Satendra Project

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A PROJECT REPORT

ON

‘RESEARCH ON INDIAN CAPITAL MARKET’

Summer Training Report Submitted inThe partial fulfillment of

Master of Business Administration of

Session 20010-12

Submitted by: Under guidance of

Satendra Singh Mr.Megha Bansal

MBA –IInd Year Faculty of MBA Deptt.

Roll No. –1042570015

MEERUT INTERNATIONAL INSTITUTE OF TECHNOLOGY,

MEERUT

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INDEX

Sr.

PARTICULAR PAGE No.

I Preface 3

II Declaration 4

III Acknowledgement 6

1. Abstract 7

2. Industry Profile 9-17

3. Company Profile 18-24

4.1 Objective & Scope 25-27

4.2 Indian capital market 28-42

4.3 Broking sector in India 43-51

4.4 Basic of Stock & Capital Market 52-57

4.5 Stock exchange & trading 58-66

4.6 Product Profile 67-72

4. Research Methodology 73-79

5. Data Analysis 80-89

6. Findings 90-91

7. Recommendation & Suggestion 92-95

8. Result 96-97

9. Conclusion 98-100

10` Bibliography 100-102

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PREFACE

Every individual who is undergoing any management course has to go under a summer

training. As we know that without practical exposure one can not qualify & is not capable

to work in any organization. Hence to fulfill the requirement, I completed my summer

training at INDIA INFO LINE Ltd . to improve my practical & professional skills.

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STUDENT DECLARATION

I Satendra Singh student of MBA here by declared that the research report entitled

“REASEARCH ON INDIAN CAPITAL MARKET” WITH SPECIAL

REFERENCE TO INDIA INFOLINE’ is completed and submitted under the guidance

of Mr. AMAN CHADDHA is my original work. The imperial finding in this report is

based on the data collected by me. I have not submitted this project report to Mahamaya

Technical University Noida or any other University for the purpose of compliance of any

requirement of any examination or degree.

DATE:

SATENDRA SINGH

PLACE: MBA II Year

ROLL NO. 1042570015

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CERTIFICATE

This is to certify that Mr satendra Singh student of MBA II year MIIT, Meerut has

under gone a summer training project on RESEARCH ON INDIAN CAPITAL

MARKET and submitted a report based on the same as a mandatory requirement the

degree of MASTER OF BUSINESS ADMINISTRATION , U.P, Technical University ,

Luckhnow.

(R K AGERWAL) Date:

Director

MIIT

(Meerut)

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ACKNOWLEDGEMENT

I would like to express my deep sense of gratitude towards few people who have

supported & helped me to complete the research .

First of all I would like to thank my project company guide Mr.Aman Chadha. He

guided me immensely during the training period.

And, secondly my project faculty guide Mr. Megha Bansal He motivated me to carry out

this research report.

And last but not the least my friends who helped me at the time of training.

(SATENDRA SINGH)

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ABSTRACT

The project work entitled a study of RESEARCH ON INDIAN CAPITAL MARKET

with special reference to INDIA INFO LINE Ltd (MEERUT) is mainly conducted to

identify how to handle all the parameters related to the STOCK MARKET and how to

do the work on ONLINE TRADING in India info line ltd.

Trading system / stock exchange works by 2 parameters:

1 BSE (Bombay stock exchange )

2 NSE ( National stock exchange)

The Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE) are also a

depository participant with NSDL. The National Stock Exchange of India was promoted

by leading financial institutions at the behest of the Government of India, and was

incorporated in November 1992 as a tax-paying company.

Share market where dealing of securities is done is known as share market .The Broking

Houses not only act as an intermediate link for the Equity Market but also for the

Commodity Market.

Today lot of investor’s depend on TV channel for recommendation about stocks to sell,

or buy or hold. Channels like CNBC offer array of experts from economist to brokers to

analyst. Most of these people have vested interest in stocks they recommend and

promote.

In this perspective this study examines the nature of relationship between stock market

and growth through capital accumulation in India.

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The data needed for the study has been collected from the employees through

questionnaire. And, data has been presented through diagrams, charts & tables.

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INDUSTRY PROFILE

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INDUSTRY PROFILE

ORIGIN AND DEVELOPMENT OF THE INDUSTRY

The Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces its

history to the 1850s, when stockbrokers would gather under banyan trees in front of

Mumbai’s Town Hall. The location of these meetings changed many times, as the

number of brokers constantly increased. The group eventually moved to Dalal Street in

1874 and in 1875 became an official organization known as ‘The Native Share & Stock

Brokers Association’. In 1956, the BSE became the first stock exchange to be recognized

by the Indian Government under the Securities Contracts Regulation Act.

The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a

means to measure overall performance of the exchange. In 2000 the BSE used this index

to open its derivatives market, trading Sensex futures contracts. The development of

Sensex options along with equity derivatives followed in 2001 and 2002, expanding the

BSE’s trading platform.

Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to

an electronic trading system in 1995. It took the exchange only fifty days to make this

transition.

Capital market reforms in India and the launch of the Securities and Exchange Board of

India (SEBI) accelerated the integration of the second Indian stock exchange called the

National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has

become the largest stock exchange in India.

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Three segments of the NSE trading platform were established one after another. The

Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital

Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options

segment began operating in 2000. Today the NSE takes the 14th position in the top 40

futures exchanges in the world.

In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX

Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified

index of 50 stocks from 25 different economy sectors. The Indices are owned and

managed by India Index Services and Products Ltd (IISL) that has a consulting and

licensing agreement with Standard & Poor’s.

In 1998, the National Stock Exchange of India launched its web-site and was the first

exchange in India that started trading stock on the Internet in 2000. The NSE has also

proved its leadership in the Indian financial market by gaining many awards such as

‘Best IT Usage Award’ by Computer Society in India (in 1996 and 1997) and CHIP Web

Award by CHIP magazine (1999).

The National Stock Exchange of India was promoted by leading financial institutions at

the behest of the Government of India, and was incorporated in November 1992 as a tax-

paying company. In April 1993, it was recognized as a stock exchange under the

Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the

Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities)

segment of the NSE commenced operations in November 1994, while operations in the

Derivatives segment commenced in June 2000.

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Since the early 1950s till the early 1990s, Indian policy makers had been nourishing the

goal of Socialist pattern of society. They had been following the development planning

strategy of the former Soviet Russia in a mixed economic framework. From July 1991, in

the face of an unprecedented foreign exchange crisis, Indian economy started

experiencing an IMF-World Bank dictated regime of liberalisation.

One aspect of this is financial liberalisation. There is a move towards privatisation of

nationalised banks – these banks are selling their shares in the stock market.

Transnational banks are encouraged to operate in the Indian banking sector. Attempts are

made to attract foreign direct investment in different sectors. There is an increasing entry

of foreign portfolio capital due to stock market liberalisation. People are encouraged to

invest in stocks through income tax benefits and abolition of capital gains tax. There is a

move to develop a national pension fund which will be invested in different stocks to get

returns out of which pension will be provided to retired people. It is expected that

boosting up of stock market will accelerate the process of capital accumulation and

growth.

Stock market development has been an important part of financial liberalisation in the

less developed countries (LDCs). In the pro-liberalisation circle, stock market is assigned

to play an important role in the capitalist development of LDCs.

There are many studies supporting the positive link between stock market development

and growth. Let us mention some of the recent studies. One important study was

undertaken by Levine and Zervos (1998). Their cross-country study found that the

Development of banks and stock markets has a positive effect on growth. In another

study Levine (2003) argued that although theory provides ambiguous relationship

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between stock market liquidity and economic growth, the cross-country data for 49

countries over the period 1976-93 suggest a strong and positive relationship (see also

Levine, 2001). Henry (2000) studied a sample of 11 LDCs and observed that stock

market liberalisations lead to private investment boom. Recently, Bekaert et al (2005)

analysed data of a large number of countries and observed that the stock market

liberalisation ‘leads to an approximate 1 % increase in annual real per capita GDP

growth’.

There are some economists who are sceptical. Long time back Keynes (1936) compared

the stock market with casino and commented: ‘when the capital development of a country

becomes the by-product of the activities of a casino, the job is likely to be ill-done’.

Referring to the study of World Bank (1993) Singh (1997) pointed out that stock markets

have played little role in the post-war industrialisation of Japan, Korea and Taiwan. He

argued that the recent move towards stock market liberalisation is ‘unlikely to help in

achieving quicker industrialisation and faster long-term economic growth’ in most of the

LDCs.

In this perspective this study examines the nature of relationship between stock market

and growth through capital accumulation in India.

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GROWTH AND PRESENT STATUS OF THE INDUSTRY

The ever-growing and fast-maturing 'India Market' is a lucrative business destination for

developed countries. With 7-8% of GDP growth, huge analytical, young and English

speaking work force the 'pull' for opportunities are luring. The bandwidth of 'India

Market' is enviably wide and very deep.

