Report of Student Internship Program

A A SSTUDYTUDY ONON

IINVESTMENTNVESTMENT P PATTERNATTERN OFOF P PEOPLEEOPLE(A Case Study on SHCIL)(A Case Study on SHCIL)

Report prepared by

in

Stock Holding Corporation of India LimitedJ. C. Road Branch

Bangalore

For the Partial fulfillment of completion of theCourse: Student Internship Program in

Term – V of PGP (PGDM Batch 2005 – 2007)

Post Graduate Diploma in Management: 2005-07

CONTENTSPage No.

Executive Summary i

Chapter – 1 Introduction 2

1.1 Definition and Overview 2

1.2 Problem Identification 2

1.3 Objective of the study 2

Chapter – 2 Industry Profile 3

2.1 Industry overview 4

2.2 Investment 6

2.3 Capital market and depository 20

Chapter – 3 Company Profile 31

3.1Basic facts about SHCIL 32

3.2 Service profile of SHCIL 35

3.3 Product profile of SHCIL 49

Chapter - 4Data Analysis & Interpretation 61

4.1Methodology 61

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4.2 Data Analysis 62

4.2.1 Analyze investors’ preference on investment 62

4.2.2 Comparison between the investors’ investment

preference in Bangalore and Bhubbaneswar 70

Chapter – 5 Suggestions and Limitation 72

5.1Findings 73

5.2 Suggestion 74

5.3 Limitation 75

Chapter – 6

Learning Outcomes 776.1On investment avenues 77

6.2 On DP Services 77

Chapter – 7 Reference: and Bibliography 78

7.1Article 79

7.2Books 79

7.3 Websites 79

Chapter – 8 Annexure 80

8.1Questionnaire 81

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EXECUTIVE SUMMARY

This project has been done in Stock Holding Corporation of India Ltd.

(SHCIL), which is one of the India’s major depository participants. Apart from the

regular activity of a DP, SHCIL provides a range of products to its client for

investment. The project is designed keeping importance of the investment

pattern of people and the popularity of the various products offered at SHCIL for

investment.

This study deals with various investment avenues like equity, bonds,

debentures, bank deposits, insurance, mutual funds etc. and the risk involved in

it. Apart from this, it also gives emphasis on the depository and various functions

of depository participants.

This study also consists of the investment pattern of people who reside in

an economically developed area & economically developing area and how the

investment pattern of people varies according to their social classes like age,

education, income etc. For this study I have taken Bangalore as an economically

developed area and Bhubaneswar as an economically developing area. In

Bangalore, people are generally prefer to take risk in investment and invest in

such avenues where the return is more but in Bhubaneswar the scenario is

contradictory to Bangalore, where people are more conservative and investing

more in Bank Deposits, Postal Deposits etc. Like that, the middle age group

people are investing more in Insurance, Equity and Mutual Funds, where as the

old age group people prefer to invest in RBI Bonds, Bank Deposits etc.

And among SHCIL’s product, investor are giving more preference to

‘Stock Direct’ rather than any other of its products. But ‘RBI Bonds’ is the more

preferred product among older age group investors. As SHCIL is one of the

major DP in India, 85 per cent of its client are dealing with demat transaction only

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and merely 15 per cent of its client invested in other products. Presently SHCIL

has been introducing new value added service and products for attracting new

investors.

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Introduction

1.1 Definition and Overview

1.2 Problem identification

1.3 Objective of the study

PART - I

1

1.1 Introduction:

The money you earn is partly spent and the rest saved for meeting future

expenses. Instead of keeping the savings idle you may like to use savings in

order to get return on it in the future, which is known as ‘investment’. There are

various investment avenues such as Equity, Bonds, Insurance, Bank Deposit etc.

A Portfolio is a combination of different investment assets mixed and matched for

the purpose of achieving an investor's goal. There are various factors which

affects investors’ portfolio such as annual income, government policy, natural

calamities, economical changes etc

1.2 Problem identification:

Analyze the investment pattern of people and the popularity of different

products (Fund Invest, RBI Bonds, Stock Direct, Insure) provided by SHCIL for

investment.

1.3 Objective of the study:

To study the investment pattern of people.

To study the investment decisions of different social class people (in term

of age group, education, income level etc.)

To analyze the investment pattern of people who reside in an

economically developed area and economically developing area.

To study the difference between various investment options offered at

SHCIL.

To study the popularity of various products offered by SHCIL.

And, to study the role of SHCIL as a depository participant.

2

Industry Profile

2.1 Industry Overview

2.2 Investment

2.3 Capital Market and Depository

PART - II

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2.1 Industry Overview:

Globalization of the financial market has led to a manifold increase

in investment. New markets have been opened; new instruments have been

developed and new services have been launched. Stock Holding Corporation of

India Ltd. (SHCIL), the premier custodian of Indian capital market providing

services of international standards, is geared up to reposition itself in the

changed scenario. With world – acclaimed automation and a team of committed

professionals, SHCIL is confident of scaling new heights. Combining its financial

strengths and technical expertise to serve the clients better, wherever and

whenever it is needed, SHCIL envisages acting as a partner one can trust. The

corporation has restructured and geared itself to serve the growing needs of

individual investors in the paperless environment. The organization in its

willingness to provide its state-of-the-art financial services in securities industries

to the various segments of the investors has expanded itself to more than

hundred cities across the country. SHCIL desires to give investors the time and

attention in monitoring the performance of their securities consistently. All aimed

at providing the investor with optimum financial gain.

India has a well established capital market mechanism where in

effective and efficient transfer of money capital or financial resources from the

investing class to the entrepreneur class in the private and public sector of the

economy occurs. Indian capital market has a long history of organized trading

which started with the transaction in loan stocks of the East India Company from

that time it has undergone drastic changes to meet the requirements of the

globalization. The Indian Capital Market had been dormant in the 70's and 80's

has witnessed unprecedented boom during the recent years. There has been a

shift of household savings from physical assets to financial assets, particularly

the risk bearing securities such as shares and debentures. Capital markets

structure has also undergone sea changes with number of financial services and

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banking companies, private limited companies coming in to the scene which

made the competition in the market stiffer.

The Companies Act 1850, introduced the concept of limited liability

to India, served to stimulate the activity in the stock market. From then number of

acts are passed to boost the revolutionary change. The global capital market

registered spectacular growth in the decade of 1990's which had an effect on the

growth of Indian market. The world market capitalization grew at an average

annual rate of 16% during the decade, it grew from about US $ 9.3 trillion in 1990

to about US $ 36 trillion in 2000 but fell to about US $ 28 trillion by 2001. The

turnover on all markets taken together has grown nearly 19 times from US $ 5.5

trillion in 1990 to US $ 48 trillion in 2000 before depleting to about US $ 42 trillion

in 2001. The turnover in developed markets has, however, grown more sharply

than that in emerging markets. The US alone accounted for about 70% of world

wide turnover in 2001. Despite having a large number of companies listed in its

stock exchanges, India accounted for a merger of 59% in 2001 down from

1.06% in 2000.

The stock markets world wide has grown in size as well as depth

over last one decade. During the decade 1990-2000, the world market

capitalization/GDP ratio more than doubled from 51% to 120%. Value traded

GDP rose from 29% to 103% and turn over ratio shot up from 48% to 89%. The

combined market capitalization of a select 22 emerging economies increased

from US $ 339 billion in 1990 to US $ 2.2 trillion in 2000. The average market

capitalization increased from 3.6% to 7%, annual value of shares traded

increased from $ 180 billion to $ 2.2 trillion and GDP increased from 16.7% to

45.5%.

For India the total capitalization grew from $ 38,567 million at the

end of 1990 to $ 110,396 million at the end of 2001. Turn-over of stocks

increased from $ 21,198 million in 1990 to $ 249,298 million in 2001. Market

capitalization as a percentage of GDP grew from 12.2% in 1999 to 32.4% in 2001

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while turnover ratio went up from 65.9% in 1999 to 191.4% in 2000. The number

of listed companies in India was 5,975 as at end of 2001. There are very few

countries, which have higher turnover ratio than India. Standard and Poor (SP)

ranked India, 25th in terms of market capitalization, 15th in terms of total value

traded in stock-exchanges and 6th in terms of turn-over ratio.

2.2 Investment:

Investment means buying securities or other monetary or paper (financial)

assets in the money markets or capital markets, or in fairly liquid real assets,

such as gold as an investment, real estate, or collectibles. Valuation is the

method for assessing whether a potential investment is worth its price. Types of

financial investments include shares or other equity investment, and bonds

(including bonds denominated in foreign currencies). These investments assets

are then expected to provide income or positive future cash flows, but may

increase or decrease in value giving the investor capital gains or losses

2.2.1 Characteristics of Investment:

(i) Interest (return) When we borrow money, we are expected to pay for using it – this is

known as Interest. Interest is an amount charged to the borrower for the privilege

of using the lender’s money. Interest is usually calculated as a percentage of the

principal balance (the amount of money borrowed). The percentage rate may be

fixed for the life of the loan or it may be variable, depending on the terms of the

loan.

What factors determine interest rates?

