Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

A project report on overview of indian stock market

110,624 views

Published on

A project report on overview of indian stock market

Published in: Business, Economy & Finance

A project report on overview of indian stock market

  1. 1. Projectsformba.blogspot.com A Project Report On “AN OVERVIEW OF INDIAN STOCK MARKET” Submitted in Partial fulfillment for the award of the degree MASTER IN BUSINESS ADMINISTRATION. (Batch—2008-2010)Under Guidance Of, Submitted By, (faculty in finance) Roll No- MBA 6th trimester ASTHA SCHOOL OF MANAGEMENT,BBSRProjectsformba.blogspot.com 1
  2. 2. Projectsformba.blogspot.com ORISSA CANDIDATE DECLARATION I solely declare that the report titled “An Overview Of Indian Stock Market”is a bonafied record of work carried by me, submitted partial fulfillment of requirement for theaward of degree Master Of Business administration under the guidance of……………………………(FINANCE FACULTY OF ASTHA SCHOOL OFMANAGEMENT) This research is solely the work of me based upon questionnaire, printed material given inbibliography. The matter embodied in this report has not been submitted for the award of anyother degree.DatedProjectsformba.blogspot.com 2
  3. 3. Projectsformba.blogspot.com ACKNOWLEDGEMENTDissertation Report is a bridge connecting the educational and professional use. It is the pathleading to success by shouldering responsibilities under the careful guidance of seniors andexperienced personnel without fear and failures.It gives me immense pleasure to take the opportunity to remember and thanks to thepersonalities who are involved with this project work during its study stage during my days ofhard work. I feel that it is my duty to express thanks and deep gratitude to everyone who isdirectly or indirectly associated in the completion of this Dissertation ReportWith deep reverence, I offer my deepest regards gratitude to ……………………… who is my financefaculty and ………………………………, finance faculty of Astha School Of Management, without whomthis Report could not have been fulfilled. Astha school of managementProjectsformba.blogspot.com 3
  4. 4. Projectsformba.blogspot.com Executive SummaryIndian securities markets have undergone many changes during the last decade.Exponential growth in trading volumes is pushing existing trading systems andprocesses to capacity and increasing settlement risk. With Indian market movingto a T+3 rolling settlement cycles in line with global markets, SEBI is continuingits efforts to increase the efficiency and transparency in Indian markets. Indeed ithas been SEBI endeavor to make the Indian markets, one of the mostcompetitive and efficient markets of the world.Income, Savings mobilization and promotion of investment are functions of thestock and capital markets which are a part of the organized financial system inIndia.This Project titled ‘An Overview of Indian stock market’ is an attempt tounderstand the stock market and role played by Indian retail Brokerage Firms instock market. The objective of brokerage firms is to help the investor to minimizethe risk involved in investment and maximize the return. Some of the maincharacteristics of the brokerage industry include growth in e-broking; growingderivatives market, decline in brokerage fees etc. An endeavor was also made tounderstand the role played by Indiabulls Securities compared to its competitors inIndian retail brokerage market.The role played by Indian retail brokerage industry is of immense significance,taking into account the health of the capital markets and the intensity ofcompetition among the brokerage companies.Projectsformba.blogspot.com 4
  5. 5. Projectsformba.blogspot.com Table of ContentsParticularsChapter 1 Outlook on Indian Stock market...........................Chapter 2 Overview of Indiabulls..........................................Chapter 3 Overview of Indiabulls Securities.........................Chapter 4 Financial Analysis..................................................Chapter 5 Understanding Capital market..............................Chapter 6 Derivatives............................................................Chapter 7 Competitors..........................................................Chapter 8 Competitive Analysis.............................................Chapter 9 SWOT Analysis......................................................Chapter 10 Research Methodology ………………………………Chapter 11 Findings & Suggestions.......................................Questionnare……………………………………………………………Conclusion ………………………………………………………………Bibliography..........................................................................Appendix...............................................................................Projectsformba.blogspot.com 5
  6. 6. Projectsformba.blogspot.comChapter 1 OUTLOOK ON INDIAN STOCK MARKET1.1 IntroductionIndian Stock Markets is one of the oldest in Asia. Its history dates back to nearly200 years ago. The earliest records of security dealings in India are meager andobscure. The East India Company was the dominant institution in those daysand business in its loan securities used to be transacted towards the close of theeighteenth century.By 1830s business on corporate stocks and shares in Bank and Cotton pressestook place in Bombay. Though the trading list was broader in 1839, there wereonly half a dozen brokers recognized by banks and merchants during 1840 and1850. The 1850s witnessed a rapid development of commercial enterprise andbrokerage business attracted many men into the field and by 1860 the number ofbrokers increased into 60. In 1860-61 the American Civil War broke out andcotton supply from United States to Europe was stopped; thus, the ShareMania in India began. The number of brokers increased to about 200 to 250.At the end of the American Civil War, the brokers who thrived out of Civil War in1874, found a place in a street (now appropriately called as Dalal Street) wherethey would conveniently assemble and transact business. In 1887, they formallyestablished in Bombay, the "Native Share and Stock Brokers Association”,which is alternatively known as “The Stock Exchange". In 1895, the StockExchange acquired a premise in the same street and it was inaugurated in 1899.Thus, the Stock Exchange at Bombay was consolidated.Projectsformba.blogspot.com 6
  7. 7. Projectsformba.blogspot.comThe Indian stock market has been assigned an important place in financing theIndian corporate sector. The principal functions of the stock markets are • enabling mobilizing resources for investment directly from the investors • providing liquidity for the investors and monitoring • Disciplining company management.The two major stock exchanges in India are National Stock Exchange (NSE)and Bombay Stock Exchange (BSE).1.2 National Stock ExchangeWith the liberalization of the Indian economy, it was found inevitable to lift theIndian stock market trading system on par with the international standards. Onthe basis of the recommendations of high powered Pherwani Committee, theNational Stock Exchange was incorporated in 1992 by Industrial DevelopmentBank of India, Industrial Credit and Investment Corporation of India, IndustrialFinance Corporation of India, all Insurance Corporations, selected commercialbanks and others.The National Stock Exchange (NSE) is Indias leading stock exchangecovering various cities and towns across the country. NSE was set up by leadinginstitutions to provide a modern, fully automated screen-based trading systemwith national reach. The Exchange has brought about unparalleled transparency,speed & efficiency, safety and market integrity. It has set up facilities that serveas a model for the securities industry in terms of systems, practices andprocedures.NSE has played a catalytic role in reforming the Indian securities market in termsof microstructure, market practices and trading volumes. The market today usesstate-of-art information technology to provide an efficient and transparentProjectsformba.blogspot.com 7
  8. 8. Projectsformba.blogspot.comtrading, clearing and settlement mechanism, and has witnessed severalinnovations in products & services viz. demutualization of stock exchangegovernance, screen based trading, compression of settlement cycles,dematerialization and electronic transfer of securities, market of debt andderivative instruments and intensive use of information technology.Trading at NSE can be classified under two broad categories: • Wholesale debt market • Capital marketWholesale debt market operations are similar to money market operations -institutions and corporate bodies enter into high value transactions in financialinstruments such as government securities, treasury bills, public sector unitbonds, commercial paper, certificate of deposit, etc.Capital market: A market where debt or equity securities are traded.There are two kinds of players in NSE: • Trading members • ParticipantsRecognized members of NSE are called trading members who trade on behalf ofthemselves and their clients. Participants include trading members and largeplayers like banks who take direct settlement responsibility.Trading at NSE takes place through a fully automated screen-based tradingmechanism which adopts the principle of an order-driven market. Tradingmembers can stay at their offices and execute the trading, since they are linkedthrough a communication network. The prices at which the buyer and seller arewilling to transact will appear on the screen. When the prices match theProjectsformba.blogspot.com 8
