to innovate, diversify and in the process, evolved Karvy as one of India’s

premier integrated financial service enterprise.

Thus over the last 20 years Karvy has traveled the success route, towards building a reputation as

an integrated financial services provider, offering a wide spectrum of services. And we have

made this journey by taking the route of quality service, path breaking innovations in service,

versatility in service and finally…totality in service.

Our highly qualified manpower, cutting-edge technology, comprehensive infrastructure and total

customer-focus has secured for us the position of an emerging financial services giant enjoying

the confidence and support of an enviable clientele across diverse fields in the financial world.


Our values and vision of attaining total competence in our servicing has served as the building

block for creating a great financial enterprise, which stands solid on our fortresses of financial

strength - our various companies.

With the experience of years of holistic financial servicing behind us and years of complete

expertise in the industry to look forward to, we have now emerged as a premier integrated

financial services provider.

And today, we can look with pride at the fruits of our mastery and experience – comprehensive

financial services that are competently segregated to service and manage a diverse range of

customer requirements.

Karvy consultant is one of India’s premier investment consultancy firms offering personalized

investment planning, advisory and prompt facilitation services to retail investors, corporates and

institutions. It started in the year 1979 as karvy and company and later emerged as a karvy

consultant to cater to specialized and personal services. The company has a long track record and

history of being transparent and trust worthy with its customers.

Evolution of karvy:

1979-1980: karvy and company

1981-1982: karvy consultant ltd

1985-1986: Foray into capital market as registrars and transfer agent

1987-1988: first branch in Mumbai

1990 : entry in to retail broking

1994 : entry in to mutualfund services.

1995 : corporate finance and investment banking.

1996 : jardine fleming invests in group companies.

1997 : first registrar in the country to be awarded ISO 9002.

2002 : launch of private client group (PCG ) desk.

2004 : jv with computershare limited , Australia.

2004 : merger of karvy securities ltd with karvy stock broking ltd.

2005 : karvy insurance broking pvt ltd.


VISION STATEMENT:

KARVY’S ASPIRATION OF ES TABLISHING ITSELF AS AN INTEGRATED

FINANCIAL SERVICES CO IS PROPELLED BYA VISION THAT IS SHARED BY

THE ENTIRE WORK FORCE. TOWARDS THIS END

KARVY IS DEDICATED ITSELF TO:

¾�HAVING A SINGLE MINDED FOCUS ON INVESTOR SERVICES.

¾�ESTABLISH AS A HOUSE HOLD NAME FOR FINANCIAL SERVICES.

¾�SET INDUSTRIAL STANDARDS.


MISSION :

OUR MISISION IS TO BE A LEADING , PREFERRED, SERVICES PROVIDER TO

OUR CUSTOMER AND WE AIM TO ACHIEVE THIS LEADERSHIP POSITION BY

AN INNOVATIVE, ENTERPRISING AND TECHNOLOGY DRIVEN

ORGANIZATION, WHICH WILL SET THE HIGHEST STANDARDS OF SERVICE

AND BUSINESS ETHICS.


VALUES:

¾�Trust

¾�Integrity

¾�Dedication

¾�Commitment

¾�Transparency

¾�Enterprise

¾�Hard work and team play

¾�Learning & innovation

¾�Empathy and humility


Quality policy:

To achieve and retain leadership, Karvy shall aim for complete customer satisfaction, by

combining its human and technological resources, to provide superior quality financial

services. In the process, Karvy will strive to exceed Customer's expectations.

Quality Objectives

As per the Quality Policy, Karvy will:

• Build in-house processes that will ensure transparent and harmonious

relationships with its clients and investors to provide high quality of services.

• Establish a partner relationship with its investor service agents and vendors that

will help in keeping up its commitments to the customers.

• Provide high quality of work life for all its employees and equip them with

adequate knowledge & skills so as to respond to customer's needs.

• Continue to uphold the values of honesty & integrity and strive to establish

unparalleled standards in business ethics.

• Use state-of-the art information technology in developing new and innovative

financial products and services to meet the changing needs of investors and

clients.

• Strive to be a reliable source of value-added financial products and services and

constantly guide the individuals and institutions in making a judicious choice of

same.

• Strive to keep all stake-holders (shareholders, clients, investors, employees,

suppliers and regulatory authorities) proud and satisfied.


KARVY CONSULTANT LIMITED:

BOARD OF DIRECTORS:

Mr. C Parthasarathy, a leader in the financial services industry in

India is responsible for building Karvy as one of India's truly

integrated Financial Services Provider; he is a fellow member of the

Institute of Company Secretaries of India, a Fellow Member of the

Institute of Chartered Accountants of India and a graduate in law. As

Chairman and Managing Director, he oversees the group's operations and renders vision and

business direction. His passion and vision for achieving leadership in the business made KARVY

a leading financial intermediary ranking them as number one in the registrar, Share Transfer and

IPO Distribution businesses. He also holds directorship in Karvy Securities Limited, Karvy Stock

Broking Limited, Karvy Investor Services Limited, Karvy Computershare Private Limited, Karvy

Commodities Broking Private Limited, EPR Pharmaceuticals Private Limited and Ocean Sparkles

Limited.

Mr. Y Yugandhar, Managing Director, founder member of Karvy

Consultants Limited, has varied experience in the field of financial

services spanning over 20 years. He is a Fellow Member of the Institute of Chartered Accountants

of India and was involved in the statutory and branch audit of banks for 26 years. Mr. Yugandhar

holds directorships in Karvy Securities Limited, Karvy Stock Broking Limited, Karvy Investor

Services Limited, Karvy Computershare Private Limited, Karvy Commodities Broking Private

Limited, Bizpro Technologies India Limited, Pokarna Limited, Ravindranath G E Medical

Associates Private Limited, Everest Power Private Limited and Green Infrastructure Private

Limited.


Mr. M S Ramakrishna, Director, founder member of Karvy Consultants Limited is orchestrator

of technology initiatives such as the call center in the service of the customer. Mr. Ramakrishna is

a member of the Hyderabad Stock Exchange and is the director of Karvy Securities Limited,

Karvy Stock Broking Limited, Karvy Investor Services Limited, Karvy Computershare Private

Limited, Karvy Commodities Broking Private Limited, Nitya Labs Limited and SAB Nife Power

Systems Limited. He has helped Karvy diversify into the field of medical transcription leveraging

on the company's core competency of transaction processing. he ahs more than 20 years of

experience in the financial services arena.

Key Personnel at Head office

G Gopalakrishnamachryulu

V Ganesh

V Mahesh

K Sridhar

S Gopichand

J Ramaswamy

M S Manohar

S Ganapathy Subramanian

T R Prashant Kumar

Ashok K Mittal


ACHIEVEMTNS:

�Among the top 5 stock brokers in India (4% of NSE volumes)

�India's No. 1 Registrar & Securities Transfer Agents

�Among the to top 3 Depository Participants

�Largest Network of Branches & Business Associates

�ISO 9002 certified operations by DNV

�Among top 10 Investment bankers

�Largest Distributor of Financial Products

�Adjudged as one of the top 50 IT uses in India by MIS Asia

�Full Fledged IT driven operations


The KARVY CREDO:

Our Clients. Our Focus

Clients are the reason for our being.

Personalized service, professional care; pro-activeness are the values that help us nurture

enduring relationships with our clients.

Respect for the individual

Each and every individual is an essential building block of our organization.


We are the kiln that hones individuals to perfection. Be they our employees, shareholders or

investors. We do so by upholding their dignity & pride, inculcating trust and achieving a sensitive

balance of their professional and personal lives.

Teamwork

None of us is more important than all of us.

Each team member is the face of Karvy. Together we offer diverse services with speed, accuracy

and quality to deliver only one product: excellence. Transparency, co-operation, invaluable

individual contributions for a collective goal, and respecting individual uniqueness within a

corporate whole, is how we deliver again and again.

Responsible Citizenship

A social balance sheet is as rewarding as a business one.

As a responsible corporate citizen, our duty is to foster a better environment in the society where

we live and work. Abiding by its norms, and behaving responsibly towards the environment, are

some of our growing initiatives towards realizing it.

Integrity

Everything else is secondary.

Professional and personal ethics are our bedrock. We take pride in an environment that

encourages honesty and the opportunity to learn from failures than camouflage them. We insist

on consistency between works and actions.