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The factors which govern these interest rates are mostly economy related and

are commonly referred to as macroeconomic factors. Some of these factors are:

Demand for money

Level of Government borrowings

Supply of money

Inflation rate

(ii) RiskRisk may relate to loss of capital, delay in repayment of capital non-

payment of interest, or variability of return. While some investment such as

government securities and bank deposits are almost without risk, others are

more risky. The risk of an investment is determined by the investment’s maturity

period, repayment capacity, nature of return commitment, and so on.

(iii) Safety Every investor expects to get back the initial capacity on maturity without

loss and without delay. Investment safety is gauged through the reputation

established by the borrower of the fund. A highly reputed and successful

corporate entity assures investors of their initial capital.

(iv) Liquidity An investment which is easily saleable or marketable without loss of

money and without loss of time is said to be possess the characteristic of

liquidity. Some investments such as deposit in unknown corporate entities, bank

deposit, post office deposit, national saving certificate, and so on are not

marketable.

An investor tends to be prefer maximization of expected return,

minimization of risk, safety of fund, and liquidity of investment

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The three golden rules for all investors are : Invest early

Invest regularly

Invest for long term and not short term

One needs to invest for Earn return on your idle resources

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

Make a provision for an uncertain future

To meet the cost of inflation

2.2.2 Types of Investment: (i) Short term Investment- It is an investment made by the investor for very

short period of time i.e. for one to three years. Such as investment in bank,

money market, liquid funds etc.

(ii) Long Term Investment – When investor invests money for more than three

to five years then it is called long term investment. Such as investment in bonds,

mutual funds, fixed bank deposits, PPF, insurance etc

Various options available for investment Physical assets

o Real estate

o Gold/jewelry

o Commodities

o Assets etc.

Financial assets

o fixed deposits with banks

o Small saving instruments with post offices

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o Insurance /provident /pension fund etc.

Securities market

o Share

o Bonds

o Debentures

o Mutual fund

o Derivatives etc.

2.2.3 Investor: Investor is a person or an organization that invest money in various

investment sources for specific objective. Attitude of investment is different in

each alternative. E.g. financial market have different attitude towards risk and

return. Some investors are risk avers, while some have an affinity of risk. The risk

bearing capacity of investor is a function of personal, economical, environment,

and situational factors such as income, family size, expenditure pattern, and age.

A person with higher income is assumed to have higher risk-bearing capacity.

Thus investor can be classified as risk skiers, risk avoiders, or risk bearers

Before making any investment, one must ensure to:

Obtain written documents explaining the investment

Read and understand such documents

Verify the legitimacy of the investment

Find out the costs and benefits associated with the investment

Assess the risk-return profile of the investment

Know the liquidity and safety aspects of the investment

Ascertain if it is appropriate for your specific goals

Compare these details with other investment opportunities available

Examine if it fits in with other investments you are considering or you have

already made

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Deal only through an authorized intermediary

Seek all clarifications about the intermediary and the investment

Explore the options available to you if something were to go wrong, and

then, if satisfied, make the investment.

Portfolio A Portfolio is a combination of different investment assets mixed and

matched for the purpose of achieving an investor's goal. Items that are

considered a part of your portfolio can include any financial asset you own, like

shares, debentures, bonds, mutual fund units etc. and real assets like gold, art

and even real estate etc. However, for most investors a portfolio has come to

signify an investment in financial instruments like shares, debentures, fixed

deposits, mutual fund units.

Diversification It is a risk management technique that mixes a wide variety of investments

within a portfolio. It is designed to minimize the impact of any one security on

overall portfolio performance. Diversification is possibly the best way to reduce

the risk in a portfolio.

Advantages of having a diversified portfolio A good investment portfolio is a mix of a wide range of asset class.

Different securities perform differently at any point of time. So with a mix of asset

types, your entire portfolio does not suffer the impact of a decline of any one

security. When your stocks go down, you may still have the stability of the bonds

in your portfolio. There have been all sorts of academic studies and formulas that

demonstrate why diversification is important, but it's really just the simple practice

of "not putting all your eggs in one basket." If you spread your investments

across various types of assets and markets, you'll reduce the risk of your entire

portfolio getting affected by the adverse returns of any single asset class.

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2.2.4 Investment Avenues: In India, numbers of investment avenues are available for the investors.

Some of them are marketable and liquid while others are non-marketable and

some of them also highly risky while others are almost risk less. The investor has

to choose proper avenue among them, depending upon his specific need, risk

preference, and return expected

Investment avenues can broadly categories under the following heads 1. Corporate securities

Equity shares Preference shares

Debenture/Bonds GDR’s/ADR’s

Warrants Derivatives

2. Deposit in bank and non banking companies

3. Post office deposits and certificate

4. Life insurance policies

5. Provident fund schemes

6. Government and semi-government securities

7. Mutual fund and schemes

8. Real estate

(i) Corporate securities:

(a) Equity share Total equity capital of a company is divided into equal units of small

denominations, each called a share. For example, in a company the total equity

capital of Rs 2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each

such unit of Rs 10 is called a ‘share’. Thus, the company then is said to have 20,

00,000 equity shares of Rs 10 each. The holders of such shares are members of

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the company and have voting rights. When company makes profit shareholder

receives there share of the profit in form of dividends. In addition, when company

performs well and the future expectation from the company is very high, the price

of the companies share goes up in the market.

Investor can invest in shares either primary market offerings or in the

secondary market.

(b) Preference shares Preference share as that part of share capital of the Company which

enjoys preferential right as to: (a) payment of dividend at a fixed rate during the

life time of the Company; and (b) the return of capital on winding up of the

Company. It is lie in between pure equity and debt. But preference shares cannot

be traded, unlike equity shares, and are redeemed after a pre-decided period.

Also, Preferential Shareholders do not have voting rights. These are issued to

the public only after a public issue of ordinary shares.

Preference shares also get traded in the market and give liquidity to

investor. Investor can opt for this type of investment when their risk performance

is very low.

(c) Debentures and Bonds It is a fixed income (debt) instrument issued for a period of more than one

year with the purpose of raising capital. The central or state government

corporations and similar institutions sell bonds. A bond is generally a promise to

repay the principal along with a fixed rate of interest on a specified date, called

the Maturity Date.

Many types of debenture and bonds have been structured to suit investors

with different time needs. Though having higher risk as compared to bank fixed

deposits, bonds and debentures do offer higher returns. Debenture instruments

require scanning the market and choosing specific securities that will cater to

investment objectives of the investor.

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(d) Depository Receipts (GDRs/ADRs)Global depository receipts are the instrument in the form of a depository

receipts or certificate created by the overseas depository bank outside India and

issued to non-resident investors against ordinary shares. A GDR issued in

America, is an American Depositary Receipts. As investors seek to diversify their

equity holdings, the option of GDRs and ADRs is very lucrative, while investing in

such securities, investors should identify the capitalization and risk characterizes

of the instrument and the companies’ performance in the home country.

(e) Warrants A warrant is a certificate giving its holder rights to purchase securities at a

stipulated price within a specified time limit. The warrants act as a value addition

because holder of the warrant has the right but not the obligation to investing in

equity at the indicated rate. An option contract often sold with another security.

For instance, corporate bonds may be sold with warrants to buy common stock of

that corporation. Warrants are generally detachable. Options generally have lives

of up to one year. The majority of options traded on exchanges have maximum

maturity of nine months. Longer dated options are called Warrants and are

generally traded over-the counter

(ii) Savings bank account with commercial bankBroadly speaking, savings bank account, money market/liquid funds and

fixed deposits with banks may be considered as short-term financial investment

options:

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

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

deposits.

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(iii) Bank fixed depositsFixed Deposits with Banks are also referred to as term deposits. Minimum

investment period for bank FDs is 30 days. Fixed Deposits in banks are for those

investors, who have low risk appetite. Bank FDs is likely to be lower than money

market fund returns.

(iv) Company fixed depositsThese are short-term (six months) to medium-term (three to five years)

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

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

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

period. The rate of interest varies between 6-9% per annum for company FDs.

The interest received is after deduction of taxes.

(v) Post Office Savings:Post Office Monthly Income Scheme is a low risk saving instrument, which

can be availed through any Post Office. It provides an interest rate of 8% per

annum, which is paid monthly. Minimum amount, which can be invested, is

Rs. 1,000/- and additional investment in multiples of Rs. 1,000/-. Maximum

amount is Rs. 3,00,000/- (if Single) or Rs. 6,00,000/-(if held Jointly) during a year.

It has a maturity period of 6 years. A bonus of 10% is paid at the time of maturity.

Premature withdrawal is permitted if deposit is more than one year old. A

deduction of 5% is levied from the principal amount if withdrawn prematurely.

The 10% bonus is also denied.

(vi) Life insurance policies Insurance companies offer many investment schemes to investors. These

schemes promote saving and additionally provide insurance cover. LIC is the

largest life insurance company in India. Some of its schemes include life policies,

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convertible whole life assurance policy, endowment assurance policy, jeevan

Saathi, money back policy etc. Insurance policies, while catering to the risk

compensation to be faced in the future by investor, also have the advantage of

earning a reasonable interest on their investment insurance premiums.

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

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

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

the year for depositing money. Tax benefits can be availed for the amount

invested and interest accrued is tax-free. A withdrawal is permissible every year

from the seventh financial year of the date of opening of the account and the

amount of withdrawal will be limited to 50% of the balance at credit at the end of

the 4th year immediately preceding the year in which the amount is withdrawn or

at the end of the preceding year whichever is lower the amount of loan if any.

