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Saddam, hussan project

  2. 2. CERTIFICATEThis is Certify that Mr. Saddam has gone through compulsory Research report as a part ofBBA course programmed. He has worked on project titled “Comparative Analysis ofStock Market”Date: (DIRECTOR/ACEDMIC COORDINATOR) 2
  3. 3. TABLE OF CONTENT Declaration Preface Acknowledgement1. Abstract2. Company profile3. Introduction to the Study & Review of Literature4. Objective of study5. Research methodology Research problem & hypothesis Research variables Research design Research venue 6. Data analysis and interpretations 7. Findings & result 8. Limitations of study 9. Conclusion 10. Suggestions/recommdation 11. References & bibliography 12. Annexure 3
  4. 4. DECLARATIONI Saddam hussan a student of BBA IIIrd Year, “Veer kunwar Degree college Bijnor”hereby solemnly declare that the project Report titled “COMPARATIVE ANALYSIS OFSTOCK MARKET” . is the outcome of my own project prepared by me and the same hasnot been submitted to any university or institute for the award of any degree or diploma.Date: Saddam HussanPlace: Bijnor Roll No. 4
  5. 5. PREFACEAs a Part of BBA Program, Student has to pursue a project duly approved by the Facultyof Concerned area. I had the privilege of undertaking the project on “Investment in ShareMarket” in India Info line Limited. Main aim of the Project is to study How to, When andwhere we can invest our money to gain more profit. My finding was that the extensive reforms introduced over the last few yearshave enhanced the integrity, transparency and efficiency of the operations in the securitiesmarket. There have been appreciable improvements in trading and settlement of securitiesin secondary market, and the market has become a safer place as revealed by the interest 5
  6. 6. ABSTRACTOff to work so as to bring this organization among the top. to be dynamic in this industry.The Present business scenario is totally consumer oriented. Every company faces stiffcompetition from its competitors, each provides the best product at competitive rates. Asa result customers have lot of choices to get the best with the least cost. To face thiscompetition, it is very important to know customer‟s behavior, their needs, preference andalso the motivation factors.India Infoline Securities Limited Provide its Expert service in share market Operations toinstitutional Investors. Company is a Member of National Stock Exchange as well asBombay Stock Exchange. India Infoline is slowly but steadily gaining market share andgoodwill in the Market. Its strategies for marketing its services as well as developing agood Relationship with its client has given an edge over the other service providers. IndiaInfoline is on expansion path and is looking forward to be in the top. India Infoline is avery flexible organization and it gives equal opportunity to its young and energetic stecomparative analysis done in this project show how India Infoline has built competitiveedge on some groundThe Project help you understand the strategies of this industry right from De-Mat toTrading, Margin to analysis and risk to return. I hope this project prove to be beneficialfor the Company and also give the idea about the industry.I learnt a lot through out theprocess of undertaking this project report.To fulfill my task I had to visit the client personally who are dealing in share trading withthis company or some other broking house.For this project I was assign the target of 10 accounts, for which I first generated thedatabase and made appointment with them and convert them in as traders of India 6
  7. 7. Infoline Securities Limited, for this I have to convince them and explain the concept andcollect the Trading Form and a cheque of Rs. 10000 only.After going through the exercise I found that IFL is one of the upcoming companies in theShare Market, as the credibility of other companies are going down in the market and it isthe right time for the IFL to built its reputation in the market. The Main reason for IFLlow market share is because of local brokers in the market which a charging very lessMargin as initial investment for Trading in Stock Market.But No doubt it is having lots of scope to grow in the financial Market, and I wish it ishaving a shining future in the coming years. 7
  9. 9. COMPANY PROFILE “India Info line Securities Pvt. Ltd.”Knowledge is power and power brings security. Risk is a very relative term and changeswith every individual and situation. Financial management is not just about managing riskbut also managing knowledge and finally deriving answers that generate wealth, securityand trust.”VISIONVision is to be the most respected company in the financial services space.To be thepremier provider of investment advisory and financial planning services in India. PUNCH LINE: “IT’S ALL ABOUT MONEY, HONEY!” 9
  10. 10. HISTORY IN BRIEFIndia Info line originally incorporated on October 18, 1995 as PROBITYRESEARCH AND SERVICES PVT LTD. at Mumbai under theCompanies Act, 1956 with Registration No.1193797, became a publiclimited company on April 28, 2000.The name of the Company was changed to India Limited on May 23,2000 and later to India Info line Limited on March 23, 2001.The objective was to provide unbiased and independent information to marketintermediaries and investors.The quality of research was so good that soon it caught the imagination of allmajor participants in the financial marketing.In a very short period they started providing research report to consulting firmslike Mckinsey, companies like HUL, banks like Citibank etc.In 1999, thecompany made all the research report free on the web and as a result the numberof user increases from mere a thousand to lacks in a very short period of time.The company got the financial support from venture capitalists and private equityinvestors. They raised US $ 1 million in first round and in March 2000 again US$5 Million.In 2001, the company faced the worst situation. The dot com suffix,which was sexiest to them suddenly, became the worst stigma. 10
  11. 11. The company was planning to set up a TV channel but circumstances forced themto jettison the plan. IIL decided to narrow its focus on businesses where it couldleverage its core competencies to the maximum. The key business lines thatemerged were mutual funds, life insurance and E-broking.The company became heavily dependent on its e-broking businesses for survival.The odds were against them. There was no money available from the privateequity investor at any valuation. All competitors were backed by institution or hadabundant capital.The core promoters of the company had little experience of broking. To add to it,the market was hit by a scam. They also had their share of price to pay and lessonsto learn. It was difficult to retain people. Although devastating for morale but notsurprising, the most market observers had written them off.There was a core groupwho never lost hope. They cut all possible costs and worked on a bare bonesstructure. They survived against all odds started capturing market share. Notbroking alone but mutual fund life insurance business also grew strongly.The company rose from strength to become the leading corporate agent in lifeinsurance and among top retail players in mutual fund and broking space. It is thefirst Company in India to foray into the online distribution of Mutual Funds.It is aone-stop financial services shop, most respected for qualityof its advice,personalized service and cutting-edge technology.The No.1Corporate agent for ICICI Prudential Life Insurance Company,Research acknowledged by Forbes as 11
  12. 12. “Must Read for investor in South Asia.”Listed on Bombay and National Stock Exchange with a net worthof INR 200 Crore and a market cap of over INR 1970 Crore.In 2005, IIL came with an IPO and raised Rs. 75 Crores from the market. Theissue price was Rs. 76.The IPO was 7.22 times oversubscribed.The company after that never looked back and started entire gamut of investmentsproducts from risk free RBI bonds to high-risk, high rewards equities and alsomutual funds and life insurance. They also forayed into portfolio managementservices and commodities broking, again leveraging upon their core competenciesin research and technology. In the last ten years, India Info line has facednumerous ups and downs, but has never compromised on integrity.They continue to ensure highest standards of corporate governance. 12
  13. 13. BUSINESS DESCRIPTIONThe India Info line group, comprising the holding company, India Info line Limited andits wholly-owned subsidiaries, straddle the entire financial services space with offeringsranging from Equity research, Equities and derivatives trading, Commodities trading,Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits, Gold,Bonds and other small savings instruments to loan products and Investment banking.India Info line also owns and manages the websites The company has a network of 976 business locations .BRANCHES AND SUB-BROKERS Spread across 365 cities and towns. It has more than 800,000 customers. It is registered with NSDL as well as CDSL as a depository participant. 13
  14. 14. 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 WealthManagement Services are:Advisor Executive directorMr. Nirmal Jain Mr.R Venkataraman 14