INVESTOR SERVICE : KEY FACTS

¾�NO. OF IPO’S HANDLED : 720

¾�FINANCIAL TRANSACTION PROCESSED : 100 MN

¾�NUMBER OF INVESTOR ACCOUNTS SERVICES : 16 Mn

¾�CORPORATE CLENTS AS R&T AGENTS : 300

¾�ASSET MGMT,COMPANIES SERVICES : 11

¾�MUTUAL FUND SCHEME SERVICES : 72


INVESTOR SERVICE STRENGTHS:

¾�Controlled and low-cost service culture.

¾�Accent on investor service based transaction processing

¾�Adherence to strict time-schedules

¾�Pooling of group resources for peak-loads and also for one-time assignment.

Investor service network:

¾�352 offices in 242 cities/towns

¾�Mobile investor services centres at two locations.

¾�Providing a human face

¾�Catering to the retail base

¾�Acceptance and acknowledgement of service request

¾�Prompt response

¾�Planned decentralized query handling.

Human resources:

No DEPARMENT NO

1 Transaction processing and

Investor servicing

1283

2 Global processing (BPO) 250

3 Financial product and distribution

Services

350


4 Corporate finance group 14

5 e-business 38

6 Insurance 230

7 Secondary market division 1257

Support function

8 Technology 15

9 Accounts 76

10 HR&Administration 104

11 Training and quality 08

12 Others 30

Total 3655


ORGANISATIONAL

STRUCTURE

MUTUALFUND DEPARMENT STRUCTURE:

MR C PARASARATHY (M.D)

MR. V SRIDHAR ( ALL OVER INDIA VP)

MR. RAJA (CHENNAI VP)

MR SHARATH (DGM)


KARVY GROUP

ORGANIZATIONAL STRUCTURE

BOARD OF DIRECTORS

MR VASU (BRANCH MANAGER)

MR SOURABH (SALES EXECUTIVE,

CHENNAI SOWCARPET BRANCH)

Karvy stock broking ltd


Karvy karvy computer

Group share pvt ltd

Mutualfund Share registry Issue registry Stock broking research depository distribution personalclientgroup Corporate affairs group HR finance &A/C TRG&DEV depository services corp quality

The internship was undertaken at CHENNAI Branch of KARVY CONSULTANT. The

following was the organizational structure at this branch:

BRANCH MANAGER BRANCH MANAGER

Karvy investor service ltd

Karvy computer pvt ltd

Karvy insurancepvt ltd

Karvy insurance broking ltd

BPO


Karvy at a glance:

SENIOR EXECUTIVE

JUNIOR EXECUTIVE

JUNIOR EXECUTIVE

INSURANCE MUTUAL FUND EQUITIES

SENIOR EXECUTIVE SENIOR EXECUTIVE

JUNIOR EXECUTIVE

TRANSACTION PROCESSING GROUP

CORPORATE FINANCE GROUP

TECHNOLOGY RESOURCE GROUP


IT ENABLED SERVICE GROUP

E- BUSINESS

SUPPORT

HR & Admin Strategic planning Corporate affairs Training and development Corporate quality

SA&FC COMPLIANCE LEGAL FINANCE AND ACCOUNTS

FINANCIAL PRODUCTS DISTRIBUTION GROUP


PRODUCTPROFILES

MUTUAL FUNDS

A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of

a mutual fund as a company that brings together a group of people and invests their

money in stocks, bonds, and other securities. Each investor owns shares, which represent

a portion of the holdings of the fund.

You can make money from a mutual fund in three ways:


1) Income is earned from dividends on stocks and interest on bonds. A fund pays out

nearly all income it receives over the year to fund owners in the form of a distribution.

2) If the fund sells securities that have increased in price, the fund has a capital gain.

Most funds also pass on these gains to investors in a distribution.

3) If fund holdings increase in price but are not sold by the fund manager, the fund's

shares increase in price. You can then sell your mutual fund shares for a profit.

Funds will also usually give you a choice either to receive a check for distributions or to

reinvest the earnings and get more shares.

The competition among funds has led to the launch of newer products, tailor-made

to suit the requirements of investors. Mutual funds now offer products for the entire range

of needs of investors. The encouraging response to index funds and sector funds shows

the growing maturity among investors. Open-end funds, which provide liquidity to

investors at daily NAV related prices are growing in popularity. The funds have been

adopting technology to provide good service to investors and with the proposed

introduction of electronic funds transfer and the growing trend towards E-Commerce; the

efficiency of service will increase even further.

In the coming years mutual funds as saving intermediaries will play a greater role in

bringing the gap between investors and issuers, especially in the area of equity funds. At

present these funds represents 13% of BSE market capitalization. This is expected to go

up with increasing flows into financial savings, especially the mutual fund with the

growth and stability in the capital market flows into equity funds are expected to go up.

A Mutual Fund is a trust that pools the savings of a number of investors who share a

common financial goal. The money thus collected is then invested in capital market

instruments such as shares, debentures and other securities. The income earned through

these investments and the capital appreciation realized are shared by its unit holders in

proportion to the number of units owned by them. Thus a Mutual Fund is the most

suitable investment for the common man as it offers an opportunity to invest in a

diversified, professionally managed basket of securities at a relatively low cost.


Mutual funds, also referred to as investment companies, offer an alternative investment

choice for individuals with a long-term horizon. The way they operate is that individual

investor money are pooled and invested in many different companies. Assets are

professionally managed to meet various investment objectives. They issue and sell shares

to share holders and also redeem them (buy them back) upon request. Prices of shares are

set daily at the close of business, based on the value of all investments in the mutual

fund’s portfo lio. Their major advantages are diversification and professional

management, which are not readily available to small investors outside the mutual fund

arena. Money market mutual funds are short-term funds. They invest in short-term cash

and cash equivalent instruments, such as Treasury bills, certificates of deposit, and short-

term notes. Mutual funds may own stocks and bonds of many different companies.

A mutual fund is the ideal investment vehicle for today’s complex and modern financial

scenario. Markets for equity shares, bonds and other fixed income instruments, real

estate, derivatives and other assets have become mature and information driven. Price

changes in these assets are driven by global events occurring in faraway places. A typical

individual is unlikely to have the knowledge, skills, inclination and time to keep track of

events, understand their implications and act speedily. An individual also finds it difficult

to keep track of ownership of his assets, investments, brokerage dues and bank

transactions etc.

History of Mutual Funds

In 1924 three Boston securities executives pooled their money together to create the first

mutual fund. The idea of pooling money together for investing purposes started in Europe

in the mid-1800s. The first pooled fund in the U.S was created in 1893 for the faculty and

staff of Harvard University on March 21st, 1924 the first official mutual fund was born. It

was called the Massachusetts Investors Trust.

However in India UTI was the first to introduce mutual funds in the Indian markets and it

commenced its operations from July 1964, Government allowed public sector banks and

institutions to set up mutual funds.


In the year 1992, Securities and exchange Board of India (SEBI) Act was passed. The

objectives of SEBI are – to protect the interest of investors in securities and to promote

the development of and to regulate the securities market.

As far as mutual funds are concerned, SEBI formulates policies and regulates the mutual

funds to protect the interest of the investors. SEBI notified regulations for the mutual

funds in1993. Thereafter, mutual funds sponsored by private sector entities were allowed

to enter the capital market. The regulations were fully revised in 1996 and have been

amended thereafter from time to time. SEBI has also issued guidelines to the mutual

funds from time to time to protect the interests of investors.

All mutual funds whether promoted by public sector or private sector entities including

those promoted by foreign entities are governed by the same set of Regulations. There is

no distinction in regulatory requirements for these mutual funds and all are subject to

monitoring and inspections by SEBI. The risks associated with the schemes launched by

the mutual funds sponsored by these entities are of similar type. It may be mentioned here

that Unit Trust of India (UTI) is not registered with SEBI as a mutual fund (as on January

15, 2002. The end of millennium marks 36 years of existence of mutual funds in our

country. The ride through these 36 years is not been smooth. Investor opinion is still

divided. While some are for mutual funds others are against it.