(viii) Government and semi-government securities It is a fixed income (debt) instrument issued for a period of more than one

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

corporations and similar institutions sell bonds. A bond is generally a promise to

repay the principal along with a fixed rate of interest on a specified date, called

the Maturity Date.

The government issues securities in the money market and in the capital

market. Money market instruments are traded in Wholesale Debt Market (WDM)

trades and retail segments. Instruments traded in the money market are short

term instruments such as treasury bills and convertible bonds.

(ix) Mutual fund These are funds operated by an investment company which raises money

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

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

unable to invest directly in equities or debt because of resource, time or

knowledge constraints. Benefits include professional money management,

buying in small amounts and diversification.

Mutual fund units are issued and redeemed by the Fund Management

Company based on the fund's net asset value (NAV), which is determined at the

end of each trading session. NAV is calculated as the value of all the shares held

by the fund, minus expenses, divided by the number of units issued. Mutual

Funds are usually long term investment vehicle though there some categories of

mutual funds, such as money market mutual funds, which are short term

instruments. On the basis of objective we can categories mutual funds as equity

funds/growth funds, diversified funds, sector funds, index funds, tax saving funds,

debt/income funds, liquid funds/money market funds, gift funds, balanced funds.

And on the basis of flexibility we can categories them as open-ended funds,

close-ended funds and interval funds.

(x) Real Estate Investment in real estate also made when the expected returns are very

attractive. Buying property is an equally strenuous investment decisions. Real

estate investment is often linked with the future development plans of the

location. At present investment in real assets is booming there are various

investment source are available for investment which are directly or indirectly

investing real estate.

(xi) Bullion investment The bullion offers investment opportunity in the form of gold, silver, and

other metals, specific categories of metals are traded in the metal exchange. The

bullion market presents an opportunity for an investor by offering returns and the

end value of future. It has been absurd that on several occasions, when stock

market failed, the gold market provided a return on investments.

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2.2.5 Sources of study for investors:A look out for new investment opportunities helps investors to beat the

market. There are many sources from which investors can gather the required

information. Such as;

(i) Financial institutionsCorporate house, government bodies and mutual funds are the main

source of investment information. Many of these enterprises have their own

website and post investment related information on their websites.

(ii) Financial market Stock exchange and regulated bodies also provide useful information to

investor to make there investment decisions. With respect to secondary market,

the Securities and Exchange Board of India uses various modes to promote

investors education and takes great effort to achieve an investor friendly

secondary market in India. The Reserve Bank of India also provide useful

information relating to the prevent interest rates and non-banking financial

intermediaries that mobiles money through deposit schemes.

(iii) Financial service intermediaries These are intermediaries who promote securities among the public. Many

of these intermediaries are the agencies of specific instruments especially tax

saving instruments. These intermediaries offer to share their commission from

there concerned organization with the individual investor thus investor get

additional advantages while investing through intermediaries.

(iv) MediaPress sources such as financial news papers, financial magazine,

business news channel, websites etc. provide information related to investment

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to the public. Besides information on securities, these sources also provide

analysis of information and in certain instance suggest suitable investment

decisions to be made by investor

2.2.6 Fundamental analysis of various investment alternatives:

Before investing in various investment alternatives fundamental analysis is

very necessary. A fundamental analysis believes that analyzing the economy,

strength, management, production, financial status and other related information

will help to choose investment avenues that will outperform the market and

provide consistent gain to the investor

Fundamental analysis is the examination of the underlying forces that

affect the interests of the economy, industrial sectors, and companies. It tries to

forecast the future movement of capital market using signals from the economy,

industry, company. Fundamental analysis requires an examination of the market

from broader prospective. It also examines the economic environment, industrial

performance, and company performance before taking an investment decision.

(i) Economic Analysis The economic analysis aims at determining if the economic climate is

conductive and is capable of encouraging the growth of business sector,

especially the capital market. When the economy expands, most industry groups

and companies are expected to benefit and grow and when the economy

declines, most sectors and companies usually face survival problems. Hence, to

predict scrip prices, an investor has to spend time exploring the forces operating

in the overall economy. Economic analysis implies the examination of GDP,

government financing, government borrowings, consumer durable goods market,

non-durable goods and capital goods market, saving and investment pattern,

interest rates, inflation rates, tax structure, foreign direct investment, and money

supply.

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The most used tools for performing economic analysis are;

Gross Domestic Product

Monetary policy and liquidity

Inflation

Interest rate

International influences

Consumer behaviors

Fiscal policy etc

(ii) Industry Analysis: It is very important to see how the industry to which the company belongs

is faring. Specifics like effect of Government policy, future demand of its products

etc. need to be checked. At times prospects of an industry may change

drastically by any alterations in business environment. For instance, devaluation

of rupee may brighten prospects of all export oriented companies. Investment

analysts call this as Industry Analysis. Companies producing similar products are

subset (form a part) of an Industry/Sector. For example, National Hydroelectric

Power Company (NHPC) Ltd., National Thermal Power Company (NTPC) Ltd.,

Tata Power Company (TPC) Ltd. etc. belong to the Power Sector/Industry of

India.

Tools for industry analysis

Cross study of performance of the industry.

Industry performance over times

Differences in industry risk

Prediction about market behaviors, and

Competition over the industry life cycle

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(iii) Company Analysis:Company analysis involved choice of investment opportunities within a

specific industry that consists of several individual companies. How has the

company been faring over the past few years? Seek information on its current

operations, managerial capabilities, growth plans, its past performance vis-à-vis

its competitors etc.

(iv) Financial Analysis: If performance of an industry as well as of the company seems good, then

check, if at the current price, the share is a good to buy or not. For this, look at

the financial performance of the company and certain key financial parameters

like Earnings per Share (EPS), P/E ratio, current size of equity etc. for arriving at

the estimated future price. This is termed as Financial Analysis. For that you

need to understand financial statements of a company i.e. Balance Sheet and

Profit and Loss Account contained in the Annual Report of a company.

2.3 About Capital Markets and Depository:

2.3.1 About Capital Market:The function of the financial market is to facilitate the transfer of funds

from surplus sectors (lenders) to deficit sectors (borrowers). A financial market

consists of investors or buyers of securities, borrowers or sellers of securities,

intermediaries and regulatory bodies. Indian financial system consists of money

market and capital market.

The capital market consists of primary and secondary markets. The

primary market deals with the issue of new instruments by the corporate sector

such as equity shares, preference shares and debt instruments. The secondary

market or stock exchange is a market for trading and settlement of securities that

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have already been issued. The investors will holding securities or sell securities

through registered brokers/sub-brokers of the stock exchange.

The introduction of NSE & BSE has increased the reach of capital market

manifold which in turn increased the number of investors participating in the

capital market and thus creates the possibility of a bad delivery. The cost & time

spend by the brokers for rectification of this bad delivery tends to be higher with

the geographical spread of the clients. The increase in trade volumes leads to

exponential rise in the back office operation. The inconvenience faced by the

investors (in area that are far long & away from the main metros) in the

settlement of the trade also limits the opportunity for such investors in

participating in auction trading.

This has made the investors as well as brokers wary of Indian capital

market. The erstwhile settlement system on Indian stock exchanges was

inefficient and increased risk, due to the time that elapsed before trades was

settled. The transfer was by physical movement of papers. There had to be a

physical delivery of securities - a process fraught with delays and resultant risks.

The second aspect of the settlement related to transfer of shares in favor

of the purchaser by the company. The system of transfer of ownership was

grossly inefficient as every transfer involves physical movement of paper

securities to the issuer for registration, with the change of ownership being

evidenced by an endorsement on the security certificate. In many cases the

process of transfer would take much longer than the two months stipulated in the

Companies Act and a significant proportion of transactions would end up as bad

delivery due to faulty compliance of paper work. Theft, forgery, mutilation of

certificates and other irregularities were rampant. In addition, the issuer had the

right to refuse the transfer of a security. All this added to costs and delays in

settlement, restricted liquidity and made investor grievance redress time

consuming and, at times, intractable.

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To obviate these problems, the Depositories Act, 1996 was passed. It

provides for the establishment of depositories in securities with the objective of

ensuring free transferability of securities with speed, accuracy and security.

2.3.2 Depository:Depository is an organization where the securities of a shareholder are

held in the electronic form at the request of the shareholder through a medium of

a Depository Participant (DP). The principal function of a Depository is to de-

materialize securities and enables their transaction in book-entry form

electronically.

Depository functions like a security bank, where the dematerialized

securities are traded and held in custody. This facilitates faster, risk-free and low

cost settlement similar to bank.

Following tables compares the two;

BANK DEPOSITORY

Hold funds in account Hold securities in accounts

Transfer funds between accounts Transfer securities between accounts

Transfer without physically handling

money

Transfer without physically handling

securities

Safekeeping of money Safekeeping of securities

In India the Depository Act defines a Depository to mean, a company

formed and registered under the Companies Act, 1956 and which has been

granted a certificate of registration under sub-section (1A) of section 12 of the

Securities and Exchange Board of India Act, 1992

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Depositories in India There are two depositories in India, which provide dematerialization of

securities.

