Summer Training Report by Deepak Dhingra

A SUMMER TRAINING REPORT ON

“ANALYSIS OF INDIAN STOCK MARKET AND COMPARISON OF CORPORATE STOCK BROKERS”

SUBMITTED TO

ROYAL INSTITUTE OF MANAGEMENT & TECHNOLOGY, CHIDANA IN PARTIAL FULFILLMENT OF REQUIREMENT OF M.B.A. DEGREE COURSE (2009-11)

Submitted by: Deepak Dhingra M.B.A. (3rd Sem.) Roll No………….. R.I.M.T., Chidan a

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Analysis of Indian Stock Market and Comparison of Corporate Stock Brokers

DECLARATION I Deepak Dhingra declare that the project done by me contains the original original work and I have not copied from anywhere, the portion which at some places in the report that has been copied by me I have declare that in the end of the project report and that portion is the originally belongs to its original writer and I don’t claim over it. It will be purely used for the academic purpose.

Place: …………..

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Signature


ACKNOWLEDGEMENT

The beatitude, bliss that accompanies the successful completion of any task would not be complete with expression of simple virtue to the people who made it possible. So, with the reverence honour we acknowledge all those guidance and encouragement has made successful in winding up this opus. I wish to express my deep sense of gratitude to Mr. Sandeep Nagpal (Branch Manager), Anagram Capital Ltd. for help, guidance and for assisting me with valuable suggestions during the project.

He not only infused in me best skill and guidance in the fields but also invoked in me a spirit to undertake the project in his prospective and to complete it successfully. The pleasant and fruitful discussions, which had given me valuable training will help me in my future career. I would like to thank Mrs. Poonam Luthra, H.O.D. (M.B.A.) and all the lecturers who support and helps me a lot during the project and by which I am able ab le to complete this project. Finally I wish to thank all my fellow trainees and my parents for supporting me all the time and my heartiest thanks to Anagram Capital Ltd. for providing me exposure to the corporate co rporate world.

Deepak Dhingra

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PREFACE Indian stock exchanges host the most number of listed companies after United States. About 2500 companies are listed in the Bombay Stock Exchange and the National Stock Exchange. Apart from foreign institutional investors, Indian stock market has some 30 million domestic investors. The working of stock markets has started in India as early as 1875, when 318 persons coming together to Native Share and Stock Brokers Association, with Re.1 for membership free. Closest to BSE is National Stock Exchange, also located at Bombay. Nifty is the market index of NSE. Indian stock market has seen many ups and downs, but now is flying high, crossing every previous record and zoom to even further heights. BSE-Sensex crossed the four-figure mark of 1000 in 1990 and had a smooth bull ride till 1992, when the big-full of Indian stock market, Harshad Mehta became a villain in the in famous Harshad Mehta scam broke out. The sensex lost 570 points in no time and some eight to 12 million investors were pushed to bankruptcy. After that incidence, came the Securities and Exchanges Board of India. With the enforcement of several regulations and strict guidelines, the confidence of investors was somewhat regained. With the present technology and practices, it is next to impossible to commit a fraud in Indian Stock market. So claims the SEBI. Under the watchful eyes of SEBI, Indian Stock markets once again gained momentum. The sensex crossed reached and crossed 6000 mark in 2000 and crossed the 7000 and 8000 marks in 2005. Foreign Institutional Investors are pumping in money into the market. The FIIs are confident of a sustainable momentum. The momentum in the stock market can be associated with the growth in the fields of export, IT, ITES, telecommunication, education, energy sector, agriculture etc. The reformist policies being pursued by the government is also a factor for this growth. Due to large scale outsourcing by American and European countries, a large number of jobs also went to India, resulting in more affluent youth who are only happy to spend out their money. This helped in

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the growth of telecommunication, FMCG and manufacturing sectors. The steady growth of GDP is also a critical factor in the upward movement of Indian stock market. Apart from FIIs, the non-resident Indians also invest hugely in the stock market. Diminishing returns from bank deposits and the facilities of online trading made them turn to stock markets and with the current bull-run many have made a good fortune from stock markets. The stockbrokers also chip in on and open offices in foreign countries, aimed at him NRIs there. The initial public offers by Tata Consultancy Consultancy Services, Services, Maruti Maruti Udyog Limited, Limited, ONGC etc. were big events in Indian stock market. Not only did they put a great show, but also took the stock market to newer heights. TCS is a big weight in the stock market from the day it was listed. Traditional heavy weights are Reliance, Tata, and Bharati etc. Now new entrants like Biocon are also play significant roles in the market. Growth directed at sky is visible everywhere. The biggest growth opportunity lies in the stock market itself. The population of India is well above one billion. The number of investors is just above 40 million. That is just 4% of the total population. The measures for a 10% growth are sought.

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TABLE OF CONTENTS

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INDUSTRY STUDY (BSE & NSE)

•

INTRODUCTION OF ACL

•

PRODUCT OFFERINGS

•

INTORDUCTION OF INDIAN STOCK MARKET

•

MARKET BASICS

•

COMPARISON OF CORPORATE STOCKBROKERS

•

RESEARCH METHODOLOGY

•

ANALYSIS & INTERPRETATION

•

CONCLUSION

•

LIMITATIONS

•

SUGGESTIONS

•

ANNEXURE

-

Questionnaire

-

Bibliography

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BOMBAY STOCK EXCHANGE ]

Bombay Stock Exchange is the oldest stock exchange in Asia What is now popularly known as the BSE was established as "The Native Share & Stock Brokers' Association" in 1875. Over the past 135 years, BSE has facilitated the growth of the Indian corporate sector by providing it with an efficient capital raising platform. Today, BSE is the world's number 1 exchange in the world in terms of the number of listed companies (over 4900). It is the world's 5th most active in terms of number of transactions handled through its electronic trading system. And it is in the top ten of global exchanges in terms of the market capitalization of its listed companies (as of December 31, 2009). The companies listed on BSE command a total market capitalization of USD Trillion 1.28 as of Feb, 2010. BSE BSE is the the firs firstt excha exchang ngee in Indi Indiaa and and the the seco second nd in the the worl world d to obtai obtain n an ISO ISO 9001: 9001:200 2000 0 cert certif ific icat atio ions ns.. It is also also the the firs firstt Exch Exchang angee in the the coun countr try y and and secon second d in the the worl world d to rece receiv ivee Information Security Management System Standard BS 7799-2-2002 certification for its BSE On-Line trading System (BOLT). Presently, we are ISO 27001:2005 certified, which is a ISO version of BS 7799 for Information Security. The BSE Index, SENSEX, is India's first and most popular Stock Market benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE and in Hong Kong. Futures and options on the index are also traded at BSE. With With its its trad tradit itio ion n of serv servin ing g the the comm communi unity ty,, BSE BSE has been been under underta taki king ng Corp Corpor orat atee Soci Social al Responsibility (CSR) initiatives with a focus on Education, Health and Environment. BSE has been awarded by the World Council of Corporate Governance the Golden Peacock Global CSR Award for its initiatives in Corporate Social Responsibility (CSR).

Vision

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"Emerge as the premier Indian stock exchange by establishing global benchmarks" Base Year- 1978-79 Base Index Value- 100 Date of launch- 1/1/1986 Method of calculation- Launched on full market capitalization method and effective September 01, 2003, calculation method shifted to free-float market capitalization.

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NATIONAL STOCK EXCHANGE

The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges. It recommended promotion of a National Stock Exchange by financial institutions (FIs) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capit Capital al Market Market (Equit (Equities ies)) segmen segmentt commen commenced ced operat operation ionss in Novemb November er 1994 1994 and operat operation ionss in Derivatives segment commenced in June 2000. The follow following ing years years witnes witnessed sed rapid rapid develop development ment of Indian Indian capita capitall market market with with introd introduct uction ion of intern internet et tradi trading, ng, Exchan Exchange ge traded traded funds funds (ETF), (ETF), stock stock deriva derivativ tives es and the first first volati volatilit lity y index index IndiaVIX in April 2008, by NSE. August 2008 saw introduction of Currency derivatives in India with the launch of Currency Futures in USD INR by NSE. Interest Rate Futures was introduced for the first time in India by NSE on 31st August 2009, exactly after one year of the launch of Currency Futures. With this, now both the retail and institutional investors can participate in equities, equity derivatives, currency and interest rate derivatives, giving them wide range of products to take care of their evolving needs.