'Markets in India' are well protected by legal guidelines and efficient administrators. With

a liberal and proactive government at the center the road ahead for 'Markets of India' is

very rosy. 'Market India' has witnessed exponential growth over past one and half decade.

Liberal and transparent financial policies has effected free-in-flow of FII and as a result

of which 'India Market' has grown to a colossal monster in the international market.

Foreseeing sure and substantial returns on investments (ROI) companies are pro- actively

listing on the stock market indexes. Government agencies once much hated for red tape

and bribes has shed its image. Professionalism is their new mantra. Public Enterprises

like IOC, ONGC, BHEL, NTPC, SAIL, MTNL, BPCL, HPCL and GAIL, SBI, LIC,

Hindustan Antibiotics Limited, Air India etc. to name a few, are giving Private Indian

companies a good run for their money. Private giants like Reliance Industries Limited,

Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, ICICI are

breaking their own records every financial years.

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'Markets in India' has witnessed meteorite rise of the Indian Software,

Telecommunication and Banking Industry. This has propelled growth of Urban Indian

class which, in turn has increased consumerism. Today, each and every type of industry

of 'Market India' like Infrastructure, Pharmaceutical & Biotechnology, Banking &

Insurance, Electronics, FMCG etc. has tremendous growth potential. Retail Industry

along with Agriculture & Food industry are yet to contribute their share to the growth

story of 'Market India'.

Today considering the stock markets, Reliance Industries Limited is at the top. The

SENSEX today has rose from 1000 levels to 8000 Indian Equity Market at present is a

lucrative field for the investors and investing in Indian stocks are profitable for not only

the long and medium-term investors, but also the position traders, short-term swing

traders and also very short term intra-day traders. In terms of market capitalization, there

are over 2500 companies in the BSE chart list with the levels providing a profitable

business to all those who had been investing in the Indian Equity Market. There are about

22 stock exchanges in India which regulates the market trends of different stocks.

Generally the bigger companies are listed with the NSE and the BSE, but there is the

OTCEI or the Over the Counter Exchange of India, which lists the medium and small

sized companies. There is the SEBI or the Securities and Exchange Board of India which

supervises the functioning of the stock markets in India.

Thus, the growing financial capital markets of India being encouraged by domestic and

foreign investments is becoming a profitable business more with each day. If all the

economic parameters are unchanged Indian Equity Market will be conducive for the

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growth of private equities and this will lead to an overall improvement in the Indian

economy.

Indian Stock Market including both NSE-National Stock Exchange and the BSE-Bombay

Stock Exchange have certainly taken a tremendous beating in the past few weeks. We are

sure most of us here knew that the correction in the trading curve was round the corner

which would be healthy, and the markets would bounce back from 18k levels with the

help of mutual fund investments & buying of Indian stocks again. However the

anticipation went wrong, and the US recession story along with global and Indian

commodity prices have added fuel to the global equity market turmoil on a whole.

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Future of the industry

The stock market is booming in spite of the low agriculture output. The monsoon is good

in an overall sense but still the question remains who takes the credit? The answer is the

karma of the people. I appreciate the Indian politicians and the industrialists who being

pawns of destiny are doing things positive and productive. India, as a country is running a

very good period and the position of planets in the transit are giving wonderful results.

Less than one percent of population own stocks and less than 1000 individuals control the

market, the majority being the FIIS, the promoters of the company. The credit should go

to media for making stock market headlines.

The question many people in the market ask:

Will the bull run continue? What heights we can reach?

First of all, mark my words Indian bourses in the future will be one of the best

investments in the world. There will be a time when it can even reach 3000 points in the

nifty. India will begin one of the best dasas of the Sun, which will work in its favour. So

before 2009 Indian bourses should see an all time high.

Now this bull run will continue.

• There can be some correction in the BSE sensex in the 7500 points level.

• The market will hover between the 6000- 7000 till mid august.

• There will be huge fluctuations.

Investors and new entrants to the market to cool down a bit and come well below 7000.

In any case if you are long terms players then step-in and buy now and forget for another

10 years. You will make a killing in the Indian markets.

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COMPANY PROFILE

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COMPANY PROFILE

About India Infoline:

India Infoline ltd. is one of the country’s leading player in the business of investment

advisory and intermediation. This group has presence across India in various businesses

through its wholly owned subsidiary businesses are broking in equities and commodities

(where company is popular known by the brand name, (5paisa.com) and distribution of

mutual fund and other personal investment products .Company is also the no. 1 corporate

agent of the no.1 private life insurance company, ICICI Prudential Life Insurance

company. India Info Line is members of both the leading stock exchanges of India viz.

The Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE) and also a

depository participant with NSDL. India Infoline also has seats on both the leading

commodity exchanges of the country, MCX and NCDEX.They also undertake research;

which is treasured by Institutions, Indian as well as global as well as retail investors

across the country. For all the investment needs the compa close to you owing to our

network ofInvestors points across the country.

Founded in 1995, ours is a professionally managed company, with world-class investors

such as Intel Capital, CDC of the UK, Reeshanar, TDA Capitals patterns, ICICI Econet

among others

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PILLARS OF THE ORGANIZATION

Unlike others, India Info line has the concept of an Investment Team.

The brains behind all the investment strategies and decisions regarding Wealth

Management Services are:

Mr. Nirmal Jain Mr. R VenkataramanMBA: IIM-A, Chartered & Cost Accountant MBA: IIM-B, B.Tech: IIT Kharagpur

Mr. Anand Tandon Mr. VenkatSubramaniam

MBA: IIM-A, B.Tech: IIT Kanpur B.sc, charteredaccountant

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India Infoline: The beginning

• Set up by a group of professionals in October 1995.

• Began with research assignments for FIIs, corporate and banks.

• Extended its offering to products in September 1996.

• Client list read like who’s who of business.

• A small team of 5-6, grew to 15-20 by 1999.

Embracing the web:

• Early 1999, we decided to deliver content only through net.

• Expanded breadth of content considerably.

• Rapid rounds of funding (Intel Capital, CDC, ICICI Venture, TDA).

• Www.indiainfoline.com launched on May 11, 1999.

Focus on Transactions

• India Infoline changed business model from information to transaction oriented in

Year 2000.

• India Infoline Distribution Company Ltd.

• India Infoline Securities Ltd. (5paisa.com) .

• Paid research report on Indiainfoline.com.

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India Infoline Group Co.

• Online Trading (5paisa.com)

– Overwhelming response to 5paisa..

– “Full service discount brokerage” option to customers .

• Distribution of PFPs (Investor Point)

– “Brick & Click” model established .

– Whole spectrum of Personal Finance Products (PFPs) available .

• Online Financial Portal

– Leader in business and finance space in India.

– Strong brand with top-of-mind recall .

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India Infoline Ltd.

Research and Online Media Property (wholly-owned Subsidiary)

• India Infoline Securities Pvt. Ltd.

Secondary market securities trading & portfolio management services.

• India Infoline.com Distribution Company Ltd.

Mobilization of Mutual Funds & other personal investment products.

• India Infoline Insurance Services Ltd.

Corporate agent for ICICI Prudential Life Insurance Company.

• India Infoline Commodities Pvt. Ltd.

Commodities Trading.

• India Info line Investment Services Pvt. Ltd

Margin Funding.

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Corporate Mutual Fund-Key Relation

ACC

Bank Of Baroda

Bayer India

Canara Bank

Indian Bank

Indian Overseas Bank

UTI Venture Fund

IDFC

I Gate Solutions

L&T Financial Services

Karnataka Bank

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OBJECTIVE OF THE STUDY

The objective of the project is to identify, understand and analyze the comparison of

stock market.

The main focus will be on understanding, analyzing and providing a valid explanation

both theoretically and technically, that how various comparisons in between the Indian

stock market and foreign stock market. By undertaking this study I would like to keep my

first step in the field of research.

This project will help me in enhancing my analytical skills and will give me a better

understanding of how things move on and are to be studied. At the same time with this

study I will be providing the organization a list of factors that affect the market, so that

they can keep a watch on the same and use the same for the benefit of clients and

company and also increase their accuracy and profits. This will be my contribution to this

huge company.

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PURPOSE, SCOPE & LIMITATIONS

PURPOSE The PURPOSE of the report is to analyze the comparative study of stock market. It is of great importance to understand, learn and analyze the same. Thus, this report is a move in path of understanding those factors and analyzing the impact of the same.

Stock market are a major part of any economic system. They provide a strong base toIndian economy too. In share markets, the performance of bank shares is of greatimportance. This is justified by the proof that in both BSE and NSE we have separateindex for Shares. for our study we have taken only Nifty which is a part of NSE and

SENSEX which is a part of BSE.