  9. 9. Projectsformba.blogspot.comtransaction will be completed and a confirmation slip will be printed at the officeof the trading member.NSE has several advantages over the traditional trading exchanges. They are asfollows: • NSE brings an integrated stock market trading network across the nation. • Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities. • Delays in communication, late payments and the malpractice’s prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.NSE NiftyS&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectorsof the economy. It is used for a variety of purposes such as benchmarking fundportfolios, index based derivatives and index funds.NSE came to be owned and managed by India Index Services and Products Ltd.(IISL), which is a joint venture between NSE and CRISIL. IISL is Indias firstspecialised company focused upon the index as a core product. IISL have aconsulting and licensing agreement with Standard & Poors (S&P), who are worldleaders in index services. CNX stands for CRISIL NSE Indices. CNX ensurescommon branding of indices, to reflect the identities of both the promoters, i.e.NSE and CRISIL. Thus, C stands for CRISIL, N stands for NSE and X stands forExchange or Index. The S&P prefix belongs to the US-based Standard & PoorsFinancial Information Services.Projectsformba.blogspot.com 9
  10. 10. Projectsformba.blogspot.com1.3 Bombay Stock ExchangeThe Bombay Stock Exchange is one of the oldest stock exchanges in Asia. Itwas established as "The Native Share & Stock Brokers Association" in1875. It is the first stock exchange in the country to obtain permanentrecognition in 1956 from the Government of India under the Securities Contracts(Regulation) Act, 1956. The Exchanges pivotal and pre-eminent role in thedevelopment of the Indian capital market is widely recognized and its index,SENSEX, is tracked worldwide.SENSEXThe Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index thatsubsequently became the barometer of the Indian stock market.SENSEX is not only scientifically designed but also based on globally acceptedconstruction and review methodology. First compiled in 1986, SENSEX is abasket of 30 constituent stocks representing a sample of large, liquid andrepresentative companies. The base year of SENSEX is 1978-79 and the basevalue is 100. The index is widely reported in both domestic and internationalmarkets through print as well as electronic mediaThe Index was initially calculated based on the "Full Market Capitalization"methodology but was shifted to the free-float methodology with effect fromSeptember 1, 2003. The "Free-float Market Capitalization" methodology of indexconstruction is regarded as an industry best practice globally. All major indexproviders like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-floatmethodology.Due to is wide acceptance amongst the Indian investors; SENSEX is regarded tobe the pulse of the Indian stock market. As the oldest index in the country, itprovides the time series data over a fairly long period of time. Small wonder, theProjectsformba.blogspot.com 10
  11. 11. Projectsformba.blogspot.comSENSEX has over the years become one of the most prominent brands in thecountry.The SENSEX captured all these events in the most judicial manner. One canidentify the booms and busts of the Indian stock market through SENSEX.The launch of SENSEX in 1986 was later followed up in January 1989 byintroduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100stocks listed at five major stock exchanges. The Exchange launched dollar-linkedversion of BSE-100 index i.e. Dollex-100 on May 22, 2006.In order to fulfill the need of the market participants for still broader, segment-specific and sector-specific indices, the Exchange has continuously beenincreasing the range of its indices. The launch of BSE-200 Index in 1994 wasfollowed by the launch of BSE-500 Index and 5 sectoral indices in 1999. In 2001,BSE launched the BSE-PSU Index, DOLLEX-30 and the countrys first free-floatbased index - the BSE TECK Index. The Exchange shifted all its indices to a free-float methodology (except BSE PSU index) in a phased manner.The values of all BSE indices are updated every 15 seconds during the markethours and displayed through the BOLT system, BSE website and news wireagencies.All BSE-Indices are reviewed periodically by the "Index Committee" of theExchange.Projectsformba.blogspot.com 11
  12. 12. Projectsformba.blogspot.comChapter 2 OVERVIEW OF INDIABULLS2.1 IntroductionIndiabulls is India’s leading Financial and Real Estate Company with a widepresence throughout India. Indiabulls Financial Services Limited was establishedin the year 2000 by three promoters all of whom are engineers from IndianInstitute of Technology, New Delhi, and has attracted over Rs 700 million ofinvestments from venture capital firms, private equity funds and institutionalinvestors.History • Indiabulls Financial Services Limited was incorporated on January 10, 2000 as Orbis Infotech Private Limited at New Delhi. • The name of the Company was changed to Indiabulls Financial Services Private Limited on March 16, 2001 due to change in the main objects of our Company from Infotech business to Investment & Financial Services business. • It became a Public Limited Company on February 27, 2004 and the name of the Company was changed to Indiabulls Financial Services Limited. Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than 4,50,000 which covers from a wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. The company employs around 4000 Relationship managers who help the clients to satisfy theirProjectsformba.blogspot.com 12
  13. 13. Projectsformba.blogspot.com customized financial goals. Indiabulls entered the Real Estate business in the year 2005 with its group of companies. Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 2500 million (29th December 2006). Indiabulls and its group companies have attracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.2.2 Growth of IndiabullsYear 2000-01:One of India’s first trading platforms was set up by Indiabulls Financial ServicesLtd. with the development of an in-house team.Year 2001-03: The service offered by Indiabulls was increased to includeEquity, F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and EquityResearch.Year 2003-04: In this particular year Indiabulls ventured into Distribution andCommodities Trading business.Projectsformba.blogspot.com 13
  14. 14. Projectsformba.blogspot.comYear 2004-05: This was one of the most important years in the history ofIndiabulls. In this year: • Indiabulls came out with its initial public offer (IPO) in September 2004. • Indiabulls started its Consumer Finance business. • Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in Indian Real Estate. • Indiabulls won bids for landmark properties in Mumbai.Year 2005-06: The world renowned investment banks like Merrill Lynch andGoldman Sachs increased their shareholding in Indiabulls. It also became amarket leader in securities brokerage industry, with around 31% share in OnlineTrading. The world’s largest hedge fund, Farallon Capital and its affiliatescommitted Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls CreditServices Ltd. and Indiabulls Housing Finance Ltd. In the same year, the SteelTycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2%stake in Indiabulls Credit Services Ltd.Year 2006-07: In this year, Indiabulls Financial Services Ltd. was included inthe prestigious Morgan Stanley Capital International Index (MSCI). The companyalso received an “in principle approval” from Government of India fordevelopment of multi product SEZ in the state of Maharashtra.Projectsformba.blogspot.com 14
  15. 15. Projectsformba.blogspot.com Diversified Business Group of Indiabulls Securities & Secured Derivatives Financing Broking Mortgage & Financial Housing Products Finance Distribution Consumer Financing Fig 2.1: Diversified Business Groups of Indiabulls2.3 IndiaBulls SubsidiariesIndiabulls securities limited: business comprises of Securities & Derivativesbroking.Indiabulls Credit services limited: business comprises of personal loans,secured and unsecured loans, and housing and auto loans.Projectsformba.blogspot.com 15
  16. 16. Projectsformba.blogspot.comFinancial products distribution: distribution of mutual funds and insuranceproducts.Indiabulls commodities Pvt ltd: deals with commodity brokerage businessIndiabulls Realities limited: is into development of Real estate and mining.Indiabulls housing loans: is into mortgage of properties and housing loanbusiness.2.4 Organizational Structure of IndiabullsThe organizational structure of Indiabulls is Functional, which consist of severaldepartments.Functioning Online: serving clients primarily through an Internet basedrelationship targeted towards clients who value anytime, anywhere access andcan be serviced at low incremental costs.Functioning Offline: serving clients primarily through an office basedrelationship targeted towards clients who value physical interaction.Online & offline business consist of following departments • Administration • Operations & Service quality • Technology • Finance • Corporate affairs • Human resources • Marketing • Corporate communications • LegalProjectsformba.blogspot.com 16