National Securities Depository Limited (NSDL)

Central Depository Services Limited (CDSL)

Benefits of participation in a depository

Immediate transfer of securities

No stamp duty on transfer of securities

Elimination of risks associated with physical certificates such

as bad delivery, fake securities, etc.

Reduction in paperwork involved in transfer of securities

Reduction in transaction cost

Ease of nomination facility

Change in address recorded with DP gets registered

electronically with all companies in which investor holds securities

eliminating the need to correspond with each of them separately

Transmission of securities is done directly by the DP eliminating

correspondence with companies

Convenient method of consolidation of folios/accounts

Holding investments in equity, debt instruments and

Government securities in a single account; automatic credit into demat

account of shares, arising out of split/consolidation/merger etc.

Depository ParticipantThe Depository provides its services to investors through its agents called

23

Depository Participants (DPs). These agents are appointed by the depository

with the approval of SEBI. According to SEBI regulations, amongst others, three

categories of entities, i.e. Banks, Financial Institutions and SEBI registered

trading members can become DPs. The depository has not prescribed any

minimum balance. Customer can have zero balance in his account.

ISINISIN (International Securities Identification Number) is a unique identification

number for a security.

CustodianA Custodian is basically an organization, which helps register and safeguard the

securities of its clients. Besides safeguarding securities, a custodian also keeps

track of corporate actions on behalf of its clients:

Maintaining a client’s securities account

Collecting the benefits or rights accruing to the client in respect of

securities

Keeping the client informed of the actions taken or to be taken by

the issue of securities, having a bearing on the benefits or rights

accruing to the client.

Dematerialization of securities In order to dematerialize physical securities one has to fill a Demat Request

Form (DRF) which is available with the DP and submit the same along with

physical certificates. Separate DRF has to be filled for each ISIN number. Odd lot

share certificates can also be dematerialized. Dematerialized shares do not have

any distinctive numbers. These shares are fungible, which means that all the

holdings of a particular security will be identical and interchangeable. One can

dematerialize his debt instruments, mutual fund units, government securities in

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his single demat account.

Re-materializationIf one wishes to get back his securities in the physical form one has to fill

in the Remat Request Form (RRF) and request his DP for rematerialisation of the

balances in his securities account.

Legal framework:The Depositories Act 1956 provides the regulation of depositories in

securities.

SEBI formulated the Depositories and participants Regulation Act, 1996 to

oversee the matter regarding admission and working of Depositories and its

participant. The Depositories Act passed by parliament received the President’s

assents on August 10, 1996. The Act enables the setting up of multiple

depositories in the country. Only a company registered under the companies Act

(1956) and sponsored by the specified categories of institution can setup

depository in India. The Depository offers services relating to holding of securities

and facility processing of transaction in such securities in book entry form. The

transaction handled by depositories includes settlement of market trades,

settlement of off-market trades, securities lending and borrowing, pledge &

hypothecations.

Eligibility criteria for a Depository:Any of the following may be a Depository:

A public financial institution as defined in section 4A of the

Companies Act, 1956.

A bank included in the second schedule to the RBI Act, 1934.

A foreign bank operating in India with the approval of the RBI.

A Recognized Stock Exchange.

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An institution engaged in providing financial services where not less

then 75% of the equity is held jointly or severally by the institution.

A custodian of the securities approved by Government of India.

A foreign financial services institution approved by Government of

India.

The promoters of Depository are also known as its sponsors. A

depository company must have a minimum net worth of Rs. 100 cr. The

sponsor(s) of the depository have to hold at least 51% of the capital of the

Depository Company.

Agreement between depository and issuers:If either the issuers (a company which has issued securities) or the

investor opts to hold his securities in a demat form, the issuer enters into an

agreement with the depository to enable the investors to dematerialize their

securities. No such agreement is necessary where the state or central

government is the issuer of securities. Where an issuer has appointed a registrar

to the issue of share transfer, the depository enters into a tripartite agreement

with the issuer and (R&T) agent, the case may be, for the securities declared

eligible for dematerialization.

Rights and obligation of Depositories: Every depository should have adequate mechanism for reviewing

monitoring and evaluating the controls, system, procedures and

safeguards.

Annual inspections of the procedures and it should be reported to SEBI.

To ensure that the integrity of automatic data processor system is

maintained to safeguards information.

Adequate measures, including insurance, to protect the interests of the

beneficial owners against any risk.

26

2.3.2.1 Function of Depository Participant:

Dematerialization: One of the primary functions of depository is to eliminate or minimize the

movement of physical securities in the market. This is done through converting

securities held in physical form in to holdings in to back entry form.

Account Transfer:The depository gives effects to all transfer resulting from the settlement of

trade and other transaction between various beneficial owners by recording

entries in the accounts of such beneficial owners.

Transfer & Registration:A transfer is a legal change of ownership of a security in the records of the

insurer. Transfer of securities under demat occur merely by passing book-entries

in the records of the depositories, on the instruction of beneficial owners.

Pledge and hypothecation:Depositories allow the securities with them to be used as collateral to

secure loans and other credits. The securities pledged are transferred to a

segregated or collateral account through book-entries in the records of the

depository.

Linkage with clearing system:The clearing system performs the function of ascertainment in the pay in

(sell) or payout (buy) of brokers who leave traded on the stock exchange.

Actually delivery of securities from the clearing system is from the selling brokers

and delivery of securities from the clearing system to the buying broker is done

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by depository. To achieve this depositories and the clearing system are linked

electronically.

To handle the securities in electronic form as per the Depositories Act

1996 two depositories are registered with SEBI.

They are

1) NSDL -- National securities depository limited.

2) CDSL -- Central depository service (India) limited.

NSDL

India had a vibrant capital market, which is more than a century old, the

paper-based settlement of trades caused substantial problems like bad delivery

and delayed transfer of title till recently. The enactment of Depositories Act in

August 1996 paved the way for establishment of NSDL, the first depository in

India. NSDL promoted by institutions of national stature responsible for economic

development of the country has since established a national infrastructure of

international standard that handles most of the trading and settlement in

dematerialized form.

Using an innovative and flexible technology system, NSDL works to

support the investors and brokers in the capital market of the country. NSDL

aims at ensuring the safety and soundness of Indian marketplaces by developing

settlement solutions that increase efficiency and minimizing risk and cost. In the

depository system, securities are held in depository accounts, which is more or

less similar to holding funds in bank accounts. Transfer of ownership of securities

is done through simple account transfers.

This method does away with all the risks and hassles normally associated

with paperwork. Consequently, the cost of transacting in a depository

environment is considerably lower as compared to transacting in certificates.

CDSL

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CDSL was set up with the objective of providing convenient, dependable

and secure depository services at affordable cost to all market participants.

CDSL received the certificate of commencement of business from SEBI in

February 1999.

Depository facilitates holding of securities in the electronic form and

enables securities transactions to be processed by book-entry by a Depository

Participant (DP), who as an agent of the depository, offers depository services to

investors. According to SEBI guidelines, financial institutions, banks, custodians,

stockbrokers, etc. are eligible to act as DPs. The investor who is known as

beneficial owner (BO) has to open a demat account through any DP for

dematerialization of his holdings and transferring securities.

The balances in the investors account recorded and maintained with

CDSL can be obtained through the DP. The DP is required to provide the

investor, at regular intervals, a statement of account, which gives the details of

the securities holdings and transactions. The depository system has effectively

eliminated paper-based certificates, which were prone to be fake, forged,

counterfeit resulting in bad deliveries. CDSL offers an efficient and instantaneous

transfer of securities.

29

Company Profile

3.1 Basic facts about SHCIL

3.2 Service profile of SHCIL

3.3 Product profile of SHCIL

PART III

30

3.0 Company profile:

Stock Holding Corporation of India Limited (SHCIL) was promoted by

public financial Institutions and insurance majors like IDBI, UTI, ICICI, LIC, GIC

and its subsidiaries, IFCI and IIBI. It was incorporated on 28th July, 1986. SHCIL

acts an intermediary between investors and NSDL / CDSL.

SHCIL is the first Depository participant to start Depository services with

the introduction of the Depository system in the country, SHCIL commenced

extending Depository related services to the retail segment as well and over the

last six years, it has come to acquire the stature of the largest Depository

participant besides being the country’s largest custodian. The Corporation

provides depository related services to its retail segment through more than 140

offices located across the length and breadth of the country.

SHCIL works in a highly computerized environment. State-of-the-art

technologies are employed to facilitate the business and to minimize the risk from

automated operations. SHCIL is a Laureate of the Computer World Honors

Program. SHCIL has also received National IT award from the Computer Society

of India. The information technology department has been assessed at CMM

level - 3 by i-flex consulting.

SHCIL handling large volumes of securities and it has been facilitated by

the state-of-the-art technology. Its highly automated set up and applications have

been acclaimed by both national and international organizations, including the

prestigious Smithsonian Institution in the US. SHCIL also has one of the best

infrastructures in the country in terms of networking and hardware equipment.

The Wide Area Network (WAN) nicknamed “SHCIL Net” is one of the largest

WANs in the country. Further, SHCIL’s in-house development methodology has

been certified at CMM level-3 by i-flex, while its IT activities have been certified

for ISO-9001:2000 by BVQI.