Mutual fund schemes:

Mutual funds offer a variety of schemes to investor so as to provide steady income or

growth or both. They differ according to the investment policies. The funds like

individual investor , have a different goals. Of the investor who will first ascertain his

investment objectives , thinking that the units of a fund have an investment goal

paralleling his objectives

Fund Mutual Basics :

As you probably know, mutual funds have become extremely popular over the last 20

years. What was once just another obscure financial instrument is now a part of our daily

lives.


In fact, to many people, investing means buying mutual funds. After all, it's common

knowledge that investing in mutual funds is (or at least should be) better than simply

letting your cash waste away in a savings account, but, for most people, that's where the

understanding of funds ends. It doesn't help that mutual fund salespeople speak a strange

language that, sounding sort of like English, is interspersed with jargon like MER,

NAVPS, load/no-load, etc.

Originally mutual funds were heralded as a way for the little guy to get a piece of the

market. Instead of spending all your free time buried in the financial pages of the

investment Journal, all you have to do is buy a mutual fund and you'd be set on your way

to financial freedom. As you might have guessed, it's not that easy. Mutual funds are an

excellent idea in theory, but, in reality, they haven't always delivered. Not all mutual

funds are created equal, and investing in mutuals isn't as easy as throwing your money at

the first salesperson who solicits your business.

Advantages of Mutual Funds:

• Professional Management - The primary advantage of funds (at least theoretically) is

the professional management of your money. Investors purchase funds because they do

not have the time or the expertise to manage their own portfolio. A mutual fund is a

relatively inexpensive way for a small investor to get a full-time manager to make and

monitor investments.

• Diversification - By owning shares in a mutual fund instead of owning individual stocks

or bonds, your risk is spread out. The idea behind diversification is to invest in a large

number of assets so that a loss in any particular investment is minimized by gains in

others. In other words, the more stocks and bonds you own, the less any one of them can

hurt you (think about Enron). Large mutual funds typically own hundreds of different

stocks in many different industries. It wouldn't be possible for an investor to build this

kind of a portfolio with a small amount of money.


• Economies of Scale - Because a mutual fund buys and sells large amounts of securities

at a time, its transaction costs are lower than you as an individual would pay.

• Liquidity - Just like an individual stock, a mutual fund allows you to request that your

shares be converted into cash at any time.

• Simplicity - Buying a mutual fund is easy! Pretty well any bank has its own line of

mutual funds, and the minimum investment is small. Most companies also have

automatic purchase plans whereby as little as Rs 500 can be invested on a monthly basis

Disadvantages of Mutual Funds:

• Professional Management- Did you notice how we qualified the advantage of

professional management with the word "theoretically"? Many investors debate over

whether or not the so-called professionals are any better than you or I at picking stocks.

Management is by no means infallible, and, even if the fund loses money, the manager

still takes his/her cut. .

• Costs - Mutual funds don't exist solely to make your life easier--all funds are in it for a

profit. The mutual fund industry is masterful at burying costs under layers of jargon.

Because funds have small holdings in so many different companies, high returns from a

few investments often don't make much difference on the overall return. Dilution is also

the result of a successful fund getting too big. When money pours into funds that have

had strong success, the manager often has trouble finding a good investment for all the

new money

• Taxes - When making decisions about your money, fund managers don't consider your

personal tax situation. For example, when a fund manager sells a security, a capital-gain

tax is triggered, which affects how profitable the individual is from the sale. It might have

been more advantageous for the individual to defer the capital gains liability


Risk Involved in Mutual Funds

All investments involve some form of risk, which should be evaluated them potential

rewards when an investment is selected.

_ Managing risk

At times the prices or yields of all the securities in a particular market rise or fall due to

broad outside influences. When this happens, the stock prices of both an outstanding,

highly profitable company and a fledgling corporation may be affected.

This change in price is due to “market risk”.

Interest rate risk

Sometimes referred to as “loss of purchasing power”. Whenever inflation sprints

forward faster than the earnings on your investment, you run the risk that you will

actually be able to buy less, not more. Inflation risk also occurs when prices rise

faster than your returns.

Credit risk

In short, how stable is the company or entity to which you lend your money when you

invest? How certain are you that it will be able to pay the interest you are promised, or

repay your principal when the investment matures?

_ Inflation risk

Changing interest rates affect both equities and bonds in many ways. Investors are

reminded that “predicting” which way rates will go is rarely successful. A diversified

portfolio can help in offsetting these changes.

_ Effect of loss of key professional and inability to adopt

An industries’ key asset is often the personnel who run the business i.e. intellectual

properties of the key employees of the respective companies. Given the ever-changing

complexion of few industries and the high obsolescence levels, availability of qualified,

trained and motivated personnel is very critical for the success of industries in few

sectors. It is, therefore, necessary to attract key personnel and also to retain them to meet

the changing environment and challenges the sector offers. Failure or inability to


attract/retain such qualified key personnel may impact the prospects of the companies in

the particular sector in which the fund invests.

_ Exchange risks

A number of companies generate revenues in foreign currencies and may have

investments or expenses also denominated in foreign currencies. Changes in exchange

rates may, therefore, have a positive or negative impact on companies which in turn

would have an effect on the investment of the fund.

_ Investment risks

The sectoral fund schemes, investments will be predominantly in equities of select

companies in the particular sectors. Accordingly, the NAV of the schemes are linked to

the equity performance of such companies and may be more volatile than a more

diversified portfolio of equities.

_ Changes in government policy

Changes in Government policy especially in regard to the tax benefits may impact the

business prospects of the companies leading to an impact on the investments made by the

fund.

VARIOUS MUTUAL FUND SCHEME

Mutual Funds: Different Types of Funds

No matter what type of investor you are there is bound to be a mutual fund that fits your

style. According to the last count there are over 10,000 mutual funds in North America!

That means there are more mutual funds than stocks. It's important to understand that

each mutual fund has different risks and rewards. In general, the higher the potential


return, the higher the risk of loss. Although some funds are less risky than others, all

funds have some level of risk--it's never possible to diversify away all risk. This is a fact

for all investments.

Each fund has a predetermined investment objective that tailors the fund's assets, regions

of investments, and investment strategies. At the fundamental level, there are three

varieties of mutual funds:

1) Equity funds (stocks)

2) Fixed-income funds (bonds)

3) Money market funds

All mutual funds are variations of these three asset classes. For example, while equity

funds that invest in fast-growing companies are known as growth funds, equity funds that

invest only in companies of the same sector or region are known as specialty funds.

Let's go over the many different flavors of funds. We'll start with the safest and then

work through to the more risky.

Money Market Funds

The money market consists of short-term debt instruments, mostly T-bills. This is a safe

lace to park your money. You won't get great returns, but you won't have to worry about

losing your principal. A typical return is twice the amount you would earn in a regular

checking/savings account and a little less than the average certificate of deposit (CD).

We've got a whole tutorial on the money market if you'd like to learn more about it.

Bond/Income Funds

Income funds are named appropriately: their purpose is to provide current income on a

steady basis. When referring to mutual funds, the terms "fixed-income," "bond," and

"income" are synonymous. These terms denote funds that invest primarily in government

and corporate debt. While fund holdings may appreciate in value, the primary objective

of these funds is to provide a steady cashflow to investors. As such, the audience for

these funds consists of conservative investors and retirees.


Bond funds are likely to pay higher returns than certificates of deposit and money market

investments, but bond funds aren't without risk. Because there are many different types of

bonds, bond funds can vary dramatically depending on where they invest. For example, a

fund specializing in high-yield junk bonds is much more risky than a fund that invests in

government securities; also, nearly all bond funds are subject to interest rate risk, which

means that if rates go up the value of the fund goes down.

Balanced Funds

The objective of these funds is to provide a "balanced" mixture of safety, income, and

capital appreciation. The strategy of balanced funds is to invest in a combination of fixed-

income and equities. A typical balanced fund might have a weighting of 60% equity and

40% fixed-income. The weighting might also be restricted to a specified maximum or

minimum for each asset class.

A similar type of fund is known as an asset allocation fund. Objectives are similar to

those of a balanced fund, but these kinds of funds typically do not have to hold a

specified percentage of any asset class. The portfolio manager is therefore given freedom

to switch the ratio of asset classes as the economy moves through the business cycle.

Equity Funds

Funds that invest in stock represent the largest category of mutual funds. Generally, the

investment objective of this class of funds is long-term capital growth with some income.

