PROJECT STUDY REPORTOn

Training Undertaken at

STUDY OF INVESTER PERCEPTION TO INVEST IN STOCK MARKET

Submitted in partial fulfilment for the

Award of degree ofMaster of Business Administration

PACIFIC INSTITUTEOF MANAGEMENT Udaipur (RAJ.)

SUBMITTED By:BILAL AHMED MBA 3RD SEM

[2010 -2012]

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Acknowledgement

I express my sincere thanks to my project guide, Ms. _________________, Designation _________________, Deptt______________., for guiding me right from the inception till the successful completion of the project. I sincerely acknowledge him/her/them for extending their valuable guidance, support for literature, critical reviews of project and the report and above all the moral support he/she/they had provided to me with all stages of this project.

I would also like to thank the supporting staff ___________________________ Department, for their help and cooperation throughout our project.

(Signature of Student) Name of the Students

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TABLE OF CONTENTS

S.NO PARTICULARS PAGE NO.

01. ABSTRACT 01-06

02 . INTRODUCTION 07

03 . FINANCIAL SERVICE INDUSTRY 08

C OMPANY P ROFILE

04. GEOJIT BNP PARIBAS -INTRODUCTION 09

05 . CORE STRENGTH 10

06 . MILE STONE. 11

07. PRODUCT PROFILE 12-13 09. CONCEPT OF MUTUAL FUND 1410. INDUSTRY OVERVIEW 15-1611. HISTORY OF MUTUAL FUND 1712. TYPES OF MUTUAL FUND 18-21 13. BENEFITS & DISADVANTAGE OF MF 22-24

14. MAJOR PLAYERS IN MF INDUSTRY 2515. SELECTION OF MUTUAL FUND 2616. RECENT TRENDS IN MF INDUSTRY 2717. DISTRIBUTION CHANNEL IN MF18. ROLE OF SEBI 2819. IPO and DEMAT 29-3220. STOCK MARKET REVIEW 33-5021. DERIVATIVES 5122. DERIVATIVES TERMINOLOGY 52-5323 QUESTIONERS 54-7224. SWOT ANALYSIS 7325. FINDINGS 7426. RECOMANDATION 7527. LIMITATION 7628. BIBLIOGRAPHY 77-78

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PREFACE

I had undergone a practical training under GEOJIT BNP PARIBAS UDAIPUR. It was a good exposure for me to undergo training in such a company to get the knowledge and experience regarding investment opportunities and future aspect

Summer training is one of the major experiencing components of the Knowledge, gain of relevant of information with respect to finance and dealing with situation in a professional course like M.B.A. where a professional person faces a problem in a field. I was able to get familiarized with the customer relationship and got to know how a company measure to resolve their grievances and services them to the maximum for future prospect and success. Field component like survey, generation of questioner With respect to marketing helped me a lot and would be a great support in future.

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OBJECTIVE

The main purpose of the On Job Training is to meet with the real life exposure &

experience of the corporate world. The objectives OJT are as follows:

Analyzing the market survey and thereby finding out the investment pattern of

the customer.

The main motive of my OJT (on the job training) is to increase the sales of the

company’s product (i.e. sale of DEMAT account and Mutual Fund), it’s a sales

orientated training.

Proper understanding and analysis of the perspective investor about this financial

product.

Create awareness about Derivative among customers

Giving knowledge how Derivative helps in minimizing loss

Aware customers about GEOJIT BNP PARIBAS Brand

Aware customers about IPOs

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ABSTRACT

There are two ways of wealth creation namely professional income and investment income. Investing money is a greater art than earning money, especially in market so volatile and with so many investment options available (mutual funds, FD’s, IPO’s, and Insurance etc.). At the retail level, investors are unique and are a highly heterogeneous group. The objective of investment differs from person to person. While someone wants security, other might give more Weighting to returns. Someone else might want to plan for his child’s education while someone might be saving for the life after retirement. This project is a detailed study about the investment behavior towards different investment options available and main concern’s of the investor.

This project tries to simplify the investor’s behavior and tries to highlight the following matters.

1. Description of investor’s behavior.

2. Factors that affect investor’s behavior. 3. Psychology of investor.

4. Financial planning.

Before we could understand investor’s behavior we should know all the investment alternatives available to investors and understand some products which are sought after by investors. Therefore first of all we will explain mutual funds and insurance in detail. The study analyses the reasons, for paradigm of shift of investors from FDs, Bonds, Equity markets and other investment options towards Mutual Funds after post liberalization period and their perception about the mutual funds in the current scenario and it also analyses the relationship between demographics and their investment option

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1.INTRODUCTION

The report is divided into five sections.

Section 1- Company Profile Section

2- Mutual Funds

Section 3- Insurance Section

4- IPO and Demat

Section 5- Investor’s Behavior and Survey Findings.

This project is in the final stage and this report is on the study of primary & secondary data and the brief discussions on the work done so far. Initially, this report contains a systematic study of various investment instruments highlighting investment behavior based on different prevailing interest rates, market scenario and the conditions; towards risk taking ability and the returns expected. The study done through secondary data has been given in investor’s behavior section and study done through primary data has been covered in survey findings. Then this study along with primary data collected regarding investment behavior will be implemented in understanding the investor’s behavior & dilemma faced by investors before investing. This will help us to understand the asset allocation pattern of investors based on various factors like risk taking ability, interest rates prevailing in the market, income, and age of investor. People have different investment objective and risk appetite. So to get the highest returns, asset allocation through active portfolio management is the key.

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S E C T I O N - 1

1.1Financial Services Industry

One of the important pillars in the Indian economy is the service sector and financial service industry plays a major role in that. Financial service industry can be divided into two parts:

1.1.1. Banking Institutions

1.1.2. Non- Banking Institutions

Banking institutions are the institutions that hold banking license which are granted by bank regulatory authority. They conduct the most fundamental banking services such as accepting deposits and making loans. Non- Banking Institutions are the one which do not hold banking license but are regulated by NBFC’s (Non Banking Financial Corporations). They perform functions like:

Stock Market

Insurance

Mutual Fund

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GEOJIT BNP PARIBAS

INTRODUCTION

It all started in the year 1987 when Mr. C.J. George and Mr.Ranajit Kanjilal founded Geojit as a partnership firm. In 1993, Mr.Ranajit Kanjilal retired from the firm and Geojit became the proprietary concern of Mr. C .J. George. In 1994, it became a Public Limited Company named Geojit Securities Ltd. The Kerala State Industrial Development Corporation Ltd. (KSIDC), in 1995, became a co-promoter of Geojit by acquiring a 24 percent stake in the company, the only instance in India of a government entity participating in the equity of a stock broking company. The year 1995 also saw Geojit being listed on the leading regional stock exchanges. Geojit listed at The Stock Exchange, Mumbai (BSE) in the year 2000. Company’s wholly owned subsidiary, Geojit Commodities Limited, launched Online Futures Trading in agri-commodities, precious metals and energy futures on multiple commodity exchanges in 2003. This was also the year when the company was renamed as Geojit Financial Services Ltd. (GFSL). The Board consists of professional directors; including a Kerala Government nominee. With effect from July 2005, the company is also listed at The National Stock Exchange (NSE). Company is a charter member of the Financial Planning Standards Board of India and is one of the largest Depository Participant(DP) brokers in the country.