SHCIL’s Depository participant services addresses an individual’s

investment needs with a parentage of leading financial institutions and insurance

31

majors and a proven track record in the custodian business. It has reiterated its

past success by establishing as the first ever largest Depository Participant in

India, from a tentative foray in 1988 into the individual investor arena to servicing

around seven lakhs account. SHCIL has endeavored to constantly add and

innovate to make business a pleasure for investors. SHCIL has a network of

more than 140 branches spread across the country providing services at your

doorstep. Across the country, 14 Depository Participant Machines (DPMs)

connected to NSDL and 7 DPMs connected to CDSL, which ensure fast and

direct processing of clients instructions.

3.1 Basics facts about SHCIL:

SHCIL is India’s first and largest depository participant and it has more than

140 0ffices across the country.

SHCIL has around 20% market share i.e. over 8 lakhs demat accounts

SHCIL has approx. 50% market share of delivery based transaction which

amount to Rs. 1.33 crore transactions.

Recognized by Securities Exchange Commission (SEC), USA as an “eligible

foreign custodian”.

SHCIL has been honored the Smithsonian Award by Conferry for its

“Visionary use of IT” and also from Computer Society of India for best usage

of IT.

SHCIL has installed “Request Transmitting Machines” (RTM’s) in the selected

places by combining investor’s bank, investor’s brokers, stock exchange,

depository and depository participants so that investors can make orders for

sale/purchase of securities. By this SHCIL became the universal service

provider.

SHCIL has wide range of financial services – DP services, Custodial

services, Securities Lending, GOI bonds, SGL services, Fund

Investment etc.

32

ORGANIZATION STRUCTURE

HEIRARCHICAL STRUCTURE OF SHCIL

List of various Functional VPs:

VP (Depository Services)

VP (Information Technology)

VP (Products)

VP (Personal)

VP (HRD)

VP (R&D)

VP (Facilitation centre Co-ordination)

The following Positoins are below Assistant

VPs & Div. Mgrs in the Company's

Organizational Hierarchy :-

Senior Manager

Manager

Deputy Manager

Assistant Manager

Executive

Junior Executive

BOARD OF DIRECTORS

MANAGING DIRECTOR AND CEO

JOINT MD

SENIOR VP{BUSINESS DIVISION}

ASSISTANT VP'S DIVISIONAL MANGER

SENIOR VP{FINANCE}

VP'S{FUNCTIONAL}

33

ORGANISATION STRUCTURE AT SHCIL, BANGALORE

DIVISIONAL MANAGER

Deputy Manager(Hubli FC)

Bangalore FC Manager (Mangalore FC)

*Koramangala CC*Malleswaram CC*Jayanagar CC*Davangere cc*ShimogaCC*MysoreCCGulbarga CC Belgaum CC Belgaum CC

Deputy Manager Deputy Manager

34

3.2 Service Profile:

Custodial service:

Since its commencement in 1988 as the première custodian in the

country, SHCIL has been providing custodial services of international standards

to financial institution. Foreign institutional investors and domestic mutual funds

with 70% of the institutional business to its credit, SHCIL has guaranteed to

providing specialized services to large investing institution dedicated pool of

professional working in inter connected offices linked to client institutions. Stock

Exchange, Depositories and brokers through VSATs, electronic mail and other

telecommunication channels is at the help of SHCIL’s custodial service.

SHCIL offers the following services to the clients:

(i) Market operation: Here they take care of activities starting from receiving the order to

receiving/delivering the securities from the clearing House/clearing Corporation

to facilitate purchase and or the sale transaction. SHCIL prefers transaction

through clearing hours. However they also undertake delivery Vs payment

transaction if the clients desire the same. Market operation also includes

customized reporting to clients.

(ii) Lodgments and registration: This covers the receipt of securities and scrutiny thereof and also their

lodgment with the Registrars/Companies. The securities sent for transfer are

followed up at regular intervals. There is also customized reporting the clients of

securities in transit.

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(iii) Custody management: Custody management covers physical receipt of securities upon

registration from the company and online audit of shares in custody. SHCIL is the

first custodian to introduce the bar coding system in India wherein a unique

identify is imparted to the securities by affixing a bar code. This aids in tracking of

securities at any point in the processing cycle correlation of certificates received

after registration.

(iv) Data bank:To serve client, the corporation requires a large amount of the information

from Stock Exchanges, Depositories, SEBI, Companies and other entries of the

capital market. Data bank departments collect information from companies and

maintain obligation that is required by the corporation for carrying out market

obligation. Databank maintain information of approximately 12,500 instruments,

8,500 companies, 2,500 registrars, two depositories and six Stock Exchange

namely BSE, NSE, OTCEI, DSE, CSE & MSE, information regarding various

scrip (listed and unlisted) in which the clients have holding, information pertaining

to book closures/records, dates for corporate events, ex-dates and no delivery

schedules for various Stock Exchanges.

It also keeps information related to details of monetary and non-

monetary benefits, in the electronic segment information such as ISIN data, the

Registrars handling demat for a company, the scrip under compulsory. Demat

trades as declared by SEBI and a script included in compulsory rolling segments

etc.

(v) Corporate actions:Corporate actions cell ensures timely collection of monetary and

non-monetary benefits. It covers all activities related to corporate actions like

calculation entitlement receipts of monitory corporate actions and transfer of the

36

same to client. It also does customized reporting to clients on the status

corporate actions.

(vi) Primary market:Here SHCIL takes care of applications on behalf of clients for

market issues, calculates the entitlement, follow up for allotment or refunds and

send customized reports to clients.

(vii) Client interface: This is the single point contact for all client issues. The client

interface team prepares and reconciles holding the statement for clients.

(viii) Reporting and market updates:SHCIL makes available reports on client’s holdings; scripts avail for

trade and valuation of securities based on the market price on hard copy as well

as through file transfer mechanism.

(ix) Street name securities:This is a special service offered to clients who wish to turn around their

portfolio in a speedy manner. The securities purchased by the clients are not

sent for registration, but are stored in the safe deposit value of the corporation,

the corporate events are monitored continuously and the securities are sent for

regulation during book closure or before the expiry of the transfer deed.

Technology support team:SHCIL has been able to maintain its lead position in this high

volume mission critical and securities environment largely due to the emphasis

on the innovative use of technology. SHCIL has recognized the need to adopt

state-of-the-art technology right from its inception a direct result of this is the

37

receipt of the Smithsonian Institutes Award for “Visionary use of information

technology “ and the NATIONAL IT award from CSI for “BEST IT USAGE”

During the past ten years SHCIL has been a user of a wide range of

hardware and has one of the best infrastructures in Indian in terms of hardware

and networking equipment. It has an enterprise wide network implemented using

leased lines VSAT, VPN, and ISDN.

About 140 offices are connected through the network. All the

workstations are interconnected via Local Area Network and all the branches and

facilitation centers (totaling 140 offices) of SCHIL are connected via Wide Area

Network. There is a total integration of front office with central back office system

and regional offices with our corporate office. SHCIL’s enterprises wide network

connects servers of various platforms.

“SHCIL Net” is one of the largest WANs in the Country. SHCIL’s in-house

development methodology has been certified at CMM level-3 by i-Flex, while its

IT activities have been certified for ISO-9001 by BVQ1.

Depository Service: SHCIL’S depository participant services addresses individual

investment needs. With a percentage of leading financial institutions and

insurance majors and a proven track record in the custodian business, SHCIL

has registered its past success by establishing itself as the first ever and largest

depository participant in India.

From a tentative foray in 1998 into the individual investor arena to

servicing around seven lakh accounts, SHCIL has endeavored to constantly add

and innovate to make business a pleasure for its clients. Across the country,

fourteen Depository Participant Machines (DPMs) connected to NSDL and seven

connected to CDSL ensure fast and direct processing clients instruction.

38

SHCIL‘s Depository Service includes:

Creation of demat request based on client requirement

Follow-up with Registrars/companies for pending demat cases.

Accounting of securities received in dematerialization form.

Opening and maintenance of client Demat accounts

Electronic holding statement to clients.

Lessoning with Depositories.

Settlement of Trades in electronic form.

Pledging.

Reporting.

Securities lending.

Account openingAny investor who wishes to avail depository services must first open an

account with a Depository participant of NSDL. The investor can open an

account with any depository participant of NSDL. An Investor may open an

account with several DPs or he may open several accounts with single DP. After

exercising this choice, the investor has to enter into an agreement with the DP.

The form and contents of this agreement are specified by the business rules of

NSDL.

A DP may be required to open three categories of accounts for clients -

Beneficiary Account, Clearing Member Account and Intermediary Account.

A Beneficiary Account is an ownership account. The holder/s of securities

in this type of account owns those securities.

The Clearing Member Account and Intermediary Account are transitory

accounts. The securities in these accounts are held for commercial

purpose only.

39

A Clearing Member Account is opened by a broker or a Clearing Member

for the purpose of settlement of trades.

An Intermediary Account can opened by a SEBI registered intermediary

for the purpose of stock lending and borrowing.

Check List for Account Opening

Proof of Address, certified copies of ration card/ passport/ voter ID/ PAN

card/ driving License / bank passbook.

Ensure that all compulsory fields in the account opening form are filled

(except PAN/ GIR & nomination which are optional).

In case of corporate, ensure a copy of board resolution of authorized

signatories. Ensure proper authorization in case of power of attorney

holder.