Thus, the performance of share market, the rise and the fall of market is greatly affected by the performance of Banking Sector Shares also and this report revolves around all

those factors, their understanding and a theoretical and technicalanalysis of the same.

SCOPE OF STUDY

• It gave me an opportunity to study the stock market in a detailed manner.

• I got knowledge of prevailing Market Scenario.

• It helped me in learning the market dynamics, study the movement of share pricesand to give a proper justification for the same, theoretically and technically.

• It helped me in understanding and learning the corporate culture

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• And above all, the concerned organization can get some valuablerecommendations, which can definitely improve the performance of theorganization.

LIMITATIONS OF THE STUDY

Though the resources seem sufficient enough to achieve high standard for this

research, still we foresee the following limitations of study.

• The Sector is very vast and it was not possible to cover every nook and corner of this sector.

• The objective which we want to fulfill in this project is really good, but the major demerit to our study is the availability of time for our search and analysis, butthen also, I have tried my level best to show a glimpse of my Research in twith

the objectives.

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INDIAN CAPITALMARKET

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History of Indian Capital MarketsController of Capital Issues Act (CCI) was passed in 1947. The stock markets have had many turbulent times in the last 140 years of their existence. The

imposition of wealth and expenditure tax in 1957 by Mr. T.T. Krishnamachari, the then finance

minister, led to a huge fall in the markets. The dividend freeze and tax on bonus

issues in 1958-59 also had a negative impact. War with China in 1962 was another memorably bad

year, with the resultant shortages increasing prices all round. This led

to a ban on forward trading in commodity markets in 1966, which was again a very bad period,

together with the introduction of the Gold Control Act in 1963. and this led to aresurgence of

interest in the capital markets, only to be punctured by the Harshad Mehta scam in 1992. The

mid-1990s saw a rise in leasing company shares, and

hundreds of companies, mainly listed in Gujarat, and got listed in the BSE. The end-

1990s saw the emergence of Ketan Parekh and the information, communication and

entertainment companies came into the limelight. This period also coincided with the dotcom

bubble in the US, with software companies being the most favoured stocks.

There was a melt down in software stock in early 2000. Mr. P Chidambaram continued the

liberalization and reform process, opening up of the companies, lifting taxes on long-term gains

and introducing short-term turnover tax. The markets have recovered since then and we have

witnessed a sustained rally that has taken the index over 13000.

Several systemic changes have taken place during the short history of modern capital markets.

The setting up of the Securities and Exchange Board (SEBI) in 1992 The history of the Indian

capital markets and the stock market, in particular can be traced back to 1861 when

the American Civil War began. The opening of the Suez Canal during the 1860s led to a

tremendous increase in exports to the United Kingdom and United States. Several companies

were formed during this period and many banks came to the fore to handle the finances

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relating to these trades. With many of these registered under the British Companies Act, the Stock

Exchange, Mumbai, came into existence in 1875. It was an unincorporated body of stockbrokers,

which started doing business in the city under a banyan tree. Business was essentially confined to

company owners and brokers, with very little interest evinced by the general public. There had

been much fluctuation in the stock market on account of the American war and the battles in

Europe. Sir Premchand Roychand remained a kingpin for many years. Sir Phiroze Jeejeebhoy

was another who dominated the stock market scene from 1946 to 1980. His word was law

and he had a great deal of influence over both brokers and the government. He was a good

regulator and many crises were averted due to his wisdom and practicality. The BSE building,

icon of the Indian capital markets, is called P.J. Tower in his memory. The planning process

started in India in 1951, with importance being given to the formation of institutions and markets

The Securities Contract Regulation Act 1956 became the parent regulation after the Indian

Contract Act 1872, a basic law to be followed by security markets in India. To regulate the issue

of share prices, the The markets have witnessed several golden times too. Retail investors began

participating in the stock markets in a small way with the dilution of the FERA in 1978.

Multinational companies, with operations in India, were forced to reduce foreign share holding to

below a certain percentage, which led to a compulsory sale of shares or issuance of fresh stock.

Indian investors, who applied for these shares, encountered a real lottery because those were the

days when the CCI decided the price at which the shares could be issued. There was no free

pricing and their formula was very conservative. The next big boom and mass participation by

retail investors happened in 1980, with the entry of Mr. Dhirubhai Ambani. Dhirubhai can be said

to be the father of modern capital markets. The Reliance public issue and subsequent issues on

various Reliance companies generated huge interest. The general public was so unfamiliar with

share certificates that Dhirubhai is rumoured to have distributed them to educate people. Mr. V.P.

Singh’s fiscal budget in 1984 was pathbreaking for it started the era of liberalization. Theremoval

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of estate duty and reduction of taxes led to a swell in the new issue market and there was a deluge

of companies in 1985. Mr. Manmohan Singh

INTROODUCTION OF STOCK MARKET

In most industrialized countries, a substantial part of financial wealth is not managed

directly by savers, but through a financial intermediary, which implies the existence of an

agency contract between the investor (the principal) and a broker or portfolio manager

(the agent). Therefore, delegated brokerage management is arguably one of the most

important agency relationships intervening in the economy, with a possible impact on

financial market and economic developments at a macro level.

As the per-capita-income of the city is on the higher side, so it is quite obvious that they

want to invest their money in profitable ventures. On the other hand, a number of

brokerage houses make sure the hassle free investment in stocks. Asset management

firms allow investors to estimate both the expected risks and returns, as measured

statistically. There are mainly two types of Portfolio management strategies.

● Passive Portfolio Strategy

● Active Portfolio Strategy

1. Passive Portfolio Strategy: A strategy that involves minimal expectation

input, and instead relies on diversification to match the performance of some

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market index. A passive strategy assumes that the marketplace will reflect all

available information in the price paid for securities.

2. Active Portfolio Strategy: A strategy that uses available information and

forecasting techniques to seek a better performance than a portfolio that is simply

diversified broadly.

Indian Stock Market

Share or stock is a document issued by a company, which entitles its holder to be one of

the owners of the company. A share is issued by a company or can be purchased from the

stock market.

Share market where dealing of securities is done is known as share market. There are

two ways in which investors gets share from market:

Primary market: markets in which new securities are issued are known as primary

market. This is part of the financial market where enterprises issue their new shares and

bonds. It is characterized by being the only moment when the enterprise received money

in exchange for selling its financial assets.

Secondary Market: Market in which existing securities are dealt is known as 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.

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The Stock Market is an invisible market that trades in stocks of various companies

belonging to both the public and private sectors. The Indian Stock Market is often

referred to as the Share Market since it deals primarily with shares of various companies.

A Stock Exchange is a place where the stocks are listed and traded. Such exchanges may

be a corporation or mutual organization which specializes in the business of introducing

the sellers with the buyers of stocks and securities.

The Indian Stock Market in India comprises of two stock exchanges:

● Bombay Stock Exchange (BSE)

● National Stock Exchange (NSE)

BSE

The Bombay Stock Exchange (BSE) was established in 1875.The BSE India Stock

Exchange serves as the most important for companies to raise money. The chief function

of the Stock Market of India is to help raise money as capital for the growth and

expansion of various private and public sector enterprises. Besides, the Stock Market of

India provides able assistance to the individual investors through daily updates on current

position of the stocks of the respective companies that are enlisted in the Stock Index in

which the movement of prices in a section of the market are captured in price indices.

The popular acronym for Stock Index is Sensitive index or sensex. Moreover, the

liquidity provided by the exchange enables the investors to sell securities owned by them

33



easily and quickly. Hence a person, who is subjected to sudden dearth of funds, can

immediately sell his shares for cash in India Stock Market.

The BSE Sensex, also known as “BSE 30” is a widely used market index not only in

India but across Asia. In terms of volume of transactions, it is ranked among the top five

stock exchanges in the world.

Sensex goes on a free fall in 2008

During CY03-CY07 the Indian equity markets experienced impressive growth and grew

by leaps and bounds. The strong momentum in the equity market was in line with the

robust economic growth witnessed during the last few years. Foreign inflows into the

country swelled to more than Rs 2,301 billion in stock markets during FY04- FY08,

which was equal to almost 80% of the net cumulative FII investments in India at the end

of FY08, as India turned into one of the fastest growing economies across the world, and

India Inc reported robust performance year after year. The phenomenal surge in FII

investments and stock indices reflected the future value and quick growth opportunities

in India.