  15. 15. PRODUCT OFFERINGSProviding in house research based advice on selected stocksAdvise on portfolio management servicesProducts that offer our clients unique risk -reward equation that arecustomized their investment objectivesResearch based recommendation on top picks in mutual fundLife & General insurance advisoryAdvise on investment in art through fund structure 15
  16. 16. Bullion buying and sellingAdvising and facilitating financing select IPO based on our in- hoursresearchProvide overdraft facility against collateral of shares/ MF unitsProvide term loan facility against collateral of shares/ MF units 16
  17. 17. Background of India Infoline LtdIndia Infoline Securities Limited, axy Promoter Group Company, was founded by late Dr.Parvinder Singh (CMD Ranbaxy Laboratories Limited), with the vision of providingintegrated financial care driven by the relationship of trust & confidence. To realize itsvision the India Infoline group provides various financial services which include broking(stocks & commodities), depository participant services, portfolio management services,advisory on mutual fund investments and many more. Working on the philosophy ofbeing “Financial Care Partner”, India Infoline unlike other traditional broking firms notonly executes the trades for the clients but also provides them critical and timelyinvestment advice. The growing list of financial institutions with which India Infoline isempanelled as an approved broker is a reflection of the high levels of service standardmaintained by the company. India Infoline is a truly professional financial serviceprovider managed by a team of highly skilled professionals who have proven track recordin their respective domains. India Infoline has the widest reach through its Regional,Zonal and Branch Offices spread across the length & breadth of the country.Now days India Infoline is driven by ethical and dynamic process for wealth creation.Based on this, the company started its endeavor in the financial market. - An ISO 9001 : 2000 company - Member of National Stock Exchange (NSE) since November 1994, first deposit based - Member of BSE. 17
  18. 18. Depository Participant with - National Securities Depository Limited (NSDL) since July 2000 - - Central Depository Services (India) Limited (CDS) since February 2003 - SEBI Approved Portfolio Manager - Working on the Philosophy of being “Financial Care Partner” In a span of less than five years of its retail operations, FSL recorded a healthy growth rate both in business volumes and profitability. • India Infoline is among the very few stock market intermediaries to having very sound based capital and healthy net worth.. • India Infoline aims to have its footprint all across the country by the end of year so that it may add value to the investing community in the country.India Infoline Limited (A Ranbaxy Promoter Group Company) through India InfolineLimited, Religare Finevest Limited, India Infoline Commodities Limited and IndiaInfoline Services Limited provides integrated financial solutions to its corporate, retailand wealth management clients. Today, we provide various financial services whichinclude Investment Banking, Corporate Finance, Portfolio Management Services, Equity& Commodity Broking, Insurance and Mutual Funds. Plus, there‟s a lot more to comeyour way. 18
  19. 19. PRESENCEIndia Infoline is present in more than 150 branches all over India and the target is tocross 350 branches very soon. Our branches are fully equipped with high bandwidthinternet lines and high end computers i.e. the latest IT tools. There are efficient branchmanagers and dealers to give you tips of highest quality and accuracy with support fromour analysts. Our branches would make you feel like doing business in Dalal Streethowever, in a more sophisticated manner. You get to work with more traders and learnmore and also trade more. 19
  20. 20. INFRASTRUCTUREOfficesThe company has offices located at prime locations in Mumbai, New Delhi, Kolkatta andChennai. The offices are centrally located to cater to the requirements of institutional andcorporate clients and retails clients, and for ease of operations due to proximity to stockexchanges and banks. Today, we have a growing network of 150 branches and more than300 business partners spread across 180 cities in India and a fully operationalinternational office at London. However, our target is to have 350 branches and 1000business partners in 300 cities of India and more than 7 International offices by the end of2006. 20
  22. 22. ORIGIN AND DEVELOPMENT OF THE INDUSTRYThe Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces itshistory to the 1850s, when stockbrokers would gather under banyan trees in front ofMumbai‟s Town Hall. The location of these meetings changed many times, as the numberof brokers constantly increased. The group eventually moved to Dalal Street in 1874 andin 1875 became an official organization known as „The Native Share & Stock BrokersAssociation‟. In 1956, the BSE became the first stock exchange to be recognized by theIndian Government under the Securities Contracts Regulation Act. The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE ameans to measure overall performance of the exchange. In 2000 the BSE used this indexto open its derivatives market, trading Sensex futures contracts. The development ofSensex options along with equity derivatives followed in 2001 and 2002, expanding theBSE‟s trading platform.Historically an open-cry floor trading exchange, the Bombay Stock Exchange switchedto an electronic trading system in 1995. It took the exchange only fifty days to make thistransition. Capital market reforms in India and the launch of the Securities and ExchangeBoard of India (SEBI) accelerated the integration of the second Indian stock exchangecalled the National Stock Exchange (NSE) in 1992. After a few years of operations, theNSE has become the largest stock exchange in India.Three segments of the NSE trading platform were established one after another. TheWholesale Debt Market (WDM) commenced operations in June 1994 and the CapitalMarket (CM) segment was opened at the end of 1994. Finally, the Futures and Optionssegment began operating in 2000. Today the NSE takes the 14th position in the top 40futures exchanges in the world. 22
  23. 23. In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNXJunior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversifiedindex of 50 stocks from 25 different economy sectors. The Indices are owned andmanaged by India Index Services and Products Ltd (IISL) that has a consulting andlicensing agreement with Standard & Poor‟s.In 1998, the National Stock Exchange of India launched its web-site and was the firstexchange in India that started trading stock on the Internet in 2000. The NSE has alsoproved its leadership in the Indian financial market by gaining many awards such as „BestIT Usage Award‟ by Computer Society in India (in 1996 and 1997) and CHIP WebAward by CHIP magazine (1999).The National Stock Exchange of India was promoted by leading Financial institutions atthe 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 theSecurities Contracts (Regulation) Act, 1956. NSE commenced operations in theWholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities)segment of the NSE commenced operations in November 1994, while operations in theDerivatives segment commenced in June 2000.Since the early 1950s till the early 1990s, Indian policy makers had been nourishing thegoal of Socialist pattern of society. They had been following the development planningstrategy of the former Soviet Russia in a mixed economic framework. From July 1991, inthe face of an unprecedented foreign exchange crisis, Indian economy startedexperiencing an IMF-World Bank dictated regime of liberalisation.One aspect of this is financial liberalisation. There is a move towards privatisation ofnationalised banks – these banks are selling their shares in the stock market. 23
  24. 24. Transnational banks are encouraged to operate in the Indian banking sector. Attempts aremade to attract foreign direct investment in different sectors. There is an increasing entryof foreign portfolio capital due to stock market liberalisation. People are encouraged toinvest in stocks through income tax benefits and abolition of capital gains tax. There is amove to develop a national pension fund which will be invested in different stocks to getreturns out of which pension will be provided to retired people. It is expected thatboosting up of stock market will accelerate the process of capital accumulation andgrowth.Stock market development has been an important part of financial liberalisation in theless developed countries (LDCs). In the pro-liberalisation circle, stock market is assignedto play an important role in the capitalist development of LDCs.There are many studies supporting the positive link between stock market developmentand growth. Let us mention some of the recent studies. One important study wasundertaken by Levine and Zervos (1998). Their cross-country study found that theDevelopment of banks and stock markets has a positive effect on growth. In another studyLevine (2003) argued that although theory provides ambiguous relationship betweenstock market liquidity and economic growth, the cross-country data for 49 countries overthe 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 liberalisationslead to private investment boom. Recently, Bekaert et al (2005) analyzed data of a largenumber of countries and observed that the stock market liberalization „leads to anapproximate 1 % increase in annual real per capita GDP growth‟.There are some economists who are sceptical. Long time back Keynes (1936) comparedthe stock market with casino and commented: „when the capital development of a countrybecomes the by-product of the activities of a casino, the job is likely to be ill-done‟. 24