On 31st December 2007, the company closed its commodities business and surrendered its membership in the various commodity exchanges held by Geojit Commodities Ltd. Global banking major BNP Paribas took a stake in the year 2007 to become the single largest shareholder. Consequently, Geojit BNP Paribas has been renamed as Geojit BNP Paribas Financial Services Ltd.

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C O R E S T R E N G T H S

BREADTH OF SERVICES

In line with its client-centric philosophy, the firm offers to its clients the entire spectrum of financial services ranging from brokerage services in equities and commodities, distribution of mutual funds, IPOs and insurance products, real estate, investment banking, merger and acquisitions, corporate finance and corporate advisory.

Clients deal with a relationship manager who leverages and brings together the product specialists from across the firm to create an optimum solution to the client needs.

MANAGEMENT TEAM

AR brings together a highly professional core management team that comprises of individuals with extensive business as well as industry experience.

IN-DEPTH RESEARCH

Our research expertise is at the core of the value proposition that we offer to our clients. Research teams across the firm continuously track various markets and products. The aim is however common - to go far deeper than others, to deliver incisive insights and ideas and be accountable for results.

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P R O D U C T P R O F I L E O F GEOJIT BNP PARIBAS

The entire firm activities are divided across distinct client groups: Individuals, Corporate and Institutions.

G R O U P O V E R V I E W

GLOBAL WEALTH INVESTMENT BANKING & CORPORATE BROKERAGE MANAGEMENT & DISTRIBUTION FINANCE

INSTITUTIONS M&A EQUITIES

PRIVATE CLIENTS IPOS, BUYBACKS, OFFERS, DERIVATIVES PLACEMENTS BONDS DEBT RAISING, MUTUAL FUNDS SYNDICATION AND COMMODITIES

RESTRUCTURING INSURANCE

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INDIVIDUALS INSTITUTIONS

1. Private Wealth Management 1.Institutional research including

Hedge funds

2. Brokerage and Distribution 2.Managed investment services

3. NRI’s

CORPORATE

1. Institutional wealth management

2. Corporate advisory services

3. Investment banking and corporate finance

4. Cross border advisory

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S E C T I O N - 2

MUTUAL FUND

CONCEPT OF MUTUAL FUNDS

Small investors do not have expert knowledge about the share market and they don’t have enough time to track the share market. So many small investors pool together their money and entrust it to an expert called Fund Manager. Fund manager invests the money entrusted to him in different securities and thus gives wide portfolio to small investors. A mutual fund gives diversification to investors and thus reduces the risk.

INTRODUCTION

A Mutual Fund is a body corporate that pools the savings of a number of investors

and invests the same in a variety of different financial instruments, or securities. The income earned through these investments and the capital appreciation realized by the scheme is shared by its unit holders in proportion to the number of units owned by them. Mutual funds can thus be considered as financial intermediaries in the investment business that collect funds from the public and invest on behalf of the investors. The losses and gains accrue to the investors only. The Investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities

An Asset Management Company (AMC) is a highly regulated organization that pools money from investors and invests the same in a portfolio. They charge a small management fee, which is normally 1.5 per cent of the total funds managed.

NAV or Net Asset Value of the fund is the cumulative market value of the assets of the fund net of its liabilities. NAV per unit is simply the net value of assets divided by the number of units outstanding. Buying and selling into funds is done on the basis of NAV-related prices. NAV is calculated as follows

NAV= Market value of the fund’s investments+ Receivables+ Accrued Income– Liabilities-Accrued Expenses

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MUTUAL FUNDS - INDUSTRY OVERVIEW

INDUSTRY DESCRIPTION

The mutual fund industry consists of investment companies that sell shares in one or more mutual funds. A mutual fund is a pool, or portfolio, of financial assets. So- called open-end funds are sold publicly and their shares must be redeemed by the investment company upon request of the shareholder. The value of the shares rises and falls with the value of the pool of financial assets. Shareholders rely on the investment company to gain a favorable return on their investment instead of operating directly in the market themselves.

A fund manager determines the composition of the portfolio, which may include stocks, bonds, Government securities, shares in precious metals, and other financial assets selected to meet the stated investment objective of the fund.

Mutual funds are commonly categorized by their general investment objectives. Equity funds consist mainly of common stocks and are organized primarily to achieve capital appreciation, or growth, rather than periodic distribution of income. Bond funds, on the other hand, are composed predominantly of corporate, U.S. Government, or municipal bonds and emphasize regular income rather than growth. Income funds have the same objective as bond funds but include Government National Mortgage Association securities, Government securities, and common and preferred stocks as well as bonds. Money market mutual funds consist of short-term instruments, such as U.S. Government securities, bank CDs, and commercial paper. Short-term municipal bond funds are composed predominantly of tax-exempt, short- term municipal securities.

Investment companies sell shares directly to the public or through agents. Registered representatives of brokerage firms, insurance agencies, and financial planning firms, among others, sell mutual fund shares as part of their overall financial service. The funds usually add a sales charge, or load," which is used in part to compensate agents.

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Many investment companies sell shares in funds directly to the public by mail and by telephone. These shares are usually sold "no load"-that is, with no sales charge or a nominal (less than 3 percent) sales charge. About a third of mutual funds do not carry a load. Revenue for investment companies from these funds is usually provided by management fees based on size of assets, performance, or both. Some funds, known as 12b-1 funds, use a portion of their assets for marketing and distribution expenses.

A mutual fund must meet specific regulatory requirements. It must register with the Securities and Exchange Commission (SEC), issue a prospectus giving a detailed report of its operations, and adhere to strict accounting and valuation rules. A number of regulations exist to prevent conflicts of interest among officials of investment companies.

Mutual funds are also governed by state regulations and securities laws. Because of

the fiduciary nature of mutual funds, they are subject to closer scrutiny than the operations of other financial institutions.

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HISTORY OF THE INDIAN MUTUAL FUND INDUSTRY

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases:

FIRST PHASE - 1964 – 87

An Act of Parliament established Unit Trust of India (UTI) on 1963. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. In 1978, UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988, UTI had Rs. 6,700 crores of assets under management.

SECOND PHASE – 1987 -1993 (ENTRY OF PUBLIC SECTOR FUNDS)

1987 marked the entry of non – UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI mutual fund was the first non – UTI mutual fund established in

June 1987 followed by Can bank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.At the end of 1993 the mutual fund industry had assets under management of Rs 47004 crores.

THIRD PHASE – 1993-2003 (ENTRY OF PRIVATE SECTOR FUNDS)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families .Also 1993 was the year in which the first Mutual fund regulations came into being under which all the mutual funds except UTI were to be registered and governed .The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised mutual fund regulations in 1996. The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 44,541 crores of assets under management was way ahead of other mutual funds.