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INTRODUCTION Anagram Capital Ltd. (Anagram) is amongst the leading retail broking houses in India. It is engaged in offering comprehensive personal finance solutions since 1994. The company is a part of the of the Rs 20 bn Lalbhai Group. The group companies in the capital and commodities market area include Anagram Capital Ltd and Anagram Comtrade Ltd. Anagram offers a wide range of services for the discerning equity investor, in addition to online account access and real time trading, Insurance Services, Wealth Management Services, Mutual Fund and Advisory Services The firm has its roots in Western India especially Gujarat where it is the biggest player. But it has expanded considerably. Anagram is positioned amongst the top retail broking houses in the country. An achievement indeed for a company company that's that's been providing comprehensive comprehensive personal finance solutions solutions since 1994. Anagram Capital Ltd. (Anagram), promoted by Edelweiss Group. Anagram Stock broking Ltd. and Anagram Comtrade Ltd. are the other group companies in the capital market area. Anagra Anagram m is a member member of all leading leading stock stock and commod commoditi ities es exchang exchangee in India India –Natio –National nal Stock Stock Exchange (NSE), Bombay Stock Exchange (BSE), National Commodities Exchange of India Ltd. (NCDEX) and multi Commodities Exchange Market of India (MCX) and a depository participant with NSDL. Our current offerings include trading in cash and derivative segment through our branches and sub-brokers high-speed anywhere trading through the net, Online Depository Services, Commodities trading, PMS, Currency Future Trading, Distribution of Mutual Funds, IPO’s and other financial products.

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DIVISIONS We have have a natio nationwi nwide de pres presen ence ce with with 150 150 plus plus bran branch ches es,, 1400 1400 plus plus Sub Sub Brok Broker erss & Busin Busines esss Associates, 3000 plus terminals and a professionalized team of 1400 plus employees spread across 200 plus cities. Our well - qualified staff will always be ready to fulfill your Stock Broking needs or solve your queries over the telephone, or at the branches themselves.

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HIERARCHY

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PRODUCT OFFERINGS Anagram has divided its product & service offering under three broad interface categories: - “Retail Spectrum”, “Wealth Spectrum” and “Institutional Spectrum” as per following details:-

Retail Spectrum

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Wealth Spectrum

Institutional Spectrum


Caters to a large number To provide customized To forge and build strong of retail clients by offering all weal wealth th advi adviso sory ry serv servic ices es to relationships with products under one roof high net worth individuals corp corpor orat atee and and inst instit itut utio ional nal through our branch network & clients online mode •

Equity & Commodity

•

Wealth Advisory Services

•

Institutional Equity Broking

Trading

•

Portfolio Management

•

Investment Banking

Services

•

Merchant Banking

•

Transaction Advisory

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Personal Financial Services

•

Online Investment

•

International Equity

•

Loans against Shares

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Arts Initiative

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Distribution of Mutual

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Priority Client Equity

Funds

Services

Services

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Personal Credit

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Personal Loan Services

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Distribution of Saving Products

Schemes Related to Equity Trading are as follows: Product Offering: Classic Scheme – Equity Segment Anagram Capital Ltd. Classic Scheme

Pay INR

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Variable Brokerage (%)

Delivery

Intraday

F&O

A/C Opening

Client’s Option

Charges

For the scheme Mark


(each leg)

(each leg)

2758

0.30

0.03

0.03

Nil

5515

0.30

0.03

0.03

Nil

11030

0.25

0.025

0.025

Nil

27575

0.20

0.02

0.02

Nil

55150

0.15

0.015

0.015

Nil

110300

0.10

0.01

0.01

Nil

Terms & Conditions:

1. All statutory statutory Charges like STT, Exchange charges, Stamp duty & any other charges will be charged charged separately. 2. Minimum brokerage as prescribed by SEBI will be charged in the option Segment. However, there will be minimum brokerage applicable for all other segments. 3. Margins on the trades would be as per the norms of the Exchange/s. 4. The cheque has to be drawn in the name of “Anagram Capital Ltd”. 5. After payment for the Classic scheme, the client account will be marked against the respective Variable brokerage structure. 6. Client will be charged at agreed brokerage rate as herein specified for a period of 12 months from subscription payment or till the complete utilization of subscription paid under the scheme, whichever is earlier. Any Adjustments in respect of Auction brokerage shall not be made against the subscription amount paid under the scheme since auction brokerage is not a part of this scheme 7. In case the client executes trades on various Exchange/s, through Anagram group Company/ies [being member/ s of other Exchange/s], Anagram shall adjust/reverse the appropriate amount, from time to time, across the trading account/s of the client maintained with Anagram group company/ies. 8. In case the above scheme is discontinued by Anagram, the client will charged the variable brokerage slab of 0.50% in delivery transaction, 0.05% (each leg) in intraday transaction & in F&O/derivative segment. 18


Declaration from Client/s:

1. I/We understand that Classic Scheme will be valid for maximum period of 1 year from enrolment in scheme. 2. I/We understand Classic Scheme once paid for, by me/us will not be refunded to me/us in any circumstances. 3. I/We understand that after payment of the Classic Scheme, my/our trading/investment account will be marked against the respective Variable brokerage structure, marked above. 4. I/We understand that this Classic Scheme will be adjusted (to the extent of the Classic Scheme amount paid by me/us), on a monthly basis against brokerage earned by Anagram (Anagram Capital Ltd & Anagram Stock broking Ltd) on the trades executed by me/us in my/our trading/investment account. 5. I/We hereby confirm that I/We have understood the above schemes and that I/We willfully agree to the terms and conditions of the scheme herein provided and the same shall be binding upon me/us. 6. I/We also agree that Anagram shall have unconditional rights to discontinue this scheme anytime without notice. However, in case where Anagram opts to amend the scheme, it shall arrange an advance notice of 7 days to me/us to intimate the amendments.

Kind Kindly ly Find Find enclo enclose sed d my chequ chequee of Rs ____ _______ _____ _____ ______ ____, _, Chq Chq No.__ No.____ _____ ______ _____ __ , Draw Drawn n On____________, Dt._________ favoring Anagram Capital Ltd , towards the Classic Scheme – Equity as above. Client Code: _____________Client Name: __________________ Mobile No:_____________________ Client Signature…………………… Signature……………………………… …………

Email:………………………………………… Email:…………………………………………

List of Corporate Stock Brokers that are the Competitors of Anagram Capital Ltd. Karvy Consultants Ltd

Centrum

Prabhudas Lilladher

Century invest

Sharekhan

Chona Financial Services (P) Ltd.

AnandRathi

CIL Securities Ltd

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JM Financial Ltd

Competent Finman Pvt Ltd

Kotak Securities Ltd

Composite Investments Private Ltd

Motilal Oswal Securities Ltd

Consortium Securities Pvt Ltd

Ambit Holdings

Crimson Financial Services Ltd/ Crimson Commodity Ltd

Indiabulls

Crosseas Capital Services

Moneypore

Crown Group

RBS Broking India

Dani Shares & Stocks Pvt Ltd

5Paisa.com

Dawnay Day AV Securities Pvt Ltd

Edelweiss

Dynamic

Enam Securities Pvt Ltd

Elite Stock Management Ltd (ESML)

HSBC InvestDirect (India) Limited (HIL)

Eureka Stock & Share Broking Services Ltd

Kisan Ratilal Choksey Shares & Securities

Farsight Group

Pvt Ltd Mathew Easow Financial Services

Fortune Financial Services (India) Ltd

DJS Stock and Shares Ltd

Globe Group

Hybrid Financial Services Ltd

Gogia International Securities Ltd India

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Modern Shares & Stock Brokers Ltd

Gupta Equities Pvt Ltd

Munoth Financial Services Ltd (MFSL)

Hem Group

Pioneer Investcorp Ltd (PINC)

ICDS Securities Ltd

Ratnabali Capital Markets Ltd

ICICI Securities

16anna.com

IDBI Capital Market Services Ltd

A.G. Shares & Securities Ltd

IDFC-SSKI Group

Abhipra

India Infoline

Adroit Financial Services Pvt Ltd

Indira Group

Ajay Natavarlal Securities Pvt. Ltd.

Innovate Securities Pvt. Ltd.

Amit Nalin Securities Pvt Ltd (ANSec)

ITI Financial Services Limited

Angel Broking Ltd

Jaypee Capital Services Ltd.

Anugrah Stock & Broking Pvt Ltd

Jhaveri Securities Pvt. Ltd.

Anush Shares and Securities Pvt Ltd

JRG Securities Ltd

Apeejay Securities Private Limited

JV Capital Services (P) Ltd

Apollo Sindhoori Capital Investments Ltd

Kassa Finvest Pvt Ltd

ASL Capital Holdings Private Ltd

Khambatta Securities Ltd

Astha Credit & Securities (P) Ltd

Khandwala Group

Bharat Bhushan & Company

Labdhi Finance Corporation

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Microsec

Macquarie Securities Pvt Ltd

Modex International Securities Ltd

Magnum.co.in

MSB Group

Marfatia Stock Broking Pvt. Ltd.

Navia Markets Ltd

MG Group of Companies

Padmakshi Financial Services Pvt. Ltd

Shah Investors Home Ltd

Parsoli Corporation Limited

Shardul Securities Ltd

Pee Aar Securities Limited

Share Mart

PKJ Share Brokers Ltd.