  25. 25. Referring to the study of World Bank (1993) Singh (1997) pointed out that stock marketshave played little role in the post-war industrialization of Japan, Korea and Taiwan. Heargued that the recent move towards stock market liberalization is „unlikely to help inachieving quicker industrialization and faster long-term economic growth‟ in most of theLDCs.In this perspective this study examines the nature of relationship between stock marketand growth through capital accumulation in India. 25
  26. 26. Figure 1: India’s Real Share Prices (log-values), 1950-2004 26
  27. 27. Figure 2: India’s Annual Growth Rate of Real Industrial Output, 1961-2003 27
  28. 28. Figure3 : India’s Annual Growth Rate of Real GDP, 1951-2003 28
  30. 30. In most industrialized countries, a substantial part of financial wealth is notmanaged directly by savers, but through a financial intermediary, which implies theexistence of an agency contract between the investor (the principal) and a broker orportfolio manager (the agent). Therefore, delegated brokerage management is arguablyone of the most important agency relationships intervening in the economy, with apossible 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 obviousthat they want to invest their money in profitable ventures. On the other hand, a numberof brokerage houses make sure the hassle free investment in stocks. Asset managementfirms allow investors to estimate both the expected risks and returns, as measuredstatistically. 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 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. 30
  32. 32. STOCK MARKET IN INDIA The Indian security market has become one of the most dynamic and efficient securitymarkets in Asia today. The Indian market now conforms to International Standards interms of operating efficiency.During the latter half of 19th century, shares of companiesused to be floated in India Occasionally. There were share brokers in Bombay whoassisted in the floatation of shares of companies. A small group of stock brokers inBombay joined together in 1875 to form an association called Native Share &Stockbrokers Association. The association drew up codes of conduct for brokeragebusiness and mobilizes private funds for investment in the corporate sector. It was thisassociation which later became the Bombay Stock Exchange, Mumbai or BSE.Later on in1894 the brokers of Ahmedabad formed the Ahmedabad Stock Exchange, the secondstock exchange of the country. During the 1900s Kolkata became another major center ofshare trading and as a result Kolkata Stock Exchange was form in 1908. Later on ChennaiStock Exchange was started in 1920. However, by 1923, it ceased to exist.Then theMadras Stock Exchange was started in 1937. Three more stock exchanges wereestablished before independence, at Indore in 1930, at Hyderabad in 1943.Thus alongwith the increase in number of stock exchanges, the number of listed companies and thecapital of listed companies grown tremendously after 1985 which results into growth anddevelopment of stock market in India. 32
  33. 33. Indian Stock MarketShare or stock is a document issued by a company, which entitles its holder to be one ofthe owners of the company. A share is issued by a company or can be purchased from thestock market.Share market where dealing of securities is done is known as share market. There aretwo ways in which investors gets share from market:Primary market: markets in which new securities are issued are known as primarymarket. This is part of the financial market where enterprises issue their new shares andbonds. It is characterized by being the only moment when the enterprise received moneyin exchange for selling its financial assets.Secondary Market: Market in which existing securities are dealt is known assecondary market. The market where securities are traded after, they are initially offeredin the primary market. Most trading is done in the secondary market.The Stock Market is an invisible market that trades in stocks of various companiesbelonging to both the public and private sectors. The Indian Stock Market is oftenreferred 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 maybe a corporation or mutual organization which specializes in the business of introducingthe sellers with the buyers of stocks and securities.The Indian Stock Market in India comprises of two stock exchanges: 33
  34. 34. ● Bombay Stock Exchange (BSE) ● National Stock Exchange (NSE)BSEThe Bombay Stock Exchange (BSE) was established in 1875.The BSE India StockExchange serves as the most important for companies to raise money. The chief functionof the Stock Market of India is to help raise money as capital for the growth andexpansion of various private and public sector enterprises. Besides, the Stock Market ofIndia provides able assistance to the individual investors through daily updates on currentposition of the stocks of the respective companies that are enlisted in the Stock Index inwhich the movement of prices in a section of the market are captured in price indices. Thepopular acronym for Stock Index is Sensitive index or sensex. Moreover, the liquidityprovided by the exchange enables the investors to sell securities owned by them easilyand quickly. Hence a person, who is subjected to sudden dearth of funds, can immediatelysell his shares for cash in India Stock Market.The BSE Sensex, also known as “BSE 30” is a widely used market index not only inIndia but across Asia. In terms of volume of transactions, it is ranked among the top fivestock exchanges in the world. 34
  35. 35. ABOUT BSE SENSEX BSE SENSEX or Bombay Stock Exchange Sensitive Index is a value-weighted indexcomposed of 30 stocks started in 01 of January, 1986. It consists of the 30 largest andmost actively traded stocks, representative of various sectors, on the Bombay StockExchange. These companies account for around one-fifth of the market capitalization ofthe BSE. The base value of the SENSEX is 100 on April 1, 1979, and the base year ofBSE-SENSEX is 1978-79. At irregular intervals, the Bombay Stock Exchange (BSE)authorities review and modify its composition to make sure it reflects current marketconditions. The index is calculated based on a free-float capitalization method; a variationof the market cap method. Instead of using a companys outstanding shares it uses itsfloat, or shares that are readily available for trading. The free-float method, therefore,does not include restricted stocks, such as those held by company insiders.The index hasincreased by over ten times from June 1990 to the present. Using information from April1979 onwards, the long-run rate of return on the BSE SENSEX works out to be 18.6%per annum, which translates to roughly 9% per annum after compensating for inflation.There are five major indices in BSE, thirteen sector specific indices and a BSE DollexIndex for dollar prices and movements. 35
  36. 36. NSEThe National Stock Exchange of India Ltd. (NSE), set up in the year 1993, is today thelargest stock exchange in India and a preferred exchange for trading in equity, debt andderivatives instruments by investors. NSE has set up a sophisticated electronic trading,clearing and settlement platform and its infrastructure serves as a role model for thesecurities industry. The standards set by NSE in terms of market practices; products andtechnology have become industry benchmarks and are being replicated by many othermarket participants.NSE provides a screen-based automated trading system with a high degree oftransparency and equal access to investors irrespective of geographical location. The highlevel of information dissemination through the on-line system has helped in integratingretail investors across the nation.The exchange has a network in more than 350 cities and its trading members areconnected to the central servers of the exchange in Mumbai through a sophisticatedtelecommunication network comprising of over 2500 VSATs.NSE has around 850 trading members and provides trading in equity shares and debtsecurities. Besides this, NSE provides trading in various derivative products such as indexfutures, index options, stock futures, stock options and interest rate futures.In addition to these organizations there are other organizations highlighting on the sharetrading in the Indian Stock Market are: ● Securities and Exchange Board of India (SEBI) ● NSDL ● CDSLThe Nifty and the Senses are the indicators which are the parameters denoting the pricesof the stocks of the major companies of the NSE and the BSE respectively. 36