There are, however, many different types of equity funds because there are many

different types of equities. A great way to understand the universe of equity funds is to

use a style box, an example of which is below.


The idea is to classify funds based on both the size of the companies invested in and the

investment style of the manager. The term "value" refers to a style of investing that looks

for high quality companies that are out of favor with the market. These companies are

characterized by low P/E ratios, price-to-book ratios, and high dividend yields, etc. The

opposite of value is growth, which refers to companies that have had (and are expected to

continue to have) strong growth in earnings, sales, and cash flow, etc. A compromise

between value and growth is "blend," which simply refers to companies that are neither

value nor growth stocks and so are classified as being somewhere in the middle.

For example, a mutual fund that invests in large-cap companies who are in

strong financial shape but have recently seen their share price fall would be placed in the

upper left quadrant of the style box (large and value). The opposite of this would be a

fund that invests in startup technology companies with excellent growth prospects. Such

a mutual would reside in the bottom right quadrant

Global/International Funds

An international fund (or foreign fund) invests only outside your home country.

Global funds invest anywhere around the world, including your home country.

It's tough to classify these funds as either riskier or safer. On the one hand they tend to be

more volatile and have unique country and/or political risks. But, on the flip side, they

can, as part of a well-balanced portfolio, actually reduce risk by increasing

diversification. Although the world's economies are becoming more inter-related, it is


likely that another economy somewhere is outperforming the economy of your home

country.

Index Funds

The last but certainly not the least important are index funds. This type of mutual fund

replicates the performance of a broad market index such as the sensex and nifty. An

investor in an index fund figures that most managers can't beat the market. An index fund

merely replicates the market return and benefits investors in the form of low fees

Mutual Funds: Costs

Costs are the biggest problem with mutual funds. These costs eat into your return, and

they are the main reason why the majority of funds end up with sub-par performance.

What's even more disturbing is the way the fund industry hides costs through a layer of

financial complexity and jargon. Some critics of the industry say that mutual fund

ompanies get away with the fees they charge only because the average investor does not

understand what he/she is paying for.

Fees can be broken down into two categories:

1. Ongoing yearly fees to keep you invested in the fund.

2. Transaction fees paid when you buy or sell shares in a fund (loads).

The Expense Ratio


The ongoing expenses of a mutual fund are represented by the expense ratio. This is

sometimes also referred to as the management expense ratio (MER). The expense ratio is

composed of the following:

The cost of hiring the fund manager(s) - Also known as the management fee, this cost is

between 0.5% and 1.0% of assets on average. While it sounds small, this fee ensures that

mutual fund managers remain in the country's top echelon of earners. Think about it for a

second: 1% of 250 million (a small mutual fund) is 2.5 million--fund managers are

definitely not going hungry! It's true that paying managers is a necessary fee, but don't

think that a high fee assures superior performance.

• Administrative costs - These include necessities such as postage, record keeping,

customer service, cappuccino machines, etc. Some funds are excellent at minimizing

these costs while others (the ones with the cappuccino machines in the office) are not.

On the whole, expense ratios range from as low as 0.2% (usually for index funds) to as

high as 2.0%. The average equity mutual fund charges around 1.3%-1.5%. You'll

generally pay more for specialty or international funds, which require more expertise

from managers.

Buying and Selling

You can buy some mutual funds (no-load) by contacting the fund companies directly.

Other funds are sold through brokers, banks, financial planners, or insurance agents. If

you buy through a third party there is a good chance they'll hit you with a sales charge

(load).

That being said, more and more funds can be purchased through no-transaction fee

programs that offer funds of many companies. Sometimes referred to as a "fund

supermarket," this service lets you consolidate your holdings and record keeping, and it

still allows you to buy funds without sales charges from many different companies.


Popular examples are Schwab's OneSource, Vanguard's FundAccess, and Fidelity's

FundsNetwork. Many large brokerages have similar offerings.

Selling a fund is as easy as purchasing one. All mutual funds will redeem (buy back) your

shares on any business day. In the United States companies must send you the payment

within seven days.

TheValueofYourFund

Net asset value (NAV), which is a fund's assets minus liabilities, is the value of a mutual

fund. NAV per share is the value of one share in the mutual fund, and it is the number

that is quoted in newspapers. You can basically just think of NAV per share as the price

of a mutual fund. It fluctuates everyday as fund holdings and shares outstanding change.

When you buy shares, you pay the current NAV per share plus any sales front-

end load. When you sell your shares, the fund will pay you NAV less any back-

end load.

Moses gave to his followers 10 commandments that were to be followed till

eternity. The world of investments too has several ground rules meant for investors who

are novices in their own right and wish to enter the myriad world of investments. These

come in handy for there is every possibility of losing what one has if due care is not

taken.

1. Assess yourself: Self-assessment of one’s needs; expectations and risk profile is

of prime importance failing which, one will make more mistakes in putting

money in right places than otherwise. One should identify the degree of risk

bearing capacity one has and also clearly state the expectations from the

investments. Irrational expectations will only bring pain.

2. Try to understand where the money is going: It is important to identify the

nature of investment and to know if one is compatible with the investment. One

can lose substantially if one picks the wrong kind of mutual fund. In order to

avoid any confusion it is better to go through the literature such as offer document

and fact sheets that mutual fund companies provide on their funds.


3. Don't rush in picking funds, think first: one first has to decide what he wants

the money for and it is this investment goal that should be the guiding light for all

investments done. It is thus important to know the risks associated with the fund

and align it with the quantum of risk one is willing to take. One should take a look

at the portfolio of the funds for the purpose. Excessive exposure to any specific

sector should be avoided, as it will only add to the risk of the entire portfolio.

Mutual funds invest with a certain ideology such as the "Value Principle" or

"Growth Philosophy". Both have their share of critics but both philosophies work

for investors of different kinds. Identifying the proposed investment philosophy of

the fund will give an insight into the kind of risks that it shall be taking in future.

4. Invest. Don’t speculate: A common investor is limited in the degree of risk that

he is willing to take. It is thus of key importance that there is thought given to the

process of investment and to the time horizon of the intended investment. One

should abstain from speculating which in other words would mean getting out of

one fund and investing in another with the intention of making quick money. One

would do well to remember that nobody can perfectly time the market so staying

invested is the best option unless there are compelling reasons to exit.

5. Don’t put all the eggs in one basket: This old age adage is of utmost

importance. No matter what the risk profile of a person is, it is always advisable

to diversify the risks associated. So putting one’s money in different asset classes

is generally the best option as it averages the risks in each category. Thus, even

investors of equity should be judicious and invest some portion of the investment

in debt. Diversification even in any particular asset class (such as equity, debt) is

good. Not all fund managers have the same acumen of fund management and with

identification of the best man being a tough task, it is good to place money in the

hands of several fund managers. This might reduce the maximum return possible,

but will also reduce the risks.

6. Be regular: Investing should be a habit and not an exercise undertaken at one’s

wishes, if one has to really benefit from them. As we said earlier, since it is

extremely difficult to know when to enter or exit the market, it is important to

beat the market by being systematic. The basic philosophy of Rupee cost

averaging would suggest that if one invests regularly through the ups and downs


of the market, he would stand a better chance of generating more returns than the

market for the entire duration. The SIPs (Systematic Investment Plans) offered by

all funds helps in being systematic. All that one needs to do is to give post-dated

cheques to the fund and thereafter one will not be harried later. The Automatic

investment Plans offered by some funds goes a step further, as the amount can be

directly/electronically transferred from the account of the investor.

7. Do your homework:

It is important for all investors to research the avenues available to them

irrespective of the investor category they belong to. This is important because an

informed investor is in a better decision to make right decisions. Having identified

the risks associated with the investment is important and so one should try to

know all aspects associated with it. Asking the intermediaries is one of the ways

to take care of the problem.

8. Find the right funds

Finding funds that do not charge much fees is of importance, as the fee charged

ultimately goes from the pocket of the investor. This is even more important for

debt funds as the returns from these funds are not much. Funds that charge more

will reduce the yield to the investor. Finding the right funds is important and one

should also use these funds for tax efficiency. Investors of equity should keep in

mind that all dividends are currently tax-free in India and so their tax liabilities

can be reduced if the dividend payout option is used. Investors of debt will be

charged a tax on dividend distribution and so can easily avoid the payout options.