Shree Naman Developers Limited

Prayas Securities Pvt. Ltd.

Shreepati Holdings & Fin. Pvt. Ltd

PSJ Securities Pvt. Ltd.

Shreyas Stocks Pvt Ltd

R. Wadiwala Securities Pvt. Ltd.

Shri Parasram Holdings Pvt Ltd

R.K. Global Shares & Securities Ltd

SKP Securities Ltd

Reliance Money

Sumedha Fiscal Services Ltd

Religare Enterprises Ltd

Sushil Finance

Bonanza Portfolio Ltd

Swastika Investmart Ltd

Amrapali Capital and Finance Services Ltd

Unicon Investment Solutions

Aryan Share and Stockbrokers Ltd

Ventura Securities Ltd

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OTHER INFORMATION ABOUT ANAGRAM Edelweiss to acquire Anagram Capital: Edelweiss Edelweiss has entered into an agreement agreement to acquire acquire Anagram Anagram Capital for Rs. 164 crore in an all-cash transaction. With a nation-wide network of more than 150 branches and over 1,400 sub-brokers, Anagram has one of the widest geographical reach among retail broking firms. The company has more than 1.80 lakh clients and estimated total revenue of Rs. 100 crore for the nine months ended December 31, 2009. The company’s average daily equity trading volume is about Rs. 800 crore. Edelweiss plans to operate Anagram as a 100 per cent subsidiary with clear focus on continuity and building on the current business and people with investments in research, products, training and technology. “This “This acquis acquisiti ition on is in synch synch with with Edelwe Edelweiss iss’’ plan plan to expand expand the retail retail brokin broking g busine business. ss. The acquisition of Anagram, with its reach and large, high quality and diversified client base, will give impetus to Edelweiss’ retail broking and distribution businesses. What makes this transaction exciting is the minimal overlap between the broking operations of both companies. We are also impressed with Anagram’s professional management team and the consistent focus on client service and risk management. I welcome all employees, Anagram’s clients and partners to the Edelweiss family,” said Rashesh Shah, Chairman, Edelweiss Group, said. With a view to focussing on its core business of textiles, Gujarat-based Lalbhai group on Wednesday exited its domestic broking business by selling its firm, Anagram Capital, to Edelweiss Capital. “The Lalbhai group’s core business is textiles and it is a global leader in denim. It is also diversifying into other businesses and since finance does not form a core business for the group, it was decided to sell-off the business,” Anagram Capital’s CEO, Mayank Shah, told PTI here. In the late-1990s, ICICI had acquired Anagram Finance, another Lalbhai group company.

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REGISTERATION DETAILS

Anagram Stockbroking Limited •

BSE Cash SEBI Regn. No.: INB011257152, BSE F&O SEBI Regn. No.: INF010808537

•

PMS Regn. No.: INP000002031, NSDL DP SEBI Regn. No.: IN-DP-NSDL-180-2000,

•

Mutual Fund: ARN 3068

Anagram Capital Limited •

NSE Cash SEBI Regn. No.: INB230597630, NSE F&O SEBI Regn. No.: INF230597630

•

NSE Currency Derivative SEBI Regn. No: INE230597630

Anagram Comtrade Limited •

MCX-10425; NCDEX-00205; NMCE- CL0126, National Spot Exchange Limited – 11270

Registered Office •

Anagr Anagram am Hous House, e, H. L. Comm Commer erce ce Coll College ege - Stad Stadiu ium m Road Road Near Near Comme Commerc rcee Six Six Circ Circle le,, Navrangpura, Ahmedabad 380 009

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LIST OF STOCK EXCHANGES IN INDIA

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OTC Exchange of India

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Madras Stock Exchange Ltd.

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The Uttar Pradesh Stock Exchange Association Ltd.

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Cochin Stock Exchange Ltd.

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Jaipur Stock Exchange Ltd.

•

Bangalore Stock Exchange Ltd.

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National Stock Exchange of India Ltd.

•

Gauhati Stock Exchange Ltd.

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The Ludhiana Stock Exchange Ltd.

•

The Calcutta Stock Exchange Association Ltd

•

Bhubaneshwar Stock Exchange Ltd.

•

The Delhi Stock Exchange Ltd.

•

Vadodara Stock Exchange Ltd.

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Madhya Pradesh Stock Exchange Ltd.

•

Bombay Stock Exchange Ltd.

•

Magadh Stock Exchange

•

Ahmedabad Stock Exchange Ltd.

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Pune Stock Exchange Ltd.

•

Mangalore Stock Exchange

•

MCX Stock Exchange Ltd

•

Hyderabad Stock Exchange

•

Saurashtra Kutch Stock Exchange (SKSE)

•

Coimbatore Stock Exchange

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Analysis of Indian Stock Market In general, the financial financial market divided into two parts, Money market and capital market. Securities Securities market is an important, organized capital market where transaction of capital is facilitated by means of direct financing using securities as a commodity. Securities market can be divided into a primary market and secondary market.

PRIMARY MARKET The primary market is an intermitt intermittent ent and discrete discrete market where the initially initially listed listed shares shares are traded first time, changing hands from the listed company to the investors. It refers to the process through which the companies, the issuers of stocks, acquire capital by offering their stocks to investors who supply the capital. In other words primary market is that part of the capital markets that deals with the issuance issuance of new securitie securities. s. Companies, Companies, governments governments or public sector sector instituti institutions ons can obtain obtain funding funding through the sale of a new stock or bond issue. This is typically done through a syndicate of securities dealers. The process of selling new issues to investors is called underwriting. In the case of a new stock issue, this sale is called an initial public offering (IPO). Dealers earn a commission that is built into the price of the security offering, though it can be found in the prospectus.

SECONDARY MARKET

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The secondary market is an on-going market, which is equipped and organized with a place, facilities and other resources required for trading securities after their initial offering. It refers to a specific place wher wheree secu securi riti ties es tran transa sact ctio ion n amon among g many many and and unsp unspec ecif ifie ied d pers person onss is carr carrie ied d out out thro throug ugh h intermediation of the securities firms, i.e., a licensed broker, and the exchanges, a specialized trading organization, in accordance with the rules and regulations established by the exchanges. A bit about history of stock exchange they say it was under a tree that it all started in 1875.Bombay Stock Exchange (BSE) was the major exchange in India till 1994.National Stock Exchange (NSE) started operations in 1994. NSE was floated by major banks and financial institutions. It came as a result of Harshad Mehta scam of 1992. Contrary to popular belief the scam was more of a banking scam than a stock market scam. The old methods of trading in BSE were people assembling on what is called a ring in the BSE building. They had a unique sign language to communicate apart from all the shouting. Investors weren't allowed access and the system was opaque and misused by brokers. The shares were in physical form and prone to duplication and fraud. NSE was the first to introduce electronic screen based trading. BSE was forced to follow suit. The present day trading platform is transparent and gives investors prices on a real time basis. With the introduction of depository and mandatory dematerialization of shares chances of fraud reduced further. The trading screen gives you top 5 buy and sell quotes on every scrip. A typical trading day starts at 9.00 am ending at 3.30 pm. Monday to Friday. BSE has 30 stocks which make up the Sensex .NSE has 50 stocks in its index called Nifty. FII s Banks, financial institutions mutual funds are biggest players in the market. Then there are the retail investors and speculators. The last ones are the ones who follow the market morning to evening; Market can be very addictive like blogging though stakes are higher in the former.

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ORIGIN OF INDIAN STOCK MARKET The origin of the stock market in India goes back to the end of the eighteenth century when long-term negotiable securities were first issued. However, for all practical purposes, the real beginning occurred in the middle of the nineteenth century after the enactment of the companies Act in 1850, which introduced the features of limited liability and generated investor interest in corporate securities. An important early event in the development of the stock market in India was the formation of the native share and stock brokers 'Association at Bombay in 1875, the precursor of the present day Bomb Bombay ay Stoc Stock k Exch Exchan ange. ge. This This was was foll followe owed d by the the form format atio ion n of asso associ ciat atio ions ns/e /exc xchan hanges ges in Ahmedabad (1894), Calcutta (1908), and Madras (1937). In addition, a large number of ephemeral exchang exchanges es emerge emerged d mainly mainly in buoyan buoyantt period periodss to recede recede into into oblivi oblivion on during during depress depressing ing times times subsequently. Stock exchanges are intricacy inter-woven in the fabric of a nation's economic life. Without a stock exchange, exchange, the saving of the communitycommunity- the sinews of economic economic progress progress and productive productive efficiencyefficiencywould remain underutilized. The task of mobilization and allocation of savings could be attempted in the old days by a much less specialized institution than the stock exchanges. But as business and industry expanded and the economy assumed more complex nature, the need for 'permanent finance' arose. Entrepreneurs needed money for long term whereas investors demanded liquidity – the facility to conve convert rt thei theirr inve invest stme ment nt into into cash cash at any any give given n time time.. The The answe answerr was a read ready y mark market et for for investments and this was how the stock exchange came into being.