  37. 37. ABOUT NSE AND NIFTY 50 The National Stock Exchange of India Limited (NSE) is a Mumbai-based stockexchange. It is the largest stock exchange in India in terms of daily turnover and numberof trades, for both equities and derivative trading. Though a number of other exchangesexist, NSE and the Bombay Stock Exchange are the two most significant stock exchangesin India and between them are responsible for the vast majority of share transactions.The NSEs key index is the S&P CNX Nifty, known as the Nifty, an index of fifty majorstocks weighted by market capitalization. NSE is mutually-owned by a set of leadingfinancial institutions, banks, insurance companies and other financial intermediaries inIndia but its ownership and management operate as separate entities. There are at least 2foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in theNSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 citiesacross India. In October 2007, the equity market capitalization of the companies listed onthe NSE was US$ 1.46 trillion, making it the second largest stock exchange in SouthAsia. NSE is the third largest Stock Exchange in the world in terms of the number oftrades in equities. It is the second fastest growing stock exchange in the world with arecorded growth of 16.6%.The Standard & Poors CRISIL NSE Index 50 or S&P CNX Nifty nicknamed Nifty 50or simply Nifty is the leading index for large companies on the National Stock Exchangeof India. The Nifty is a well diversified 50 stock index accounting for 22 sectors of theeconomy. It is used for a variety of purposes such as benchmarking fund portfolios, indexbased derivatives and index funds. There are seven major Indices in NSE and fifteensector specific Indices. CNX BANK INDEX or BANK NIFTY is the index which has 17banks listed on it and is a separate index to look upon price movements of bank’s share P. 37
  38. 38. Listed companies As indicated in the above chart, the BSE has the largest number of listed companies(4,921), followed by the TSX Group (3,841). The number of companies listed on theNSE increased by 21.6% to 1,406 in 2008 as compared with the 2006 figure. The London Stock Exchange had the highest number of foreign companies liste onits exchange (681), which constituted 22% of the total number of companies listed on it;followed by the NYSE Group with 415 foreign companies, which represented close to14% of the total listed companies on it. In terms of percentage share, Luxemburg Stock 38
  39. 39. Exchange had the highest percentage of foreign companies at 87%, followed bySingapore Exchange at 41%. The two main exchanges in the US, Nasdaq, and NYSEGroup, had a combined total of 5,963 companies, out of which, 751 were foreigncompanies. 39
  40. 40. GROWTH AND PRESENT STATUS OF THE INDUSTRYThe ever-growing and fast-maturing India Market is a lucrative business destination fordeveloped countries. With 7-8% of GDP growth, huge analytical, young and Englishspeaking work forces the „pull‟ for opportunities are luring. The bandwidth of IndiaMarket is enviably wide and very deep.Markets in India are well protected by legal guidelines and efficient administrators. Witha liberal and proactive government at the center the road ahead for Markets of India isvery rosy. Market India has witnessed exponential growth over past one and half decade.Liberal and transparent financial policies have effected free-in-flow of FII and as a resultof which India Market has grown to a colossal monster in the international market.Foreseeing sure and substantial returns on investments (ROI) companies are pro- activelylisting on the stock market indexes. Government agencies once much hated for red tapeand bribes has shed its image. Professionalism is their new mantra. Public Enterprises likeIOC, ONGC, BHEL, NTPC, SAIL, MTNL, BPCL, HPCL and GAIL, SBI, LIC,Hindustan Antibiotics Limited, Air India etc. to name a few, are giving Private Indiancompanies a good run for their money. Private giants like Reliance Industries Limited,Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, ICICI arebreaking their own records every financial years.Markets in India has witnessed meteorite rise of the Indian Software,Telecommunication and Banking Industry. This has propelled growth of Urban Indianclass which, in turn has increased consumerism. Today, each and every type of industryof Market India like Infrastructure, Pharmaceutical & Biotechnology, Banking &Insurance, Electronics, FMCG etc. has tremendous growth potential. Retail Industry 40
  41. 41. along with Agriculture & Food industry are yet to contribute their share to the growthstory of Market India.Indian Equity Market at present is a lucrative field for the investors and investing inIndian stocks are profitable for not only the long and medium-term investors, but also theposition traders, short-term swing traders and also very short term intra-day traders. Interms of market capitalization, there are over 2500 companies in the BSE chart list withthe Reliance Industries Limited at the top. The SENSEX today has rose from 1000 levelsto 8000 levels providing a profitable business to all those who had been investing in theIndian Equity Market. There are about 22 stock exchanges in India which regulates themarket trends of different stocks. Generally the bigger companies are listed with the NSEand the BSE, but there is the OTCEI or the Over the Counter Exchange of India, whichlists the medium and small sized companies. There is the SEBI or the Securities andExchange 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 andforeign investments is becoming a profitable business more with each day. If all theeconomic parameters are unchanged Indian Equity Market will be conducive for thegrowth of private equities and this will lead to an overall improvement in the Indianeconomy.Indian Stock Market including both NSE-National Stock Exchange and the BSE-BombayStock Exchange have certainly taken a tremendous beating in the past few weeks. We aresure most of us here knew that the correction in the trading curve was round the cornerwhich would be healthy, and the markets would bounce back from 18k levels with thehelp of mutual fund investments & buying of Indian stocks again. However theanticipation went wrong, and the US recession story along with global and Indiancommodity prices have added fuel to the global equity market turmoil on a whole. 41
  42. 42. Future of the industryThe stock market is booming in spite of the low agriculture output. The monsoon is goodin an overall sense but still the question remains who takes the credit? The answer is thekarma of the people. I appreciate the Indian politicians and the industrialists who beingpawns of destiny are doing things positive and productive. India, as a country is running avery 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 themarket, the majority being the FIIS, the promoters of the company. The credit should goto 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 bestinvestments in the world. There will be a time when it can even reach 3000 points in thenifty. India will begin one of the best dasas of the Sun, which will work in its favor. Sobefore 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 another10 years. You will make a killing in the Indian markets.Most of the tech companies and the main index will do well but slightly in the lower sideof expectations. 42
  43. 43. FINANCIAL SECTORThe financial sector is in a process of rapid transformation. Reforms are continuing aspart of the overall structural reforms aimed at improving the productivity and efficiencyof the economy. The role of an integrated financial infrastructure is to stimulate andsustain economic growth.The US$ 28 billion Indian financial sector has grown at around 15 per cent and hasdisplayed stability for the last several years, even when other markets in the Asian regionwere facing a crisis. This stability was ensured through the resilience that has been builtinto the system over time. The financial sector has kept pace with the growing needs ofcorporate and other borrowers. Banks, capital market participants and insurers havedeveloped a wide range of products and services to suit varied customer requirements.The Reserve Bank of India (RBI) has successfully introduced a regime where interestrates are more in line with market forces.Financial institutions have combated the reduction in interest rates and pressure on theirmargins by constantly innovating and targeting attractive consumer segments. Banks andtrade financiers have also played an important role in promoting foreign trade of thecountry. 43
  44. 44. BanksThe Indian banking system has a large geographic and functional coverage. Presently thetotal asset size of the Indian banking sector is US$ 270 billion while the total depositsamount to US$ 220 billion with a branch network exceeding 66,000 branches across thecountry. Revenues of the banking sector have grown at 6 per cent CAGR over the pastfew years to reach a size of US$ 15 billion. While commercial banks cater to short andmedium term financing requirements, national level and state level financial institutionsmeet longer-term requirements. This distinction is getting blurred with commercial banksextending project finance. The total disbursements of the financial institutions in 2001were US$ 14 billion.Banking today has transformed into a technology intensive and customer friendly modelwith a focus on convenience. The sector is set to witness the emergence of financialsupermarkets in the form of universal banks providing a suite of services from retail tocorporate banking and industrial lending to investment banking. While corporate bankingis clearly the largest segment, personal financial services is the highest growth segment.The recent favorable government policies for enhancing limits of foreign investments to49 per cent among other key initiatives have encouraged such activity. Larger banks willbe able to mobilize sufficient capital to finance asset expansion and fund investments intechnology. 44