9. Keep track of your investments

Finding the right fund is important but even more important is to keep track of the

way they are performing in the market. If the market is beginning to enter a

bearish phase, then investors of equity too will benefit by switching to debt funds

as the losses can be minimized. One can always switch back to equity if the equity

market starts to show some buoyancy.


10. Know when to sell your mutual funds: Knowing when to exit a fund too is of

utmost importance. One should book profits immediately when enough has been

earned i.e. the initial expectation from the fund has been met with. Other factors

like non-performance, hike in fee charged and change in any basic attribute of the

fund etc. are some of the reasons for to exit. For more on it, read "When to say

goodbye to your mutual fund."

Investments in mutual funds too are not risk-free and so investments warrant some

caution and careful attention of the investor. Investing in mutual funds can be a dicey

business for people who do not remember to follow these rules diligently, as people are

likely to commit mistakes by being ignorant or adventurous enough to take risks more

than what they can absorb. This is the reason why people would do well to remember

these rules before they set out to invest their hard-earned money.

SOME OF THE EXISTING AMC(ASSET MANAGEMENT COMPANY)

¾�Alliance Mutual Fund

¾�Birla Mutual Fund

¾�BOB Mutual Fund

¾�BOI Mutual Fund

¾�Canbank Mutual Fund

¾�Chola Mutual Fund

¾�DSP Merrill Lynch Mutual Fund

¾�Dundee Mutual Fund

¾�Escorts Mutual Fund

¾�First India Mutual Fund

¾�Franklin Templeton Investments

¾�GIC Mutual Fund

¾�HDFC Mutual Fund

¾�IDBI Principal Mutual Fund

¾�IL & FS Mutual Fund


¾�Indian Bank Mutual Fund

¾�ING Mutual Fund

¾�JF Mutual Fund

¾�JM Mutual Fund

¾�Kotak Mahindra Mutual Fund

¾�LIC Mutual Fund

¾�Morgan Stanley Mutual Fund

¾�Pioneer ITI Mutual Fund

¾�PNB Mutual Fund

¾�Prudential ICICI Mutual Fund

¾�Reliance Capital Mutual Fund

¾�SBI Mutual Fund

¾�Standard Chartered Mutual Fund

¾�SUN F&C Mutual Fund

¾�Sundaram Mutual Fund

¾�Tata TD Waterhouse Mutual Fun

¾�Taurus Mutual Fund

¾�Unit Trust of India

INSURANCE:


It is a system to make large financial losses more affordable by pooling the risks of many

individuals and business entities and transferring them to an insurance company or other

large group in return for a premium.

At KARVY, the company has tie-ups with many insurance companies nsurance are of

two types:

a) Life Insurance

b) General Insurance

Further these could be for a) Individuals or b) Corporates

The list of products that KARVY has to offer as follows:

Product Range for Individual

LIFE INSURANCE

Term Plan:

¾�ICICI Prulife Single Premium Without Returns.

¾�ICICI Prulife Regular Premium Without Returns

¾�ICICI Prulife Regular Premium With Returns

¾�LIC`s Bima Kiran Regular Premium With Returns

¾�LIC`s Anmol Jeevan Regular Premium Without Returns

¾�LIC`s Anmol Jeevan Single Premium Without Returns

Endowment Plan:

¾�ICICI Prulife Endowment Plan

¾�LIC`s Endowment Plan Table –14.


¾�LIC`s Jeevan Mitra. Double Cover Table –88.

¾�LIC`s Jeevan Mitra. Triple Cover Table –133

¾�LIC`s Jeevan Sathi Table – 89

Money Back Plans:

¾�ICICI Prulife Cash Bak – 15 yrs & 20 yrs

¾�LIC`s Money Back 20 yrs & 25 yrs

¾�LIC`s Jeevan Surabhi 15 yrs, 20 yrs & 25 yrs

¾�LIC`s Jeevan Samriddhi 12 yrs, 15 yrs, 20 yrs & 25 yrs.

Pension Plan:

¾�ICICI Prulife Forever life

¾�ICICI Prulife Life Time

¾�ICICI Prulife Life Link

¾�LIC`s Jeevan Suraksha -1

¾�o LIC`s Jeevan Dhara - 1

¾�LIC`s Jeevan Akshay –1

¾�LIC`s Varishtha Pension Bima Yojana

Investment Plans:

¾�ICICI Prulife Life Time

¾�ICICI Prulife Life Link

¾�LIC`s Bima Nivesh

¾�LIC`s Bima Plus

Child Care Plans:


¾�ICICI Prulife Smart Kid

¾�LIC`s Jeevan Chhaya

¾�LIC`s Komal Jeevan

¾�LIC`s Jeevan Kishore

¾�LIC`s Children`s Money Back.

Whole Life:

¾�LIC`s Ltd.Premium Whole life

¾�LIC`s Jeevan Anand

¾�LIC`s Jeevan Rekha

GENERAL INSURANCE

¾� Personal Accident:

¾�Bajaj Allianz Personal Accident cover.

¾�ICICI Lombard Personal Care

¾�Royal Sundaram Accident Shield Classic

¾�Tata AIG Accident Guard

¾�Tata AIG Voluntary accident guard

¾�Tata AIG Family Guard.

Travel Insurance:

¾�Bajaj Allianz Travel Companion

¾� ICICI Lombard Globetrotter - Overseas Leisure Travel

¾�Royal Sundaram GroupTravel

Mediclaim:

¾�Bajaj Allianz Health Guard

¾�Bajaj Allianz Critical Illness

¾�Bajaj Allianz Hospital Cash

¾�ICICI Lombard Mediclaim

¾�Royal Sundaram Health Shield


House Holders:

¾�Bajaj Allianz House Holders.

¾�ICICI Lombard Home Insurance

¾�Royal Sundaram Home Shield Classic

¾�Tata AIG Home Secure

Product Range for Corporates/ Small Scale Industries/Offices

LIFE INSURANCE

¾� ICICI Prulife Group Term plan

¾� ICICI Prulife Group Gratuity

¾� ICICI Prulife Group Superannuation.

¾� LIC`s Group Term Cover

¾� LIC`s Group Gratuity

¾� LIC`s Group Superannuation.

GENERAL INSURANCE

Professional Indemnity

Mediclaim:

¾�Bajaj Allianz Health Guard

¾�ICICI Lombard Group Mediclaim

¾�ICICI Lombard Group Critical Illness

¾�Royal Sundaram Group Health

Office / Shop Package:

¾�Bajaj Allianz Office Package.

¾�Bajaj Allianz Shop Keepers

¾�ICICI Lombard Merchant Cover

¾�Royal Sundaram – Office, Shop, Hotel


¾�Tata AIG Business Jyoti

¾�Tata AIG Business Sanjeevani

Personal Accident:

¾�Bajaj Allianz Personal Accident cover.

¾�ICICI Lombard Group Accident Policy

¾�Royal Sundaram Group Accident

¾�Tata AIG Executive Guard

¾�Tata AIG Group Accident

Travel Insurance:

¾�Bajaj Allianz Over seas

¾�ICICI Lombard Globetrotter - Overseas Corporate Travel

¾�Insurance.

¾�Royal Sundaram Group Travel

Corporate Cover

Fire, Burglary, Plate glass, Electronic Equipment cover, Baggage, Public

Liability, Fidelity guarantee Consequential Loss (Fire) Insurance, Industrial

All Risk Motor (includes private cars, two wheelers and commercial vehicles), Money

Insurance, Contractors All risk Policy, Workmen’s

Compensation Engineering, Machinery Breakdown and others.

EQUITIES:


Equity participation of clients is the daily earning of the company. People

participate in intraday trades, Short, Medium and Long term investing to plan for their

financial goals. The company is listed member of National Stock Exchange (NSE). It has

terminals at all outlets and helps it customers participate in the stock market trades.

The equities can be traded in

a) Primary Markets

b) Secondary Markets

Indian Stock Market Overview:

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd

(NSE) are the two primary exchanges in India. In addition, there are 22 Regional Stock

Exchanges. However, the BSE and NSE have established themselves as the two leading

exchanges and account for about 80 per cent of the equity volume traded in India. The

NSE and BSE are equal in size in terms of daily traded volume. Most key stocks are

traded on both the exchanges and hence the investor could buy them on either exchange.