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FOURTH PHASE – SINCE FEBRUARY 2003

In February 2003, following the repeal of the Unit Trust of India act 1963 UTI was divided into two separate entities. One is the specified undertaking of the UTI with assets under management of Rs. 29,835 crores as at the end of January 2003, representing broadly the assets of US 64 scheme, assured return & certain other schemes. The specified undertaking of UTI, functioning under an administrator & the rules framed by Govt. of India & does not come under the purview of Mutual fund regulations

TYPES OF MUTUAL FUNDS

By Investment Objective

o Growth Schemes

o Diversified Fund

o Sector Fund

o Index Fund

o Tax Saving Fund

o Debt Fund

o Liquid Funds

o Gilt Funds

o Balanced Fund

o Hedge Funds

By Flexibility

o Open - Ended Schemes

o Close - Ended Schemes

o Interval Schemes

By Geographic Location

o Domestic Funds

o Offshore Funds

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(A) ON THE BASIS OF OBJECTIVE

Equity Funds/ Growth Funds

Funds that invest in equity shares are called equity funds. They carry the principal objective of capital appreciation of the investment over the medium to long-term. The returns in such funds are volatile since they are directly linked to the stock markets. They are best suited for investors who are seeking capital appreciation. There are different types of equity funds such as Diversified funds, Sector specific funds and Index based funds.

Diversified funds

These funds invest in companies spread across sectors. These funds are generally meant for risk-taking investors who are not bullish about any particular sector.

Sector funds

These funds invest primarily in equity shares of companies in a particular business

sector or industry. These funds are targeted at investors who are extremely bullish about a particular sector.

Index funds

These funds invest in the same pattern as popular market indices like S&P 500 and BSE Index. The value of the index fund varies in proportion to the benchmark index

Tax Saving Funds

These funds offer tax benefits to investors under the Income Tax Act. Opportunities provided under this scheme are in the form of tax rebates U/s 88 as well saving in Capital Gains U/s 54EA and 54EB. They are best suited for investors seeking tax concessions.

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Debt / Income Funds

These Funds invest predominantly in high-rated fixed-income-bearing instruments like bonds, debentures, government securities, commercial paper and other money market instruments. They are best suited for the medium to long-term investors who are averse to risk and seek capital preservation. They provide regular income and safety to the investor.

Liquid Funds / Money Market Funds

These funds invest in highly liquid money market instruments. The period of investment could be as short as a day. They provide easy liquidity. They have emerged as an alternative for savings and short-term fixed deposit accounts with comparatively higher returns. These funds are ideal for Corporate, institutional investors and business houses who invest their funds for very short periods.

These funds invest in Central and State Government securities. Since they are Government backed bonds they give a secured return and also ensure safety of the principal amount. They are best suited for the medium to long-term investors who are averse to risk

Balanced Funds

These funds invest both in equity shares and fixed-income-bearing instruments (debt) in some proportion. They provide a steady return and reduce the volatility of the fund while providing some upside for capital appreciation. They are ideal for medium- to long-term investors willing to take moderate risks.

Hedge Funds

These funds adopt highly speculative trading strategies. They hedge risks in order to increase the value of the portfolio.

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(B) ON THE BASIS OF FLEXIBILITY

Open-ended Funds

These funds do not have a fixed date of redemption. Generally they are open for subscription and redemption throughout the year. Their prices are linked to the daily net asset value (NAV). From the investors' perspective, they are much more liquid than closed-ended funds. Investors are permitted to join or withdraw from the fund after an initial lock-in period.

Close-ended Funds These funds are open initially for entry during the Initial Public Offering (IPO) and thereafter closed for entry as well as exit. These funds have a fixed date of redemption. One of the characteristics of the close-ended schemes is that they are generally traded at a discount to NAV; but the discount narrows as maturity nears. These funds are open for subscription only once and can be redeemed only on the fixed date of redemption. The units of these funds are listed (with certain exceptions), are tradable and the subscribers to the fund would be able to exit from the fund at any time through the secondary market.

Interval funds

These funds combine the features of both open–ended and close-ended funds wherein the fund is close-ended for the first couple of years and open-ended thereafter. Some funds allow fresh subscriptions and redemption at fixed times every year (say every six months) in order to reduce the administrative aspects of daily entry or exit, yet providing reasonable liquidity.

(C) ON THE BASIS OF GEOGRAPHIC LOCATION

Domestic funds

These funds mobilize the savings of nationals within the country.

Offshore Funds

These funds facilitate cross border fund flow. They invest in securities of foreign companies. They attract foreign capital for investment.

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BENEFITS OF MUTUAL FUNDS

Affordability: A mutual fund invests in a portfolio of assets, i.e. bonds, shares, etc. depending upon the investment objective of the scheme. An investor can buy in to a portfolio of equities, which would otherwise be extremely expensive. Each unit holder thus gets an exposure to such portfolios with an investment as modest as Rs.500/-. Thus it would be affordable for an investor to build a portfolio of investments through a mutual fund rather than investing directly in the stock market.

Diversification: Investments are spread across a wide cross-section of industries and sectors and so the risk is reduced. Diversification reduces the risk because all stocks don’t move in the same direction at the same time. One can achieve this diversification through a Mutual Fund with far less money than one can on his own.

Variety: Mutual funds offer a whole variety of schemes. This variety is beneficial in two ways: first, it offers different types of schemes to investors with different needs and risk appetites; secondly, it offers an opportunity to an investor to invest sums across a variety of schemes, both debt and equity. For example, an investor can invest his money in a debt scheme and a equity scheme depending on his risk appetite to create a balanced portfolio easily or simply just buy a Balanced Scheme.

Professional Management: Mutual Funds employ the services of skilled professionals who have years of experience to back them up. They use intensive research techniques to analyze each investment option for the potential of returns along with their risk levels to come up with the figures for performance that determine the suitability of any potential investment.

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Potential of Returns: Returns in the mutual funds are generally better than any other option in any other avenue over a reasonable period of time. People can pick their investment horizon and stay put in the chosen fund for the duration.

Equity funds can outperform most other investments over long periods by placing long-term calls on fundamentally good stocks. The debt funds too will outperform other options such as banks. Though they are affected by the interest rate risk in general, the returns generated are more as they pick securities with different duration that have different yields and so are able to increase the overall returns from the portfolio.

Liquidity: You are free to take your money out of open-ended mutual funds whenever you want, no questions asked. Most open-ended funds mail your redemption proceeds, which are linked to the fund's prevailing NAV (net asset value), within three to five working days of your putting in your request.

Regulations: Securities and Exchange Board of India ("SEBI"), the Capital Markets regulator has clearly defined rules, which govern mutual funds. These rules relate to the formation, administration and management of mutual funds and also prescribe disclosure and accounting requirements. Such a high level of regulation seeks to protect the interest of investors.

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DISADVANTAGES OF MUTUAL FUNDS

Professional Management: Did you notice how we qualified the advantage of professional management with the word "theoretically"? Many investors debate over whether or not the so-called professionals are any better than you or I at picking stocks. Management is by no means infallible, and, even if the fund loses money, the manager still takes his/her cut.

Costs: Mutual funds don't exist solely to make your life easier--all funds are in it for a profit. The mutual fund industry is masterful at burying costs under layers of jargon. These costs are so complicated that in this tutorial we have devoted an entire section to the subject.

Dilution: It's possible to have too much diversification. Because funds have small holdings in so many different companies, high returns from a few investments often don't make much difference on the overall return. Dilution is also the result of a successful fund getting too big. When money pours into funds that have had strong success, the manager often has trouble finding a good investment for all the new money.