  45. 45. Capital MarketThe Indian capital markets have witnessed a transformation over the last decade. India is now placed among the mature markets of the world. Key progressive initiatives in recent years include:• The depository and share dematerialization systems that have enhanced the efficiency ofthe transaction cycle• Replacing the flexible, but often exploited, forward trading mechanism with rollingsettlement, to bring about transparency• The infotech-driven National Stock Exchange (NSE) with a national presence (for thebenefit of investors across locations) and other initiatives to enhance the quality offinancial disclosures.• Corporatization of stock exchanges.• The Securities and Exchange Board of India (SEBI) has effectively been functioning asan independent regulator with statutory powers.• Indian capital markets have rewarded Foreign Institutional Investors (FIIs) withattractive valuations and increasing returns.• The Mumbai Stock Exchange continues to be the premier exchange in the country withan increase in market capitalization from US$ 40 billion in 1990-1991 to US$ 203 billionin 1999-2000. The stock exchange has about 6,000 listed companies and an average dailyvolume of about a billion dollars• Many new instruments have been introduced in the markets, including index futures,index options, derivatives and options and futures in select stocks. 45
  46. 46. InsuranceWith the opening of the market, foreign and private Indian players are keen to convertuntapped market potential into opportunities by providing tailor-made products:• The presence of a host of new players in the sector has resulted in a shift in approach and the launch of innovative products, services and value-added benefits. Foreign majors have entered the country and announced joint ventures in both life and non-life areas. Major foreign players include New York Life, Aviva, Tokio Marine, Allianz, Standard Life, Lombard General, AIG, AMP and Sun Life among others.• With competition, the erstwhile state sector companies have become aggressive in termsof product offerings, marketing and distribution.• The Insurance Regulatory and Development Authority (IRDA) has played a proactiverole as a regulator and a facilitator in the sector‟s development.• The size of the market presents immense opportunities to new players with only 20 percent of the country‟s insurable population currently insured.• The state sector Life Insurance Corporation (LIC), the largest life insurer in 2000, soldclose to 20 million new policies with a turnover of US$ 5 billion.• The gross premia for the insurance sector was US$ 13 billion for 2001-02.• There are four public sector and nine private sector insurance companies operating ingeneral/non-life insurance business with a premium income of over US$ 2.58 billion.• The market‟s potential has been estimated to have a premium income of US$ 80 billionwith a potential size of over 300 million people. The General Insurance Corporation(GIC) (which covers the non-life sector) had a total premium income of US$ 2 billion in2001-02. This has the potential to reach US$ 9 billion in the next five years. 46
  47. 47. Venture CapitalTechnology and knowledge have been and continue to drive the global economy. Giventhe inherent strength by way of its human capital, technical skills, cost competitiveworkforce, research and entrepreneurship, India is positioned for rapid economic growthin a sustainable manner. To realise the potential, there is a need for risk finance andventure capital (VC) funding to leverage innovation, promote technology and harnessknowledge based ideas.• The Indian venture capital sector has been active despite facing a challenging externalenvironment in 2001 and a competitive market scenario.• There were 34 VCFs and 2 Foreign VCFs registered with SEBI in March 2002.• According to a survey conducted by Thomson Financial and Prime Database, India ranked as the third most active venture capital market in Asia Pacific (excluding Japan). It recorded 115 deals in 2001 with average investment per deal amounting to US$ 7.9 million. 57 VCFs invested US$ 908 million in 101 Indian companies during 2001.• Disbursements for 2002 are expected to be US$ 2 billion and are estimated to reachUS$ 10 billion by 2007.• There is an increased interest in India: 70 VC funds operate in India with the total assetsunder management worth about US$ 6 billion.• The amount has grown nearly twenty fold in the past five years. Most VCs believe that2002-03 will be driven by a relatively stable economy and new initiatives that will boostthe e-commerce sector, particularly on-line trading and e-banking sectors. 47
  48. 48. STOCK BROKING SECTOR IN INDIAThe Indian broking industry is one of the oldest trading industries that has been aroundeven before the establishment of the BSE in 1875. Despite passing through a number ofchanges in the post liberalization period, the industry has found its way towardssustainable growth. In this section our purpose will be of gaining a deeper understandingabout the role of the Indian stock broking industry in the country‟s economy.What is meant by a Stock Exchange?The Securities Contract (Regulation) Act, 1956 [SCRA] defines „Stock Exchange‟ asanybody of individuals, whether incorporated or not, constituted for the purpose ofassisting, regulating or controlling the business of buying, selling or dealing in securities.Stock exchange could be a regional stock exchange whose area of operation/jurisdictionis specified at the time of its recognition or national exchanges, which are permitted tohave nationwide trading since inception. NSE was incorporated as a national stockexchange. 48
  49. 49. What is an „Equity‟/Share?Total equity capital of a company is divided into equal units of small denominations, eachcalled a share. The holders of such shares are members of the company and have votingrights.What is a „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 principalamount by the borrower to the lender. In the Indian securities markets, the term „bond‟ isused for debt instruments issued by the Central and State governments and public sectororganizations and the term „debenture‟ is used for instruments issued by private corporatesector.What is a Derivative?Derivative is a product whose value is derived from the value of one or more basicvariables, called underlying. The underlying asset can be equity, index, foreign exchange(forex), commodity or any other asset. Derivative products initially emerged as hedgingdevices against fluctuations in commodity prices and commodity-linked derivativesremained the sole form of such products for almost three hundred years. The financialderivatives came into spotlight in post-1970 period due to growing instability in thefinancial markets. 49
  50. 50. What is a Mutual Fund?A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board ofIndia) that pools money from individuals/corporate investors and invests the same in avariety of different financial instruments or securities such as equity shares,Government securities, Bonds, debentures etc. Mutual funds can thus be considered asfinancial intermediaries in the investment business that collect funds from the publicand invest on behalf of the investors. Mutual funds issue units to the investors. Theappreciation of the portfolio or securities in which the mutual fund has invested themoney leads to an appreciation in the value of the units held by investors. Theinvestment objectives outlined by a Mutual Fund in its prospectus are binding on theMutual Fund scheme. The investment objectives specify the class of securities a MutualFund can invest in. Mutual Funds invest in various asset classes like equity, bonds,debentures, commercial paper and government securities. The schemes offered bymutual funds vary from fund to fund. Some are pure equity schemes; others are a mix ofequity and bonds. Investors are also given the option of getting dividends, which aredeclared periodically by the mutual fund, or to participate only in the capitalappreciation of the scheme.What is an Index?An Index shows how a specified portfolio of share prices is moving in order to give anindication of market trends. It is a basket of securities and the average price movementof the basket of securities indicates the index movement, whether upwards ordownwards. 50