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Stock Stock exchang exchangee means means anybody anybody of indivi individual duals, s, whethe whetherr incorp incorpora orated ted or not, not, consti constitut tuted ed for the purpose of regulating or controlling the business of buying, selling or dealing in securities. These securities include: (i) Shares, scrip, stocks, bonds, debentures stock or other marketable securities of a like nature in or of any incorporated company or other body bod y corporate; (ii) Government securities; and (iii) Rights or interest in securities. The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges. However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80 per cent of the equity volume traded in India. The NSE and BSE are equal in size in terms of daily traded volume. The average daily turnover at the exchanges has increased from Rs 851 crore in 1997-98 to Rs 1,284 crore in 1998-99 and further to Rs 2,273 crore in 1999-2000 (April - August 1999). NSE has around 1500 shares listed with a total market capitalization of around Rs 9, 21,500 crore. Analysis of Indian Stock Market and Comparison of Corporate Stock Brokers The BSE has over 6000 stocks listed and has a market capitalization of around Rs 9, 68,000 crore. Most key stocks are traded on both the exchanges and hence the investor could buy them on either exchange. Both exchanges have a different settlement cycle, which allows investors to shift their positions on the bourses. The primary index of BSE is BSE Sensex comprising 30 stocks. NSE has the S&P NSE 50 Index (Nifty) which consists of fifty stocks. The BSE Sensex is the older and more widely followed index. Both these indices are calculated calculated on the basis of market market capitaliza capitalization tion and contain contain the heavily traded shares from key sectors. The markets are closed on Saturdays and Sundays. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE on Line Trading) and NEAT (National Exchange Automated Trading) System.

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It facilitate facilitatess more efficient processing, processing, automatic automatic order matching, matching, faster faster execution execution of trades trades and transparency; the scrip's traded on the BSE have been classified into 'A', 'B1', 'B2', 'C', 'F' and 'Z' groups. The 'A' group shares represent those, which are in the carry forward system (Badla). The 'F' group represents the debt market (fixed income securities) segment. The 'Z' group scrip's are the blacklisted companies. The 'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights renunciation renunciations. s. The key regulator regulator governing governing Stock Exchanges, Brokers, Depositori Depositories, es, Depository Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.

BACKGROUND OF STOCK EXCHANGE IN INDIA The emergence of stock market can be traced back to 1830. In Bombay, business passed in the shares of banks like the commercial bank, the chartered mercantile bank, the chartered bank, the oriental bank and the old bank of Bombay and shares of cotton presses. In Calcutta, Englishman reported the quotations of 4%, 5%, and 6% loans of East India Company as well as the shares of the bank of Bengal in 1836. This list was a further broadened in 1839 when the Calcutta newspaper printed the quotations of banks like union bank and Agra bank. It also quoted the prices of business ventures like the Bengal bonded warehouse, the Docking Company and the storm tug company. Between 1840 and 1850, only half a dozen brokers existed for the limited business. But during the share mania of 1860-65, the number of brokers increased considerably. By 1860, the number of brokers was about 60 and during the exciting period of the American Civil war, their number increased to about 200 to 250. The end of American Civil war brought disillusionment and many failures and the brokers decreased in number and prosperity. It was in those troublesome times between 1868 and 1875 that brokers organized an informal association and finally as recited in the Indenture constituting the “Articles of Association of the Exchange”. On or about 9th day of July,1875, a few native brokers doing brokerage business in shares and stocks resolved upon forming in Bombay an association for protecting the character, status and interest of native share and stock brokers and providing a hall or building for the use of the members of such association.

31


As a meeting held in the broker’ Hall on the 5th day of February, 1887, it was resolved to execute a formal deal of association and to constitute the first managing committee and to appoint the first trustees. Accordingly, the Articles of Association of the Exchange and the Stock Exchange was formally established in Bombay on 3rd day of December, 1887. The Association is now known as “The Stock Exchange”. The entrance fee for new member was Re.1 and there were 318 members on the list, when the exchange was constituted. The numbers of members increased to 333 in 1896, 362 in 1916and 478 in 1920 and the entrance fee was raised to Rs.5 in 1877, Rs.1000 in 1896, Rs.2500 in 1916 and Rs. 48,000 in 1920. At present there are 23 recognized stock exchanges with about 6000 stock brokers. 14 stock exchanges are organized as public limited companies, 6 as companies limited by guarantee and 3 are non-profit voluntary organization. Of the total of 23, only 9 stock exchanges have been permanent recognition. Others have to seek recognition on annual basis. These exchange do not work of its own, rather, these are run by some persons and with the help of some persons and institution. All these are down as functionaries on stock exchange. These are 1. Stockbrokers 2. Sub-broker 3. Market makers 4. Portfolio Consultants etc.

1.) Stockbrokers: Stock brokers are the members of stock exchanges. These are the persons who buy, sell or deal in securities. A certificate of registration from SEBI is mandatory to act as a broker. SEBI can impose certain conditions while granting the certificate of registrations. It is obligatory for the person to abide by the rules, regulations and the buy-law. Stock brokers are commission broker, floor broker, arbitrageur etc.

2.) Sub-broker: 32


A sub-broker acts as agent of stock broker. He is not a member of a stock exchange. He assists the investors in buying, selling or dealing in securities through stockbroker. The broker and sub-broker should enter into an agreement in which obligations of both should be specified. Sub broker must be registered SEBI for a dealing in securities. For getting registered with SEBI, he must fulfill certain rules and regulation.

3.) Market Makers: Market maker is a designated specialist in the specified securities. They make both bid and offer at the same time. A market maker has to abide by bye-laws, rules regulations of the conce concern rned ed stoc stock k excha exchang nge. e. He is exem exempt pt from from the the marg margin in requ requir irem emen ents ts.. As per per the the list listin ing g requirements, a company where the paid-up capital is Rs. 3 crore but not more than Rs. 5 crore and having a commercial operation for less than 2 years should appoint a market maker at the time of issue of securities.

4.) Portfolio Consultants: A combination of securities such as stocks, bonds and money market instruments is collectively called as portfolio. Whereas the portfolio consultants are the persons, firms or companies who advise, direct or undertake the management or administration of securities or funds on behalf of their clients.

33


ABOUT NSE AND BSE Formation: The National Stock Exchange of India was promoted by leading financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000. Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share Stock Brokers Association" in 1875. It was the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956. Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatized entity incorporated under the provisions provisions of the Companies Act, 1956, pursuant to the BSE (Corporati (Corporatization zation and Demutualiza Demutualization) tion) Scheme Scheme,, 2005 2005 notifi notified ed by the Securi Securitie tiess and Exchan Exchange ge Board Board of India India (SEBI) (SEBI).Bo .Bomba mbay y Stock Stock Exchange Limited received its Certificate of Incorporation on 8th August, 2005 and Certificate of Commencement of Business on 12th August, 2005. The Exchange has succeeded the business and 34


operations of BSE ongoing concern basis and its recognition as an Exchange has been continued by SEBI.

Members: While the BSE has over 874 members-brokers across the country, NSE has more than 1000 members. In NSE, a prospective trading member is admitted to any of the following combinations of market segmen segments: ts: Wholes Wholesale ale Debt Debt Market Market segmen segment, t, Capit Capital al Market Market (CM) (CM) and the Future Futuress and Option Optionss segments, CM Segment and the WDM segment, or CM Segment, the WDM and the F and O segment. There is no such thing at BSE and members join as any of the following: Trading Members, Trading cum Clearing Members, Professional clearing member, Limited trading member and Self Clearing member.

For NSE: In order to be admitted as a trading member, the individual trading member/at least two partners of the applicant firm/at least two directors of the applicant corporate must be graduates and must must poss posses esss at leas leastt two two year years' s' exper experie ienc ncee in secu securi riti ties es mark market ets. s. The The appli applican cantt for for trad tradin ing g membership/any of its partners/shareholders/directors must not have been declared defaulters on any stock stock excha exchang nge, e, must must not be deba debarr rred ed by SEBI SEBI for for bein being g asso associ ciat ated ed with with capi capita tall mark market et as intermediaries and must not be engaged in any fund-based activity. The trades executed on the Exchange may be cleared and settled by a clearing member. The initial joining fee for a member at BSE is Rs. 90 Lakhs while that for an NSE member is between 100 to 300 Lakh depending on the kind of membership one chooses. In addition to annual fees, NSE members are required to pay transaction charges on trades undertaken by them. They pay transaction charge at the rate of Rs. 3.5 for every Rs. 1 lakh of turnover in the CM segment. The transaction charges payable to the exchange by the trading member for the trades executed by him on the F&O segment are fixed at the rate of Rs. 2 per lakh of turnover (0.002%) subject to a minimum of Rs. 1, 00,000 per year. At BSE, these fees differ according to the various types of members.