The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE

50 Index (Nifty) which consists of fifty stocks. The BSE Sensex is the older and more

widely followed index. Both these indices are calculated on the basis of market

capitalization and contain the heavily traded shares from key sectors. The markets are

closed on Saturdays and Sundays.

Both the exchanges have switched over from the open outcry trading system to a fully

automated computerized mode of trading known as BOLT (BSE On Line Trading) and

NEAT (National Exchange Automated Trading) System. It facilitates more efficient

processing, automatic order matching, faster execution of trades and transparency. The

key regulator governing Stock Exchanges, Brokers, Depositories, Depository

participants, Mutual Funds, FIIs and other participants in Indian secondary and primary

market is the Securities and Exchange Board of India (SEBI) Ltd.


Working of a stock market:

A person desirous of buying/selling shares in the market has to first place his order with a

broker. When the buy order of the shares is communicated to the broker he routes the

order through his system to the exchange. The order stays in the queue exchange's

systems and gets executed when the order logs on to the system within buy limit that has

been specified. The shares purchased will be sent to the purchaser by the broker either in

physical or demat format.

DERIVATIVES:


A derivative is a product whose value is derived from the value of an underlying

asset, index or reference rate. The underlying asset can be equity, forex, commodity or

any other asset. For example, if the settlement price of a derivative is based on the stock

price of a stock for e.g. Infosys, which frequently changes on a daily basis, then the

derivative risks are also changing on a daily basis. Very often, the variables underlying

the derivative securities are the prices of traded securities

Derivatives and futures are basically of 3 types:

¾� Forwards and Futures

¾� Options

¾� Swaps

Forward contract

A forward contract is the simplest mode of a derivative transaction. It is an agreement to

buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No

cash is exchanged when the contract is entered into. It is an agreement between two

parties to buy or sell an asset at a certain time in the future at a certain price.

Index futures permits speculation and if a trader anticipates a major rally in the market he

can simply buy a futures contract and hope for a price rise on the futures contract when

the rally occurs. We shall learn in subsequent lessons how one can leverage ones position

by taking position in the futures market.

In India we have index futures contracts based on S&P CNX Nifty and the BSE Sensex

and near 3 months duration contracts are available at all times.

Each contract expires on the last Thursday of the expiry month and

simultaneously a new contract is introduced for trading after expiry of a contract. The

permitted lot derivatives for future size is 200 or multiples thereof for the Nifty.

Spot price:


The price at which an asset trades in the spot market.

Futures price:

The price at which the futures contract trades in the futures market.

Contract cycle:

The period over which a contract trades. The index futures contracts on the NSE as well

as BSE have one-month, two-months and three-months expiry cycles which expire on the

last Thursday of the month. Thus a July expiration contract would expire on the last

Thursday of July. On the Friday following the last Thursday, a new contract having a

three-month expiry would be introduced for trading.

Expiry date:

It is the date specified in the futures contract. This is the last day on which the contract

will be traded. It will cease to exist by the end of that day.

Contract size:

The amount of asset that has to be delivered under one contract. The contract size of the

stock index futures on NSE Nifty is 200 and the contract size of the stock index futures

on BSE Sensex is 50.

Basis:

Basis is usually defined as the spot price minus the futures price. There will be a different

basis for each delivery month for the same asset at any point in time. On 19th June 2001

Nifty closed at 1096.65. August 2001 Nifty futures closed at 1098.90. Therefore the basis

for the August Nifty futures is –2.25 index points. In a normal market, basis will be

negative. This reflects the fact that the underlying asset is to be carried at a cost for

delivery in the future.

Cost of carry:

The relationship between futures prices and spot prices can be summarized in terms of

what is known as the cost of carry. This measures the storage cost plus the interest that is


paid to finance the asset less the income earned on the asset. In the case of stocks,

dividend will be the income earned on the asset. The storage cost will be negligible.

Initial Margin:

The amount that must be deposited in the margin account kept with the broker at the time

a futures contract is first entered into is known as initial margin. Margins are to be strictly

collected in the futures and options markets by brokers as per the exchange regulations.

Otherwise the exchange cannot guarantee the trades to all participants in the market.

Marking-to-market:

In the futures market, at the end of each trading day, the margin account is a adjusted to

reflect the investor’s gain or loss depen ding upon the futures closing price or settlement

price. This is called marking-to-market.

Options:

Options give the holder or buyer of the option the right to do something. If the option is a

call option, the buyer or holder has the right to buy the number of shares mentioned in the

contract at the agreed strike price. If the option is a put option, the buyer of the option has

the right to sell the number of shares mentioned in the contract at the agreed strike price.

The holder or the buyer does not have to exercise this right. Thus on the expiry of day of

the contract

the option may or may not be exercised by the buyer. In contrast, in a futures contract, the

two parties to the contract have committed themselves to doing something at a future

date. To have this privilege of doing the transaction at a future only if it is profitable, the

buyer of options has to a premium to the seller of options.

Option Basic Terminology:

Stock options:


Stock options are options on individual stocks. A contract gives the holder the right to

buy or sell shares at the specified price.

American option:

American options are options that can be exercised any time up to the expiration date.

This name is only a classification and does not imply that they are available only in

America.

European options:

European options are options that can be exercised only on the expiration date. European

options are easier to analyze than American options, and properties of American options

are frequently deducted from those of its European counter part.

Call option

A call option gives the holder the right but not the obligation to buy an asset by a certain

date for a certain price.

Put option

A put option gives the holder the right but not the obligation to sell an asset by a certain

date for a certain price.

Buyer of an option

The buyer of the option, either call or put, pays the premium and buys the right but not

the obligation to exercise his option on the seller/writer.

Writer of an option:

The writer of a call/put option is the one who receives the option premium and is thereby

obliged to sell/buy the asset if the buyer exercises on him. Option writer is the seller of

the option contract.

Strike price


The price specified in the option contract at which buying or selling will take place is

known as the strike price or the exercise price.

Option price

Option price is the premium which the option buyer pays to the option seller or writer.

Black and Scholes formula is widely used for determining the fair value of options.

Expiration date It is the date on which the European option is exercised. It is also called

as exercise date, strike date or maturity date.

Beta:

It is a measure of systematic risk of a security. Beta (or beta coefficient) is a means of

measuring the volatility of a security or portfolio of securities in comparison with the

market as a whole. Beta is calculated using regression analysis. A beta of 1 indicates that

the security's price will move with the market. A beta greater than 1 indicates that the

security's price will be more volatile than the market. A beta which is less than will mean

that the stock will be less volatile than the market.


COMMODITIES:

About Karvy Commodities Broking Private Limited

Commodities market, contrary to the beliefs of many people, has been in existence in

India through the ages. However the recent attempt by the Government to permit Multi-

commodity National levels exchanges has indeed given it, a shot in the arm. As a result

two exchanges Multi Commodity Exchange (MCX) and National Commodity and

derivatives Exchange (NCDEX) have come into being. These exchanges, by virtue of

their high profile promoters and stakeholders, bundle in themselves, online trading

facilities, robust surveillance measures and a hassle-free settlement system. The futures

contracts available on a wide spectrum of commodities like Gold, Silver, Cotton, Steel,

Soya oil, Soya beans, Wheat, Sugar, Channa etc., provide excellent opportunities for

hedging the risks of the farmers, importers, exporters, traders and large scale consumers.

They also make open an avenue for quality investments in precious metals. The

commodities market, as it is not affected by the movements of the stock market or debt

market provides tremendous opportunities for better diversification of risk. Realizing this

fact, even mutual funds are contemplating of entering into this market.

Karvy Commodities Broking Private Limited is another venture of the prestigious Karvy

group. With our well established presence in the multifarious facets of the modern

Financial services industry from stock broking to registry services, it is indeed a pleasure

for us to make foray into the commodities derivatives market which opens yet another

door for us to deliver our service to our beloved customers and the investor public at

large.

With the high quality infrastructure already in place and a committed Government

providing continuous impetus, it is the responsibility of us, the intermediaries to deliver

these benefits at the door-steps of our esteemed customers. With our expertise in financial

services, existence across the lengths and breadths of the country and an enviable

technological edge, we are all set to bring to you, the pleasure of investing in this

burgeoning market, which can touch upon the lives of a vast majority of the population


from the farmer to the corporate alike. We are confident that the commodity futures can

be a good value addition to your portfolio.