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In FY08, the average market capitalisation of companies listed on Bombay Stock

Exchange (BSE) was Rs 53.5 trillion, almost 9% more than the country’s GDP during

the same year. The market capitalisation to GDP ratio rose from just 21.9% in 2002-03

to over 109.0% during 2007-08. The surge in activity and participation at the Indian

stock exchange reflects in the total turnover to GDP ratio shown in the table below. The

foreign investment in India grew more than 24 times during FY03 to FY08. The sharp

surge in market capitalisation-to-GDP ratio and the continuous boom in stock market

were synchronous with the robust GDP growth that the Indian economy witnessed. The

number of companies listed on the stock exchanges increased to 1,381 in FY08, up by

around 68% as compared with FY03.

In terms of movement of stock indices, the trend set in 2008 turned out to be a sharp

contrast to the trend seen in preceding years as volumes dropped amid global sell-off

triggered by the crisis in the global financial markets and the fall out of major banks

35



across the world. After climbing up to 21,206 on Jan 10, 2008, the Sensex went on a free

fall of more than 50% and ended the year at 9,903.

India Inc looks towards public capital markets for funds

Riding high on the wave of economic boom, India Inc opted strongly for the initial

public offer (IPO) route to raise finances during FY05-FY08. The burgeoning size of the

Indian IPOs increased the borrowers’ access to capital, offered more efficient prices,

and increased opportunities for risk sharing.

The bull-run in India’s capital markets encouraged a shift in financing from banks to

public capital markets; there was a surge in large IPOs worth few billion dollars in the

last few years. In FY08 larger issues made way into the market, and more than 30 mega

issues (issue size of above Rs 3 billion) hit the stock exchanges, including the Rs

115.63-billion ($3 billion) Reliance Power IPO. In FY08, 124 public issues (including

rights issue) garnered Rs 870.29 billion while in FY07 the same number of issues could

collect only Rs 335.08 billion. The average size of the issue was Rs 7,020 million in

FY08 as compared with Rs 2,700 million in FY07, which was an indication of both the

growing size as well as the attractive valuations earned by Indian companies.

However, the scene changed drastically in 2008, when on an average, only three IPOs

per month were raised as compared with eight IPOs in a month raised during 2007.

Moreover, few large high profile IPOs like that of Emaar MGF, Wockhardt Hospitals

withdrew or failed during the year.

36



FIIs sell equity worth Rs 477 billion during FY09

Foreign institutional investments (FII) increased significantly during FY03 and FY08,

especially in FY04, when the surge in net foreign investment in the equity market

reached a record Rs 458 billion as compared with just Rs 27 billion in FY03. The net FII

investment was at an all-time high of Rs 662 billion during FY08; to reach a cumulative

investment of Rs 2,914 billion. During the same year, the FII turnover on the capital

market segment of NSE was close to 17.9% of the total market turnover.

However, an abrupt reversal in trend was observed in 2008, as the world’s financial

woes widened and so did the credit crunch. The failure of large banks worldwide

prompted large outflows from almost all emerging markets including India. India

registered a net outflow in equity investments by foreign investors way back in FY99,

when approximately 5% of the cumulative net investment by FIIs was liquidated. After

ten years, the Indian markets currently are witnessing some FII outflow due to global

recession and a depression worse than the Great Depression that hit the developed

countries in 1920s. In FY09, the FII investment was negative at Rs 477 billion, whereas

the number of registered FIIs increased by 316 (24%) to 1,635 and the number of

registered sub-accounts increased by 1,051 (27.4%) to 5,051.

37



As the FIIs shied away from the Indian markets, the domestic institutional investors

comprising banks, domestic financial institutions, insurance and mutual funds came into

the picture and purchased huge amount of shares sold by FIIs throughout 2008. The data

on the investor category-wise turnover shows that the domestic financial institutions

bought aggressively in 2008 when the FIIs were selling heavily. The FII turnover on the

capital market segment of NSE was close to 17.9% of the total market turnover.

Investors poorer by Rs 167.4 billion on each trading day

The Indian markets witnessed a fantastic year of business in 2007 when the market was

at its bullish best and cash counters were ringing across the emerging markets. The

financial markets were on an upswing and the premier stock exchanges recorded a total

turnover of Rs 25,123 billion in Oct 2007 as compared with a turnover of Rs 9,011

billion in Jan 2007.

38



However, there was a reversal in trend in 2008, when the markets entered one of the

worst bearish modes seen in recent times. During this year, the markets were

characterised by high volatility following a decline in volumes and consequent decrease

in liquidity. The financial markets in India lost nearly Rs 41,190.1 billion in 2008, as

they mirrored the global trend. Even though the crises had originated in the US and

other European countries the slowdown did mar the Indian markets. Consequently, on

an average, the financial markets in India lost close to Rs 499.8 million for every trading

minute in 2008, which made investors poorer by Rs 167.4 billion on each trading day of

2008. The ripple effects of this loss were seen in the rising numbers of illiquid securities

and the sharply decreasing traded turnover. The number of illiquid securities rose to

1,923 in Feb 2009 as compared with 1,641 in July 2008. The rise in the number of

illiquid securities is a concern as it mirrors the fact that more than half of the securities

are illiquid.

39



The volume of shares traded declined by 25% and to a certain extent this decline could

be attributed to the fall in stock prices. In 2008, the number of shares traded declined by

just 2.83% to 222,726 million as compared with 2007. The volume of shares traded fell

by 12.1% on the BSE and it climbed up by 3.4% in the National Stock Exchange (NSE).

The NSE not only garnered almost the entire market share in equity derivatives but also

increased its market share in the cash market segment. A closer scrutiny of the equity

cash and equity derivative segments of the stock exchanges indicate that in Dec 2008

the derivative market of BSE was almost deserted as the exchange witnessed a total

traded turnover of just Rs 0.3 billion as compared with a traded turnover of Rs 222.8

billion in Jan 2008. In the cash market segment also, the market share of the BSE fell

from 29.3% in Jan 2008 to 27.5% during Dec 2008. Investors are bound to trade in

markets that are more liquid and exit the illiquid markets during liquidity crisis, and the

investor behaviour in the derivative segment of BSE probably follows this reason.

Volatility of international stock market indices during 2007-08

The movement of stock indices to a certain extent depends on market sentiments — one

of the indicators of volatility, as increase and decrease in volatility is always a signal of

extent of fear within the sentiment. The volatility in stock markets is high when fear is

high. The volatility index generally starts rising during times of financial stress and

decreases as investors become complacent. The rise in volatility index also reflects the

panic demand for puts as a hedge against decline in stock portfolios; therefore, there is

40



less need for portfolio managers to buy puts during a bull run.

The stock markets across the world remained turbulent during the whole of 2008 and

closed the year with significant declines, and high volatility. During FY08, China

recorded high volatility as compared with other BRIC countries (See table below). The

volatility increased sharply in the second half of FY08 (Oct–Mar). In fact for almost all

the countries, volatility almost doubled during the second half of FY08 as compared

with the start of the year.

41



Brokers cautious about client funding

The dismal performance at the stock markets and the steep fall in trading volumes was a

result of liquidity issues, deleveraging of markets, and the credit crunch coupled with

the most severe bear market in recent history. Due to the current bearish phase, revenue

from related businesses in equity broking is also expected to have taken a huge hit. The

uncertain events and rise in uncovered debits have turned brokers extra cautious in terms

of lending without security.

According to the data on the NSE, the institutional clients accounted for a major chunk

of the amount funded during CY08. The amount funded through margin funding

accounts formed close to 20% of the total client funding. A margin trading agreement

allows the traders to borrow up to 50% of the total money required for a stock purchase

from the broker at a pre-agreed rate of interest (18-20%).

Client funding by brokers on the NSE, which comprises of temporary margin, margin

trading, and funding for institutional and non-institutional clients, declined since Jan 2008.

The total amount funded in Dec 2008 was Rs12,829.5 million, down by about 55% as

compared with the amount funded in Jan 2008. The phasing in of the bear market from Jan

2008 suggests that the declining trading activity, low market volumes, liquidity issues, and

credit crunch had caused a ripple effect and resulted in a decline in client funding.

42



STOCK BROKING SECTOR IN INDIA

The Indian broking industry is one of the oldest trading industries that have been around

even before the establishment of the BSE in 1875. Despite passing through a number of

changes in the post liberalization period, the industry has found its way towards

sustainable growth. In this section our purpose will be of gaining a deeper understanding

about the role of the Indian stock broking industry in the country’s economy.

‘Mean of stock exchange’

The Securities Contract (Regulation) Act, 1956 [SCRA] defines ‘Stock Exchange’ as

anybody of individuals, whether incorporated or not, constituted for the purpose of

assisting, regulating or controlling the business of buying, selling or dealing in securities.

Stock exchange could be a regional stock exchange whose area of operation/jurisdiction

is specified at the time of its recognition or national exchanges, which are permitted to

have nationwide trading since inception. NSE was incorporated as a national stock

exchange.

‘Mean of equity share’

Total equity capital of a company is divided into equal units of small denominations,

each called a share. The holders of such shares are members of the company and have

voting rights.