  17. 17. Projectsformba.blogspot.com Department based Organizational Structure: Director-Online Director-Offline Operations Corporate Technolog Corporate HumanAdministration & Finance Communi Legal y Affairs Resources cation Service Customer Recruitment Marketing Training Service Sr. Vice President Regional Manager Branch Manager Relationship Manager Projectsformba.blogspot.com 17
  18. 18. Projectsformba.blogspot.comFigure 2.2 Department based organizational Structure ofIndiabullsRegional Hierarchy of IndiabullsProjectsformba.blogspot.com 18
  19. 19. Projectsformba.blogspot.com Senior Vice President Regional Manager Branch Manager Senior Sales Manager Support System Sales Function RM/SRMBack Office Local Compliance Executive Officer ARM Dealer Projectsformba.blogspot.com 19
  20. 20. Projectsformba.blogspot.com Figure 2.3 Regional hierarchies of IndiabullsKey Positions Chairman CFO & President Securities Consumer Finance Real Estate Chief Executive Executive Director Executive Director Officer Figure 2.4 Key PositionsProjectsformba.blogspot.com 20
  21. 21. Projectsformba.blogspot.com2.5 Products and Services of IndiabullsIndiabulls offer the following products and services in the financial markets: • Stocks • Options and Futures • Depository Services • Commodities • Insurance Products • Mutual Funds • Bonds and Debt ProductsServicesCommercial Vehicle Loans:In April 2006 Indiabulls started Commercial Vehicle Finance under the flagship ofIndiabulls Credit Services Ltd. in order to provide refinance to its commercialvehicle clients. Their fundamentals, competent management and expertise infinancing the transporters are pretty sound. The company’s unique marketposition enables it to excel in client contentment, quick service and growth–ledprofitability.Projectsformba.blogspot.com 21
  22. 22. Projectsformba.blogspot.com.Mortgage Loans:Indiabulls Housing Finance Ltd. which is a flagship of Indiabulls has startedlending of Mortgage Loans to prospective customers. This company enables thehome-seekers to access finance to buy their homes. They provide different typesof loans like plot loans, Loan against Residential, Commercial and RentalProperty, thereby enabling the borrower to leverage the property owned to fundany genuine needs be it Business Expansion, Childs Education, Childs Marriageor for Holiday Abroad.Consumer Finance:Indiabulls is a retail focused organization that fulfills the credit needs of a largepercentage of population in India. The key aspect of Indiabulls business model isto provide an extremely unique customer experience.Projectsformba.blogspot.com 22
  23. 23. Projectsformba.blogspot.comChapter 3 OVERVIEW OF INDIABULLS SECURITIES LTD3.1 IntroductionIndiabulls Securities Ltd is engaged in the business of Internet based trading andis registered with SEBI as a stockbroker, trading and clearing member of NSE,member of BSE and as a depositary participant with National SecuritiesDepository Limited (“NSDL”) and Central Depository Services (India) Limited(“CDSL”). ISL is also a member of the National Securities Clearing CorporationLimited.HistoryIndiabulls Securities Limited (ISL) was incorporated as GPF Securities PrivateLimited on June 9, 1995.The name of the company was changed to Orbis Securities Private Limited onDecember 15, 1995 to change the profile of the company and subsequently dueto the conversion of the company into a public limited company; the name wasfurther changed to Orbis Securities Limited on January 5, 2004.The name of the company was again changed to Indiabulls Securities Limited onFebruary 16, 2004 so as to capitalize on the brand image of the term “Indiabulls”in the company name. ISL is a corporate member of capital market & derivativesegment of The National Stock Exchange of India Ltd.Projectsformba.blogspot.com 23
  24. 24. Projectsformba.blogspot.com Trading With IndiabullsThis section will introduce us about the process and instruments used to help a customeror a client to trade with Indiabulls securities. This process is almost similar to any othertrading firm but there will be some difference in the cost of brokerage commission.Trading: It is a process by which a customer is given facility to buy and sell share thisbuying and selling can only be done through some broker and this is where Indiabullshelp its customer.A customer willing to trade with any brokerage house need to have a demat account,trading account and saving account with a brokerage firm. Any one having followingdocument can open all the above mentioned account and can start trading.Document Required • 3 photographs ( signed across) • Photo Identification Proof - any of the following - Voter ID/Driving License/Passport. • Address Proof any of the following - Voter ID/Driving License/ Passport/ Bank statement or pass book sealed and attestation by bank official/ BSNL landline bill. • A crossed Cheque favoring “India bulls Securities Ltd”. of the required amount. The amount for Demat as well as trading will be Rs. 900/-(free Demat +900 Trading Account) the minimum amount being Rs. 900 a cheque can be given for a larger amount. • Copy of PAN Card is mandatory. • Registration Kit • CDSL Demat Kit • Bank and address proof declaration. (Master undertaking)Projectsformba.blogspot.com 24
  25. 25. Projectsformba.blogspot.com • PAN name discrepancy form These documents may not be consumer friendly but it is to avoid illegal transaction and to prevent black money this ensures that money invested is accounted.3.2 Business Model & Operations of Indiabulls Securities LtdThe three distinct internal business segments are: • Online business • Offline business • Other SalesOnline business: serving clients primarily through an Internet basedrelationship targeted towards clients who value anytime, anywhere access andcan be serviced at low incremental costs. The Online sales force sells all productsand services and follows the relationship manager model.Offline business: serving clients primarily through an office based relationshiptargeted towards clients who value physical interaction and are typically largeraccounts. The Offline Sales force sells all products and services and follows therelationship manager model. The Institutional business serving clients such asmutual funds and pension funds is considered part of the offline business due tolargely similar client servicing and channel needs as required for high net worthclients. Indiabulls Securities Limited has established relationships with some largeinstitutional players in India and is qualified broker for Equities, F&O and Debtmarkets for 145 such institutional clients.Other Sales: includes insurance, research services and other offeringsProjectsformba.blogspot.com 25
  26. 26. Projectsformba.blogspot.com3.3 Basic Requirement for doing Trading Trading requires Opening a Demat account. Demat refers to a dematerializedaccount.You need to open a Demat account if you want to buy or sell stocks. So it is justlike a bank account where actual money is replaced by shares. We need toapproach the Depository Participants (DP, they are like bank branches), to openDemat account.A depository is a place where the stocks of investors are held in electronic form.The depository has agents who are called depository participants (DPs).Think of it like a bank. The head office where all the technology rests and detailsof all accounts held is like the depository. And the DPs are the branches thatcater to individuals.There are only two depositories in India – • The National Securities Depository Ltd (NSDL) and the • Central Depository Services Ltd (CDSL).Projectsformba.blogspot.com 26
  27. 27. Projectsformba.blogspot.com3.4 Trading Products of Indiabulls Securities Indiabulls Securities Cash Account Intraday Account Margin Trading Fig showing 3.1 Trading Products of Indiabulls securitiesIndiabulls Securities provide three products for trading. They are • Cash account • Intraday account • Margin trading (Mantra)Projectsformba.blogspot.com 27
  28. 28. Projectsformba.blogspot.comCash account provides the client to buy 4 times of cash balance in his tradingaccount.Intraday product provides the client to buy 8 times of his cash balance in thetrading account.Mantra account – called as margin trading, is a special account to buy on leverage for alonger durationChapter 4 FINANCIAL ANALYSIS OF INDIABULLS SECURITIES4.1 Income: Indiabulls Securities Ltd income unit has the following componentsIncome from Online business : The contribution of revenue from Onlinebusiness have grown from Rs. 31.85 million in FY 2002 to Rs. 242.26 million in FY2004 and from 24.05% of total business in FY 2002 to 34.85% of business in FY2004. The rapid growth of the online business is driven by growth in total clients,increasing product flexibility and quality, enhanced online-only features such asportfolio analysis and updates, streaming tickers, enhanced product offering ofPower Indiabulls. • Brokerage • Equities • F&OIncome from Offline Business: The offline business unit has one of the widestbranch networks in India with a pan India presence with large market share. TheProjectsformba.blogspot.com 28