Taxes: When making decisions about your money, fund managers don't consider your personal tax situation. For example, when a fund manager sells a security, capital-gain tax is triggered, which affects how profitable the individual is from the sale.It might have been more advantageous for the individual to defer the capital gains liability.

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MAJOR PLAYERS IN THE MUTUAL FUND INDUSTRY

Mutual Fund Schemes No. of Schemes

Franklin Templeton Investments 136 Pru ICICI Mutual Fund 172

Birla Mutual Fund 157

HDFC Mutual Fund 95

DSP ML Mutual Fund 60

Fedility Mutual Fund 8

HSBC Mutual Fund 70

Kotak Mahindra Mutual Fund 88

Reliance Mutual Fund 106

Tata Mutual Fund 145

Standard Chartered Mutual Fund 136

Sundaram Mutual Fund 80

LIC Mutual Fund 56

SBI Mutual Fund 85

UTI Mutual Fund 140

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FACTORS TO BE CONSIDERED BEFORE SELECTING A MUTUAL FUND

1. Making Risk- adjusted returns comparison. By doing this the investor will know whether the returns generated by the scheme have been adequately compensated for the extra risk undertaken by the scheme.

2. The investor depending upon his risk appetite and preferences should sub- classify the schemes on the basis of the characteristics of the schemes, which may be defensive or aggressive in nature.

3. Portfolio objective is also an important factor to be considered. It is always advisable to choose a scheme, which has a well-diversified portfolio rather than a concentrated portfolio, as it carries lesser risk.

4. Liquidity of the portfolio is also one of the critical parameters.

5. The fund size of the scheme is also of importance. A large corpus size firstly denotes investor’s confidence in the scheme and its fund manger abilities over the years and, secondly it allows the fund manager to diversify the portfolio, which reduces the overall market risk.

6. Other factor like turnover rate. low expense ratio load structure etc. of the schemes etc should also be considered before finally zeroing down on a scheme of your choice.

7. The rankings undertaken by ICRA is an initiative to inform the investors- who

Does not have the time or the expertise to undertake the analysis on their own- about the relative performance of the schemes.

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R ECENT T RENDS IN M UTUAL F UNDS

In the last few years Mutual Funds industry has evolved a lot. Private and foreign mutual funds are operating in the Indian market and constitute a substantial portion of the mutual fund industry. Today the industry consists of Unit Trust of India, mutual funds sponsored by public sector banks and insurance corporations, private and foreign mutual funds. The following changes can be observed in the Mutual Funds industry.

Investor’s preference for debt fund has decreased due to low interest rates. liquid funds have immerged as a new fund option. A lot of foreign AMC’s have entered into the Indian market and a lot more

are in the queue. India is emerging as a high potential market.

Ceiling on aggregate investments by mutual funds in overseas instruments to

be raised from $ 1 billion to $ 2 billion with removal of requirement of 10% reciprocal shareholding.

Limited number of qualified Indian mutual funds to be allowed to invest, cumulatively up to $ 1 billion, in overseas exchange traded funds.

Definition of open-ended equity-oriented schemes of mutual funds in the Income tax Act aligned with the definition adopted by SEBI

pen ended equity oriented scheme and close ended equity oriented schemes to be treated on par for exemption from dividend distribution tax.

As per the SEBI circular (SEBI/IMD/CIR No.1/64057/06) dated April 4, 2006, Initial Issue Expenses will henceforth be permitted for closed-ended schemes only. Open ended schemes should meet the sales, marketing and other such expenses connected with sales and distribution of schemes from the entry load and not through initial issue expenses.

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DISTRIBUTION CHANNEL

In the recent years the distribution channel of mutual funds has become very strong mutual funds are being distributed not only directly through AMC’s but also through internet, brokers, banks and other agencies. The chart given below shows the distribution channel of Mutual Funds. Large corporate usually purchase mutual funds directly through AMC;s. small investors for the sake of convenience prefer buying mutual fund schemes from distributors and through internet.

ROLE OF SEBI IN MUTUAL FUND INDUSTRY

In the year 1992, Securities and Exchange Board of India Act was passed. The objectives of SEBI are to protect the interest of investors in securities and to promote the development of and to regulate the securities market.

As far as Mutual Fund is concerned, SEBI formulates policies and regulates the Mutual Fund to protect the interest of the investors. SEBI notified regulations for the Mutual Funds in 1993. Thereafter, Mutual Funds sponsored by private sector entities Were allowed to enter in stock market .The regulation were fully revised in 1996 and have been amended thereafter from time to time. SEBI has also issued guidelines to the Mutual Funds from time to time to protect the interest of investors.

All Mutual Funds whether promoted by public sector or private sector entities including those promoted by foreign entities are governed by the same set of regulations. There is no distinction in regulatory requirements for these Mutual Funds and all are subject to monitoring and inspections by SEBI. The risks associated with the schemes launched by the Mutual Funds sponsored by this entity are of similar type. It may be mentioned here that Unit Trust of India is not registered with SEBI as a Mutual Fund (as on Jan 15, 2002.)

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IPO AND DEMAT

Initial Public Offering Intital public offer(IPO)is when unlisted company maks either a fresh issue of securities or an offer for sale of its existing securities or both for the first time to the public. This paves way for listing and trading of the issuer’s securities.

Follow on Public Offering

A follow on public offering (FPO) is when an already listed company makes either a fresh issue of securities to the public or an offer for sale to the public, through an offer document. An offer for sale in such scenario is allowed only if it is made to satisfy listing or continuous listing obligations

Red Herring Prospectus is a prospectus, which does not have details of either

price or number of shares being offered, or the amount of issue. This means that in case price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares are determined later. An RHP for and FPO can be filed with the RoC without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of book-built issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with ROC in terms of the provisions of the Companies Act. Only on completion of the bidding process, the details of the final price are included in the offer document. The offer document filed thereafter with ROC is called a prospectus. Who decides the price of an issue?

Indian primary market ushered in an era of free pricing in 1992. Following this, the guidelines have provided that the issuer in consultation with Merchant Banker shall decide the price. There is no price formula stipulated by SEBI. SEBI does not play any role in price fixation. The company and merchant banker are however required to give full disclosures of the parameters which they had considered while deciding the issue price. There are two types of issues one where company and LM fix a price

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(called fixed price) and other, where the company and LM stipulate a floor price or a price band and leave it to market forces to determine the final price (price discovery through book building process).

Fixed Price offersAn issuer company is allowed to freely price the issue. The basis of issue price is disclosed in the offer document where the issuer discloses in detail about the qualitative and quantitative factors justifying the issue price. The Issuer company can mention a price band of 20% (cap in the price band should not be more than 20% of the floor price) in the Draft offer documents filed with SEBI and actual price can be determined at a later date before filing of the final offer document with SEBI / ROCs.

Book building process

“Book Building” means a process undertaken by which a demand for the securities proposed to be issued by a body corporate is elicited and built up and the price for the securities is assessed on the basis of the bids obtained for the quantum of securities offered for subscription by the issuer. This method provides an opportunity to the market to discover price for securities. Book building is a process of price discovery. Hence, the Red Herring prospectus does not contain a price. Instead, the red herring prospectus contains either the floor price of the securities offered through it or a price band along with the range within which the bids can move. The applicants bid for the shares quoting the price and the quantity that they would like to bid at. Only the retail investors have the option of bidding at ‘cut-off’. After the bidding process is complete, the ‘cut-off’ price is arrived at on the lines of Dutch auction. The basis of Allotment (Refer Q. 15.j) is then finalized and letters allotment/refund is undertaken. The final prospectus with all the details including the final issue price and the issue size is filed with ROC, thus completing the issue process.