The company provides investment, advisory and brokerage services in Indian

Commodities Markets. And most importantly, we offer a wide reach through our branch

network of over 225 branches located across 180 cities.

To open a commodities trading account, click here else contact the nearest Karvy branch.

Registered Office:

Karvy Commodities Broking Private Limited.

46, Avenue 4, Street No. 1,

Banjara Hills, Hyderabad – 500 034.

Andhra Pradesh, India.

Mail : [email protected]

Telephone : +91 – 40 – 2331 2454 / 2332 0751

Fax : +91 – 40 – 2331 1968

Commodity Derivatives

A commodity derivative derives its value from an underlying asset which is necessarily a

commodity. To understand the commodity derivatives markets it’s necessary to clear

about ‘commodities’.

Commodities, in simple words are any goods that are common and unbranded. Gold,

silver, rubber, pepper, jute, wheat, sugar, cotton etc., are some of the common

commodities. For e.g. apple juice can be a commodity whereas the ‘Real’ apple juice

cannot be called a commodity. You may be surprised to know that in the US commodities

markets there are futures available even on cattle. Another feature of commodities is that

they are commonly available.


Commodity markets represent the formal system for the interplay of demand for and

supply of commodities. These markets can be broadly classified into spot market and

futures market. Commodities for immediate delivery are traded through the spot market.

The players in the spot market are the actual producers and the consumers of the

commodities.

The other type of market called the ‘Futures market’ is for facilitating contracts for future

delivery. (Please go through the material on ‘Futures and Options’ to understand about

futures) These markets make available for trading, the various derivatives based on

commodities. Usually traded ones are the futures and options. However in India options

on commodities are not available and are expected to be introduced soon. The players in

the futures markets are Hedgers, Arbitragers and investors.

Hedgers are those who hold simultaneous positions in the spot market also. These are

generally the actual consumers or the producers of the commodities. For eg: A wheat

farmer who expects his harvest to be over in 3 months time may sell a futures contract

with an expiry of three months, so that even if the prices happen to fall after three

months, he can still manage to sell at the price at which the contract was struck.

The large scale consumers of the products can also make use of the futures to secure their

purchase. For eg: A cooldrinks can manufacturing company may buy tin futures, so that

even if the prices happen to rise later, thy can be assured of the supply of raw materials at

the pre-determined price.

The other major group of participants in the commodity futures market are the importers

and the exporters. Since they have confirmed obligations to export/import fixed quantity

of commodities at a particular period of time, they can take opposite positions in the

futures market.

Arbitrage is a process of making profits using the price differences between two markets

without exposing oneself to any risk. Arbitraging is a very profitable business. It is

possible to arbitrage between two different futures markets or between the futures market


and the spot market. However in an ‘efficient’ market arbitraging is not possible, because

any price gap is closed immediately as soon the arbitragers enter the market.

Investors are those who participate in the market for profits and are ready to face the risk

involved in the market. An investor can be anyone from an individual who has a small

surplus income to the treasury desks of banks and corporate.

Most commonly traded derivatives around the world are futures, options and option

futures. Some of the most popular commodity exchanges in the world are listed below:

London Metals Exchange, London

New York Mercantile Exchange, New York

Chicago Mercantile Exchange, Chicago

Chicago Board of Trade, Chicago

London International Financial Futures and Options Exchange (LIFFE), London

Tokyo Commodity Exchange, Tokyo

Winnipeg Commodity Exchange, Canada

Indian Commodities Market

In India commodity markets have been in existence for decades. However in 1975 the

Government banned forward contracts on commodities. Later in 2003 the Government of

India again allowed forward contracts in commodities. There have been over 20

exchanges existing for commodities all over the country. However these exchanges are

commodity specific and have a strong regional focus. The Government, in order to make

the commodities market more transparent and efficient, accorded approval for setting up

of national level multi commodity exchanges. Accordingly three exchanges are there

which deal in a wide variety of commodities and which allow nation-wide trading. They

are

1. Multi Commodity Exchange (MCX)

2. National Commodities Derivatives Exchange (NCDEX)


3. National Multi Commodity Exchange (NMCE)

The MCX is Mumbai-based and is promoted by Financial Technologies Pvt Ltd. MCX

allows trading on a host of commodities ranging from bullion to grains. Please check the

‘Commodities traded’ menu’. MCX has become the first exchange in the world to launch

futures on steel. Recently on 11th August 2004, MCX crossed a peak daily turnover of

Rs.950 Crores.

NCDEX is promoted by an elite group of financial institutions including NSE, LIC, SBI,

UBI etc., NCDEX also allows trading of futures on a host of commodities

The following tables indicate the various commodities traded in both exchanges and also

the critical information regarding the various contracts.

National Commodities and Derivatives Exchange, NCDEX

COMMODITY

UNIT OF

PRICE

QUOTATION

UNIT OF

TRADING

YIELD/Re.

MOVEMENT

TIC

SIZE

or

TIC

YIELD/TIC

or TIC

VALUE

TRADING

SESSION

PRECIOUS METALS

GOLD 10gm 100gm 10.00 1.00 10.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

KILO GOLD 10gm 1000gm 100.00 1.00 100.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

SILVER 1KG 5KG 5.00 1.00 5.00

10:00AM-

4:00PM &

5:00PM-

11:00PM


MEGA SILVER 1KG 30KG 30.00 1.00 30.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

AGRICULTURAL PRODUCTS

SOYA 1QT 10QT 10.00 0.05 0.50

10:00AM-

4:00PM &

5:00PM-

11:00PM

SOYA OIL 10KG 10000KG 1000.00 0.10 100.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

COTTON-M 1QT 11 bales 18.70 0.05 0.935

10:00AM-

4:00PM &

5:00PM-

11:00PM

COTTON-L 1QT 11 bales 18.70 0.05 0.935

10:00AM-

4:00PM &

5:00PM-

11:00PM

MUSTARD 10KG 1000KG 100.00 0.05 5.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

MUSTARD

OIL 20KG 1000KG 50.00 0.05 2.50

10:00AM-

4:00PM &

5:00PM-

11:00PM

PALMOLEIN

OIL CRUDE 10KG 1000KG 100.00 0.05 5.00

10:00AM-

4:00PM &

5:00PM-

11:00PM


PALMOLEIN

OIL RBD 10KG 1000KG 100.00 0.05 5.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

PEPPER 1QT 1000KG 10.00 1.00 10.00

10:00AM-

4:00PM

&5:00PM-

11:00PM

CHANA 1QT 10000KG 100.00 1.00 100.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

GAUR SEEDS 1QT 10000KG 100.00 1.00 100.00

10:00AM-

4:00PM &

5:00PM-

11:00PM


RUBBER 1QT 1000KG 10.00 1.00 10.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

Multi-Commodity Exchange, MCX

COMMODITY

UNIT OF

PRICE

QUOTATION

UNIT OF

TRADING

YIELD/Re.

MOVEMENT

TIC

SIZE

or

TIC

YIELD/TIC

or TIC

VALUE

TRADING

SESSION

PRECIOUS METALS

GOLD-M 10gm 100gm 10.00 1.00 10.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

GOLD 10gm 1000gm 100.00 1.00 100.00 10:00AM-

4:00PM &

5:00PM-

11:00PM


4:00PM &

5:00PM-

11:00PM

SILVER-M 1KG 5KG 5.00 1.00 5.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

SILVER 1KG 30KG 30.00 1.00 30.00

10:00AM-

4:00PM &

5:00PM-

11:00PM


SOYA 1QT 10QT 10.00 0.05 0.50

10:00AM-

4:00PM &

5:00PM-

11:00PM

SOYA OIL 10KG 1000KG 100.00 0.05 5.00

10:00AM-

4:00PM &

5:00PM-

11:00PM

PALMOLEIN

OIL CRUDE 10KG 1000KG 100.00 0.05 5.00

10:00AM-

4:00PM

PALMOLEIN

OIL RBD 10KG 1000KG 100.00 0.05 5.00

10:00AM-

4:00PM

CASTOR 100KG 1MT 10.00 0.25 2.50 10:00AM-

4:00PM

CASTOR OIL 10KG 1MT 100.00 0.10 10.00 10:00AM-

4:00PM

GROUND

NUT OIL 10KG 1MT 100.00 0.10 10.00

10:00AM-

4:00PM

GAUR SEED 100KG 5MT 50.00 1.00 50.00 10:00AM-

4:00PM


BLACK

PEPPER 100KG 1MT 10.00 1.00 10.00

10:00AM-

4:00PM

KAPAS 20KG 4MT 200.00 0.10 20.00 10:00AM-

4:00PM

INDUSTRIAL METALS

STEEL LONG 1MT 25MT 25.00 0.50 12.50 10:00AM-

4:00PM

STEEL FLAT 1MT 25MT 25.00 0.50 12.50 10:00AM-

4:00PM

COPPER 1KG 1MT 1000.00 0.05 50.00

10:00AM-

4:00PM &

5:00PM-

11:15PM

NICKEL 1KG 250KG 250.00 0.50 125.00

10:00AM-

4:00PM &

5:00PM-

11:15PM

TIN 1KG 500KG 500.00 0.25 125.00

10:00AM-

4:00PM &

5:00PM-

11:15PM

Note: NCDEX introduced trading on Saturdays in all eligible contracts with effect from May 15,

2004.