  29. 29. Projectsformba.blogspot.comrevenues have grown from Rs. 96.02 million in FY 2002 to Rs. 447.25 million inFY 2004 and have changed from 72.52% of total business in FY 2001 to 64.34%of business in FY 2004. The rapid growth of the Offline business is driven bygrowth in total clients, increased geographical presence. • Brokerage • Equities • F&O • Wholesale Debt MarketsBrokerage IncomeBrokerage Income comprises revenues earned from Equities, F&O and Wholesaledebt markets on all stock exchanges. • The income from brokerage services is driven primarily by the number of active clients. • The rapid growth in total clients is driven primarily by increased geographical presence. • Equities constitute the largest portion of brokerage business. • F&O brokerage is becoming an increasingly important component of its revenues as Futures & Options trading gains more acceptance. • Wholesale Debt market is focused on institutional clients.Income from transaction and service charges and interestincomeProjectsformba.blogspot.com 29
  30. 30. Projectsformba.blogspot.comRelated income comprises revenues earned from market related activities such astransaction charges, service charges and interest levied on customertransactions. These charges are dependent on trading volume, number oftransactions completed and any ledger debit amount in the client account.Income from other Sales including Insurance, Mutual FundSales and Other ProductsOther income comprises revenues earned from sale of third party products suchas Insurance, Mutual Funds and new services such as Research Services.Revenues are a function of volume of mutual funds sold, the type of fund sold(active managed equity, passive fixed income etc.) and the commissions paid onthe funds sold.Brokerage Income of Indiabulls SecuritiesProjectsformba.blogspot.com 30
  31. 31. Projectsformba.blogspot.com Brokerage Income of Indibulls Securities of 3 Years( in Crore) 300 261.11 250 Brokerage Income 200 150 99.65 100 47.2 50 0 2004 2005 2006 Years Mar-04 Mar-05 Mar-06 Bar Chart 4.1 Brokerage Income of Indiabulls Securities (in Crore)Segment wise Sales of Indiabulls securities for March 2005(in Crore)Projectsformba.blogspot.com 31
  32. 32. Projectsformba.blogspot.com Segmentwise Sales of Indiabulls Securities For March 2005(in Crore) 9.88, 9% 2, 2% 1.93, 2% 0.84, 1% Brokerage Income 99.65, 86% Income From Depository Service Income From other Financial Activity Interest Transaction ChargesPie Chart 4.2 Segment wise Sales of IndiaBulls Securities for year 2005Segment wise Sales of Indiabulls securities for March 2006(in Crore)Projectsformba.blogspot.com 32
  33. 33. Projectsformba.blogspot.com Segmentwise sales of Indiabulls Securities For March 2006(in Crore) 21.16, 7% 23.06, 7% 9.08, 3% 3.57, 1% 261.11, 82% Brokerage Income Income From Depository Service Income From other Financial Activity Interest Transaction Charges4.2 Financial Ratio Analysis of Indiabulls Securities LtdProjectsformba.blogspot.com 33
  34. 34. Projectsformba.blogspot.com Profitability ratios:Projectsformba.blogspot.com 34
  35. 35. Projectsformba.blogspot.com Indiabulls Securities Ltd. Mar 2004 Mar Mar 2006 2005 Per cent (Non-Annualized) 12 months 12 12 months months - Margins ratios (%) - As % of operating income PBDT 43.05 44.75 58.76 PBT 41.45 42.87 56.7 PAT 25.92 27.25 37.49 PBDT (NNRT) 43.01 44.52 58.72 PBT (NNRT) 41.41 42.63 56.66 PAT (NNRT) 25.88 27.02 37.45 - Corporate tax as per cent of PBT 35.83 33.69 32.47 - Returns ratios (%) - As % of total assets PBDT 18.95 31.35 PBT 18.15 30.25 PAT 11.54 20 PAT (NNRT) 11.44 19.98 Operating cash flow 77.78 65.19 - As % of net worth PBDT 53.48 128.77 PBT 51.23 124.25 PAT 32.57 82.16 PAT (NNRT) 32.29 82.07 Operating cash flow 219.53 267.75 - As % of capital employed PBDT 47.39 58.11 PBT 45.39 56.06 PAT 28.86 37.07 PAT (NNRT) 28.61 37.03 Operating cash flow 194.53 120.82 - Appropriation of profits (as % of PAT) Dividends 3.89 19.66 0.52Projectsformba.blogspot.com 35
  36. 36. Projectsformba.blogspot.com Equity dividends 0.44 2.27 0.07 Preference dividends 3.44 17.39 0.45 Retained profits 96.11 80.34 99.48 - Dividends / net worth 6.4 0.43 Equity dividends / equity capital 3.98 0.45 Equity dividends / equity cap. & sh. 3.98 0.45 prem. Liquidity ratios: Indiabulls Securities Ltd. Mar 2004 Mar 2005 Mar 2006 Times (Non-Annualized) 12 months 12 months 12 months - Short term liquidity - Cash / current liabilities & provisions 0.67 0.86 1.7 Quick ratio 1.6 0.86 1.89 - Medium to long term liquidity - Current ratio 1.776 1.141 2.137 Solvency ratio 1.567 1.561 1.269 Debt equity ratio 1.237 0.848 2.056 - Interest incidence (%) 11.42 19.13 11.67 - Interest cover - PBIT / interest 3.63 4.01 5.2 PBIT (NNRT) / interest 3.63 4 5.2 Operating cash flow / interest -2.99 11.97 8.91 - (Rs. Crore) Current assets 231.47 261.19 914.49 Current liabilities 130.34 228.86 427.87 Working capital 101.13 32.33 486.62 Net worth 83.34 108.43 181.77 Reserves & surplus 20.24 45.33 163.94Projectsformba.blogspot.com 36
  37. 37. Projectsformba.blogspot.com Asset utilization ratios Indiabulls Securities Ltd. Mar Mar 2005 Mar 2006 2004 Times (Non-Annualized) 12 12 12 months months months - Efficiency ratios - Operating cash flow / total assets 0 0.78 0.65 Operating cash flow / gross fixed 0 17.46 14.15 assets Operating cash flow / capital 0 1.95 1.21 employed - Operating income / total assets 0.42 0.53 Operating income / GFA / leased 9.51 11.58 assets Operating income / capital employed 1.06 0.99 - PBDT (NNRT) / total assets 0.19 0.31 PBDT (NNRT) / gross fixed assets 4.23 6.8 PBDT (NNRT) / capital employed 0.47 0.58 - PBT / total assets 0.18 0.3 PBT / gross fixed assets 4.05 6.56 PBT / capital employed 0.45 0.56 - PAT / total assets 0.11 0.2 PAT / gross fixed assets 2.57 4.34 PAT / capital employed 0.29 0.374.3 Interpretation:Projectsformba.blogspot.com 37
  38. 38. Projectsformba.blogspot.comProfitability Ratios: Profitability is the net result of a number of policies anddecisions. The ratios examined thus far provide useful clues to the effectivenessof firms operations.Liquidity Ratios: liquidity ratios deal with firm’s ability to pay off its debts. Itincludes • Current ratio: The current ratio is calculated by dividing current assets by current liabilities. The current ratio of Indiabulls securities is 1.776, 1.441, & 2.137 for year 2004, 2005 & 2006 respectively. Current ratio = Current assets Current Liabilities • Quick ratio (acid test ratio): The quick ratio is calculated by deducting inventories from current assets and then dividing the remainder by current liabilities. The quick ratio is a measure of the firm’s ability to pay-off the short-term liabilities. A large part of the firms current assets are tied up in slow paying debts. The industry average for Acid test ratio is 2.1, but for Indiabulls securities quick ratio is 1.6, 0.86 & 1.89 for year 2004, 2005 & 2006 respectively, which is less than Industry average. The quick ratio should be high which indicates the company’s ability to pay-off short term obligations.Debt equity Ratio:Projectsformba.blogspot.com 38
  39. 39. Projectsformba.blogspot.comDebt equity ratio is the related contribution of creditors and owners of thebusiness in its financing.4.4 Financial performance Year on Year (1) Increasing Market Share of Indiabulls on NSE Trading Volumes 35 % 30.7 30 % 25 22.3 % 21.9 18.8 % 20 % 17.5 15 10 5.5 5 3.4 % % 1.1 1.9 2.2 % % 0 (1) FY200 FY200 FY200 FY200 FY200 Share in Online Share in Total(1) Source: NSE data from NSE website (Equity Segment)Projectsformba.blogspot.com 39
  40. 40. Projectsformba.blogspot.comGraph 4.3 Market share of Indiabulls on NSE trading Volumes Market Shares of Top Brokers on NSE (2)40% 35%35%30% 24%25% 20%20% 14%15% 12%10% 7%5%0% Top 5 Top 10 Top 25 FY02 FY05 UNDERSTANDING CAPITAL MARKETProjectsformba.blogspot.com 40
  41. 41. Projectsformba.blogspot.com 5.1 Project Framework An Outlook on Indian Stock Market Capital Market Derivative SegmentIntraday Delivery Futures Options Figure 5.1 Project Framework Projectsformba.blogspot.com 41
  42. 42. Projectsformba.blogspot.comThe Indian capital markets have witnessed a transformation over the last decade.India now finds its place amongst some of the most sophisticated and largestmarkets of the world. With over 20 million shareholders, India has the thirdlargest investor base in the world after the USA and Japan. The Indian capitalmarket is significant in terms of the degree of development, volume of tradingand its tremendous growth potential.Over the past few years, the capital markets have also witnessed substantialreforms in regulation and supervision. Reforms, particularly the establishmentand empowerment of SEBI, market-determined prices and allocation ofresources, screen-based nation-wide trading, dematerialization and electronictransfer of securities, rolling settlement and derivatives trading have greatlyimproved both the regulatory framework and efficiency of trading and settlement.5.2 Indian Capital markets - Chronology • 1994- Equity Trading commences on NSE • 1995- All Trading goes Electronic • 1996- Depository comes in to existence • 1999- FIIs Participation- Globalization • 2000- over 80% trades in Demat form • 2001- Major Stocks move to Rolling Set • 2003- T+2 settlements in all stocks • 2003 - Demutualization of Exchanges5.3 Capital Market Participants • Banks • ExchangesProjectsformba.blogspot.com 42