DP should give a copy of agreement to the client, including the charges.

Inform clients regarding standing instruction facility.

Branches of DP to co-ordinate & follow up with Head Office for account

opening.

Ensure account is activated before forwarding Client ID to client.

Inform settlement deadlines to clients.

DematerializationOne of the methods for preventing all the problems that occur with

physical securities is through dematerialization (demat). The share certificates

are shredded (i.e., its paper form is destroyed) and a corresponding credit entry

of the number of securities (written on the certificates) is made in the account

opened with the depository participant (DP). Each security is identified in the

depository system by ISIN and short name.

40

Steps in Dematerialization of shares:

1. Client/ Investor submit the DRF (Demat Request Form) and physical

certificates to DP. DP checks whether the securities are available for

demat or not. Client defaces the certificate by stamping ‘Surrendered for

Dematerialization’. DP punches two holes on the name of the company

and draws two parallel lines across the face of the certificate.

2. DP enters the demat request in his system to be sent to NSDL. DP

dispatches the physical certificates along with the DRF to the R&T Agent.

3. NSDL records the details of the electronic request in the system and

forwards the request to the R&T Agent.

4. R&T Agent, on receiving the physical documents and the electronic

request, verifies and checks them. Once the R&T Agent is satisfied,

dematerialization of the concerned securities is electronically confirmed to

NSDL.

5. NSDL credits the dematerialized securities to the beneficiary account of

the investor and intimates the DP electronically. The DP issues a

statement of transaction to the client.

Rematerialisation

Re-materialization is the exact reverse of dematerialization. It refers

to the process of issuing physical securities in place of the securities held

electronically in book-entry form with a depository. Under this process, the

depository account of a beneficial owner is debited for the securities sought to be

re-materialized and physical certificates for the equivalent number of securities

is/are issued. A beneficial owner holding securities with a depository has a right

to get his electronic holding converted into physical holding at any time. The

beneficial owner desiring to receive physical security certificates in place of the

41

electronic holding should make a request to the issuer or it’s R&T Agent through

his DP in the prescribed re-materialization request form (RRF).

Re-Materialization Process:

1. The DP should provide re-materialization request forms (RRF) to clients.

2. The client should complete RRF in all respects and submit it to the DP.

3. If RRF is not found in order, the DP should return the RRF to the client for

rectification.

4. If RRF is found in order the DP should accept RRF and issue an

acknowledgement to the client.

5. DP should enter the re-materialization request in DPM. DPM will generate

a remat request number (RRN) which should be mentioned on RRF.

6. An authorized person, other than one who entered the RRF details in

DPM, should verify the details of RRN and release a request to the

depository.

7. The DP should complete the authorization of RRF and forward it to the

issuer or it’s R&T Agent for re-materialization. The DP should forward

RRF to the issuer or it’s R&T Agent within seven days of accepting it from

the client.

8. The issuer or its R&T Agent should verify the RRF for validity,

completeness and correctness. It should also match the details with the

intimation received from the depository against the same RRN.

9. In case the issuer or its R&T Agent finds RRF in order, it should confirm

the re-mat request. The issuer or its R&T Agent should then proceed to

issue the physical security certificates and dispatch them to the beneficial

owner.

10.The DP, on receiving confirmation of debit entry in DPM, should inform the client accordingly.

The entire process takes a maximum of 30 days.

42

Trading and settlement

One of the basic services provided by NSDL is to facilitate transfer of

securities from one account to another at the instruction of the account holder. In

NSDL depository system both transferor and transferee have to give instructions

to its depository participants [DPs] for delivering [transferring out] and receiving

of securities. However, transferee can give 'Standing Instructions' [SI] to its DP

for receiving in securities. If SI is not given, transferee has to give separate

instructions each time securities have to be received.

Transfer of securities from one account to another may be done for any of

the following purposes:

a. Transfer due to a transaction done on a person to person basis is called 'off-

market' transaction.

b. Transfer arising out of a transaction done on a stock exchange.

c. Transfer arising out of transmission and account closure.

Settlement of off-Market transaction

43

Steps in settlement of off-market transaction

1. Seller gives delivery instructions to his DP to move securities from his

account to the buyer's account.

2. Buyer automatically receives the credit of the securities into his account

on the basis of standing instruction for credits.

3. Buyer receives credit of securities into his account only if he gives receipt

instructions, if standing instructions have not been given.

4. DP needs to be extra careful in verifying the signature of the client if

unusual quantities of securities are being debited to the account

5. Funds move from buyer to seller outside the NSDL system.

A market trade is one that is settled through participation of a Clearing

Corporation. In the depository environment, the securities move through account

transfer. Once the trade is executed by the broker on the stock exchange, the

seller gives delivery instructions to his DP to transfer securities to his broker's

account.

44

The broker has to then complete the pay-in before the deadline prescribed

by the stock exchange. The broker removes securities from his account to

CC/CH of the stock exchange concerned, before the deadline given by the stock

exchange.

The CC/CH gives pay-out and securities are transferred to the buying

broker's account. The broker then gives delivery instructions to his DP to transfer

securities to the buyer's account.

The movement of funds takes place outside the NSDL system.

1. Seller gives delivery instructions to his DP to move securities from his

account to his broker's account

2. Securities are transferred from broker's account to CC on the basis of a

delivery out instruction.

3. On pay-out, securities are moved from CC to buying broker's account.

4. Buying broker gives instructions and securities move to the buyer's

account.

Transfer of securities towards settlement of transactions done on a stock

exchange is called settlement of market transaction. This type of settlement is

done by transferring securities from a beneficiary account to a clearing member

account.

Brokers of stock exchanges that offer settlement through depository are

required to open a 'clearing member account'. In addition to the brokers,

custodians registered with SEBI and approved by stock exchanges can open a

clearing member account. These accounts are popularly known as 'Broker

Settlement Account'. A client who has sold shares will deliver securities into the

settlement account of the broker through whom securities were sold.

45

Pledge and HypothecationThe Depositories Act permits the creation of pledge and hypothecation

against securities. Securities held in a depository account can be pledged or

hypothecated against a loan, credit, or such other facility availed by the beneficial

owner of such securities. For this purpose, both the parties to the agreement, i.e.,

the pledger and the pledgee must have a beneficiary account with NSDL.

However, both parties need not have their depository account with the same DP.

The nature of control on the securities offered as collateral determines

whether the transaction is a pledge or hypothecation. If the lender (pledge) has

unilateral right (without reference to borrower) to appropriate the securities to his

account if the borrower (pledger) defaults or otherwise, the transaction is called a

pledge.

Pledge of Demat shares

Steps:

1. Agreement is signed between the pledger and pledgee outside the NSDL system

2. Pledger gives a pledge creation request to DP who enters it in the system.

3. The request reaches the pledgee's DP through the NSDL system. Pledgee is intimated by his DP.

4. Pledgee gives a pledge creation confirmation to his DP who enters it in the system.

5. Securities are transferred from 'free balances' head to 'pledged balances' head.

6. Loan is given by pledgee to pledger outside the NSDL system.

Checklist for pledge/hypothecation

While processing a pledge/hypothecation request, the DP should take care with

regard to the following steps/points:

1. Ensure that the instruction form is submitted in duplicate.

46

2. On receipt of instruction for creation of pledge, check whether there is

enough balance in pledger's account to effect the creation of

pledge/hypothecation or not. If not, advise the client suitably.

3. Ensure that all compulsory fields in the instruction form are entered.

4. Ensure that request for confirmation of pledge is given before the closure

date mentioned in the instruction form.

Stock Lending and BorrowingThe transactions involving lending and borrowing of securities are

executed through approved intermediaries duly registered with SEBI under the

Securities Lending Scheme, 1997. Such an intermediary may deal in the

depository system only through a special account (known as Intermediary

Account) opened with a DP. An intermediary account may be opened with the

DP only after the intermediary has obtained SEBI approval and registered itself

with SEBI under the Securities Lending Scheme. The intermediary also needs to

obtain an approval of NSDL.

Deposit of securities from lender to intermediary

47

Steps:

1. Lender forwards request to his DP.

2. Lender's DP electronically communicates request to NSDL.

3. The securities are blocked in lender's account in favor of the

intermediary.

4. NSDL electronically informs intermediary's DP.

5. Intermediary forwards acceptance request to his DP.

6. Intermediary's DP electronically communicates acceptance to NSDL.

7. Securities are moved from lender's account to intermediary's account.

Lending of securities by intermediary to Borrower

Steps:1. Borrower forwards request to his DP.

2. Borrower's DP electronically communicates request to NSDL.

3. NSDL electronically informs intermediary's DP.

4. Intermediary forwards acceptance request to his DP.

5. Intermediary's DP electronically communicates acceptance to NSDL.

6. Securities are moved from intermediary's account to borrower's account

48

Repayment of securities by Borrower to intermediary1. Borrower forwards repayment request to his DP.

2. Borrower’s DP electronically communicates request to NSDL.

3. The securities are blocked in borrower’s account in favour of the

intermediary.

4. NSDL electronically informs intermediary’s DP.

5. Intermediary forwards acceptance request to his DP.

6. Intermediary’s DP electronically communicates acceptance to NSDL.

7. Securities are moved from borrower’s account ton Intermediary’s

account.