Price band The red herring prospectus may contain either the floor price for the securities or a price band within which the investors can bid. The spread between the floor and the capital of the price band shall not more than 20%.In other, it means that the cap should not be more than 120% of the floor price. The price band can have a revision and such a revision in the price band shall be widely disseminated by informing the stock exchanges, by issuing press release and also indicating the change on the relevant website and the terminals of the syndicate members. In case the price band is revised, the bidding period shall be extended for a further period of three days, subject to the total bidding period not exceeding thirteen days.

29

It may be understood that the regulatory mechanism does not play a role in setting the price for issues. It is up to the company to decide on the price or the price band, in consultation with Merchant Bankers. The basis of issue price is disclosed in the offer document. The issuer is required to disclose in detail about the qualitative and quantitative factors justifying the issue price.

D EMAT A CCOUNT Dematerialization as the name suggests as an account in which share are kept in electronic form. If shares are kept in physical form one can not sell shares partly if he wants. But through Demat account this restriction is removed. Dematerialization and trading in the Demat mode is the safer and faster alternative to the physical existence of securities. Demat as a parallel solution offers freedom from delays, thefts, forgeries, settlement risks and paper work. This system works through depository participants (DPs) who offer Demat services and the securities are held in the electronic form for the investor directly by the Depository . As per the requirement, all the public issues of size in excess of Rs.10 crores, are to made compulsorily in the Demat more. Thus, if an investor chooses to apply for an issue that is being made in a compulsory Demat mode, he has to have a Demat account and has the responsibility to put the correct DP ID and Client ID details in the bid/application forms.

Procedure for getting a Demat Account An investor can apply for a Demat account to a depository participant who charges little annual fees for that. Investor is required to fill a form and attach documents like PAN copy, Address proof and photo proof. Demat Account is to be renewed every year on the payment of annual charges. Depository participants are companies like Anand Rathi, Anagram, HDFC etc which are registered with NSDL and CDSL.

E NTITIES INVOLVED IN AN ISSUE

Merchant Banker to the issue or book running lead manager (BRLM) syndicate members, Registrars to the issue, Bankers to the issue, Auditors of the company, Underwriters to the issue, Solicitors, etc. are the intermediaries to an issue. The issuer discloses the addresses, telephone/fax numbers and email addresses of these intermediaries. In addition to this, the issuer also discloses the details of the compliance officer appointed by the company for the purpose of the issue.

R OLE OF A L EAD M ANAGER ( PRE AND POST ISSUE )

In the pre-issue process, the Lead Manager (LM) takes up the due diligence of company’s operations/ management/ business plans/ legal etc. Other activities of the

30

LM include drafting and design of Offer documents, Prospectus, statutory advertisements and memorandum containing salient features of the Prospectus. The LMs shall ensure compliance with stipulated requirements and completion of prescribed formalities with the Stock Exchanges, RoC and SEBI including finalization of Prospectus and RoC filing. Appointment of other intermediaries viz., Registrar(s), Printers, Advertising Agency and Bankers to the Offer is also included in the pre-issue processes.

The LM also draws up the various marketing strategies for the issue. The post issue activities including management of escrow accounts, coordinate non-institutional allocation, intimation of allocation and dispatch of refunds to bidders etc are performed by the LM. The post Offer activities for the Offer will involve essential follow-up steps, which include the finalization of trading and dealing of instruments and dispatch of certificates and demat of delivery of shares, with the various agencies connected with the work such as the Registrar(s) to the Offer and Bankers to the Offer and the bank handling refund business. The merchant banker shall be responsible for ensuring that these agencies fulfill their functions and enable it to discharge this responsibility through suitable agreements with the Company.

R OLE OF A REGISTRAR

The Registrar finalizes the list of eligible allottees after deleting the invalid applications and ensures that the corporate action for crediting of shares to the Demat accounts of the applicants is done and the dispatch of refund orders to those applicable are sent. The Lead manager coordinates with the Registrar to ensure follow up so that that the flow of applications from collecting bank branches, processing of the applications and other matters till the basis of allotment is finalized, dispatch security certificates and refund orders completed and securities listed.

ROLE OF BANKERS TO THE ISSUE

Bankers to the issue, as the name suggests, carries out all the activities of ensuring that the funds are collected and transferred to the Escrow accounts. The Lead Merchant Banker shall ensure that Bankers to the Issue are appointed in all the mandatory collection centers as specified in DIP Guidelines. The LM also ensures follow-up with bankers to the issue to get quick estimates of collection and advising the issuer about closure of the issue, based on the correct figures.

SYNDICATE MEMBER

31

The Book Runner(s) may appoint those intermediaries who are registered with the Board and who are permitted to carry on activity as an ‘Underwriter’ as syndicate members. The syndicate members are mainly appointed to collect and entire the bid forms in a book built issue.

Indian Stock Market Overview

The Bombay Stock Exchange (BSE) and the National Stock Exchange of India Ltd (NSE) are the two primary exchanges in India. In addition, there are 22 Regional Stock Exchanges. However, the BSE and NSE have established themselves as the two leading exchanges and account for about 80 per cent of the equity volume traded in India. The NSE and BSE are equal in size in terms of daily traded volume. 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

32

9,21,500 crore (Rs 9215-bln). The BSE has over 6000 stocks listed and has a market capitalization of around Rs 9,68,000 crore (Rs 9680-bln). 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 on the basis of market capitalization and contain the heavily traded shares from key sectors.

The markets are closed on Saturdays and Sundays. Both the exchanges have switched over from the open outcry trading system to a fully automated computerized mode of trading known as BOLT (BSE On Line Trading) and NEAT (National Exchange Automated Trading) System. It facilitates more efficient processing, automatic order matching, faster execution of trades and transparency. The scripts 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 scripts are the blacklisted companies. The 'C' group covers the odd lot securities in 'A', 'B1' & 'B2' groups and Rights renunciations. The key regulator governing Stock Exchanges, Brokers, Depositories, Depository participants, Mutual Funds, FIIs and other participants in Indian secondary and primary market is the Securities and Exchange Board of India (SEBI) Ltd.

Rolling Settlement Cycle:

In a rolling settlement, each trading day is considered as a trading period and trades executed during the day are settled based on the net obligations for the day. At NSE and BSE, trades in rolling settlement are settled on a T+2 bases i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE/BSE holidays, Saturdays and Sundays are excluded. Typically trades taking place on Monday are settled on Wednesday, Tuesday's trades settled on Thursday and so on.