  51. 51. What is a Depository?A depository is like a bank wherein the deposits are securities (viz. shares, debentures,bonds, government securities, units etc.) in electronic form.What is Dematerialization?Dematerialization is the process by which physical certificates of an investor areconverted to an equivalent number of securities in electronic form and credited to theinvestor‟s account with his Depository Participant (DP)What is meant by „Securities‟?The definition of „Securities‟ as per the Securities Contracts Regulation Act (SCRA),1956, includes instruments such as shares, bonds, scrips, stocks or other marketablesecurities 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 bythe Central Government.What is the function of Securities Market?Securities Markets is a place where buyers and sellers of securities can enter intotransactions to purchase and sell shares, bonds, debentures etc. Further, it performs animportant role of enabling corporate, entrepreneurs to raise resources for their companiesand business ventures through public issues. Transfer of resources from those having idleresources (investors) to others who have a need for them (corporate) is most efficientlyachieved through the securities market. Stated formally, securities markets provide 51
  52. 52. channels for reallocation of savings to investments and entrepreneurship. Savings arelinked to investments by a variety of intermediaries, through a range of financialproducts, called „Securities‟.Which are the securities one can invest in? ● Shares ● Government Securities ● Derivative products ● Units of Mutual Funds etc.Why does Securities Market need Regulators?The absence of conditions of perfect competition in the securities market makes the roleof the Regulator extremely important. The regulator ensures that the market participantsbehave in a desired manner so that securities market continues to be a major source offinance for corporate and government and the interest of investors are protected.Who regulates the Securities Market?The responsibility for regulating the securities market is shared by Department ofEconomic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank ofIndia (RBI) and Securities and Exchange Board of India (SEBI). 52
  53. 53. What is SEBI and what is its role?The Securities and Exchange Board of India (SEBI) is the regulatory authority in Indiaestablished under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides forestablishment of Securities and Exchange Board of India (SEBI) with statutory powersfor (a) protecting the interests of investors in securities (b) promoting the development ofthe securities market and (c ) regulating the securities market. Its regulatory jurisdictionextends over corporates in the issuance of capital and transfer of securities, in addition toall intermediaries and persons associated with securities market. SEBI has been obligatedto perform the aforesaid functions by such measures as it thinks fit. In particular, it haspowers for: ● 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. 53
  54. 54. Broking houses in IndiaIndia is a country having a big list of Broking Houses. The Equity Broking Industry inIndia has several unique features like it is more than a century old, dynamic, forwardlooking, and good service providers, well conversant, highly innovative and evenadaptable. The regulations and reforms been laid down in the Equity Market has resultedin rapid growth and development. Basically, the growth in the equity market is largelydue to the effective intermediaries.The Broking Houses not only act as an intermediate link for the Equity Market but alsofor the Commodity Market, Foreign Currency Exchange Market, and many more. TheBroking Houses has also made an impact on the Foreign Investors to invest in India tocertain extent.In the last decade, the Indian brokerage industry has undergone a dramatictransformation. From being made of close groups, the broking industry today is one of themost transparent and compliance oriented businesses. Long settlement cycles and largescale bad deliveries are a thing of the past with the advent of T+2 settlement cycle anddematerialization. Large and fixed commissions have been replaced by wafer thinmargins, with competition driving down the brokerage fee, in some cases, to a few basispoints.There have also been major changes in the way business is conducted. Technology hasemerged as the key driver of business and investment advice has become research based.At the same time, adherence to regulation and compliance has vastly increased. The scopeof services have enhanced from being equity products to a wide range of financialservices. Investor protection has assumed significance,. 54
  55. 55. SOME BASICS OF STOCK AND CAPITAL MARKETThe money you earn is partly spent and the rest saved for meeting future expenses.Instead of keeping the savings idle you may like to use savings in order to get return on itin 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 futureOne of the important reasons why one needs to invest wisely is to meet the cost ofInflation. Inflation is the rate at which the cost of living increases. The cost of living issimply what it costs to buy the goods and services you need to live. Inflation causesmoney to lose value because it will not buy the same amount of a good or a service in thefuture as it does now or did in the past. 55
  56. 56. What care should one take while investing? ● explaining the Obtain written documents 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 ● 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 availableWhat is meant by 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. 56
  57. 57. What factors determine interest rates?When we talk of interest rates, there are different types of interest rates - rates that banksoffer to their depositors, rates that they lend to their borrowers, the rate at which theGovernment borrows in the Bond/Government Securities market, rates offered toinvestors in small savings schemes like NSC, PPF, rates at which companies issue fixeddeposits etc. The factors which govern these interest rates are mostly economy related andare 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 policiesWhat are 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. or securities market related instruments like shares, bonds, debentures etc. 57
  58. 58. What are various Short-term financial options available for investment?Broadly speaking, savings bank account, money market/liquid funds and fixed depositswith banks may be considered as short-term financial investment options:Savings Bank Account is often the first banking product people use, which offers lowinterest (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 inextremely short-term fixed income instruments and thereby provide easy liquidity. Unlikemost mutual funds, money market funds are primarily oriented towards protecting yourcapital and then, aim to maximize returnsFixed Deposits with Banks are also referred to as term deposits and minimuminvestment period for bank FDs is 30 days. Fixed Deposits with banks are for investorswith low risk appetite, and may be considered for 6-12 months investment period asnormallyWhat are various Long-term financial options available for investment?Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bondsand Debentures, Mutual Funds etc.Post Office Savings: Post Office Monthly Income Scheme is a low risk savinginstrument, which can be availed through any post office.Public Provident Fund: A long term savings instrument with a maturity of 15 years andinterest payable at 8% per annum compounded annually. A PPF account can be openedthrough a nationalized bank at anytime during the year and is open all through the yearfor depositing money. Tax benefits can be availed for the amount invested and interestaccrued is tax-free. A withdrawal is permissible every year from the seventh financialyear of the date of opening of the account and the amount of withdrawal will be limited to 58
  59. 59. 50% of the balance at credit at the end of the 4th year immediately preceding the year inwhich the amount is withdrawn or at the end of the preceding year whichever is lower theamount of loan if any.Company Fixed Deposits: These are short-term (six months) to medium-term (three tofive 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 wherethe 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 yearwith the purpose of raising capital. The central or state government, corporations andsimilar institutions sell bonds. A bond is generally a promise to repay the principal alongwith 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 moneyfrom the public and invests in a group of assets (shares, debentures etc.), in accordancewith a stated set of objectives. It is a substitute for those who are unable to invest directlyin equities or debt because of resource, time or knowledge constraints 59
  60. 60. INTERNATIONAL STOCK EXCHANGE AND TRADINGInternational Online Trading Scenario. In this chapter we will have a comprehensive look taking the international share-tradingscenario as a whole. We have considered those particular continents, nations; thoseusually have major influence in the various economic aspects of India. So, the UnitedStates of America, United Kingdom and the entire European Union, Australia, NewZealand and African countries as a whole.UNITED STATES OF AMERICALet us start with the United States. A brief set of information consisting of StockExchanges functioning, online share broking firms, and the latest technology they areoffering for hassle free service for their customers etc.The prominent online share broking firms are The Wall Street Journal, DxDollars, PowerPointers Page, Xdrive, Saxo Bank etc. These firms are providing online as well as offlinefacilities to their customers. The salient features the organizations are offering are as:1. Online Broker List - This section contains a comprehensive list of brokers thatwill allow you to trade online. Make sure to investigate them thoroughly before choosingan online share-trading firm.2. Broker Ranking Resources - These sites have their own broker performancedata and rankings, if youre looking for info on a single specific broker, or just wantanother opinion. 60