DEPOSITORY:


what is a depository?

A Depository is a Company where the shares of an individual are held in the electronic

form, at the request of the shareholder. This eliminates the physical form of holding. The

National Securities Depository Limited (NSDL) was promoted by IDBI, UTI, SBI and

NSE. The Central Securities Depository Limited (CDSL) was promoted by BSE .

What is the Depository System?

Your money may be held in the form of liquid cash at your home or may be deposited in

a bank. The bank holds your funds in the electronic form and subsequently debits or

credits the account. Depending on your issuance of cheques or deposit of cheques. The

advantages of safety and convenience of dealing with a Bank overweigh the reasons for

holding liquid cash in your home. Your financial assets such as Equity Shares may be

compared to the above example. You may hold physical share certificates in your home

and be exposed to the various risks of lack of safety, mutilation, loss etc.Alternatively,

you may deposit your shares in an organization called a Depository, which holds your

shares in the electronic form.

The advantages of the Depository System can be further compared with physical shares

as below:

¾�The risk of loss, mutilation is common for physical certificates and completely

removed in electronic shares. Handling of a large number of physical certificates

is ended in the Depository mode.

¾�In the electronic segment, there are no bad delivers as in physical segment.

¾�There is no stamp duty payable in electronic shares compared to the duty of

0.50% in the physical segment while transferring ownership. In loans against

shares, banks usually charge a lower interest rate and margin money than in the

physical share certificates. Settlements in the Stock exchanges has commenced in

the electronic segment and has proven to be far more efficient and convenient

compared to physical shares.


How can I Deal with the Depository directly?

You cannot deal with the Depository directly. However, if you have any unresolved

grievances against your DP, you can make a complaint to the Depository at the below

mentioned address.

What are the obligations of a Depository?

The Depository is obligated to maintain the Client Holdings, enable demat and remat of

eligible securities, disbursement of corporate benefits,effect settlement of securities

traded on the exchanges as well as Off-market trades through book entry transfers,

provide for Pledging/Hypothecation of eligible securities.

How many DPM's are there in Karvy?

Karvy Consultants Ltd. have four DPMs as on date. They are:

1. Hyderabad - IN300394

2. Lucknow - IN301557

3. Bangalore - IN301926

4. Mumbai - IN302470

What is NSDL?

National Securities Depositories Limited is a Depository promoted by UTI, IDBI, SBI &

NSE who hold the securities in electronic form on behalf of the beneficiary holder.

Tell me about the Insurance Policy by NSDL ?

Shares in the electronic segment are 100 percent secure. The agreement between you and

the DP indemnifies you against misuse of your electronic holdings by any party, in any

manner whatsoever. You may legally invoke such indemnity and be 100 percent

compensated. A comprehensive Insurance Policy has been taken by NSDL which covers

your DP account so as to protect you against any losses, breach of security etc.


What is CDSL?

Central Depositories Securities Limited is a Depository promoted by BSE.

How does the Depository curtail Forgeries / Fakes in Duplicate Distinctive

Numbers?

Physical share certificates with duplicate distinctive numbers are essentially forged

certificates. The R&T would identify and reject the certificates.The concerned Stock

Exchanges are informed of the details.

What are the services offered by Depository Participant?

Our Electronic Custodial Services are:

• Convert your physical holding into electronic holding (which is called

"dematerialisation" of securities)

• Keep custody of your holdings in electronic form.

• Transfer the shares in the electronic form from one account to another.

• Facilitate pledge of your electronic securities.

• Give electronic credit of new share allotments such as public issues, bonus , rights

etc.

• Convert your electronic holding into physical holding (which is called

"rematerialisatoin of securities")


SWOT ANALYSIS


SWOT ANALYSIS:

Strength: ¾�Good research team.

¾�Dedicated employees.

¾�Strong customer relationship.

¾�Strong brand name.

¾�Wide spread branches and brokers network..

Weakness: ¾�Technology need to be upgraded.

¾�Not enough advertisement.

Opportunity: ¾�Growing IPO issues.

¾�Positive outlook of people towards financial products.

¾�Growing consumer awareness about equity related product.

Threat : ¾�Market uncertainty.

¾�Galloping competition.

¾�Broad economic factors like inflation etc


FINDINGS


FINDINGS:

��KARVY IS ONE OF THE LEADING BROKING HOUSE IN THE EQUITY

MARKET.

��KARVY HAS GOOD SUCCESS RATE AS LEAD MANAGERS.

��IT HAS BRANCHES ALL OVER COUNTRY.

��ITS BIGGEST STRENGTH IS THER PRESENCE IN THE FIELD OF

FINANCE FOR A LONG TIME.


SUGGESTIONS AND

RECOMMENDATIONS


SUGGESTIONS AND RECOMMENDATIONS

Karvy has achieved a lot in the field of finance. Not much can be suggested in regard to

the policies and principles it has. The good success rate is a clear reflection about the

company’s strong rules, coupled with dedicated work put in by its employees.

The following could help the company to become a pioneer in its field.

1) Karvy offered IPO’s but found it not quite profitable. The present year has seen a

boom in equities and a large number of IPO’s are being issued by a umber of companies.

This could be a good segment to tap with. Entry into the IPO allotment procedure could

be quite helpful and profitable.

2) Competitors like share khan, Geojit, etc. are known better than karvy. The company

lacks publicity. A good portion of the general public is not quite aware of the existence of

such an investment firm like karvy, which caters to most of the available investing

instruments. The company could undertake promotional activities with the general public

as the target group. They could make aware of the services they render to the public. This

could attract new customers which can be transformed into a long lasting relationship.

This could be put into action by having print advertisements in papers like The Economic

Times, Business Line, Financial Express etc. Advertisement

in CNBC-India could give a very good brand image to the company.

3) The company acts as a mediatory for most of the investment options. It gives people

access to a wide variety of mutual funds, Insurance schemes etc for third party

companies. The company can start its own mutual fund and start investing in stocks,

debts and government securities. It has a special and dedicated Research Desk who are

into constant monitoring of the share markets. It can take advantage of this and start a

separate mutual fund. People will have good confidence in this and the business can also

be profitable.


CONCLUSION


CONCLUSION:

Investment in India has become more of a security necessity than a business lifestyle. As

the interest rates all over are dropping, people are switching to other avenues which fetch

better results. The risk band that initially existed as been eased out and people are on the

lookout for new and better stuff. In olden days, one could invest only in a few companies,

but the present day has given people to try a wide range of companies. The decision in

regard to investments is based on the sector performance as well as the strong

fundamentals of the company. The act of speculation has considerably been reduced due

to the statistical data and its analysis that companies like karvy do and people have

become intelligent investors rather than mere speculators.

It was a very fruitful experience working in karvy as a management trainee. It offered

exposure to the wide range of investment options available. The risk factors involved

could be understood easily. Not only did it give a learning experience but also gave an

idea on how we could incorporate the various investment options, discovered by the

economists, into a good planning package.


BIBLIOGRAPHY

�

Understanding Organizations by Madhukar Shukla �

www.mutualfundindia.com �

Statistics.com �

Business Line Newspaper � Economic Times Newspaper

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