  43. 43. Projectsformba.blogspot.com • Clearing Corporations • Brokers • Custodians • Depositories • Investors • Merchant Bankers5.4 Types of Investors • Institutional Investors- MFs / FI / FIIs / Banks • Retail Investors • Arbitrageurs / Speculators • Hedgers • Day traders/Jobbers5.5 Cash MarketThe Spot Market or Cash Market is a commodities or securities market inwhich goods are sold for cash and delivered immediately. Contracts bought andsold on these markets are immediately effective. Spot markets can operatewherever the infrastructure exists to conduct the transaction. The Spot marketfor most securities exists primarily on the internet. The trading in this cashmarket can be further divided into Intraday and Delivery.5.6 Key Terms • Intraday refers to buying or selling stocks today with an obligation to sell or buy the stock on the same day. It means completing the trading cycle in the same day. Here the stocks do not come to the Demat account.Projectsformba.blogspot.com 43
  44. 44. Projectsformba.blogspot.com • Delivery refers to buying stocks today with a plan of selling it in future. In India there is a concept of T+2 settlements. Which means a stock bought on trade day is credited to your Demat account (or delivered) into your Demat account after 2 days. • Square off- making the position nil. Say selling off the stocks. (or buying back in case of short selling) • Short selling- selling without having the possession of the stocks (possible in intraday trade). Selling the stocks initially and buying them back later. It is a concept used in the falling markets. • Demat Account- the account where in the shares are delivered. Every Demat account is linked to a trading account and a savings bank account. Demat account are provided by CDSL (central depository services limited) and NSDL (national securities depository limited). Indiabulls is a depository participant which links the depository to the beneficial owner of the account (client). • Trading pool/margin account- the place where the stock is received after the trade, it is the broker’s account called the broker pool account. • T+2= Transaction + 2 daysProjectsformba.blogspot.com 44
  45. 45. Projectsformba.blogspot.comChapter 6 DERIVATIVESBy far the most significant event in finance during the past decade has been theextraordinary development and expansion of financial derivatives. Theseinstruments enhance the ability to differentiate risk and allocate it to thoseinvestors most able and willing to take it6.1 Definition:Derivatives are instruments whose value is ‘derived’, in whole or in part, from thevalue of one or more underlying assets.History of DerivativesThe history of derivatives is surprisingly longer than what most people think.Some texts even find the existence of the characteristics of derivative contracts inincidents of Mahabharata. Traces of derivative contracts can even be found inincidents that date back to the ages before Jesus Christ. However, the advent ofmodern day derivative contracts is attributed to the need for farmers to protectthemselves from any decline in the price of their crops due to delayed monsoon,or overproduction.Projectsformba.blogspot.com 45
  46. 46. Projectsformba.blogspot.comThe first futures contracts can be traced to the Yodoya rice market in Osaka,Japan around 1650. These were evidently standardized contracts, which madethem much like todays futures.The Chicago Board of Trade (CBOT), the largest derivative exchange in theworld, was established in 1848 where forward contracts on various commoditieswere standardized around 1865. From then on, futures contracts have remainedmore or less in the same form, as we know them today.Derivatives have had a long presence in India. The commodity derivative markethas been functioning in India since the nineteenth century with organized tradingin cotton through the establishment of Cotton Trade Association in 1875. Sincethen contracts on various other commodities have been introduced as well.Exchange traded financial derivatives were introduced in India in June 2000 atthe two major stock exchanges, NSE and BSE. There are various contractscurrently traded on these exchanges. National Commodity & DerivativesExchange Limited (NCDEX) started its operations in December 2003, to provide aplatform for commodities trading.The derivatives market in India has grown exponentially, especially at NSE. StockFutures are the most highly traded contracts on NSE accounting for around 55%of the total turnover of derivatives at NSE, as on April 13, 2005.6.2 Understanding DerivativesProjectsformba.blogspot.com 46
  47. 47. Projectsformba.blogspot.comThe primary objectives of any investor are to maximize returns and minimizerisks. Derivatives are contracts that originated from the need to minimize risk.The word derivative originates from mathematics and refers to a variable, whichhas been derived from another variable. Derivatives are so called because theyhave no value of their own. They derive their value from the value of some otherasset, which is known as the underlying.Derivatives are specialized contracts which signify an agreement or an option tobuy or sell the underlying asset of the derivate up to a certain time in the futureat a prearranged price, the exercise price. The contract also has a fixed expiryperiod mostly in the range of 3 to 12 months from the date of commencement ofthe contract. The value of the contract depends on the expiry period and also onthe price of the underlying asset.For example, a farmer fears that the price of soybean (underlying), when his cropis ready for delivery will be lower than his cost of production.Lets say the cost of production is Rs 8,000 per ton. In order to overcome thisuncertainty in the selling price of his crop, he enters into a contract (derivative)with a merchant, who agrees to buy the crop at a certain price (exercise price),when the crop is ready in three months time (expiry period).In this case, say the merchant agrees to buy the crop at Rs 9,000 per ton. Now,the value of this derivative contract will increase as the price of soybeandecreases and vice-a-versa.If the selling price of soybean goes down to Rs 7,000 per ton, the derivativecontract will be more valuable for the farmer, and if the price of soybean goesdown to Rs 6,000, the contract becomes even more valuable.Projectsformba.blogspot.com 47
  48. 48. Projectsformba.blogspot.comThis is because the farmer can sell the soybean he has produced at Rs 9000 perton even though the market price is much less. Thus, the value of the derivativeis dependent on the value of the underlying.6.3 Difference between Commodity Derivative & Financial DerivativeIf the underlying asset of the derivative contract is coffee, wheat, pepper, cotton,gold, silver, precious stone or for that matter even weather, then the derivative isknown as a commodity derivative.If the underlying is a financial asset like debt instruments, currency, share priceindex, equity shares, etc, the derivative is known as a financial derivative.Derivative contracts can be standardized and traded on the stock exchange. Suchderivatives are called exchange-traded derivatives. Or they can be customized asper the needs of the user by negotiating with the other party involved.Such derivatives are called over-the-counter (OTC) derivatives. Continuing withthe example of the farmer above, if he thinks that the total production from hisland will be around 150 quintals, he can either go to a food merchant and enterinto a derivatives contract to sell 150 quintals of soybean in three months time atRs 9,000 per ton. Or the farmer can go to a commodities exchange, like theNational Commodity and Derivatives Exchange Limited, and buy a standardcontract on soybean.Projectsformba.blogspot.com 48
  49. 49. Projectsformba.blogspot.comThe standard contract on soybean has a size of 100 quintals. So the farmer willbe left with 50 quintals of soybean uncovered for price fluctuations.However, exchange traded derivatives have some advantages like low transactioncosts and no risk of default by the other party, which may exceed the costassociated with leaving a part of the production uncovered.In India we have several derivatives, two of the most famous derivatives tradedon National stock exchange are • Futures • Option Futures and options are traded on the NSE platform, with a normal IndiaBulls trading account the client get the access to trade in the F&O contracts.6.4 Futures and ForwardsAs the name suggests, futures are derivative contracts that give the holder theopportunity to buy or sell the underlying at a pre-specified price some time in thefuture.They come in standardized form with fixed expiry time, contract size and price.Forwards are similar contracts but customizable in terms of contract size, expirydate and price, as per the needs of the user.6.5 OptionsProjectsformba.blogspot.com 49