43



‘Debt Instrument’

Debt instrument represents a contract whereby one party lends money to another on pre-

determined terms with regards to rate and periodicity of interest, repayment of principal

amount by the borrower to the lender. In the Indian securities markets, the term ‘bond’ is

used for debt instruments issued by the Central and State governments and public sector

organizations and the term ‘debenture’ is used for instruments issued by private corporate

sector.

‘ Derivative’

Derivative is a product whose value is derived from the value of one or more basic

variables, called underlying. The underlying asset can be equity, index, foreign exchange

(forex), commodity or any other asset. Derivative products initially emerged as hedging

devices against fluctuations in commodity prices and commodity-linked derivatives

remained the sole form of such products for almost three hundred years. The financial

derivatives came into spotlight in post-1970 period due to growing instability in the

financial markets.

44



‘ Mutual Fund’

A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of

India) that pools money from individuals/corporate investors and invests the same in a

variety of different financial instruments or securities such as equity shares, Government

securities, Bonds, debentures etc. Mutual funds can thus be considered as financial

intermediaries in the investment business that collect funds from the public and invest on

behalf of the investors. Mutual funds issue units to the investors. The appreciation of the

portfolio or securities in which the mutual fund has invested the money leads to an

appreciation in the value of the units held by investors. The investment objectives

outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The

investment objectives specify the class of securities a Mutual Fund can invest in. Mutual

Funds invest in various asset classes like equity, bonds, debentures, commercial paper

and government securities. The schemes offered by mutual funds vary from fund to fund.

Some are pure equity schemes; others are a mix of equity and bonds. Investors are also

given the option of getting dividends, which are declared periodically by the mutual fund,

or to participate only in the capital appreciation of the scheme.

45



‘ Index’

An Index shows how a specified portfolio of share prices is moving in order to give an

indication of market trends. It is a basket of securities and the average price movement of

the basket of securities indicates the index movement, whether upwards or downwards.

‘ A Depository’

A depository is like a bank wherein the deposits are securities (viz. shares, debentures,

bonds, government securities, units etc.) in electronic form.

‘ Dematerialization’

Dematerialization is the process by which physical certificates of an investor are

converted to an equivalent number of securities in electronic form and credited to the

investor’s account with his Depository Participant (DP).

‘Securities’

The definition of ‘Securities’ as per the Securities Contracts Regulation Act (SCRA),

1956, includes instruments such as shares, bonds, scrips, stocks or other marketable

securities of similar nature in or of any incorporate company or body corporate,

government securities, derivatives of securities, units of collective investment scheme,

interest and rights in securities, security receipt or any other instruments so declared by

the Central Government.

46



‘Function of Securities Market’

Securities Markets is a place where buyers and sellers of securities can enter into

transactions to purchase and sell shares, bonds, debentures etc. Further, it performs an

important role of enabling corporate, entrepreneurs to raise resources for their companies

and business ventures through public issues. Transfer of resources from those having idle

resources (investors) to others who have a need for them (corporate) is most efficiently

achieved through the securities market. Stated formally, securities markets provide

channels for reallocation of savings to investments and entrepreneurship. Savings are

linked to investments by a variety of intermediaries, through a range of financial

products, called ‘Securities’.

‘Securities one can invest in’

● Shares

● Government Securities

● Derivative products

● Units of Mutual Funds etc.

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‘ Securities Market need Regulators’

The absence of conditions of perfect competition in the securities market makes the role

of the Regulator extremely important. The regulator ensures that the market participants

behave in a desired manner so that securities market continues to be a major source of

finance for corporate and government and the interest of investors are protected.

‘Regulates the Securities Market’

The responsibility for regulating the securities market is shared by Department of

Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of

India (RBI) and Securities and Exchange Board of India (SEBI).

‘ SEBI & role of SEBI’

The Securities and Exchange Board of India (SEBI) is the regulatory authority in India

established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for

establishment of Securities and Exchange Board of India (SEBI) with statutory powers

for (a) protecting the interests of investors in securities (b) promoting the development of

the securities market and (c ) regulating the securities market. Its regulatory juridiction

extends over corporates in the issuance of capital and transfer of securities, in addition to

all intermediaries and persons associated with securities market. SEBI has been obligated

to perform the aforesaid functions by such measures as it thinks fit. In particular, it has

powers for:

48



● Regulating the business in stock exchanges and any other securities markets

● Registering and regulating the working of stock brokers, sub–brokers etc.

● Promoting and regulating self-regulatory organizations

● Prohibiting fraudulent and unfair trade practice.

● Calling for information from, undertaking inspection, conducting inquiries and

audits of the stock exchanges, intermediaries, self- regulatory organizations,

mutual funds and other persons associated with the securities market.

49



Broking Houses In India

India is a country having a big list of Broking Houses. The Equity Broking Industry in

India has several unique features like it is more than a century old, dynamic, forward

looking, and good service providers, well conversant, highly innovative and even

adaptable. The regulations and reforms been laid down in the Equity Market has resulted

in rapid growth and development. Basically, the growth in the equity market is largely

due to the effective intermediaries.

The Broking Houses not only act as an intermediate link for the Equity Market but also

for the Commodity Market, Foreign Currency Exchange Market, and many more. The

Broking Houses has also made an impact on the Foreign Investors to invest in India to

certain extent.

In the last decade, the Indian brokerage industry has undergone a dramatic

transformation. From being made of close groups, the broking industry today is one of

the most transparent and compliance oriented businesses. Long settlement cycles and

large scale bad deliveries are a thing of the past with the advent of T+2 settlement cycle

and dematerialization. Large and fixed commissions have been replaced by wafer thin

margins, with competition driving down the brokerage fee, in some cases, to a few basis

points.

There have also been major changes in the way business is conducted. Technology has

emerged as the key driver of business and investment advice has become research based.

50



At the same time, adherence to regulation and compliance has vastly increased. The

scope of services have enhanced from being equity products to a wide range of financial

services. Investor protection has assumed significance,.

51



SOME BASICS OF STOCK AND CAPITAL MARKET

Investment

The money we earn is partly spent and the rest saved for meeting future expenses. Instead

of keeping the savings idle , may like to use savings in order to get return on it in the

future. This is called Investment.

Why should one invest?

● Earn return on your idle resources

●

Generate a specified sum of money for a specific goal in life

● Make a provision for an uncertain future

One of the important reasons why one needs to invest wisely is to meet the cost of

Inflation. Inflation is the rate at which the cost of living increases. The cost of living is

simply what it costs to buy the goods and services you need to live. Inflation causes

money to lose value because it will not buy the same amount of a good or a service in the

future as it does now or did in the past.

Takes these care for investing

● Obtain written documents explaining the investment.

● Read and understand such documents.

● Verify the legitimacy of the investment.

● Find out the costs and benefits associated with the investment.

● Assess the risk-return profile of the investment.

52



● Know the liquidity and safety aspects of the investment.

● Ascertain if it is appropriate for your specific goals.

● Compare these details with other investment opportunities available.

● Examine if it fits in with other investments you are considering.

● Deal only through an authorized intermediary.

● Seek all clarifications about the intermediary and the investment.

● Explore the options available .

‘Interest’

When we borrow money, we are expected to pay for using it – this is known as Interest.

Interest is an amount charged to the borrower for the privilege of using the lender’s

money. Interest is usually calculated as a percentage of the principal balance (the amount

of money borrowed). The percentage rate may be fixed for the life of the loan, or it may

be variable, depending on the terms of the loan.

53



Factors determine interest rates

When we talk of interest rates, there are different types of interest rates - rates that banks

offer to their depositors, rates that they lend to their borrowers, the rate at which the

Government borrows in the Bond/Government Securities market, rates offered to

investors in small savings schemes like NSC, PPF, rates at which companies issue fixed

deposits etc. The factors which govern these interest rates are mostly economy related

and are commonly referred to as macroeconomic factors.

Some of these factors are:

● Demand for money.

● Level of Government borrowings.

● Supply of money.

● Inflation rate.

● The Reserve Bank of India and the Government policies.

Various options available for investment

One may invest in:

Physical assets like real estate, gold/jewellery, commodities etc.

Financial assets such as fixed deposits with banks, small saving instruments with

post offices, insurance/provident/pension fund etc. securities market related or

instruments like shares, bonds, debentures etc.

54



Various Short-term financial options available for investment

Broadly speaking, savings bank account, money market/liquid funds and fixed deposits

with banks may be considered as short-term financial investment options:

Savings Bank Account is often the first banking product people use, which offers low

interest (4%-5% p.a.), making them only marginally better than fixed deposits.