  61. 61. 3. After Hours Resources - Use the sites in this section to get information abouthow 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 tradestocks after hours.5. Exchanges - This section contains a listing of stock exchanges throughout the USand around the world. The sites can often be used to investigate stocks that are traded on agiven exchange. This can be especially useful for international stocks that may bedifficult to research due to a lack of readily available information.6. International Online Trading - Thanks to the Internet, it has become muchsimpler to analyze and participate in international investment opportunities. Once youhave thoroughly researched global opportunities, use the sites in this section to tradestocks around the world.7. ECNs - Electronic Communications Networks (ECNs) represent orders in Nasdaqstocks, internally matching buy and sell orders or representing the highest bid prices andlowest ask prices on the open market. The benefits of trading with an ECN include afterhours trading, avoiding market makers (which charge a spread), and anonymity (which isoften important for large trades). This section contains a listing of ECNs that are availablefor your trading needs. 61
  62. 62. 8. Scripophily - This section contain links to sites that specialize in old stockcertificates and Broking houses in IndiaIndia is a country having a big list of Broking Houses. The Equity Broking Industry inIndia has several unique features like it is more than a century old, dynamic, forwardlooking, and good service providers, well conversant, highly innovative and evenadaptable. The regulations and reforms been laid down in the Equity Market has resultedin rapid growth and development. Basically, the growth in the equity market is largelydue to the effective intermediaries.The Broking Houses not only act as an intermediate link for the Equity Market but alsofor the Commodity Market, Foreign Currency Exchange Market, and many more. TheBroking Houses has also made an impact on the Foreign Investors to invest in India tocertain extent.In the last decade, the Indian brokerage industry has undergone a dramatictransformation. From being made of close groups, the broking industry today is one of themost transparent and compliance oriented businesses. Long settlement cycles and largescale bad deliveries are a thing of the past with the advent of T+2 settlement cycle anddematerialization. Large and fixed commissions have been replaced by wafer thinmargins, with competition driving down the brokerage fee, in some cases, to a few basispoints.There have also been major changes in the way business is conducted. Technology hasemerged 62
  63. 63. as the key driver of business and investment advice has become research based. At thesame time, adherence to regulation and compliance has vastly increased. The scope ofservices have enhanced from being equity products to a wide range of financial services.Investor protection has assumed significance,.9. Traders World - Offers articles, software, and newsletters on the financialmarkets for subscribers.10. Domestic Securities ATTAIN System - An order display alternative to thetraditional market making price quote system on the Nasdaq. The ATTAIN ECN allowsits subscribers immediate and direct posting of orders to the ATTN book.11. Day Trader - Brings insight, ideas, trading techniques, and innovative thinking toinvestors looking to trade the financial markets. This is all shown to you via the actualtrading 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 isavailable.13. - A virtual community for day traders that offer messageboards, book reviews, and brokerage reviews. Free registration is required for some of thesites features.Over the last two decades the constant upward translocation in the trends ofonline share trading in The USA has been perfectly described below. 63
  65. 65. The objective of the project is to identify, understand and analyze the comparison of stockmarket. The main focus will be on understanding, analyzing and providing a validexplanation both theoretically and technically, that how various comparisons in betweenthe Indian stock market and foreign stock market. By undertaking this study I would liketo keep my step in the field of research.This project will help me in enhancing my analytical skills and will give me a betterunderstanding of how things move on and are to be studied. At the same time with thisstudy I will be providing the organization a list of factors that affect the market, so thatthey can keep a watch on the same and use the same for the benefit of clients andcompany and also increase their accuracy and profits. This will be my contribution to thishuge company. 65
  66. 66. PURPOSE,The PURPOSE of the report is to analyze the comparative study of stock market. It is ofgreat importance to understand, learn and analyze the same. Thus, this report is a move inpath of understanding those factors and analyzing the impact of the same. Journals,diaries, or so-called "trade blotters" of an experienced Day Trader.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 prices and to give a proper justification for the same, theoretically and technically. It helped me in understanding and learning the corporate culture And above all, the concerned organization can get some valuable recommendations, which can definitely improve the performance of the organization 66
  68. 68. Research methodology is a systematic way, which consists of series of action steps,necessary to effectively carry out research and the desired sequencing to these steps. Themarketing research is a process of involves a no. of inter-related activities, which overlapand do rigidly follow a particular sequence. It consists of the following steps:- Formulating the objective of the study Designing the methods of data collection Selecting the sample plan Collecting the data Processing and analyzing the data Reporting the findings Objective of Study Research Design Sample Design Data Collection Data Analysis Report of findings 68
  69. 69. DATA COLLECTIONPrimary data collection:- primary data are those which are collected a fresh & forthe first time. Personal unstructured interview of the employee of the bank. Distribution of the questionnaires among the bank employee to gather information.Secondary data collection:- secondary data which has already been collected &analyzed by some one else. Documents given by bank. Internet information & websites. Book & magazines. Information given by customers Registration kit and information broacherDATA ANALYSIS-{BASED ON INVESTORS OF SHARE MARKET IN VARIOUSREGION OF Meerut} Representing in the form of table & chart.There are some areas of Ghaziabad region from where I got the investors response which arealready invests their money in share market through India Info line. From where I found somepersons either most satisfied or least satisfied. Analysis is given below: 69
  70. 70. CIVIL LINE BIJNORIn this area 11 % investors are dissatisfied, 17 % satisfied, 28 % good, 44 %excellent. CIVIL LINE BIJNOR 11 % DISSATISFIED 17 % SATISFIED 28 % GOOD 44 % EXCELLENT 11% 17% EXCELLENT 44% GOOD SATISFIED DISSATISFIED 28%According to this diagram 11% dissatisfied,28% good17% satisfied and 44%excellentbecause some problem are related to the awareness of stock market. 70
  71. 71. AVAS VIKAS BIJNORIn this area 17 % investors are dissatisfied, 22 % satisfied, 22 % good, 39 %excellent. AVAS VIKAS 17 % DISSATISFIED 22 % SATISFIED 22 % GOOD 39 % EXCELLENT 17% 22% EXCELLENT 39% GOOD SATISFIED DISSATISFIED 22%According to this diagram 17% dissatisfied, 22% good 22% satisfied and 39%excellentbecause some problem are related to the awareness of stock market. 71
  72. 72. CHAKKAR ROAD BIJNORsatisfied, 33 % good, 3%excellent. CHAKKAR ROAD 6% DISSATISFIED 22 % SATISFIED 33 % GOOD 39 % EXCELLENT 6% 22% EXCELLENT 39% GOOD SATISFIED DISSATISFIED 33%According to this diagram 22% dissatisfied, 33% good 22% satisfied and 39%excellentbecause some problem are related to the awareness of stock market. 72
  73. 73. ADARSH NAGARIn this area 17 % investors are dissatisfied, 22 % satisfied, 28 % good,excellent. ADARSH NAGAR 17 % DISSATISFIED 22 % SATISFIED 28 % GOOD 43% EXCELLENT 17% 22% EXCELLENT 43% GOOD SATISFIED DISSATISFIED 28%According to this diagram 17% dissatisfied ,28% good 22% satisfied and 43%excellentbecause some problem are related to the awareness of stock market. 73
  74. 74. Market Research AnalysisInterpretation: This shows that although the mutual fund market is on rise yet, the mostfavored investment continues to be in the Share Market. So, with a more transparentsystem, investment in the Stock Market can definitely be increased. Awareness of online share tradingInterpretation: With the increase in cyber education, the awareness towards online sharetrading has increased by leaps and bounds. This awareness is expected to increase furtherwith the increase in internet education. Awareness of India Info line Ltd in as a Brand 37% Yes -- 63% No -- 37% 63%Interpretation: This pie-chart shows that India Infoline Ltd has reasonable amount ofBrand awareness in terms of a premier Retail Stock Broking Company. This brand image 74