  50. 50. Projectsformba.blogspot.comOption contracts give the holder the option to buy or sell the underlying at a pre-specified price some time in the future. • An option to buy the underlying is known as a Call Option. • An option to sell the underlying at a specified price in the future is known as Put Option.In the case of an option contract, the buyer of the contract is not obligated toexercise the option contract. Options can be traded on the stock exchange or onthe OTC market. 6.6 Futures Terminology • Spot Price: the price at which an asset trades in the spot market. • Futures Price: the price at which the futures contract trades in the futures market • Contract Cycle: The period over which the contract trades. The index futures contracts on the NSE have a one-month, two-month and three- month expiry cycles which expire on the last Thursday of the month. On the Friday following the last Thursday, a new contract having a three-month expiry is introduced for trading. • Expiry Date-the date specified in the futures contract. It is the last Thursday of the month • Contract Size: the amount of asset that has to be delivered less than one contract. For instance, the contract size on NSE futures market is 100 Niftiest. It is prescribed by NSE for stocks. Each stock had a different lot size. • Basis – the futures price minus the spot price. There will be a different basis for each delivery month for each contract. In a normal market,Projectsformba.blogspot.com 50
  51. 51. Projectsformba.blogspot.com basis will be positive. This reflects that futures prices normally exceed spot prices. • Cost of Carry – the storage cost plus the interest that is paid to finance the asset less the income earned on the asset. • Initial Margin – the amount that must be deposited in the margin account at the time the futures contract is first entered into. These margins are prescribed by the exchange. It varies from stock to stock. • Marking to Market – the adjustment made at the end of each trading day to the investor’s margin account to reflect the investor’s gain or loss depending upon the futures closing price. It is the difference between today’s closing price and yesterdays closing. The MTM profit /loss are credited to the client account on day to day basis. Thus we call this a T+0 settlement. • Maintenance Margin – somewhat lower than the initial margin; the balance in the margin account must never become negative and in case it does, the investor receives a margin call that must top-up the account to the initial margin level before trade commences the following day. •Difference between Long Position & Short Position A long position is an agreement to buy. You take a long position on a stock when you are bullish or have a feeling that the stock will move up. LONG => BUY A short position is an agreement to sell. You take a short position on a stock when you are bearish or have a feeling that the stock will move down.Projectsformba.blogspot.com 51
  52. 52. Projectsformba.blogspot.com SHORT => SELL There are around 152 companies which are underlying for future and options in NSE. There are • index Futures (Nifty futures, Bank Nifty, CNX IT futures) • Stock Futures (Infosys futures. ITC futures, etc linked to specific stocks) • Index options (linked to indices) • Stock option (linked to specific stocks).6.7 Option Contracts: The owner of an option has the OPTION to buy or sellsomething at a predetermined price. Option provides the buyer of the contractthe right but not the obligation to exercise. Right to BUY / OWN – CALL OPTION Or Right to SELL / WRITE – PUT OPTION You buy a call option when you are bullish or have an upward target. You buy a put option when you are bearish or have a downward target.6.8 Options Terminology • Stock options – options on individual stocks. A contract gives the buyer the right to buy or sell shares at the specified price • Buyer of an option – the one who by paying price (premium) buys the right but not the obligation to exercise his/her option on the seller/writer • Writer of an option – the one who by receiving premium, is obliged to sell/buy the asset if the buyer exercises on himProjectsformba.blogspot.com 52
  53. 53. Projectsformba.blogspot.com • Call Option – gives the buyer the right but not the obligation to buy an asset by a certain date for a certain price • Put Option – gives the buyer the right but not the obligation to sell an asset by a certain date for a certain price • Spot Price – the price at which an asset trades in the spot market. • Strike Price – the target price or the expected price. • Contract Cycle – the period over which the contract trades. There are three month contracts just like the futures. • Expiry Date – the date specified in the option contract. It is the last Thursday of the month, just as in futures. • Contract Size – the amount of asset that has to be delivered under one contract. • In-The-Money Option (ITM) – an option that would lead to a positive cash-flow to the holder if it were exercised immediately. • A call option on the index is said to be ITM if the current index stands higher than the strike price (Spot Price > Strike Price). • A put option is ITM if the index is below the Strike price (Spot Price < Strike Price). • At-The-Money (ATM) – an option that would lead to zero cash flows to the holder if it were exercised immediately. • Out-Of-The-Money Option (OTM) – an option that would lead to a negative cash-flow to the holder if it were exercised immediately. • A call option on the index is said to be OTM if the current index stands at a level which is less than the strike price (Spot Price < Strike Price).Projectsformba.blogspot.com 53
  54. 54. Projectsformba.blogspot.comChapter 7 THE COMPETITORS7.1 Major Competitors of Indiabulls Securities LtdIndiabulls Securities faces significant competition from companies seeking toattract client financial assets, including traditional and online brokerage firms,mutual fund companies and institutional players having wide presence and astrong brand name. They are; • ICICI Securities Ltd. • Kotak Securities Ltd. • India Infoline SSKI Ltd. • Motilal Oswal Securities • Karvy • Geojit Securities • HDFC Securities7.2 India Infoline LtdProjectsformba.blogspot.com 54
  55. 55. Projectsformba.blogspot.com India Infoline Ltd is listed on both the leading stock exchanges in India,viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE).The India Infoline group, comprising the holding company, India Infoline Ltd andits subsidiaries, straddles the entire financial services space with offerings rangingfrom Equity research, Equities and derivatives trading, Commodities trading,Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits andother small savings instruments to loan products and Investment banking. IndiaInfoline also owns and manages the websites, www.indiainfoline.com andwww.5paisa.com .India Infoline Securities Pvt LtdIndia Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, whichis engaged in the businesses of Equities broking and Portfolio ManagementServices. It offers broking services in the Cash and Derivatives segments of theNSE as well as the Cash segment of the BSE.A choice of technologically advanced trading that is with the help of 5paisa.com.5 paisa also represents the availability of world class service to investors at thelowest possible rate - 5 paisa for every trade of Rs100, i.e., a brokerage rate of0.05%.Features of 5 paisa.com:Paisa sense - They offer a good value for money proposition. Their brokeragerates are very competitive, charging only 5 paise for Rs100 of trade done, whichis 0.05% brokerage. They offer the most reasonable rates, independent of yourProjectsformba.blogspot.com 55
  56. 56. Projectsformba.blogspot.comnet worth or volumes. In case of trades that result in delivery, they charge anadditional 0.20% for back office and securities handling.Personalized service - At 5paisa.com, they are committed to provide you withunparalleled service, using e-mail, call centers and support staff. They have alsoinvested in physical infrastructure.Protection – All transactions of 5paisa.com are secure and confidential. Theorders are electronically routed via sophisticated trading systems for execution.They follow a world class security system that enables them to protect from anyfraud or hacking.Pedigree - 5paisa.com is a brand renowned for quality of information andservices, they are professionally managed, with a skill set which is of highstandard. Their top management has years of experience in financial serviceswith leading banks and institutions.7.3 Sharekhan SecuritiesSharekhan was created when SSKI Investor Services Pvt. Ltd., a company in thesecurities and equities segment decided to harness the power of the Internet andoffer services to its customers through an online stock trading portal. Sharekhanbrings and provides a user-friendly online trading facility. They also have anextensive all-India ground network of franchisees across the country.Projectsformba.blogspot.com 56