Money Market or Liquid Funds are a specialized form of mutual funds that invest in

extremely short-term fixed income instruments and thereby provide easy liquidity. Unlike

most mutual funds, money market funds are primarily oriented towards protecting your

capital and then, aim to maximize returns

Fixed Deposits with Banks are also referred to as term deposits and minimum

investment period for bank FDs is 30 days. Fixed Deposits with banks are for investors

with low risk appetite, and may be considered for 6-12 months investment period as

normally

55



Various Long-term financial options available for investment

Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds

and Debentures, Mutual Funds etc.

Post Office Savings: Post Office Monthly Income Scheme is a low risk saving

instrument, which can be availed through any post office.

Public Provident Fund: A long term savings instrument with a maturity of 15 years and

interest payable at 8% per annum compounded annually. A PPF account can be opened

through a nationalized bank at anytime during the year and is open all through the year

for depositing money. Tax benefits can be availed for the amount invested and interest

accrued is tax-free. A withdrawal is permissible every year from the seventh financial

year of the date of opening of the account and the amount of withdrawal will be limited

to 50% of the balance at credit at the end of the 4th year immediately preceding the year

in which the amount is withdrawn or at the end of the preceding year whichever is lower

the amount of loan if any.

Company Fixed Deposits: These are short-term (six months) to medium-term (three to

five years) borrowings by companies at a fixed rate of interest which is payable monthly,

quarterly, semi10 annually or annually. They can also be cumulative fixed deposits where

the entire principal along with the interest is paid at the end of the loan period.

Bonds: It is a fixed income (debt) instrument issued for a period of more than one year

with the purpose of raising capital. The central or state government, corporations and

56



similar institutions sell bonds. A bond is generally a promise to repay the principal along

with a fixed rate of interest on a specified date, called the Maturity Date.

Mutual Funds: These are funds operated by an investment company which raises

money from the public and invests in a group of assets (shares, debentures etc.), in

accordance with a stated set of objectives. It is a substitute for those who are unable to

invest directly in equities or debt because of resource, time or knowledge constraints

57



STOCK EXCHANGE AND

TRADING

58



INTERNATIONAL STOCK EXCHANGE AND TRADING

International Online Trading Scenario

Here we will have a comprehensive look taking the international share-trading scenario

as a whole. We have considered those particular continents, nations; those usually have

major influence in the various economic aspects of India. So, the United States of

America, United Kingdom and the entire European Union, Australia, New Zealand and

African countries as a whole.

UNITED STATES OF AMERICA

Let us start with the United States. A brief set of information consisting of Stock

Exchanges functioning, online share broking firms, and the latest technology they are

offering for hassle free service for their customers etc.

The prominent online share broking firms are The Wall Street Journal, DxDollars, Power

Pointers Page, Xdrive, Saxo Bank etc. These firms are providing online as well as offline

facilities to their customers. The salient features the organizations are offering are as:

1. Online Broker List - This section contains a comprehensive list of brokers that

will allow you to trade online. Make sure to investigate them thoroughly before choosing

an online share-trading firm.

59

http://www.investorguide.com/brokerlist.html

http://www.investorguide.com/brokerlist.html



2. Broker Ranking Resources - We have their own broker performance data and

rankings, if you're looking for info on a single specific broker, or just want another

opinion.

3. After Hours Resources- In this section to get information about how and where

to trade stocks after the markets have closed for the day.

4. After Hours Online Trading - This listing contain sites that will allow you to

trade stocks after hours.

5. Exchanges - This section contains a listing of stock exchanges throughout the US

and around the world. The sites can often be used to investigate stocks that are traded on

a given exchange. This can be especially useful for international stocks that may be

difficult to research due to a lack of readily available information.

6. International Online Trading - Thanks to the Internet, it has become much

simpler to analyze and participate in international investment opportunities. Once you

have thoroughly researched global opportunities, use the sites in this section to trade

stocks around the world.

7. ECNs - Electronic Communications Networks (ECNs) represent orders in Nasdaq

stocks, internally matching buy and sell orders or representing the highest bid prices and

lowest ask prices on the open market. The benefits of trading with an ECN include after

hours trading, avoiding market makers (which charge a spread), and anonymity (which is

often important for large trades). This section contains a listing of ECNs that are

available for your trading needs.

8. Scripophily - This section contain links to sites that specialize in old stock

certificates and collectibles.

60

http://www.investorguide.com/brokerrankingsres.html

http://www.investorguide.com/afterhours.html

http://www.investorguide.com/exchanges.html

http://www.investorguide.com/internationaltrading.html

http://www.investorguide.com/ecns.html

http://www.investorguide.com/scripophily.html

http://www.investorguide.com/brokerrankingsres.html

http://www.investorguide.com/afterhours.html

http://www.investorguide.com/exchanges.html

http://www.investorguide.com/internationaltrading.html

http://www.investorguide.com/ecns.html

http://www.investorguide.com/scripophily.html



9. Traders World - Offers articles, software, and newsletters on the financial

markets for subscribers.

10. Domestic Securities ATTAIN System - An order display alternative to the

traditional market making price quote system on the Nasdaq. The ATTAIN ECN allows

its subscribers immediate and direct posting of orders to the ATTN book.

11. Day Trader - Brings insight, ideas, trading techniques, and innovative thinking to

investors looking to trade the financial markets. This is all shown to you via the actual

trading journals, diaries, or so-called "trade blotters" of an experienced Day Trader.

12. Day Traders Online - Fee-based site offering a morning stock market report,

access to their real-time trading room, and access to their news desk. free trial is

available.

13. Daytradingstocks.com - A virtual community for day traders that offers

message boards, book reviews, and brokerage reviews. Free registration is required for

some of the site's features.

AFRICAN SCENARIO

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http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.tradersworld.com

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.dom-sec.com/

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.daytraders.com

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.elitetrader.com

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.tradersworld.com

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.dom-sec.com/

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.daytraders.com

http://www.investorguide.com/cgi-bin/browse2.cgi?back=http://www.investorguide.com/daytrading.html&site=http://www.elitetrader.com



Strategic Alliances and Mergers of Financial Exchanges: The Case of

the SADCs

Over the last year or so, there has been increased speculation in Europe and elsewhere as

to the benefits or otherwise of merging a number of national and international financial

exchanges. Several countries in the SADC region have a financial exchange. However

the vast majority of these exchanges have a small number of listed securities, low

capitalization and low liquidity. The design, size, scope, institutional and regulatory

framework of a financial exchange determines its relative costs and benefits. Seen in this

light, without the appropriate scale, liquidity, social and technological infrastructure, it is

unlikely that a financial exchange will be able to efficiently meet its strategic objectives.

This research suggests that there is a strong economic case for establishing an SADC

financial exchange and the most efficient and least costly way of accomplishing this is for

the national exchanges in the SADC region to merge with the Johannesburg Securities

Exchange (JSE).

Introduction and Background

The presence of bid –ask spreads, serial correlation patterns in security and index returns

and unresolved issues regarding the returns of small firms seems to suggest that securities

markets prices are not set via Walrasian auction and that trading does not take place at

equilibrium prices. In the main, prior to the development of market microstructure

analysis, financial economists assumed a frictionless trading process. The field of market

microstructure attempts to examine issues or friction in markets which might influence

the outcomes of those markets. As electronic trading has grown, the debate has centered

on number of broad questions . These include inter alia questions such as; are auction

62



markets cheaper than dealer markets? Is screen based trading cheaper and more efficient

than an open cry system? Is the cost of trading on certain exchanges influenced by the

size of the company? Does the cost of trading influence the liquidity of the stock and vice

versa? And as a corollary, to what extent does the design of financial exchanges influence

liquidity and other variables?

A survey by economist Madhavan indicates most of the answers to the above questions

have been based on studies in the United States. However this is an issue which other

regions of the world need to examine carefully. In Europe, there has been some debate as

to the most appropriate design of exchanges for the trading of equities. This has been

compounded by the increase in online share trading and the perception that the trend is

likely to increase. Although very few mergers have actually taken place relative to the

amount of time and effort that has been put into the discussions, the large exchanges in

Europe are still planning to merge their trading, clearing and settlement platforms. An

estimate from the European Securities Forum indicates that the costs of cross border

trading in the European Union are ten times higher than the costs in the United States.

Settlement and clearing is a significant component of the total cost in dealing in equities.

INDIAN SCENARIO

63



HURDLES FOR ONLINE SHARE TRADING

1. Internet fraud

In India, we see this kind of frauds happening in different way due to nature of our

society. Here when we talk to broker's staff while buying or selling, we will usually

advise to buy share which he has bought and plans to dump when price goes up.

We have seen enough of PUMP and DUMP even without help of internet in cases of

Harshad Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult

following with Index of 10 shares called K-10).

Today lot of investor’s depending on TV channel for recommendation about stocks to

sell, or buy or hold. Channels like CNBS offer array of experts from economist to brokers

to analyst. Most of these people have vested interest in stocks they recommend and

promote.