Concept Of Buying Limit

Suppose you have sold some shares on NSE and are trying to figure out that if you can use the money to buy shares on NSE in a different settlement cycle or say on BSE. To simplify things for ICICI Direct customers, we have introduced the concept of Buying

33

Limit (BL). Buying Limit simply tells the customer what is his limit for a given settlement for the desired exchange. Assume that you have enrolled for a ICICI Direct account, which requires 100% of the money required to fund the purchase, be available. Suppose you have Rs 1,00,000 in your Bank A/C and you set aside Rs 50,000 for which you would like to make some purchase. Your Buying Limit is Rs 50,000. Assume that you sell shares worth Rs 1, 00,000 on the NSE on Monday. The BL therefore for the NSE at that point of time goes upto Rs 1,50,000. This means you can buy shares upto Rs 1,50,000 on NSE or BSE. If you buy shares worth Rs 75,000 on Tuesday on NSE your BL will naturally reduce to Rs 75,000. Hence your BL is simply the amount set aside by you from your bank account and the amount realized from the sale of any shares you have made less any purchases you have made.

Your BL of Rs 50,000, which is the amount set aside by you from your Bank account for purchase is available for BSE and NSE. As you have made the sale of shares on NSE for Rs.100000, the BL for NSE & BSE rises to 1,50,000. The amount from sale of shares in NSE will also be available for purchase on BSE. ICICI Direct makes it very easy for its customers to know their BL on the click of a mouse. You just have to specify the Exchange and settlement cycle and on a click of your mouse, the BL will be known to you.Shares and Trading:

What is a share?

Having a share of a company means you own a part (SHARE) of the company

When a company wants to sell its Shares it comes out with an IPO – Initial Public Offer

Investors can fill in Forms and apply for buying the shares

Post IPO the shares are listed on a Stock Exchange – a stock exchange is a place where the shares of a company are bought and sold

The everyday buying and selling, demand-supply determines the price – and therefore the value of the share.

Working of a stock market

34

• A person desirous of Buying/Selling shares in the market has to first place his order with a broker

• The broker routes the order through his system to the stock exchange

• The order is in the queue in the exchange's systems

• It gets executed when the order logs on to the system within buy limit that has been specified

• The shares purchased are sent to the purchaser by the broker either in physical or demat format.

The stock Exchanges

• India has: 24 Regional Stock Exchanges

• 2 Leading Exchanges : Bombay Stock Exchange (BSE) & National Stock Exchange of India Ltd (NSE)

• The Indices:– BSE : BSE Sensex comprising 30 stocks– NSE : S&P NSE 50 Index (Nifty) which consists of 50 stocks

Bombay Stock Exchange Mumbai's (earlier known as Bombay), Bombay Stock Exchange is the largest, with over 6,000 stocks listed. The BSE accounts for over two thirds of the total trading volume in the country. Established in 1875, the exchange is also the oldest in Asia. Among the twenty-two Stock Exchanges recognised by the Government of India under the Securities Contracts (Regulation) Act, 1956, it was the first one to be recognised and it is the only one that had the privilege of getting permanent recognition ab-initio.

Approximately 70,000 deals are executed on a daily basis, giving it one of the highest per hour rates of trading in the world. There are around 3,500 companies in the country which are listed and have a serious trading volume. The market capitalization of the BSE is Rs.5 trillion. The BSE `Sensex' is a widely used market index for the BSE. The main aims and objectives of the BSE is to provide a market place for the purchase and sale of security evidencing the ownership of business property or of a public or

35

business debt. It aims to promote, develop and maintain a well regulated market for dealing in securities and to safeguard the interest of members and the investing public having dealings on the Exchange. It helps industrial development of the country through efficient resource mobilization. To establish and promote honorable and just practices in securities transactionsBSE SensexThe BSE Sensex is a value-weighted index composed of 30 companies with the base April 1979 = 100. It has grown by more than four times from January 1990 till date. The set of companies in the index is essentially fixed. These companies account for around one-fifth of the market capitalization of the BSE. We can use information from April 1979 onwards in estimating the long-run rate of return on the BSE Sensex and that comes to 0.52% per week (continuously compounded) with a standard deviation of 3.67%. This translates to 27% per annum, which translates to roughly 18% per annum after compensating for inflation.

New DevelopmentsIn November, 1996, as a move to reduce the counter party risk, the Exchange set up a trade guarantee scheme i.e. all trades carried out on the BOLT are guaranteed by the Clearing House of the Exchange. A depository has been set up as a joint venture by the Bank of India and the Exchange. However, it will be a subsidiary of the Bank of India. The Exchange introduced trading in fixed income securities under a separate group to give impetus to trading in debentures and other corporate debt instruments, to increase trading in government dated securities.

National Stock ExchangeThe National Stock Exchange (NSE), located in Bombay, is India's first debt market. It was set up in 1993 to encourage stock exchange reform through system modernization and competition. It opened for trading in mid-1994. It was recently accorded recognition as a stock exchange by the Department of Company Affairs. The instruments traded are, treasury bills, government security and bonds issued by public sector companies.

Membership

1026 trading members on the Capital Market segment, of which around 86% account for corporates and the remaining individuals and firms.

36

113 trading members on the Wholesale Debt Market segment, all of which account for corporates. (Out of these 113 trading members, 106 are members of the Capital Market segment also and are included in the 1026 members indicated above).

Geographic Distribution Over 2600 trading terminals Over 1500 VSAT’s across the country with a 24 hour Network monitoring system in over 160 cities as of December 31st, 1997.

Number of Companies

On the Capital Market segment, 600 securities are listed and 762 securities are permitted to trade as of December 31st, 1997. On the Wholesale Debt Market segment, 470 securities are listed and 369 securities are permitted to trade as of December 31st, 1997. Of the 470 securities listed, 267 are Government Securities, T-Bills and the balance account for other securities.

Capital Market Operations

NSE is working to increase the capacity of the trading system from the present 4,00,000 trades per day to more than 10,00,000 trades per day.

The average daily numbers of trades have gone up from over 893 trades in November-94 to over 1,48,783 trades in November 97. On August 7, ’97 the number of trades reached a record high of 2,36,411 which makes NSE one of the largest stock exchanges in the world.

Average daily traded value has increased from Rs.7 crores in November-94 to more than Rs. 1480 crores in December-97 with a high of Rs.3,080.61 crores recorded on 26th June-97.

Number of shares traded has increased from 76.10 lakhs in November-94 to 11,148.21 lakhs in December-97.

Net traded value has increased from Rs.125 crores in November -94 to Rs. 32,549 crores in December-97.

Delivered value (settlement wise) has increased from Rs.60 crores in November -94 to Rs.5,008 crores in December -97.

Number of shares traded (depository segment) has increased from 200 shares in December -96 to 1,19,102 shares in December-97.

Net traded value (depository segment) has increased from Rs.0.43 lakhs in December -96 to Rs.185.44 lakhs in December-97.

37

Market share of cities other than five metros (Mumbai, Delhi, Calcutta, Chennai & Ahmadabad) which was about 16% in first quarter of 1996 grew to as high as 24% during the last quarter of 1997.

The ratio of contribution to turnover from Non Stock Exchange centers to Stock Exchange centers has risen from 0.36% in first quarter (Jan to Mar) of 1996 to over 10% in fourth quarter of 1997.

The market capitalization of companies has increased from Rs. 292637 crores in November'94 to Rs. 4571663 crores in February'98.

Clearing & Settlement Completed 170 settlements successfully without any delay or postponement as

on February 28, 1998. Value of shares handled by the Clearing house per week has increased from Rs.