For BSE: The requirements to becoming a member are: 35


1. Authorized By NSC as A Brokerage House 2. Authorization of BSE 3. Negotiation from NSC 4. Trained Staff at BSE (Brokers, Traders, Accountants) 5. Data on Member Registration 6. Company By-Laws 7. Membership Fee 8. Financial Statements 9. Company Mission Statements 10. Handbook on Internal Operations & Control 11. Personal Information File for Management and Specialized Staff 12. Contribution to the Guarantee Fund 13. Payment for the Licensed Access to Use the Operating System

Listing: Listing means formal admission of a security to the trading platform of the Exchange. In BSE, the securities may be of any public limited company, Central or State Government, quasi governmental and other financial institutions/corporations, municipalities, etc. The objectives of listing are mainly to provi provide de liquid liquidity ity to securi securitie ties; s; mobili mobilize ze saving savingss for econom economic ic develo developme pment; nt; protec protectt intere interest st of investors by ensuring full disclosures. The Exchange has a separate Listing Department to grant approval for listing of securities of companies in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956, Securities Contracts (Regulation) Rules, 1957, Companies Act, 36


1956, Guidelines issued by SEBI and Rules, Bye-laws and Regulations of the Exchange. A company intending to have its securities listed on the Exchange has to comply with the listing requirements prescribed by the Exchange. At NSE, the following criteria’s are to be fulfilled when one applies to be listed: •

Approval of Memorandum and Articles of Association

•

Approval of draft prospectus

•

Submission of Application

•

Listing conditions and requirements

Once a company fulfils these criteria’s then they have to submit the following to the board: 1. A brief note on the promoters and management. 2. Company profile. 3. Copies of the Annual Report for last 3 years. 4. Copies of the Draft Offer Document. 5. Memorandum & Articles of Association. The listing fees depend on the companies paid up capital at both NSE and BSE. While the initial listing fee at NSE is Rs.7500, it is Rs.20, 000 at BSE. The annual listing fees for a company with a paid up capital up to Rs. 5 Crores is Rs. 10,000 at BSE while it is Rs. 8,400 at NSE. For a company with paid up capital between 5 to 10 crores, BSE charges Rs. 15,000 while NSE charges Rs. 10,000.

Indices: The main Index of BSE is SENSEX while that of NSE is CNX Nifty. The other indices indices at BSE are: BSE 500, BSE 100, BSE 200, BSE PSU, BSE MIDCAP, BSE SMLCAP, BSE BANKEX, BSE Teck, BSE Auto, BSE Pharma, BSE Fast Moving Consumer Goods (FMCG), BSE Consumer Durables (SYMBOL: Cons Dura), BSE Metal. NSE also set up as index services firm known as India Index 37


Services & Products Limited (IISL) and has launched several stock indices, including: S&P CNX Nifty, CNX Nifty Junior, CNX 100 (= S&P CNX Nifty + CNX Nifty Junior), S&P CNX 500 (= CNX 100 + 400 major players across 72 industries), CNX Midcap (introduced on 18 July 2005 replacing CNX Midcap 200).

CALCULATION CALCULATION OF SENSEX SENS SENSEX EX is calc calcul ulat ated ed usin using g a "Mar "Marke kett Capi Capita tali liza zati tionon-We Weig ight hted ed"" meth method odol olog ogy. y. As per this this methodology, the level of index at any point of time reflects the total market value of 30 component stocks relative to a base period. (The market capitalization of a company is determined by multiplying the price of its stock by the number of shares issued by the company). An index of a set of combined variables (such as price and number of shares) is commonly referred as a 'Composite Index' by statisticians. A single indexed number is used to represent the results of this calculation in order to make the value easier to work with and track over time. It is much easier to graph a chart based on indexed values than one based on actual values. The base period of SENSEX is 1978-79. The actual total market value of the stocks in the Index during the base period has been set equal to an indexed value of 100. This is often indicated by the notation 1978-79=100. The formula used to calculate the Index is fairly straightforward. However, the calculation of the adjustments to the Index (commonly called Index maintenance) is more complex. The calculation calculation of SENSEX involves dividing dividing the total market capitalization capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index maintenance adjustments. During market hours, prices of the index scrip’s, at which latest trades

38


are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time.

CLOSURE OF SENSEX The The clos closin ing g SENS SENSEX EX is comput computed ed taki taking ng the the weigh weighte ted d avera average ge of all all the the trade tradess on SENS SENSEX EX constituents in the last 15 minutes of trading session. If a SENSEX constituent has not traded in the last 15 minutes, the last traded price is taken for computation of the Index closure. If a SENSEX constituent has not traded at all in a day, then its last day's closing price is taken for computation of Index closure. The use of Index Closure Algorithm prevents any intentional manipulation of the closing index value.

MAINTAINENCE OF SENSEX One of the important aspects of maintaining continuity with the past is to update the base year average. The The base base year year valu valuee adju adjust stme ment nt ensur ensures es that that addit additio iona nall issu issuee of capi capita tall and othe otherr corp corpor orat atee announcements like bonus etc. do not destroy the value of the index. The beauty of maintenance lies in the fact that adjustments for corporate actions in the Index should not per se affect a ffect the index values. The Index Cell of the Exchange does the day-to-day maintenance of the index within the broad index policy framework set by the Index Committee. The Index Cell takes special care to ensure that SENSEX and all the other BSE indices maintain their benchmark properties by striking a delicate 39


balance between high turnover in Index scrip’s and its representative character. The Index Committee of the Exchange has experts from different field of finance related to the capital markets. They include Academicians, Fund-managers from leading Mutual Funds, Finance - Journalists, Market Participants, Independent Governing Board members, and Exchange administration.

SENSEX UPDATION During market hours, prices of the index scrip’s, at which trades are executed, are automatically used by the trading computer to calculate the SENSEX every 15 seconds and continuously updated on all trading workstations connected to the BSE trading computer in real time.

COMPANIES LISTED IN NIFTY As on Friday, July 16 th, 2010 •

ABB ltd.

•

ACC ltd.

•

Ambuja cements

•

BHEL

•

Axis bank ltd.

•

40

Bharat petroleum corporation ltd.

•

Bharti Airtel ltd.

•

Cairn India ltd.

•

Cipla ltd.

•

DLF ltd.

•

GAIL

•

HCL tech ltd.

•

HDFC bank ltd.

•

Hero Honda motors ltd.

•

Hindalco Industries ltd. Analysis of Indian Stock Market and Comparison of Corporate Stock Brokers

•

•

•

HDFC finance corporation ltd. ITC ltd.

•

ICICI Bank ltd.

•

Idea cellular ltd.

•

Infosys Technologies ltd.

•

Infrastructure Development Finance Co.ltd.

•

Jaiprakash associates ltd.

•

Jindal Steel and Power ltd.

•

Kotak Mahindra bank ltd.

•

Larsen and Tubro ltd.

•

Mahindra and Mahindra ltd.

•

Maruti Suzuki India ltd.

•

NTPC ltd.

•

ONGC

•

Power grid corporation of India ltd.

•

PNB

•

Ranbaxy Laboratories ltd.

•

•

•

41

Hindustan Unilever ltd.

Reliance Capital ltd. Reliance Infrastructure ltd. Reliance Communications ltd.

•

Reliance Industries ltd.

•

Reliance Power ltd.

•

Siemens ltd.

•

SBI

•

SAIL

•

Sterlite Industries ltd.

•

Sun Pharmaceuticals Industries ltd. Analysis of Indian Stock Market and Comparison of Corporate Stock Brokers

•

Suzlon Energy ltd.

•

TCS

•

Tata Motors ltd.

•

Tata Power co. ltd.

•

Tata Steel ltd

•

Unitech ltd.

•

Wipro ltd.

COMPANIES LISTED IN SENSEX As on Friday, 16th July •

HDFC

•

DLF

•

ONGC

•

Reliance Infra

•

Sterlite India

•

Mahindra and Mahindra

•

Tata Motors

•

Reliance Communications

•

Wipro

•

Tata Power 42


•

Tata Steel

•

Reliance

•

NTPC

•

Jaiprakash Associates

•

Maruti Suzuki

•

Jindal Steel

•

SBI

•

Larsen

•

ICICI Bank

•

Infosys

•

Bharti Airtel

•

TCS

•

HDFC Bank

•

Hindalco

•

BHEL

•

Hero Honda

•

Cipla

•

ACC

•

HUL

•

ITC

43


DIFFERENCE DIFFERENCE BETWEEN BSE AND NSE

Basis

B SE

Market capitalization of listed Rs. 4,670,227 crore companies

NS E Rs. 3,367,350 crore.