One of the most common forms of securities fraud on the Internet involves an imposter

who attempts to manipulate the price of a stock by disseminating phony press releases or

information, or creating phony websites. A recent example of this scheme is the hoax

perpetrated against US based, PairGain Technologies.

2. Volatility of India’s Stock Markets

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Recent market developments have once more focused attention on the volatility that has

come to characterise India’s stock markets.

Movements in the Sensex during the two years have clearly been driven by the behaviour

of foreign institutional investors (FIIs), who were responsible for net equity purchases of

as much

as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare with a

peak level of net purchases of $3.1 billion as far back as 1996 and net investments by FIIs

of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last

two years account for the two bouts of medium-term buoyancy that the Sensex recently

displayed.

Given the presence of foreign institutional investors in Sensex companies and their active

trading behaviour, their role in determining share price movements must be considerable.

Indian stock markets are known to be narrow and shallow in the sense that there are few

companies whose shares are actively traded. Thus, although there are more than 4700

companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies,

trading in whose shares is seen as indicative of market activity. This shallowness would

also mean that the effects of FII activity would be exaggerated by the influence their

behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs

when making their investment decisions.

3. Rampant Speculation

65



The Indian stock markets are perhaps the only place in the world where you can buy

shares without having to put money on the table and sell shares you do not own. This

extraordinary situation has facilitated rampant speculation by all sorts of operators – the

indigenous variety, FIIs and even our own native financial institutions (FIs) as the

massive UTI scandal of recent years has demonstrated. So, when the stock markets were

made to collapse by a record 800-plus points on May 17 under the pretext that the Left is

opposed to divestment, the profits reaped by short sellers were astronomical and

incalculable.

`Could this situation have been avoided? As aforesaid, the answer is yes. The electronic

monitoring system in both the Bombay Stock Exchange and the bigger National Stock

Exchange automatically stopped trading for half-an-hour when the two markets

respectively collapsed by 10 percentage points. Thereafter when trading resumed and the

markets fell further to another stipulated lower level, the electronic system automatically

stopped all trading again for another two hours.

A similar situation had occurred on Tuesday, September 11, 2001, the day of the terrorist

attacks in New York City. At the end of the day the stock exchange authorities of both

the New York Stock Exchange and the heavily-weighted software exchange called

NASDAQ suspended all trading for the remainder three working days during that fateful

week to safeguard investor interests. So, advanced capitalism does know how to

intervene "politically" in the markets when fundamental interests are in danger of

violation by short sellers.

66



PRODUCT PROFILE

67



PRODUCTS PROFILE

EQUITIES

Trading in Equities with Religare truly empowers our investment needs. A highly

process driven, diligent approach backed by powerful Research & Analytics and one of

the “best in class” dealing rooms ensures that we have a superlative experience.

Further, Religare also has one of the largest retail networks, with its presence in more

than 900 locations across more than 320 towns & cities. This means, we can walk into

any of these branches and connect to our highly skilled and dedicated relationship

managers to get the best services. We could also choose to enjoy the freedom to execute

own trades through our online mechanism.

COMMODITIES

Religare Commodities Limited (RCL) was initiated to spearhead Exchange based

Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL is a trade

facilitator providing the platform to trade in commodities. Grounded in the Religare

philosophy, highly skilled and dedicated professionals strive to offer the clients "best-fit"

investment solutions in the country.

- 68 -



The Operating Fabric-Commodities Business

In terms of the business structure, RCL caters to retail clients; it has a structured

arbitrage desk which focuses on spot futures arbitrage, RCL is also present in close to 40

Mandi locations across the country and also caters to the Corporate / Institutional

business through one of the “best in class” Corporate Desks.

Company’s business philosophy is to treat each client situation as unique, requiring

customized solutions. Company list of corporate clients reads like a Who’s one of the

Indian Industry and company has been successful in providing customer with practical

customized solutions for customer requirements. Company is propelled by group vision

and desire to strive tirelessly and aim to be the best within this category.

- 69 -



Online Investment Portal

Investing online will never be the same again with companies 360 degree portal

www.religareonline.com Now customer can not just invest online in Equities, IPOs,

Mutual Funds, Commodities and much more but, also get trade rewards each time

investment.

Besides this, Company also offers customer a host of other revolutionary features such as

Zero Percent Brokerage; Interest on cash margin, exposure upto 20 times cash margin

etc... depends upon the select product schemes available through customer highly

sophisticated and customized platform R-ACE (Religare Advanced Client Engine).

So get empowered, enrich customer experience of investing online and open to a whole

new world of possibilities.

- 70 -

http://www.religare.in/retail/internet_trading.asp

http://www.religareonline.com/


http://www.religare.in/retail/internet_trading.asp




Personal Financial Services

India Infoline has recently entered into personal financial advisory services. It caters to

the financial needs of individuals by advising on various financial plans. India infoline

Personal financial advisors, also called financial planners or financial consultants, use

their knowledge of investments, tax laws, and insurance to recommend financial options

to individuals in accordance with the individual’s short-term and long-term goals. Some

of the issues that planners address are general investments, retirement and tax planning.

- 71 -

http://www.religare.in/retail/personal_finance.asp

http://www.religare.in/retail/personal_finance.asp



PROCESS

- 72 -



RESEARCHMETHODOLOGY

- 73 -





Sampling Design.

A sample design is a finite plan for obtaining a sample from a given population.

Simple random sampling is used for this study.

- The number of group & subgroup should be analyzed

- The sample size should be neither too large nor too small

Universe.

The universe chooses for the research study is the employees of India Info line

Ltd.

Sample Size.

Number of the sampling units selected from the population is called the size of the

sample. Sample of 50 respondents were obtained from the population.

- Sample should be acceptable error.

- It should be cost effective.

Sampling Procedure.

The procedure adopted in the present study is probability sampling, which is also known

as chance sampling. Under this sampling design, every item of the frame has an equal

chance of inclusion in the sample.

There are many steps of sampling procedure.

1. Define the universe.

2. Make a sample frame.

3. Specifying the sampling unit.

- 75 -



4. Selection of sample design.

5. Determination of sample size.

6. Select the sample.

Methods of Data Collection.

The data’s were collected through Primary and secondary sources.

Primary Data

Primary data are in the form of “raw material” to which statistical methods are

applied for the purpose of analysis and interpretations.

The primary sources are discussion with employees, data’s collected through

questionnaire.

Primary data recorded by the researcher for the first time to their knowledge

Methods Of Primary Data Collection.

1. Observation Method

2. Interview Method

3. Questionnaire

4. Schedule Method

- 76 -



Secondary Data

Secondary data’s are in the form of finished products as they have already been

treated statistically in some form or other.

The secondary data mainly consists of data and information collected from

records, company websites and also discussion with the management of the organization.

Secondary data was also collected from journals, magazines and books.

Methods Of Secondary Data Collection

1 . Books

2 . Internet

3 . Journals

4 . Research Association

Nature of Research.

Descriptive research, also known as statistical research, describes data and

characteristics about the population or phenomenon being studied. Descriptive research

answers the questions who, what, where, when and how.

Although the data description is factual, accurate and systematic, the research

cannot describe what caused a situation. Thus, descriptive research cannot be used to

create a causal relationship, where one variable affects another. In other words,

descriptive research can be said to have a low requirement for internal validity.

- 77 -



Questionnaire A well defined questionnaire that is used effectively can gather

information on both overall performance of the test system as well as information on

specific components of the system. A defeated questionnaire was carefully prepared and

specially numbered. The questions were arranged in proper order, in accordance with the

relevance.

Nature of Questions Asked.

The questions are following types.

1. Open ended Questions

2. Dichotomous,

3. Rating and Ranking Questions.

4. Multiple Choice Question

Sample

A finite subset of population, selected from it with the objective of investigating

its properties called a sample. A sample is a representative part of the population. A

sample of 50 respondents in total has been randomly selected. The response to various

elements under each questions were totaled for the purpose of various statistical testing.

- 78 -



Variables of the Study.

The direct variable of the study is the employee motivation & Indirect variables are the

incentives, interpersonal relations, career development opportunities and performance

appraisal system.

Presentation of Data

The data are presented through charts and tables.

- Data should be under the limit

- Data presentation should be clear in charts

- We can use Bar Chart, Bar Diagram Table etc

Tools and Techniques for Analysis

Correlation is used to test the hypothesis and draw inferences.There are some

requirement for data analysis.

1.Editng ,

2. Coding ,

3. Tabulation

So,These are the technical term for analyzing the data.

- 79 -



DATA ANALYSIS

- 80 -



DATA ANALYSIS

1.Are you offering these products \ services to your existing customer?