  75. 75. should be further levered by the company to increase its market share over itscompetitors. Awareness of India Info line Ltd Facilities 20% Yes -- 20% 80% No -- 80%Interpretation: although there is sufficiently high brand equity among the targetaudience yet, it is to be noted that the customers are not aware of the facilities providedby the company meaning thereby, that the company should concentrate more towardspromotional tools and increase its focus on product awareness rather than brandawareness 75
  76. 76. DEMAT Account MarketInterpretation: This shows that even with sufficiently high Brand Equity India Info lineLtd ranks only 3rd amongst the Demat Account providers. This is probably because of twomain reasons. 1. Lack of promotion and unfocussed approach towards Product awareness. 2. Non – transparent marketing policies of the company.Hence, the company should crystallize its products and should indulge in aggressivemarketing and promotion.Satisfaction Level among Customers with Current BrokerInterpretation: This pie-chart accentuates the fact that Strategic Marketing, today, hasgone beyond only meeting sales targets and generating profit volumes. It shows that allthe competitors are striving hard not only to woo the customer but also to make themBrand loyal by generating customer satisfaction. 8% Yes -- 92% 92% No -- 8% 76
  77. 77. Frequency of Trading 11% 9% Daily-9% 27 % Weekly-27% 53 % Monthly-53% Yearly-11%Interpretation: In spite of the huge returns that the share market promises, we see thatthere is still a dearth of active trade and investors. This is because of non transparentstructure of the Indian share market and the skepticism of the target audience that isgenerated by the volatility of the stock market. It requires efficient bureaucraticintervention on the part of the Government. Percentage of Earning Invested In Share Trading 7% 2% 16% Upto 10%--71% Upto 25%--19% 75% Upto 50%--7% Above 50%--3%Interpretation: This shows that people invest only up to 10% of their earnings inthe stock market, again reiterating the volatile and non-transparent structure ofthe Indian stock market. Hence, effective and efficient steps should be undertakento woo the customers to investment more in the lucrative stock market. 77
  78. 78. Rating of Share Trading Companies 10% 15% Religare-15% 25% 20% Sharekhan-20% ICICI Direct-30% 30% India Bulls-25% Others-10%Interpretation: The survey indicated that people ranked India Infoline Ltd at the 3rdposition as an online stock broking company. Even after relatively low brokerages andbetter services being provided in competitors, India Infoline Ltd is not at top spot becauseof ineffective marketing and promotion strategies. Hence, the company should indulge into aggressive marketing and promotional methods and should approach this problem in amore structured format. 78
  79. 79. SWOT ANALYSIS 79
  80. 80. 80
  81. 81. A SWOT analysis focuses on the internal and external environments, examining strengthsand weaknesses in the internal environment and opportunities and threats in the externalenvironment. STRENGTHSSERVICEAs products of India Infoline Ltd is a extremely innovative product with very less cost.Services like online trading facility, institutional and domestic broking, customizedresearch reports with almost 80% efficiency etc give India Infoline Ltd an edge over itscompetitors. India Infoline Ltd provides other support services that make retail investorsmore confident and assured with their trading. SMS alerts (allowing traders and investorsto make the most of the available opportunities), Softer, intangible features like imagery,equity driving preference. Through efficient trading processes Investors can place theirorders directly on the Internet, do all the information seeking and basically own theinvesting processDistribution NetworkWe have a growing network of 150 branches and more than 300 business partners spreadacross 180 cities in India and a fully operational international office at London 81
  82. 82. OUR target is to have 350 branches and 1000 business partners in 300 cities of India andmore than 7 International offices by the end of 2006.Unlike a traditional broking firm, India Infoline Ltd group works on the philosophy ofpartnering for wealth creation.ProductsCompany‟s product line is quite flexible in the sense that there is a product for every kindof investors. Also all the products cover all the loop holes of all the products offered bythe other competitors like low cost, user friendly online trading services etc. WeaknessBrandingThough the company has efficient products but large part of investment interestedpopulation does not know the company. The most basic expectation for a trader orinvestor when one begins trading is that one must get timely delivery of shares andproceeds from sale of shares. Also ones cash balances with the broker must be safe andsecure. Though this confidence in the broker comes with time and experience, good andtransparent practices also play a major role in imbibing confidence in tradersCompetition from BanksMost of the banks due to good branding have the faith of the customers of their bankingdatabase. So they enjoy the liberty of huge database and customers find it more reliable totrade there rather than with a unknown broker. Also banks like HDFC Bank and ICICI 82
  83. 83. Bank have the advantage of linking the trading accounts of their customers to savingaccounts. This makes trading easier, and at the same time a trader withdraws exactly asmuch money from his account as is needed to complete the trade. Similarly salesproceeds are credited directly to saving account OPPORTUNITIESThe external environment analysis may reveal certain new opportunities for profit andgrowth.Ever-Increasing MarketAfter the NSE brought the screen based trading system stock markets are now moresecured which has attracted lot of retail investors and the demand is increasing day byday. This has resulted in improved liquidity and heavy volumes on transactions. IndiaInfoline Ltd is one of the early entrants here. As to how much it will roar and how swift itcan swoop on the market, the future alone can answer such queries. India Infoline Ltd hasbeen a mega player and is known for being a mover of stocks. It is also known for puttingbig deals through and enjoys good networking with the FIIs. It has been dynamic enoughto move with the times and capture the opportunities that the market throws up from timeto time.Improving TechnologyIn country like India technology is always improving which gives the company a chanceto keep on improving their product with time whereas for the small players like localbrokers it will be difficult to keep the same pace as the changing technology. Also with 83
  84. 84. SEBI lying down some strict guidelines small brokers are finding it harder to retain thecustomers with no research department and small capital. The traditional business modelis highly dependent on a large network of sub-brokers, and many established players maynot have systems (technology, customer service, etc.) capable of directly servicing somany retail customers.Unfulfilled Needs of the CustomersWith so many competitors offering their products in the market but no one is able tocompletely satisfy the customers. Some have the problem of lack of information or somewere scared of volatility of the stock markets. India Infoline Ltd has the opportunity to tapthis unsatisfied set of customers and to make hold in the market. The Internet serves tobreak all barriers to information, as it offers an extremely hassle-free investing platform.And, India Infoline Ltd hopes to fully utilize and capitalize on this platform. This originalidea by India Infoline Ltd itself was born out of the consumers need for a moretransparent, easy to understand and convenient option of investing in stocks.Education LevelThe education level in the country is improving year after year as far as technology goes.With that the understanding of the stock market is also increasing and a lot of retailinvestors are steeping in the markets which are being shown by increasing volumes,transactions and indices. 84
  85. 85. THREATSNew CompetitorsA lot of new competitors are trying to enter the market in this bullish run to taste theflavor of this cherry. This is creating a lot of competition for large players like IndiaInfoline Ltd and it is creating little confusion in the minds of the customers about theservices provided by the broker. Also many banking firms are entering into the marketwith huge investment. Competitors like ICICI, kotuku; HDFC, 5-paisa etc. are posing alot of threats to the company.Technology Based BusinessOnline trading is totally based on the technology which is quite complex. Typically, thetechnology solution has to start from the Internet front-end (or the screen that you seewhen you begin trading). Then it needs to get into the middle tier of risk managementsystems that assess data from banks and depository participants (DP), calculate client riskat that point in time, and give the Go/No go advice to the trade. So technology is a kindof threat because unless until it is working properly it is good .s 85