Number of members

951 (Oct 2007)

1,009 as on March 2007

Number of listed companies

4,867 OCT(2007)

1,288 (March 2007)

Geographical spread

Presence in 417 cities

Presence in 1,486 cities

Website

www.bseindia.com

www.nse-india.com

Main Index

BSE Sensex

S & P CNX Nifty

44


Owner

Bombay Stock Exchange

National Stock Exchange of

India

Limited Key people

Rajnikant Patel (CEO)

R.H. Patil (Founder, MD)

Claim Claim to fame fame

Oldest Oldest stock stock exchang exchangee in Asia. Asia.

Third Third larges largestt stock stock exchan exchange ge in the world in terms of volumes.

Established in

1875

Name

1993 Bombay Stock Exchange

National Stock Exchange

Location

Mumbai

Mumbai

Index value

17,326.01 ( 2009)

6,097 (2007)

No. of of tr trader wo workstations

15,151(Oct 20 2007)

45


MARKET BASICS

Electronic Trading:

•

Electronic trading eliminates the need for physical trading floors. Brokers can trade from their offices, using fully automated screen-based processes. Their workstations are connected connected to a Stock Exchange's Exchange's central central computer computer via satellit satellitee using Very Small Aperture Aperture Terminus Terminus (VSATs). The orders placed by brokers reach the Exchange's central computer and are matched electronically. •

Exchanges in India:

46


The Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE) are the country's two leading Exchanges. There are 20 other regional Exchanges, connected via the Inter-Connected Stock Exchange (ICSE). The BSE and NSE allow nationwide trading via their VSAT systems. •

Index: An Index is a comprehensive measure of market trends, intended for investors who are

concerned with general stock market price movements. An Index comprises stocks that have large liquidity and market capitalization. Each stock is given a weight age in the Index equivalent to its market capitalization. At the NSE, the capitalization of NIFTY (fifty selected stocks) is taken as a base capitalization, with the value set at 1000. Similarly, BSE Sensitive Index or Sensex comprises 30 selected stocks. The Index value compares the day's market capitalization vis-à-vis base capitalization and indicates how prices in general have moved over a period of time. •

Execute an Order: Select a broker of your choice and enter into a broker-client agreement and fill

in the client registration form. Place your order with your broker preferably in writing. Get a trade confirmation slip on the day the trade is executed and ask for the contract note at the end of the trade date. •

Need a Broker: As per SEBI (Securities and Exchange Board of India.) regulations, only registered

members can operate in the stock market. One can trade by executing a deal only through a registered broker of a recognized Stock Exchange or through a SEBI-registered sub-broker.

•

Contract Note: A contract note describes the rate, date, time at which the trade was transacted

and and the the broke brokera rage ge rate rate.. A cont contra ract ct note note issu issued ed in the the pres prescr crib ibed ed form format at esta establ blis ishe hess a legal legally ly enforceable relationship between the client and the member in respect of trades stated in the contract

47


note. These are made in duplicate and the member and the client both keep a copy each. A client should receive the contract note within 24 hours of the executed trade. •

Split: A Split is book entry wherein the face value of the share is altered to create a greater number of

shares outstanding without calling for fresh capital or altering the share capital account. For example, if a company announces a two-way split, it means that a share of the face value of Rs 10 is split into two shares of face value of Rs 5 each and a person holding one share now holds `two shares. •

Buy Back: As the name suggests, it is a process by which a company can buy back its shares from

shareholders. A company may buy back its shares in various ways: from existing shareholders on a proportionate basis; through a tender offer from open market; through a book-building process; from the Stock Exchange; or from odd lot holders. A company cannot buy back through negotiated deals on or off the Stock Exchange, through spot transactions or through any private arrangement. •

Settlement Cycle: The accounting period for the securities traded on the Exchange. On the NSE, the cycle begins on Wednesday and ends on the following Tuesday, and on the BSE the cycle commences on Monday and ends on Friday. At the end of this period, the obligations of each broker are calculated and the brokers settle their respective obligations as per the rules, bye- laws and regulations of the Clearing Corporation. If a transaction is entered on the first day of the settlement, the same will be settled on the eighth working day excluding the day of transaction. However, if the same is done on the last day of the settlement, it will be settled on the fourth working day excluding the day of transaction. •

Rolling Settlement: The rolling settlement ensures that each day's trade is settled by keeping a fixed

gap of a specified number of working days between a trade and its settlement. At present, this gap is five working days after the trading day. The waiting period is uniform for all trades. In a Rolling 48


Settlement, all trades outstanding at end of the day have to be settled, which means that the buyer has to make payments for securities purchased and seller has to deliver the securities sold. In India, we have adopted the T+5 settlemen settlements ts cycle, which means that a transaction transaction entered into on Day 1 has to be settled on the Day 1 + 5 working days, when funds pay in or securities pay out takes place. Advantages of Rolling Settlements

As mentioned earlier, this is the system practiced in developed countries. Pay outs are quicker than in weekly weekly settl settleme ements nts,, and invest investors ors will will benefi benefitt from from increa increased sed liquid liquidity ity.. The other other benefi benefitt of the modified system is that it keeps cash and forward markets separate. In the current system, the trader has five days to square off his transaction which leads to a high level of speculation as people even without without funds tend to "play" "play" the market. During volatile markets, markets, especially especially in a bearish bearish market, this often leads to a payment problem which has dogged the Indian stock exchanges for a long time. It provides for a higher degree of safety, and once mechanisms such as futures and stock-lending become popular, it would result in quality speculation and genuine investor interest. •

Short Selling: Short selling is a legitimate trading strategy. It is a sale of a security that the seller does

not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers take the risk that they will be able to buy the stock at a more favorable price than the price at which they "sold short." The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller, Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short. •

Auction: An auction is conducted for those securities that members fail to deliver/short deliver

during during pay-in pay-in.. Three Three factor factorss primar primarily ily give give rise rise to an auctio auction: n: short short delive deliveri ries, es, un-rec un-rectif tified ied bad deliveries, and un-rectified company objections. •

49

Separate Market for Auctions: Analysis of Indian Stock Market and Comparison of Corporate Stock Brokers

The buy/sell auction for a capital market security is managed through the auction market. As opposed to the normal market where trade matching is an on-going process, the trade matching process for auction starts after the auction period is over. If the shares are not bought at the auction i.e. if the shares are not offered for sale, the Exchange squares up the transaction as per SEBI guidelines. The transaction is squared up at the highest price from the relevant trading period till the auction day or at 20 per cent above the last available Closing price whichever is higher. The pay-in and pay-out of funds for auction square up is held along with the pay-out for the relevant auction. •

Bad Delivery: SEBI has formulated uniform guidelines for good and bad delivery of documents. Bad

delivery may pertain to a transfer deed being torn, mutilated, overwritten, defaced, or if there are spelling mistakes in the name of the company or the transfer. Bad delivery exists only when shares are transferred physically. In "Demat" bad delivery does not exist. •

Dematerialization: Dematerialization in short called as 'demat' is the process by which an investor can

get physical certificates converted into electronic form maintained in an account with the Depository Participant. The investors can dematerialize only those share certificates that are already registered in their name and belong to the list of securities admitted for dematerialization at the depositories. •

Depository: The organization responsible to maintain investor's securities in the electronic form is

called the depository. In other words, a depository can therefore be conceived of as a "Bank" for securities. In India there are two such organizations viz. NSDL and CDSL. The depository concept is similar to the Banking system with the exception that banks handle funds whereas a depository handles securities of the investors. An investor wishing to utilize the services offered by a depository has to open an account with the depository through Depository Participant. •

50

Depository Participant:


The market intermediary through whom the depository services can be availed by the investors is called a Depository Participant (DP). As per SEBI regulations, DP could be organizations involved in the business of providing financial services like banks, brokers, custodians and financial institutions. This system of using the existing distribution channel (mainly constituting DPs) helps the depository to reach a wide cross section of investors spread across a large geographical area at a minimum cost. The admission of the DPs involves a detailed evaluation by the depository of their capability to meet with the strict service standards and a further evaluation and approval from SEBI. Realizing the potential, all the custodians in India and a number of banks, financial institutions and major brokers have already joined as DPs to provide services in a number of o f cities.

51


COMPARISON OF CORPORATE STOCKBROKERS

Criteria

Types of Account A/C Opening Fees(Trading + Demat) Brokerage Intraday Delivery AMC 52

Offer Provided 2 900/0.03% - 0.10% 0.25% - 0.50% None


Lead Time Margin

Intraday Delivery

Interest Rate Sauda Expiry Software

Criteria

Types of Account A/C Opening Fees(Trading + Demat) Brokerage Intraday Delivery AMC Lead Time Margin Intraday Delivery Interest Rate Sauda Expiry Software

Criteria

Types of Account A/C Opening Fees(Trading + Demat) Brokerage Intraday Delivery AMC Lead Time Margin Intraday Delivery Interest Rate 53

1 Week 3 times 12 times None T+5 Power Indiabulls (750/-)

Offer Provided 2 555/- + 300/0.05% 0 .5 % 300/1 Week 3 times 12 times 18% T+5 ODIN

Offer Provided 2 500/- + 40/0.01% 0.10% 300/4-5 days 4 times 10 times 18%


Sauda Expiry Software

Never ODIN

Criteria


Criteria


54

Offer Provided 2 2520/0.03% 0.30% 2000/7-8 days 5 times 10 times 18% T+3 GOTX

Offer Provided 2 200/- + 651/0.01% to 0.03% 0.10% to 0.30% 350/1 week 7 times 10 times 18% T+5 ODIN


55


STATEMENT OF PROBLEM To select a corporate broker that is rated highest on customer satisfaction level.