Repayment of securities by intermediary to lender

1. Intermediary forwards repayment requires to his DP.

2. Intermediary’s DP electronically communicates request to NSDL.

3. Securities are blocked in intermediary’s account in favour of the lender.

4. NSDL electronically informs lender’s DP.

5. .Lender forwards acceptance request to his DP.

6. Lender’s DP electronically communicates acceptance to NSDL.

7. Securities are moved from intermediary’s account to lender’s account.

3.3 Products offered by SHCIL:

Add shares:

Stock holding has tie up with reputed banks, which offer the most

competitive interest rates in the market. The clients can use the shares in their

free account as collateral and take a loan from any of an empanelled bank.

49

SCHIL completes the documentation and processing and give the cheque

to the customers. ADD shares is available at SHCIL centers in all the major

cities.

Features : Loan against demat shares held in the DP account with SHCIL.

Competitive interest rates from a range of Banks, with whom SHCIL has tied

up.

SHCIL processes the entire paperwork required with the bank.

The service is available at over 100 branches in the SHCIL.

Advantages: The stock holding tie-ups with banks gives a wide range of banks to choose

from this reads as a wider range of specified and non-specified shares to get

a loan against their share.

The ADD shares team helps customer with the paper formalities precedent to

a loan.

The clients can now get a loan at competitive interest rates and margins.

This is a resultant of SHCIL’s tie-up with a wide range of banks.

ADD a share simplifies long-winded loan procedures for customer and

facilitates early disbursement of funds

Add shares are available at 120 branches all over.

Equibuy:

As a depository participant, SHCIL assures a safe delivery of shares every

time the client buys on the exchange. SHCIL has lined up a panel of reputed

brokers who process orders on priority. As the clearing corporations of leading

stock exchanges SCHIL ensures smooth and sure credits into an account. An

50

initial advance and timely replenishments into the Purchase Advance account

take care of the payment for customer purchases.

Features: An Equibuy instruction from clients gets the shares credited into the account

the next day of payout.

Payment for purchase made from a running account called Purchase

Advance into which the remit an initial advance of Rs. 1,000 and maintain a

minimum balance of Rs. 250 at all times.

Choosing one or more brokers from a list of 77 brokers empanelled with

SHCIL. Registration with broker is not necessary if client is already registered

under any of SHCIL’s other product schemes

Purchase on BSE or NSE.

Advantages Buy shares with a single instruction and get an assured credit of shares into

clients account the next day of payout.

Leave the settlement procedures and broker interaction to SHCIL.

It affects a faster turnaround of customer portfolio.

Equibuy has a very nominal charge.

An initial advance of Rs. 1,000 in the Purchase Advance Account and

replenishments, as and when necessary, it takes care of payment for client’s

purchases.

Fund invest:Fund Invest is a basket of financial products, ranging from fixed income

securities like fixed deposits, Infrastructure bonds and Capital Gain Bonds to

variable income securities like Initial Public Offers (IPOs) of equities and mutual

funds. It is an attempt to offer financial products that cater to the various

investments needs of esteemed clients of SHCIL. An effort to guide the investor

51

to a product portfolio that best suits his risk returns profile. Applications for

investments can be source from any of the SHCIL offices. Apart from guiding,

investor to pick up the right combination of investment instruments, SHCIL help

them 'after-sales' service, by acting as an interlocutor between the investor and

the issuer of the securities. SHCIL is an AMFI Registered Mutual Fund Advisor

(ARMFA).

Features:At present, SHCIL are distributing schemes of 25 different Mutual Fund.

All these Funds offer wide varieties of investment option depending on the risk

appetite of the investor.

Capital Gains Bonds come under 54 EC Capital Gains Bonds, where

investors get exemption from Capital Gain Tax. These are 'on-tap ' issues. At

present, SHCIL is distributing Capital Gain Bonds of Rural Electrification

Corporation, National Housing Bank, Small Industries Development Bank of India

and National Highway Authority of India. ICICI Bank and IDBI, with Section 88 as

the main feature issue infrastructure Bonds

Private Placements:

Stock Holding distributes Debt papers issued for Private Placement with

Structural Obligations by the State and Central Government, typically targeted for

Trusts and Provident Funds.

Fixed Deposits: SHCIL distribute Fixed Deposits with high investment rating and issued by

blue- chip corporate. These papers generally offer 50 to 100 basis points more

than bank fixed deposits of comparable period. At present, they are distributing

IDBI Suvidha Fixed Deposits and HDFC Fixed Deposits.

Initial Public Offer:

52

IPOs offered from blue chip corporate can be subscribed from SHCIL.

GOI Bonds:

Savings Bonds are issued by RBI on behalf of Government of India.

8.0% taxable bonds

These Bonds are held in electronic form in an account called Bond Ledger

Account (BLA). Bond Ledger Accounts can be opened and operated with RBI

designated Receiving Offices. SHCIL has been designated as one of the

Receiving Offices by RBI for this purpose. Subscriptions for Savings Bonds can

be submitted at any of the branches.

Savings Bonds being sovereign in nature are absolutely safe and an

attractive investment option in the current volatile market situation.

Advantages: Hassle free maintenance: The GOI Bonds are held in electronic form in

an account called Bond Ledger Account. This ensures smooth investing minus

paperwork.

Electronic Clearing Services: The investor can avail of Electronic

Clearing System (ECS) services. This ensures automatic credit of benefits and

redemptions when they accrue.

Easy access: Investor can apply for subscriptions into these Bonds in any

SHCIL center across the country.

Dispatch: Certificate of Holdings is dispatched to the client through courier on

realization of subscription.

Features

53

Investment LimitMinimum investment is Rs.1000 and there is no

maximum limit

Interest OptionPayable half yearly on 1st Feb, 1st Aug or

cumulative on maturity.

Tax BenefitsInterest is taxable under IT Act 1961. Exempt from

Wealth Tax under Wealth Tax Act 1957

TransferabilityNon-transferable, non-tradable and cannot be used

as collateral for borrowings

NominationAvailable. Only sole holder or surviving holder can

nominate

RepaymentRepayable on expiry of 6 years from date of issue.

No interest would accrue after maturity

Premature Encashment Not available

Stock direct:The client can send instructions for buying/selling shares. A three-way

handshake between leading brokers, national and international banks and SHCIL

is the crux of Stock direct.

Stock direct is India's first online trading platform which was launched in

1999. Today Stock direct is the most secure online trading platform which

combines encryption technology / digital signature as well as Smart Card security

features.

A few clicks will seamlessly check client’s funds and security positions,

route the order to the broker of choice and do the necessary fund and share

movements for the client. For people who are not inclined to trading on the net,

54

SHCIL has Request Transmitting Machines (RTMs) placed at specified SHCIL

centers. This is an electronic touch screen kiosk where client can insert smart

card and trade effortlessly.

Features:A single instruction enables client to combine the trading, fund and share

transfers with SHCIL taking care of the settlement. Trade from home on the

Internet with a floppy containing the Stock direct software or use the Smart Card

to trade through the Request Transmitting Machines (RTMs) placed at specified

SHCIL centers and partner banks' designated branches. Security measures

based on encryption and digital signature coupled with smart card technology

make online deals 100% secure.

Advantages: One Stop Shop gives a single instruction towards funds confirmation for buy

orders, order routing to clients broker and fund and share movements for

settlement purpose.

Convenient.

Trade from home through the net or use the RTMs placed at specified SHCIL

centers

Security

Digital Signature & Smart Card technology based on 128-bit Encryption make

transactions 100% secure.

Cost Effective

No minimum value of transactions

Services

Trade processing services

55

SHCIL has specially trained personnel handling thousands of trade

instructions involving large values on sophisticated systems using digital

signature on STP (Straight Through Processing) systems, ensuring smooth trade

confirmations to Stock Exchanges, reporting and resolution of mismatches with

Clients, etc.

Settlement services Institutional trades are either settled through the Clearing House of the

Stock Exchanges or as DVP directly with the contracting broker or Counter Party.

As a Custodian SHCIL strives for timely settlement of Funds and Securities,

funds are collected/ deposited from/to client and settled with the Clearing

Houses/ Brokers/ Counter Parties.

In the present context, most of the Institutional trades are settled in the

Depository mode. For the Institutional segment alone, SHCIL has a unique

clearing code on the two principal stock exchanges and separate DPM units on

both NSDL and CDSL. This ensures smooth settlement of transactions on both

Exchanges/Depositories, based on the deliverables and receivables received by

them for each settlement.

For the occasional delivery and receipt of securities in the physical mode,

SHCIL ensures prompt scrutiny, processing and lodgment of securities with the

respective Company/Registrar and Transfer Agent, with the objective of final

transfer to the purchaser, with objections handling if needed, thus facilitating

delivery of securities to the parties concerned on sale.

Physical custody services

56

The transferred physical securities, when received, are held in state-of-

the-art, high-security vaults on behalf of the clients. A pioneer in introducing the

bar-coding system to track certificates, SHCIL ensures the availability of each

and every share certificate at a moments notice.

Intuitional DP services

SHCIL has installed dedicated DPM’s (Depository Participant Modules) on

both the Depositories, viz. NSDL (National Securities Depository Ltd) and CDSL

(Central Depository Services Ltd).