30 crores in November-94 to over Rs.1042 crores per week in December-97. The highest value of shares handled during the period was more than Rs. 2251.40 crores.

Inter-Region Clearing : NSCCL has Regional Clearing Centers at Delhi, Calcutta, Chennai and a Central Clearing Centre at Mumbai. Members have the option of delivering/receiving the securities at a clearing centre chosen by them.

Wholesale Debt Market Operations

The WDM segment commenced operations on June 30, 1994 with 224 securities carrying an outstanding debt value of Rs. 1,35,000 crores (US$ 34 billion). This has now increased to 839 securities with a market capitalization of Rs. 3,50,565 crores (US$ 88 billion). More than half of the securities available for trading are listed and the balance are permitted to trade.

Currently, the Exchange has 78 registered participants on the WDM segment which includes 24 Public sector banks, 18 Foreign banks, 15 Private sector banks, 6 Primary dealers, 5 Financial institutions, the others being corporate bodies, mutual funds and foreign debt fund.

Average daily value in the WDM segment increased from Rs. 2.4 crores in June-94 to Rs. 298.17 crores in December -97 with a high of Rs. 1831.27 crores recorded on 12-Aug-97.

38

Net traded value in the WDM segment increased from Rs. 1096.25 crores in July -94 to Rs. 7,752.52 crores in December-97 with a high of Rs. 15,545.40 crores recorded in July '97.

There has been a consistent increase in NSE’s share of the total volume of activity in the market (gilt securities) over the period. Government securities along with Treasury bills together account for over 80% of the total market activity.

The share of the Exchange of the total market activity in Government Securities and T-Bills has increased from a mere 22% in 1996 to 53% in 1997.

Stock Exchange Working…..

Broker Broker

Buyer of Share

Seller of Share

39

ONLINE TRADING A/C

Stock Exchange

Problems In Traditional Way Of Trading

– Problem 1: Broker is not available in place.

– Problem 2: Broker takes a wrong order by mistake.

– Problem 3: Broker takes a right order. But before he puts the order to the exchange, the price of share changes. Your order is placed at the wrong price.

– Problem 4: The broker may not inform the investor of the trade.–– Problem 5: Broker is supposed to send contract notes; many brokers do

not send such notes.

– Problem 6: Investor can’t track pay-in and payout dates and write cheques / transfer instructions for transfer of monies and shares.

– Problem 7: Investor will therefore transfer monies/shares to his broker’s pool account.

40

– Problem 8: On the payout date, broker needs to give monies/shares to the investor. Normally, investors will chase brokers for receiving monies and shares.

41

Competitors

42

There are many competitors prevailing in the market but the most powerful One’s Being :

India bulls

Share Khan

Angel Broking

Religare

Almondz

SBI Capital Securities

Reliance Money

India Infoline

ICICI Direct.Com

UTI

Bonanza

These companies are differentiated on the following bases like :

Opening charges,

Margin money

Brokerage,

AMC, etc.

Comparison Chart

43

Company Name

Opening Charges

Margin Money

Brokerage Intraday

BrokerageDelivery AMC

India Info line

555(Life Time) 5000 0.05 0.20 0

Geojit bnp paribas

350(if margin

money given then no opening charges) 10000 0.03 0.30 350

India bulls 900 NA 0.03 0.30 NAShare Khan 750 NA 0.05 0.20 250Angel Broking 625 NA 0.025 0.25 200

SBI capital Security 450 5000 0.05 0.35 NA

Bonanza 500 10000 0.03 0.30 NA

What is Demat Account?An investor can hold securities either in the form of physical paper certificates or in electronic form. A Demat account enables an investor to hold securities in electronic

44

form. The conversion of securities of electronic format is held on the investor’s behalf by an entity called a Depository. This depository interfaces with investors thought its agent’s called depository participants (DP). Investors are required to open an account, called the Demat account.It is just like opening a bank account where actual money is replaced by share.As you open an account with a bank to save your money & make cheque payments etc, you need to open a demat account if you want to buy or sell stocks. You have to approach the DP’s to open your demat account.Demat aacount allows you to buy, sell and transact shares without the endless paperwork and delays. It is also safe, secure and convenient.Investors have to open a Demat account with a depository through a depository participant (DP).A depository is similar to a bank which holds securities in an account.Currently, there are two depositories :

(1)NSDL : National Securities Depository Ltd(2)CDSL : Central Depository Services Ltd

Whish are registered with the securities and Exchange Board of India (SEBI). These depositories operate through a number of DPs, who are agents of these depositories.Thought SEBI has allowed for transactions of less than 500 shares in physical format, not many people accept physical shares these days, as to is difficult to sell them.

Keeping Demat securities is also far more advantageous. It does away the need for paperwork, making transactions faster and more efficient. It saves investors from destruction or loss of securities in transit, name transfer, stamp duties etc.

What is Initial Public Offering - IPO

The first sale of stock by a private company to the public is called IPO’s. They are often by smaller companies seeking capital to expand, but can also be done by large private companies planning to invite public to invest in there companies.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market…

BROKERAGE RATES

45

Delivery-based Volumes *

Volume *(Rs.) New Brokerage Rate

< 10 lacs 0.30% (current)

> 10 lac < 50 lac 0.25%

> 50 lac < 1 cr 0.20%

> 1 cr < 2 cr 0.15%

> 2 cr 0.10%

Intra-day Volumes *

Volume *(Rs.) New Brokerage Rate

< 2 cr 0.030% (current)

> 2 cr < 6 cr 0.025%

> 6 cr < 12 cr 0.020%

> 12 cr < 15 cr 0.015%

> 15 cr 0.010%

F&O Volumes *

Volume (Calendar Month) (Cr.)

OptionsFutures (including Mini Nifty)

less than 5 Rs. 75 /- 0.030 %

5 to 10 Rs. 65 /- 0.025 %

10 to 20 Rs. 50 /- 0.020 %

20 to 30 Rs. 40 /- 0.015 %

> 30 Rs. 30 /- 0.010 %

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Network & Manpower Strength

Presence across India

Amristar

Chandigarh

DehradunHaridwar

Roorkee

Delhi Bareilly

Meerut Saharanpur

Lucknow

Kurukshetra

Kanpur AligarhMoradabad

Patna

Guwahati

Asansol

Durgapur

Kolkata

Ranchi

Jamshedpur

Gwalior

Dewas

BhopalUjjain

Indore

Jaipur

Udaipur

Jodhpur

Sriganganagar

Ambala

GandhinagarBhuj

Vapi

Baroda

Rajkot

Surat

Nasik

ThaneMumbai

Kolhapur

BelgaumHubli

Goa

Bhimavaram

Guntur

Secunderabad

Vijaywada

Hyderabad

Kakinada

Vizianagram

Vizag

Nizamabad

Rajmundhry

Bangalore

Chennai

Pondicherry

Trichi

Coimbatore

Madurai

Trivandrum

Cochin

Manjeri

Nizamabad

Bhubaneshwar

Bhilai

47

Where do you invest your Money today?