OBJECTIVE •

To conduct a study on awareness level of people about stock brokers in Panipat city.

•

To study the market share of Anagram Capital Ltd in the Panipat city.

•

What factors should Anagram Capital Limited consider to become a market leader?

•

To find out the problems faced by clients while trading with Anagram Capital Ltd.

•

To identify the drawbacks in the current system of trading and suggesting improvements in

the same. •

To get practically exposed to the trading market. Steps in Research Methodology are as follows:-

 Research Problem: I was trying to study the Corporate Stock Brokers. Under this the problem is that I had to know the factors on the basis of which client takes decision to open Demat account. acco unt.



Research Design: A good research design is that design which is made keeping in view the objective of research and availability of staff, time, & money. I have also selected Exploratory Research studies which are as follows: Area of Study - The area of my research project was Panipat.



Sample Design:

56


A sample design is a definite plan for obtaining a sample for a given population. It refers refers to the technique or the procedure and the researcher researcher would adopt in selecting items of sample. sample. Sample design may as well lay down the number of items to be included in the sample i.e. the size of the sample. Sample design is determined before data is collected. Sampling Area

-

Panipat

Sampling Size

-

20 clients of Anagram Capital Ltd. and 50 clients of other corporate brokers.



Data Collection: Data collection is most important part of research because the research is based on it. There are several ways of collecting data which differs considerably in terms of cost, time and other resources at the disposal of the researchers. The data collection method for this research work is from primary source as well as secondary. The survey is carried out through a non probability convenience sampling in Panipat through a structured questionnaire.

Type of Data: There are two types of Data: 1)

Primary

2)

Secondary

Primary Primary Source: Source from where first hand information gathered directly are called primary

source and thus information collected is called Primary data. In case of o f above study the primary source was consumer. Primary Data: - The techniques available for collecting primary data are: •

Observation method

•

Questionnaire method

57


Interview method

•

Secondary Source: - The source of information already gathered for some other purpose are available

is called secondary data, with regard to my study secondary sources of my study where records of the company, magazines and papers. The Secondary data was collected on the basis of requirement, conveniences and reliability of the data. Out of these I have chosen questionnaire method to collect the data because of low cost, free from the bias of other interviewer and respondent.

Collection of data through Questionnaire: This method of data collection is quite popular partic particula ularly rly in case case of big enquir enquires, es, privat privatee indivi individual duals, s, resear research ch worker workers, s, privat privatee and public public organizatio organizations ns and even is adopting adopting it by governments. governments. In this method I went to the clients clients personally personally and asked them to fill the questionnaire.



Findings and Analysis: Interview

This study was conducted to find out corporate broker that is rated highest on customer satisfaction level. The people undergoing the test were divided into into 7 categories. 1.

Clients of Ana Anagram Capital Ltd.

2.

College Students

3.

Working Professionals (Desk Work)

4.

Servicemen

5.

Businessmen

58


For the purpose of research project I had applied the following process:

59


60


ANALYSIS & INTERPRETATION

61


Brokerage Charged

Name of Companies

62


Interpretation: On an average Indiainfoline is rated highest on brokerage while on the other hand Angel Stock Broking Limited is the company that charges the least brokerage on both intraday and s e e p delivery transactions. u R n i . t m A

3000

A/C Opening Charges 2500

2000

1500

A/ C Opening Charg Charges es AMC

1000

500 500

0 Indi India abulls bulls Indi India ainfoline infoline Ang Angel Brokin roking g

Karvy rvy

Ana Anagram ram

Interpretation: Karvy Securities charges the maximum account opening fees and the Annual Maintenience Charges while Angel Stock broking b roking is on the other extreme. 63


ANALYSIS & INTERPRETATION (CLIENTS OF ACL) s e e p u R n i . t m A

Q1: Who are you? No. of Respondents

Percentage

(a) Trader

15

75%

(b) Investor

5

25%

Name of Companies

Interpretation: After survey, it is found that 75% of the respondents are traders and the rest 25% are investors.

64


Q2: What is your favorite instrument of saving? No. of Respondents

Percentage

(a) Stock Market

16

80%

(b) Others (specify)…….

4

20%

Interpretation: After survey, it is found that 80% of the respondents like stock market whereas 20% like others instruments like insurance, mutual funds, etc.

65


Q3: What is the basic purpose of your investment? No. of Respondents

Percentage

(a) Returns

14

70%

(b) Capital Appreciation

3

15%

(c) Tax Benefits

1

5%

(d) Others (specify)…….

2

10%

Interpretation: After survey, it is found that the purpose of 70% of the respondents are returns & of 15% of the respondents are capital appreciation & of 5% of the respondents are tax benefits & the rest are others.

66


Q4: What is the time horizon of your investment? No. of Respondents

Percentage

(a) 1-30 days

3

15%

(b) 1-6 months

1

5%

(c) More than 6 months

1

5%

(d) Depend upon profits

15

75%

Interpretation: After survey, it is found that the time horizon of 15% of the respondents are 1-30 days & of 5% of the respondents are 1-6 months & of 5% of the respondents are more than 6 months & for the the rest 75% are depend upon profits. profits.

67


Q5: Your source of information of Anagram Capital Limited is No. of Respondents

Percentage

(a) Newspaper

3

15%

(b) Internet

2

10%

(c) Friends/Relatives

2

10%

(d) Existing clients of ACL

13

65%

Interpretation: After survey, it is found that the source of information of 15% of the respondents are news newspa pape perr & of 10% of the the resp respon onde dent ntss are are inte intern rnet et & of 10% of the the resp respon onden dents ts are are more more friends/relatives & for for the rest 65% are existing clients of ACL.

68


Q6: How would you rate the following elements of Anagram Capital Limited? Excellent

Very good

Good

Poor

1 5%

35%

40%

10%

(b) Ability to resolve problems

2 0%

40%

35%

5%

(c) Quality of advice

2 0%

30%

45%

5%

(a) Knowled Knowledge ge of employee employeess you deal with

Interpretation:

69


After survey, it is found that 40% of the respondents feel that knowledge of employees of ACL are good and 40% of the respondents feel that ability to resolve problems of ACL are very good and 45% of the respondents feel that quality of advice of ACL are good.

Q7: Based on your experience with ACL, use a tick to indicate how you feel about the online services (software provided and back office support) of ACL? No. of Respondents

Percentage

(a) Friendly

13

65%

(b) Unfriendly

7

35%

Interpretation:

70


After survey, it is found that 65% of the respondents feel that online services (software) provided by ACL are friendly whereas 35% of the respondents feel that online services (software) provided by ACL are unfriendly.

ANALYSIS & INTERPRETATION (NON-CLIENTS)

Q1: Do you have a pan card? No. of Respondents (a) Yes (b) No

Percentage

48

96%

2

4%

Interpretation: 71


After survey, it is found that 96% of the respondents (non-clients of ACL) have pan card whereas 4% of the respondents don’t have pan card.

Q2: Who are you? No. of Respondents

Percentage

(a) Trader

40

80%

(b) Investor

10

20%

Interpretation: After survey, it is found that 80% of the respondents are traders and the rest 20% are investors. 72


Q3: What is the time horizon of your investment? No. of Respondents

Percentage

(a) 1-30 days

9

18%

(b) 1-6 months

6

12%


4

8%

(d) Depend upon profits

31

62%

Interpretation:

73


After survey, it is found that the time horizon of 18% of the respondents are 1-30 days & of 12% of the respondents are 1-6 months & of 8% of the respondents are more than 6 months & for the the rest 62% are depend upon profits. profits.

Q4: What is your preferred medium of receiving research report and tips from your dealer?

74

No. of Respondents

Percentage

(a) SMS Facility

35

7 0%

(b) Instant messaging

7

1 4%

(c) E-mail

5

1 0%

(d) others

3

6%


Interpretation: After survey, it is found that for 70% of the respondents preferred SMS facility as a medium of receiving tips whereas14 % & 10% respondents preferred instant messaging & e-mail respectively.

Q4: In which company you have d-mat and trading account? No. of Respondents

Percentage

6

12%

(b) India Infoline Security Pvt. Ltd.

18

36%

(c) Indiabulls Securities Ltd.