Services

M u t u a l

I n s ur a n c e

P M S

B a c k of f i c e

E -Br ok i n g

I n v e s t m e n t

M- C onn e c t

F un d i n g

P e r s on a l

S of t w a r e

E - C h o u p a p a

Religare

Securities

Yes Yes Yes Yes Yes Yes Yes No Yes Yes Yes

ICICI Direct No Yes Yes Yes Yes Yes No Yes Yes Yes No

India Infoline

Security Pvt.

Ltd.

Yes No Yes Yes Yes Yes No No Yes Yes No

HDFC

Securities

Yes No Yes Yes Yes Yes No Yes Yes Yes No

Indiabulls Yes Yes No Yes Yes Yes No No Yes Yes No

Reliance

Money

Yes Ye No Ye Ye Yes No No Yes Yes No

Sharekhan

Securities

No No Yes Yes Yes Yes No No Yes Yes No

- 81 -



Motilal Oswal No Yes No Yes Yes Yes No No Yes Yes No

Anand Rathi

Securities

No Yes Yes Yes Yes Yes No No No Yes No

Hem Securities Yes Yes Yes Yes Yes Yes No No No Yes No

2.How many clients are you having active?

- 82 -



Showing the activeness of client

20%

80%

Active Client

Non active cli

In ,India Infoline Ltd 80% client are active . who do the online trading regular bases. But,

20% client are not and they do not active for the trading.

- 83 -



3. How many sub Broker is your company having?

Showing The Presence of Sub Broker

10%

90%

Sub Broker

Non Sub Bro

In, India Info line Ltd 10% brokers are sub –broker and 90% are not Sub Broker.

- 84 -



4.What is the Brokerage on intraday of different companies?

-India infoline Ltd,Motilal Oswal Securities, Kotak Securities, India Bulls, Anand

Securities charges Rs.3 brokerage on Intraday.

- Angel Broking Ltd, Religare Securities charges Rs.2 brokerage on Intraday.

- ICICI Direct charge Rs.7.5 brokerage on Intraday

-Sharekhan Securities charges Rs.5 brokerage on Intraday

- Hem Securities charges Rs.1.5 brokerage on Intraday

- 85 -



5.What is the Charges the opening of DEMAT Account of different

companies?

Account opening Charges

560

900

999

750

350

460

865

700

0

200

400

600

800

1000

1200

Angel

Broking

Ltd.

Indiabulls

Securities

Religare

Securities

ICICI

Direct

Sharekhan

Securities

Anand

Rahti

Securtites

India

Infoline

Hem

Securities

Comapny Name

Value in Rs.

-Angel Broking charges Rs.560, India bulls Securities charges Rs.900, Religare

Securities charges Rs.999, ICICI Direct charges Rs.750, Sharekhan Securities charges

Rs.350, Anand Rathi Securities charges Rs.460, India Infoline Ltd charges Rs.865,

Hem Securities charges Rs.700. for opening the DMAT Account.

- 86 -



6.What is the Market share of different companies?

Market Share Of Companies

26%

19%

16%

28%

11%

Angel Broking

LtdReligare

Indiabulls

- Angel Broking Ltd have the 26% Market Share of total

-Religare have the 19% Share of total Market Share

-India info line have the 11% Share

-Indiabulls have the 16% Share

-28% have the others

- 87 -



7. Are you organizing any event or survey for customer awareness ?

Customer Awareness

0

10

20

30

40

50

60

70

80

90

Aware Not Aware

Awareness of eo le

V a l u e

Yes, Company regularly contact the customers ,that customer properly aware to the

company scheme and company also contact to the new client knowning the detail

through survey.In this, I take the sample size 50.

- 88 -



8. Any special service which you provide makes different your company

in market.

Customer Awareness of extra Services

0

10

20

30

40

50

60

Not Aware to the

Service

Slightly Aware to the

Service

Full Aware to the

Service

Customer Awareness

V a l u e ( % )

Yes , These are as followed :-

- Some special and confidential scheme which access only through company data.

- Some company kit , which have some prizes .

- Some time company provide offer related to the Intraday Brokerage etc.

- 89 -



FINDINGS

- 90 -



FINDINGS

• India infoline is the second in charging lowest brokerage.

• Reliance Money is having 32% market share in Meerut (Market Leader)

because of lowest brokerage whereas Angel Broking is performing best on

country level.

• Company is having 75 Sub-brokership in Meerut which provides a major part

of revenue.

• Despite three branches India infoline has 10000 clients whereas Hem

Securities has 70 branches and only 12000 clients.

• India info line is providing free of cost softwares for online clients.

• Company is providing M-connect software whereas other companies are not

having this service.

• India info line has the highest market coverage with respect to channel sales.

This is because Angel has the highest number of sub-brokers. There are 140

sub-brokers in Meerut.

- 91 -



RECOMMENDATION

- 92 -



RECOMMENDATIONS

• India infoline has to decrease it’s margin money up to Rs. 3000 it attracts more

new clients and for sub-brokership company should decrease its security up to Rs.

50,000.

• There should be two more branches of India Info Line Limited in Meerut as well

as in Rajasthan so that clients will get its services easily.

• There should be more public awareness programmed and advertisement related to

company’s product and services so that people should be more aware about India

info line.

• Company should organise customer happiness survey for both active and inactive

clients .

• Company has to more aggressive toward its existing client’s feedback and for

their services after giving them products because it can increase company loyalty

as well its brand name.

• Company should provide demo version of software and its training for each

clients.

- 93 -



SUGGESTION

- 94 -



SUGGESTIONS

● Commitment should be equalized for every person.

● Provide the facility of free demonstrations for all.

● Improvement in the opening of De-mat & contract notice procedure is required.

● Company should have a limited number of clients under the relationship manger.

So that they can handle new as well as old customer properly.

● Some promotional activities are required for the awareness of the customer.

● People at young age should be encouraged to invest in stock market.

● Seminars should be more held for providing information to prospective and

present customers.

● In the organization, Company must me be in co-operation with other department

and other branches .

● Company should make more promotional activities by giving advertisements and

publicity.

● Give more demonstration to customers so that they can get complete knowledge

about online trading.

● Give the complete information about products and services offered by the

company to the customers.

● The number of branches it has at present should be increased all over the country,

which will attract a large number of customers.

- 95 -



RESULT

- 96 -



RESULT

- According to the first problem many of the companies as – India Info Line, Reliance

Securities, ICICI provides many of facilities as-Banking, Software, Loan Advisory,

funds etc.

- According to the second problem 80% are active and 20% are inactive client.

- According to the third 10% are company sub-Broker.

- There are different- different companies , which provides different - different Intra

day Brokerage as- 5, 7.5, 2.

- In this company different- different amount for opening the DMAT Account.

- In this all companies have different market share as- India Info Line-11%.

- In this we analyse that 20% customer are aware to the extra services .

This is the result after analyzing the data.

- 97 -



CONCLUSION

- 98 -



CONCLUSION

On the basis of the study it is found that India infoline is better services provider than the

other stockbrokers because of their timely research and personalized advice on what

stocks to buy and sell. India infoline provides the facility of Trade tiger as well as

relationship manager facility for encouragement and protects the interest of the investors.

Company also provides the information through the internet and mobile alerts that what

IPO’s are coming in the market and it also provides its research on the future prospect of

the IPO.

Study also concludes that people are not much aware of commodity market and while it’s

going to be biggest market in India. From the above survey and observation it is found

that most of the people who are trading in share market belongs to the employee group,

next comes the business men and other class of income people. As the share market value

goes on increasing day by day the investor who wants to invest in shares also increasing.

But investing in shares is as risky as earning yield.

- 99 -



Trading in online trading firm is easy as it all delivered with internet and within a few

minutes the customer can buy and sell shares which save time as well as reduction of

paper work. Hence trading in share market is increasing day by day and investors are

ready to invest their investment in share market only.

I got the knowledge about the customer’s needs and their references for having a

particular product. The need of customers differs from person to person, area, locality and

occupation. Customer always wants more service by paying less.

Company expect all the information such less rates, less brokerages, highly returns and

better service level without delay.

- 100 -



BIBLIOGRAPHY

- 101 -



BIBLIOGRAPHY

Websites

●

www.usectrade.com

● www.angeltrade.com

● www.indianshareshistory.com

● www.bseindia.com

● www.nseindia.com

● www. India infoline.com

News Papers

● Times of India

● Business Standard

● Market Express

● Business Standard

Books

● Kothari C. R –Research Methodology ( New Age International( P) , II

Edition,2004)

● Brochures and Pamphlets of India infoline

● Pandey I M – Financial Management ( Vikas, IX Edition 2004)

- 102 -

http://www.nseindia.com/

http://www.nseindia.com/



● Prasanna Chandra- Fundamentals of Financial Management (TMH, 2004)

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