INVEST in Saving banks Insurance Fixed Deposits Postal Savings Real Estate Stock Markets

48

Introduction to Title

Equity Market:A stock market is a market for the trading of company stock, and derivatives of same; both of these are securities listed on a stock exchange as well as those only traded privately.The share of equity issues in total new equity and debt issues is a strong predictor of U.S. stock market returns between 1928 and 1997. In particular, firms issue relatively more equity than debt just before period of law market returns. The equity share in new issues has stable predictive power in both halves of the sample period and after controlling for other known predictors results. Instead, the fact that the equity share some times predicts significantly negative market returns suggests inefficiency and that firms time the market component of there returns when issuing securities.General terms referring to the organized trading of securities through the various physical and electronic exchange and the over the counter market. The securities involved include common stock, preferred stock, bonds, convertibles, options rights, and warrants. The term may also encompass commodities when used in its most general sense, but more often then not the stock market and the commodities (or futures) market and distinguished. The query “How did the market do today?” is usually answered by a reference to the dow jones industrial average, comprised of stock listed on the New York stock exchange…. Research MethodologyDefinitions of sampleA small part of something intended as representative of the whole sample distribution.

Sample Size: 100 individual

Sampling Techniques: Random SamplingRandom sampling techniques is sampling in which all items have some chance of selection that can be calculated.

49

A sample is a subject chosen from a population for investigation. A random sample is one chosen by a method involving an unpredictable component. Random sampling can also refer to taking a number of independent observations from the same probability distribution, without involving any real population. A probability sample is one in which each item has a known probability of being in the sample.

Types of Random Sample

Simple random sample. Stratified sampling. Cluster sampling Systematic sampling

Data Collection Sampling

1. Primary Data: Primary data collected from directly to the Respondents the researcher is directly involved in the collection of information. With the collected by questionnaire, survey interview, measurement, direct observation.

2. Secondary Data: That are already exists. Secondary data can help Identify, clarify and redefine the research problem. It might also hold a solution to the problem; secondary data may provide alternative methods that can be used for primary research. Sources of secondary data include web site, trade association, journals, books etc .with the help of internet and employee handout book.

50

Derivatives

What is derivative?Derivatives are the financial contract, which derives its value from the prices or index of prices of underlying securities. Underlying assets are equity, forex, and commodity.

Types of Derivatives

Forward

Future

Option

Swap

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Future ForwardTrade on organized exchange OTC in nature

Standardized contract Customized contract

More liquid Less liquidMargin payment No margin paymentFollows daily settlement Settlement happens at end of period

Future Contract

Contract value - 200000 Rs.Spot price - Price at which asset tradesStrike price - Price at which future contract tradeExpiry date - Last Thursday of monthInitial margin - Deposited at the time of enteringDuration of - One,Two and Three monthcontactFuture types - Stock Future Index Future

52

Option contractCall option- A call option gives the right to holder but not the Obligation to buy an asset by an certain date for a certain price

Put option- A put option gives the right to holder but not the obligation to sell an asset by a certain date for a certain period

Option Terminology

Option Price - PremiumExpiration Date – Last Thursday of monthContract Duration – one,two and three monthMinimum Contract – 50 niftiesOption Type - Stock option Index option

Option Money - in-the –money (Spot price>strike price) at-the-money (Spot price=strike price) out-of-money (Spot price<strike price)

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1.Do you invest ?

yes85%

No15%

yes

No

2.Where do you like to invest your money?

54

where do you like to invest your money?

Real Estate15%

Debt Market

7%

Bank FD10%

Post Office14%Gold

3%

Equity51%

3.Whom do you prefer to ask before making your invest?

55

No. of customer

22%

44%

34%

05

101520253035404550

Frie

nd

s/R

ela

tive

Fin

an

cia

l

ad

vis

ors

/Co

nsu

lta

nts

Pe

rso

na

l A

na

lysis

Friends/Relative

Financialadvisors/Consultants

Personal Analysis

4.Rank the following investment according to your preference.

56

1st RANK

1419

45

1

813

05

101520253035404550

No. of Customer

57

5.Which is the safest investment option?

Which is the safest investment option?

Bank FD29%

Post Office18%

Equity11%

Gold12%

Debt Market1%Real Estate

29%

58

6.In which of the following return is maximum?

In which of the following the return is maximum?

7%24%

2%

26%

5%7%

29%

Bank FD

Post Office

Equity

Gold

Real Estate

Debt Market

No Remark

59

7.Why Do you invest in equity?

Why you investing in equity?

High return19%

Divident14%

Fast return24%

other8%

No remark35%

High return

Divident

Fast return

other

No remark

60

8.For how much duration you invest?

For how much duration you invest?

3%7%

19%

44%

27%

05

101520253035404550

No. of customer

61

9.What are factors that motivate you for investment?

What are factors that motivate you for investment?

Professional investment,

7%No remark, 2% Capital

Appreciation, 11%

High return, 34%Dividend, 13%

Safety & security, 33%

Professionalinvestment

Capital Appreciation

High return

Dividend

Safety & security

No remark

62

10.How much % you invest on equity of your income

0

10

20

30

40

0-10% 10-20% 20-30% 30% &above

noremark

How much % you invest on equity of your income?

Number ofcustomers

63

11.How much return (annually) do you expect from your investment?

How much return (annually) do you expect from your investment ?

Avrage30%

40% & above7%

20-40%19%

0-20%24%

Maximum20%

0-20%

20-40%

40% & above

Avrage

Maximum

64

12. Why are you investing in Derivatives?

13.Which is more profitable Investment in Derivative and equity?

65

14.Derivatives you like most as ?

66

15.Through which security are you trading in Derivative?

67

16.How you apply for IPOs ?

68

17.How much return (annually) do you expect from your investment?

69

18.Through which Broker are you applying for IPO?

70

Swot Analysis (IPOs)

StrengthLucrative investment optionSafe investmentHigh rate of return

WeaknessGrading system not appliedHigh competition

OpportunitiesVast scopeIncrease the relationships

ThreatsExpenses increasing

Swot Analysis (Derivatives)

StrengthEasy Prediction of marketMore used in hedgingHigh earning

WeaknessHigh riskyLess knowledge in customerLess knowledge provide center

OpportunitiesAware customer about derivativeEmerging Product

ThreatsVolatile market

71

Findings

Derivative

Easy predictionModerate riskInvestment ratio increasing spurtlyInvestor wants awareness about derivativeHigh return

IPOs

Lucrative investment optionHigh ReturnLess RiskyInvestors are crazy toward IPOs

Recommendations

No. of SUB-Brokers should be increased72

Build a separate IPO department

Increase the demand of IPO form to head office

Build a separate department for trading

Make awareness programme for Derivative

Make brokerage plans according to consumer

LimitationsLess no. Of IPO form was available

On-Line IPO facility not provided to sub-broker

73

No. Of Bolt was less

74

Bibliography

www.geojitbnpparibas.com

www.demataccount.com

www.icicidirect.com

www.moneycontrol.com

www.nseindia.com

www.bseindia.com

C.R.Kothari, Research methodology, New Delhi, Wishwa praksashan,2004

75

References

1.Mr. Dharmendra Gupta (Company guide)

2.Gr.Cap. Manoj Kumar (Placement Officer)

3.Customer hand out book.

“Always Try to Do Good”

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“Credit has done a thousand times more to enrich mankind than all the gold mines in the world. It has exalted labour, stimulated manufacture, and pushed commerce over every sea"

Daniel Webster

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