14

28%

(d) Others

12

24%

(a) Karvy Securities

Interpretation: 75


After survey, it is found that 12% of the respondents have d-mat & trading account in Karvy Securities whereas 36% of the respondents are in India Infoline & 28% of the respondents are in Indiabulls.

Q6: Are you satisfied with you present broking firm? No. of Respondents (a) Yes

36

(b) No

14

Interpretation: After the survey, it is found that India Infoline is the company whose clients are most satisfied with the services of the company and other column signifies that some other company(s) is rated as the least preferred companies of the respective clients 76


Q7: State the reason for your satisfaction? No. of Respondents

Percentage

15

30%

(b) Brokerage

20

40%

(c) Operating Expenses

9

18%

(d) Others

6

12%

(a) Services

Interpretation:

77


After the survey, it is found that brokerage is the most convenient factor on which the respondents are satisfied. The brokerage chart (mentioned above) also displays that Angel Stock Broking has the least brokerage charged cha rged from its clients.

78


CONCLUSION • According to the survey most of the clients of “Anagram Capital Ltd.” say that the research data provided is sufficient for them to take intelligent trading decisions. • Anagram Capital Limited takes much in to account the budget of their clients and then takes any investment decisions. • People pay more emphasis on brokerage than service provided by brokerage houses. • Angel stock broking Ltd. came out to be a leading company on the following points: 

Brokerage



Fees charged



Awareness

•

79

Anagram Capital Ltd. is also an upcoming challenging competitor to Angel Stockbroking Ltd.


80


LIMITATIONS •

Size of the research may not be substantial.

•

There was lack of time on the part of respondents.

•

There may be biasness in information by market participant.

•

Due to limitation of time a sample size of only 50 respondents were chosen.

•

The sample for research was chosen only from a limited area.

•

Some of the respondents may be biased in giving responses.

•

Complete data was not available due to company privacy and secrecy.

81


82


SUGGESTIONS TO ANAGRAM CAPITAL LTD. •

Improvement in the time delay of account opening is required.

•

There should be a specific number of clients under each relationship manger, so that each client can be attended properly and can be imparted desired time.

•

Some promotional activities are required for the awareness of the customer, seminars should be held for providing information to prospective and present customers.

•

People at young age should be encouraged to invest in stock market.

•

The company officials should maintain healthy relationship with their clients.

83


84


QUESTIONNAIRE FOR CLIENT OF ANAGRAM CAPITAL LIMITED

Dear Respondent, This information revealed by you will be used for institutional work only. This will be a part of my summer summer Traini Training ng Projec Project. t. No inform informati ation on will will be disclo disclosed sed to any outsid outsidee party party.. Please Please spare spare sometime to fill in this questionnaire.

Q1. Who you are? (a)Trader

(b) Investor

Q2. What is your favorite instrument of saving? (a) Stock Market

(b) Others (specify) _________

Q3. What is the basic purpose of your investment?

85


(a) Returns

(b) Capital Appreciation

(c) Tax benefits

(d) Others (specify) _________

Q4. What is the time horizon of your investment? (a) 1-30 days

(b) 1-6 months


(d) depends upon the profit

Q5. Your source of information of Anagram Cap ital Limited is. (a) Newspaper

(b) Internet

(c) Friends/ Relatives

(d) Existing clients of ACL

Q6. How would you rate the following elements of Anagram Capital Limited? (Please tick)

Excellent

Very good

Good

Poor

Knowledge of employees you deal with Ability to resolve problems Quality of advice

86


Q7. Based on your experience with ACL, use a tick to indicate how you feel about the online services (software provided and back office support) of ACL? (a) Friendly

(b) Unfriendly

Q8. Feedback (if any) _________________________________________________________________________________ _________________________________________________________________________________

Please tell a little about yourself:

Name: -……………………… -………………………………………………… ………………………………………… ……………… Age: - (a) 20-30years

(b) 31-40years

(c) 40-50years

(d) Above 50years

Contact No. : -……………………………………………………… -………………………………………………………

Address: -………………………………………………………………………………….

Gender: -

(a) Male

Marital status: - (a) Married

87

(b) Female

(b) Unmarried


Education: -

Occupation: -

(a) Under Graduate

(b) Graduate

(c) Post Graduate

(d) Other

(a) Business

(b) Service

(c) Professional

(d) Others

QUESTIONNAIRE FOR NON-CLIENTS

Dear Respondent, This information revealed by you will be used for institutional work only. This will be a part of my Summer Summer Traini Training ng Projec Project. t. No inform informati ation on will will be disclo disclosed sed to any outsid outsidee party party.. Please Please spare spare sometime to fill in this questionnaire. 88


Q1. Do you have a pan card? (a)Yes

(b) No

Q2. Who you are? (a) Trader

(b) Investor

Q3. What is the time horizon of your investment? (a) 1-30 days

(b) 1-6 months


(d) depends upon the profit

Q4. What is your preferred medium of receiving research report and tips from your dealer? (a) SMS facility

(b) Instant messaging

(c) E-mail

(d) others (specify) ________

Q5. In which company you have d-mat and trading account? (a) Karvy Securities

(b) IndiaInfoline Security Private Limited

(c) Indiabulls Securities Limited

(d) Others (specify) _________

Q6. Are you satisfied with you present broking firm? 89


(a)Yes

(b) No

Q7. State the reason for your satisfaction? (a) Services

(b) Brokerage

(c) Operating expenses

(d) Others

Q8. Feedback (if any) ___________________________________________________________________________ ___________________________________________________________________________

Please tell a little about yourself: Name: -……………………… -……………………………………………… ………………………

Age: - (a) 20-30years

(b) 31-40years

(c) 40-50years

(d) Above 50years

Contact No. : -………………………………………….. -…………………………………………..

Address: -……………………… -………………………………………………… ………………………………… ………

Gender: 90

(a) Male

(b) Female


Marital status: - (a) Married

Education: -

(b) Unmarried

(a) Under Graduate

(b) Graduate

(c) Post Graduate

(d) Other

Occupation: - (a) Business

(b) Service

(c) Professional

(d) Others

ABBREVIATIONS ABBREVIATIONS USED •

91

BSE

-

Bombay Stock Exchange Analysis of Indian Stock Market and Comparison of Corporate Stock Brokers

•

CSDL

-

Central Securities Depository Limited

•

CARE

-

Credit Analysis & Research Limited

•

CRISIL

-

Credit Rating Information Services of India Limited

•

F&O

-

Futures and Options

•

FPO

-

Follow up Public Offering

•

IISL

-

India Index Services & Products Ltd.

•

ICRA

-

Investment Information and Credit Rating Agency of India

•

NCDEX

-

National Commodity and Derivatives Exchange Ltd.

•

NSCCL

-

National Securities Clearing Corporation Limited

•

CDSL

-

Central Depositories Services Ltd.

•

DRF

-

Demat Request Form

•

DCA

-

Department of Company Affairs

•

DEA

-

Department of Company Affairs

•

DP

-

Depository Participant

•

FII

-

Foreign Institutional Investors

•

FMC

-

Forward Markets Commission

•

IPO

-

Initial Public Offer

•

ISIN

-

International Securities Identification Number

•

NEAT

-

National Exchange for Automated Trading

•

NSDL

-

National Securities Depository Limited

•

NAV

-

•

NYSE

-

New York Stock Exchange

•

NCFM

-

NSE’ Certification in Financial Markets

Net Asset Value

•

OTC

-

Over The Counter

•

RRF

-

Remat Request Form

•

SBTS

-

Screen Based Trading System

•

T+2

92

-

Second day from the trading day


•

SEBI

-

Securities and Exchange Board of India

•

SAT

-

Securities Appellate Tribunal

•

SCRA

-

Securities Contract (Regulation) Act

•

SCRR

-

Securities Contract (Regulation) Rules

•

S&P

-

Standard & Poor

•

ICSE

-

Inter-Connected Stock Exchange

•

VSAT’s

-

Very Small Aperture Terminus

•

IBT

-

Internet-based Trading

•

ACL

-

Anagram Capital Ltd.

BIBLIOGRAPHY

93


•

Kothari. C. R, Research Methodology, New Age International (P) Ltd., New Delhi (2008

Edition). •

Marketing Research- Harper W. Boyd, Jr. Ralph Westfall, Stanley F. Stasch (2007 Edition).

•

M.D. Rashikh Irfan - Stock exchanges in India.

WEBLIOGRAPHY •

http://www.anagram.co.in

•

http://www.moneycontrol.com

•

http://www.karvy.com

•

http://www.bseindia.com

•

http://www.nseindia.com

•

http://www.nseindia.com/content/indices/ind_niftylist.csv

•

http://www.tradersedgeindia.com/bse_sensex.htm

•

http://www.indiahowto.com/what-is-sensex-nifty.html

•

http://www.moneycontrol.com/sensex/bse/sensex-live

•

http://www.google.com

94


Summer Training Report by Deepak Dhingra

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