  57. 57. Projectsformba.blogspot.comThe company offers its services through a combination of online and offlinechannels. The online model comprises a portal, chat facilities, and speed tradeterminals. And the offline model uses a combination of an IVR infrastructure anda team of customer agents to receive orders over the telephone.7.4 Motilal OswalMotilal Oswal Securities Ltd. was founded in 1987 as a small sub-broking unit,with just two people running the show. Motilal Oswal Securities Limited hasestablished itself as the Best Local Brokerage House in India (Asia Money Brokers’Poll 2005). Their Institutional Equities Division combines the efforts of theResearch and Sales & Trading departments to best serve clients needs.Consistent delivery of high quality advice on individual stocks, sector trends andinvestment strategy has established them as a reliable research unit amongstleading Indian as well as international investors.Their sales & trading team, comprising top equity professionals, translates theresearch findings into actionable advice for clients, based on their specific needs.Sophisticated computerized tools are used to understand client investment profileand objectives, which ensures proactive and timely service.FEATURESIntegrity: A company honoring commitment with highest ethical and businesspractices.Projectsformba.blogspot.com 57
  58. 58. Projectsformba.blogspot.comTeam Work: Attaining goals collectively and collaboratively.Meritocracy: Performance gets differentiated, recognized and rewarded in anapolitical environment.Passion & Attitude: High energy and self motivated with a “Do It” attitude.Excellence in Execution: Time bound results within the framework of thecompany’s value system.7.5 KarvyThe birth of Karvy was on a modest scale in the year 1982. It began with thevision and enterprise of a small group of practicing Chartered Accountants basedin Hyderabad, who founded Karvy. They started with consulting and financialaccounting automation, and then carved inroads into the field of Registry andShare Transfers. Karvy has built a reputation as an integrated financial servicesprovider, offering a wide spectrum of services for over 20 years.In 1982, a group of Hyderabad-based practicing Chartered Accountants startedKarvy Consultants Limited with a capital of Rs.150, 000 offering auditing andtaxation services initially. Later, it forayed into the Registrar and Share Transferactivities and subsequently into financial services.Karvy made inroads into a host of capital-market services, - corporate and retail -which proved to be a sound business synergy. In January 1998, Karvy becamethe first Depository Participant in Andhra Pradesh.Projectsformba.blogspot.com 58
  59. 59. Projectsformba.blogspot.comKarvy Securities LimitedDeals in distribution of various investment products, viz., equities, mutual funds,bonds and debentures, fixed deposits, insurance policies for the investor.7.6 Kotak SecuritiesKotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stockbroking and distribution arm of the Kotak Mahindra Group. Kotak Mahindra is oneof Indias leading financial institutions, offering complete financial solutions thatencompass every sphere of life. From commercial banking, to stock broking, tomutual funds, to life insurance, to investment banking, the group caters to thefinancial needs of individuals and corporate.Kotak Securities was set up in 1994. Kotak Securities is a corporate member ofboth The Bombay Stock Exchange and the National Stock Exchange of IndiaLimited.Its operations include stock broking and distribution of various financial products- including private and secondary placement of debt and equity and mutualfunds. Currently, Kotak Securities is one of the largest broking houses in Indiawith wide geographical reach. The company has four main areas of business: • Institutional Equities, • Retail (equities and other financial products), • Portfolio Management and • Depository Services.Kotak Securities Ltd is also a depository participant with National SecuritiesDepository Limited (NSDL) and Central Depository Services Limited (CDSL),Projectsformba.blogspot.com 59
  60. 60. Projectsformba.blogspot.comproviding dual benefit services wherein the investors can use the brokerageservices of the company for executing the transactions and the depositoryservices for settling them.Kotak Securities has 195 branches servicing more than 2, 20,000 customers andcoverage of 231 Cities. Kotaksecurities.com, the online division of KotakSecurities Limited offers Internet Broking services and also online IPO and MutualFund Investments.Features of Kotak Securities • AKSESS Kotak securities Electronic Search Service: AKSESS offers you an easy way to get to Kotak Securities institutional research. On this online archive you will be able to access estimates, company reports, sector reports, strategy reports and a bunch of other products including the daily India Market Flash produced by Kotak Securities. • High Quality of software (KEAT): K.E.A.T is special software that Koataksecurities.com provides its customers using which they can view live market rates of scrip’s on both the NSE and BSE. • Research Reports: Kotak Securities provide Different reports to investors which include • Intraday calls • Daily Technical View • Daily Morning Brief • Weekly Technical Report • Sectoral Reports • Stock Ideas • Derivative Reports • SMS Alerts: Kotak Securities also provides SMS alerts to customers providing useful tips about stocks & shares.Projectsformba.blogspot.com 60
  61. 61. Projectsformba.blogspot.com7.7 ICICI SECURITIESICICI Securities, A subsidiary of ICICI Bank, was set up in February 1993 toprovide investment-banking services to investors in India. As on date ICICI Bankholds 99.9% of the share capital of ICICI Securities.ICICI Securities Limited is India’s leading full service investment bank with adominant position in all segments of its operations – • Corporate Finance • Fixed Income and • Equities.Features of ICICI securities ICICI provides multiple channels in banking like,which is unique feature. • Internet Banking • Mobile Banking • ATM banking • Phone Banking • ICICI Securities is amongst the largest arranger of funds in Debt and Equity segments and also amongst the leading advisors in Mergers and Acquisitions.Projectsformba.blogspot.com 61
  62. 62. Projectsformba.blogspot.comChapter 8 COMPETITIVE ANALYSIS FOR INDIABULLS SECURITIES8.1 Indian Retail Brokerage MarketThe Indian retail brokerage industry consists of companies that primarily act asagents for the buying and selling of securities (e.g. stocks, shares, and similarfinancial instruments) on a commission or transaction fee basis.It has two main interdependent segments: Primary market and theSecondary market. Indian Retail Brokerage Market Interdepende ntProjectsformba.blogspot.com 62 Segments
  63. 63. Projectsformba.blogspot.com Primary Market Secondary Market Figure 8.1 Interdependent Segments of Brokerage MarketObjective: The main objective is to • Analyze retail brokerage industry taking into account the health of the capital markets, Derivative Market and the intensity of competition among the brokerage companies. • Doing Competitive Analysis for Indiabulls 8.2 Major growth drivers for brokerage revenue and trading volume are: • Continuous fall in brokerage fees • Adoption of technology — screen-based trading, electronic matching, and paperless securities. • Centralized operations, effective risk management, and control on large interconnected operations spanning multiple locations, which is enabled by telecom connectivity and low costs • Increasing access to capital and the ability to provide margin financeProjectsformba.blogspot.com 63
  64. 64. Projectsformba.blogspot.com8.3 Parameter Assessment for Doing Competitive analysisA differentiating aspect is a comparative assessment of the top retail brokerageson various value indicators, comprising of • Product • Pricing • Service Competitive analysis Product Price Service Value Proposition • Unique Value proposition.Projectsformba.blogspot.com 64
  65. 65. Projectsformba.blogspot.com8.4 Customers need to analyze the Brokerage Firms Based on these 5Parameters. • Brokerage & Miscellaneous charges • Quote Software • Execution Platform • Demat Account, and finally • Back office Support.Brokerage & Miscellaneous charges: This accounts for all the charges thatyou incur for your trading/investing. A few examples would be: Demat Accountmaintenance, Brokerage, Annual account Fee, Telephone based trading charges,trading software usage charges, etc.Quote Software: This is used mainly for technical study and for live quotes.Many people don’t evaluate quote software. Some Investors don’t pay attentionto the quality of data (how accurate it is). Or how fast and often it refreshes.Does it allow us to back test our strategy? Does it allow customizing technicalsignals/parameters?? Does it allow us to see historic data? For, what period isProjectsformba.blogspot.com 65
  66. 66. Projectsformba.blogspot.comintra day data available? They might need all this information. They should beclear on what they need and ensure quote software provides it all.Execution Platform: It’s nothing but a platform that allows us to execute ourtrade fast. It should automate trade management and execution, and shouldautomatically give protection against human errors.Demat Account: Demat account should only be opened with a well known andestablished brokerage firm in the market.Back office Support: People while trading face lots of problem because of lackof good back office support. Relationship Managers trading without their client’sknowledge, funds not being transferred, trades not being executed, slowexecution etc are a few examples. 8.5 Brokerage Charges Intraday Brokerage charges of the Competitors of Indiabulls Securities LtdProjectsformba.blogspot.com 66
  67. 67. Projectsformba.blogspot.com Intraday Brokerage Charges 0.3 0.25 0.25 0.2 Charges 0.15 0.1 0.1 0.1 0.1 0.1 0.05 0.05 0.05 0 Indiabulls Kotak India-infoline ICICI direct Karvy Motilal Sharekhan Securities oswal Financial Brokerage Firms Indiabulls Kotak Securities India-infoline ICICI direct Karvy Motilal oswal Sharekhan Graph 8.2 Intraday Brokerage Charges Delivery Brokerage charges of the Competitors of Indiabulls Securities LtdProjectsformba.blogspot.com 67
  68. 68. Projectsformba.blogspot.com Delievery Brokerage Charges 0.8 0.75 0.7 0.6 0.5 0.5 0.5 0.5 0.5 0.5 0.45Charges 0.4 0.3 0.2 0.1 0 Indiabulls Kotak India- ICICI Direct Karvy Motilal oswal Sharekhan Securities infoline Financial Brokerage Firms Indiabulls Kotak Securities India-infoline ICICI Direct Karvy Motilal oswal Sharekhan Graph 8.3 Delivery Brokerage Charges 8.6 Analyzing the Blogs from Web Site Traderji.com (online community for Indian Investors & Traders) Projectsformba.blogspot.com 68
  69. 69. Projectsformba.blogspot.comWe were interpreting the blogs written by customers, their experiences and theirreview on brokerage firms.In this web site they have conducted opinion poll on broker preferences ofcustomers & reasons for choosing the particular brokerage firm. In this pollopinion, customers have shared their viewpoint about pros & cons of differentbrokerage firms.Experiences of CustomersPoll OptionsWhich online broker u prefer and why - chose one5paiseShareKhanMotilal OswalICICI DirectHDFCIndia BullsKotakAny other (mention name)View Poll Results Poll Results of Blogs: Total Number of Voters =457 Which Online Broker You Prefer? Poll Results of Blog(Voters 457) Any other Mention, India-Infoline(5paisa), (58), 13% (68), 15% Kotak, (34), 7% Sharekhan, (83), 18% Indiabulls, (75), 16% Motilal Oswal, (16), 4% ICICI direct, (109), 24% HDFC, (14), 3%Projectsformba.blogspot.com 69 India-Infoline(5paisa) Sharekhan Motilal Oswal ICICI direct HDFC Indiabulls Kotak Any other Mention
  70. 70. Projectsformba.blogspot.com Pie chart 8.4 showing Poll results8.7 Competitive Strength of Indiabulls SecuritiesIndiabulls securities Ltd have a distinct set of competitive advantages that makeit uniquely capable of winning in the marketplace against its competitors • Diverse Branch Network • Bouquet of financial products and services • Advanced technology team that delivers market leading product innovation • Strong sales and marketing teams with continuous reinvestment and training • Strong cross-selling opportunities. • Strong and experienced promoters • Leading product innovation and marketing strategies • Well capitalized player, with strong banking relationships and credit ratings • Ability to combine people and technology in unique ways • Strong market presence and increased market share leading to a virtuous cycle of growth and Profitability.Core pillars of Business strategy • Increase the number of Client Relationships. • Offer Diversified Financial Products & Services. • Multiple Channels – Enhance Customer Experience and Opportunities. • Low cost and highly scalable business.Merits of Indiabulls Securities • Low brokerage charges (Competitive) with 0.10 for Intra-day and 0.50 % for delivery.Projectsformba.blogspot.com 70
  71. 71. Projectsformba.blogspot.com • Indiabulls securities provide 8 times margin for Intra-day and 4 times margin for delivery. • Indiabulls is suitable for both Day trading & Long term investment • IndiaBulls has software called Power IndiaBulls. It is a Java based application, with real-time streaming quotes. It is fast in terms of speed and execution • Research reports are free of cost to trading members. • They Provide 3 in 1 interface, i.e. Demat Account, Trading account & bank account all are linked in one interface.De-Merits of Indiabulls Securities • You have to open a bank account with the banks mentioned in Indiabulls site for Credit/ Debit Facility as they don’t have their own bank. And In ICICI direct , you have a direct debit/credit facility with the bank • Most customers feel that it is difficult to understand the ledger reports of Indiabulls securities, so proper customer guidance should be given. • Lack of Banking arm • Rural market is yet to be tapped. • More importance should be given to promotions & advertisements.Value Proposition of Indiabulls Securities • ISL provide a very good Trading tools like Power Indiabulls & Indiabulls market trader. • Power Indiabulls: A desktop Trading application offering clients sophisticated trading tools accessible at lightning fast speed.Projectsformba.blogspot.com 71
  72. 72. Projectsformba.blogspot.com • Indiabulls Market Trader: Browser based trading application built for retail investor. • Indiabulls Equity Analysis: Premium research on 400 plus companies. • Indiabulls Professional Network: Offers real-time prices, detailed data and news, intelligent analytics and electronic trading capabilities. • Relationship manager: Indiabulls securities robust technology is integrated with knowledgeable and customer-focused relationship managers who are available 24X7 to assist the clients. • In Depth Market Analysis and Research Their special research cell bring you intensive research reports on how the stock market is faring, when is the right time to invest, when to execute your order and more. Depending on what kind of investor you are, they bring you fundamental or basic research and technical research. 8.8 Number of Branches of Competitors compared with Indiabulls securities Branches of Competitors of Indiabulls as per the Year 2005-06 800 750 Number of Branches 700 667 600 500 500 400 400 306 257 300 250 200 100 0 Kotak Indiabulls ICICI Sharekhan India- Motilal- Karvy Infoline oswal Competitors Kotak Indiabulls ICICI Sharekhan India-Infoline Motilal-oswal KarvyProjectsformba.blogspot.com 72
  73. 73. Projectsformba.blogspot.com Number of Customers of competitors compared with Indiabulls Number of Customers Using Online Trading Terminal as per Year 2005 800,000 Number of Customers using Online Trading 675,000 700,000 600,000 500,000 400,000 Terminal 300,000 140,000 200,000 75,000 60,000 90,000 100,000 0 es es e s es lin ie iti i rit i rit rit fo ur cu cu cu In ec Se a- Se Se Is di IC ak l ls n In ha IC t u Ko ab ek di ar In Sh Brokerage Firms8.9 Merits & De-merits of CompetitorsICICI securities: It provides products & services in fixed income, equity &corporate finance.Merits of ICICI Securities • ICICI Direct is considered best for long term investment.( Indiabulls is suitable for both Day trading & Long term investment) • A direct debit/credit facility with the bank. • All facilities available under one umbrella. • BTST (Buy today & sell tomorrow) is available; this facility is available only in ICICI Direct. • Can apply for IPO online (we can’t do this in Indiabulls).Projectsformba.blogspot.com 73
  74. 74. Projectsformba.blogspot.com • Can apply for mutual funds online and can also sell them online. • Internet banking demo which gives customers an opportunity to learn.De-Merits of ICICI Securities • Brokerage charges are high - intraday 0.3% and 0.75% delivery compared to other brokerage firms (is considered as highest in the market). • Day trading is a night mare in ICICI because of Web based terminal, which is very slow. Orders placed at or around 10.00 hrs may be queued for a while. So intra-day Margin trading could be annoying now & then. Its not much of a hassle for Cash trading though. (Indiabulls offers you a trading terminal powerIndiabulls, which is java based software. It is fast in terms of speed and execution). • ICICI Direct brokerages are not negotiable ( Where as Indiabulls Brokerage Charges are negotiable) • While opening Demat account, three accounts are opened ,the saving bank account, trading account and Demat account and you have to maintain minimum of rs5000 in case if it is not a salaried account. (That Rs5000 sleeps without earning any money) • Other banks account cannot be linked with the ICICI trading account. • They charge an annual maintenance charges are Rs540.Value Proposition of ICICI Securities • E-Instructions: You can transfer securities 24 hours a day, 7 days a week through Internet & Interactive Voice Response (IVR) at a lower cost. Now with "Speak to transfer", you can also transfer or pledge instructions through our customer care officer.Projectsformba.blogspot.com 74

×