A dedicated Institutional DP team at SHCIL addresses your need for all

core DP services like conversion of physical holdings into electronic form,

settlement of trade instructions, Rematerialisation, repurchase and pledge

instructions, providing of holding and transaction statements and daily

reconciliation of client holdings.

NRI services

Over the years, SHCIL has grown to become a major player in the capital

market. With a network of more than 140 offices operating across the country

and franchisees operating abroad, SHCIL provides Depository Participant and

related services close to 0.7 million satisfied investors out of which over 6000 are

NRI Clientele.

SHCIL has a full-fledged NRI cell operating specifically to cater needs

pertaining to Depository account opening and maintenance. NRI cell co-ordinates

with prospective NRI customers, collects and assists in obtaining the relevant

documents and ensures the Depository Account is opened hassle free.

NRI Cell collects physical certificates to be sent for demat and ensures

that the certificates are in order and can be sent for dematerialisation under the

existing guidelines issued by the depositories. Instructions for trade are accepted

57

by fax on request by NRI Cell to ensure timely settlement of trades. In this case

later on the client needs to regularise by sending the original trade delivery

instruction. Any tariff and billing related query are addressed by NRI Cell.

In short NRI Cell is a single point contact for any matter relating to NRI

Depository operations.

Derivative services:SHCIL provides Clearing Services for derivative segment of BSE/NSE and

Commodity segment of MCX/NCDEX. Derivative services are classified into two

they are:

Stock derivative services,

Commodity derivative clearing services.

As a professional clearing member, SHCIL performs the following functions:

Clearing - Computing obligations of all his TM’s i.e. determining positions

to settle.

Settlement - Performing actual settlement.

Collateral Management - Collection of collateral (cash/cash equivalents

and securities), valuation on a regular basis (as per J. R. Varma

recommendations) and setting up exposure limits for TMs and Institutional

clients.

Risk Management - Setting position limits based on upfront deposits /

margins for each TM and monitoring positions on a continuous basis.

Stock broking service Stock Holding Corporation of India ltd, Bangalore recently started the

stock broking service on 18th June 2006. foe availing these services client must

want demat account with SHCIL. For those only this service is available.

Presently client can trade only in BSE.

For availing this services client want to opening of stock broking account by

submitting necessary document. After submission of application account will

58

open in 7 to 10 days Personal client ID will give to client then client can trade. If

he want to purchase any script client want to deposit margin amount in bank then

he can buy scripts. .

Charges Account opening charges 150/- for one month (from commencement of

business), 450/-Second month onward. DP charges will nil for trades done

through SSL. Minimum charge of Rs. 50/- for per transaction.

Brokerage on transaction:

Slabs Brokerage

Base brokerage 0.55%

Cumulative transaction value

5-10 lacs 0.50%

10-20 lacs 0.45%

20-50 lacs 0.40%

50 lacs-1crore 0.35%

1 crore-2 crore 0.30%

5 crore-10 crore 0.25%

10 crore and above 0.20%

59

Data Analysis and Interpretation

4.1 Methodology

4.2 Data Analysis

PART IV

60

4.1 Methodology:

Primary DataA questionnaire schedule was prepared and the primary data was

collected.

Secondary Data Company website

Customer data base

Company report ‘

Books and publications

Related information from net

Period of Study:The study concentrates only on the past 3 years data with the help of data

source available. Period of study and analyzing the primary data is two months.

Type of research:This is a descriptive research where survey method is adopted to collect primary

information from the investors using different scales as required and the required

secondary information for the analysis.

Sampling Technique

The sampling technique followed in this study is non-probability

convenient sampling. Simple random techniques are used to select the

respondent from the available database. The research work will be carried on the

basis of structured questionnaire. The study is restricted to the investors of the

Bangalore and Bhubaneswar city only.

61

Sample Size

The population being large the survey will be carried among 150

respondents who are the clients of SHCIL, Bangalore Stock Exchange and

Bhubaneswar Stock Exchange. They will be considered adequate to represent

the characteristics of the entire population.

Tools used for data analysis

The analysis of data collection is completed and presented systematically

with the use of Microsoft Excel and SPSS.

4.2 Data analysis:

1. Investment preference among various age groups:

Investment Avenues Age Group (in Years)< 20 20 - 30 31 - 40 41 - 60 > 60

Equity 25 24 27 28 15Debenture / Bonds 11 10 9 15 23Bank Deposits 18 18 17 16 20Insurance 20 24 22 21 14PPF 6 5 8 4 7Gold & Real Estate 18 15 15 12 17Others 2 4 2 4 4

Investment preference among various age group

05

1015202530

< 20 20 -30

31 -40

41 -60

> 60

Age group (in Years)

Freq

uenc

y (in

%)

Equity

Debenture / Bonds

Bank Deposits

Insurance

PPF

Gold & Real Estate

Others

62

Interpretation: From the above tables we can conclude that, all the age groups are give

more preference on investing in equity, except those who are more than sixty

years. And the second more preferable investment avenue is insurance. But the

age group which is more than sixty years gives more preference to invest in

Debenture, Tax saving bonds and then bank deposits.

2. Investment preference among various income levels:

Investment Avenues

Annual Income (in Rs. lakh)< 1 1 - 2 2 - 3.5 3.5 - 5 > 5

Equity 16 19 26 26 29Debenture / Bonds 5 6 7 7 8Bank Deposits 31 24 21 18 14Insurance 15 17 18 20 21PPF 14 16 18 15 16Gold & Real Estate 3 4 5 8 9Others 16 14 5 6 3

05

101520253035

Freq

uenc

y (in

%)

< 1 1 - 2 2 -3.5

3.5 -5

> 5

Income level

Investment preference among various income level

Equity

Debenture / Bonds

Bank Deposits

Insurance

PPF

Gold & Real Estate

Others

63

Interpretation:The above table reveals that higher income levels are giving more preference to

invest in equity where as lower income levels given more preference to invest in

bank deposits. It implies that the higher income level groups are preferred to take

more risk in investment rather than lower income level. And those who are taken

more risk in investment are preferred to invest in equity rather than any

investment avenues.

3. Relationship between income level and investment:

Annual income Investment per annum (Weighted Average)

Below 1.5 lakhs 28500

1.5 to 3 lakhs 45000

3 to 4.5 lakhs 70000

4.5 lakhs and Above 100000

0

20000

400006000080000

100000

Below1.5

Lakhs

1.5 to3

lakhs

3 to4.5

Lakhs

4.5lakhsand

AboveAnnual Income (in

Rs.)

Relation between income and investment

Investment per annum(Weighted Average)

64

Types of investment

Short Term Investment

21%

Long Term Investment

44%

Both35%

Interpretation:From above table and chart we can come to know when increases in

income of investor his investment also increases and % increase of investment is

more than % increase in income. It means when income of investor changes his

portfolio also changes. So portfolio of investor is depend on income of a investor

4. Types of Investment:

Types of investment Frequency Short Term Investment 21

Long Term Investment 44

Both 35

Interpretation:Among the total sample size 44 per cent investors are prefer to investing

in long term and 21 percent are prefer to investment in short term. Where as 35

per cent of investors are preferred to invest in both long term as well as in short

term investment avenues.

65

5. Frequency of Investment:

Frequency of Investment Frequency

Weekly 13

Monthly 35

Quarterly 26

Half Yearly 15

Yearly 11

0

510

1520

2530

35

Freq

uenc

y

Weekly Quarterly Yearly

Time Period

Frequency of investment

Interpretation:This graph reveals that 35 percent of investors are investing monthly, 26 per cent

of investors are investing quarterly. 11 per cent of investors are investing in a

yearly basis where as 13 per cent and 15 per cent of investors are investing in

weekly and half-yearly basis respectively.

66

6. Basis of investment:

Basis of Investment Percentage

Self Analysis 54

Financial Advice 19

Broker Advice 11

F/R Advice 11

C A Advice 5

Basis of investment

54%

19%

11%

11% 5%

Self Analysis Financial Advice Broker Advice

F/R Advice C A Advice

Interpretation:From this we can come to know most of the investor i.e. 54% basis of

study is self analysis and remaining 46% of investors take advice from advisers

such as broker advice, financial advice, friends or relatives advice or charted

account advice for investment. So it shows most of the individual investor basis

of study is self analysis.

67

7. Investment pattern affected by market movement:

Options Frequency Yes 53

No 27

Investment pattern affected by market movement

Yes 66%

No34%

Yes No

Interpretation:From this we can come to know that 53 investors investment

pattern will affect if any market movement (BSE index, inflation rate etc). So

majority of the investor’s investment pattern will affect if any changes in the

market. Market movement is very important factor for changing in investment

pattern

8. Factors influence to choice various investment alternatives:

Factors influence Percentage

Risk Involved 16

Return they give 30

Past performance 20

Future Growth 24

Other factor 10

68

Factors influence on investment decision

Risk Involved

16%

Return they give30%Past

performance20%

Future Growth

24%

Other factor 10%

Risk Involved Return they give Past performanceFuture Growth Other factor

Interpretation:By seeing this findings we can say 30% of investor investment decision is

depend on return on investment, second important factor is future growth and

past performance of the company. 16% of investor’s investment is based on risk

involved. Choice of factor is changing from investor to investor.

9. Investors’ preference in SHCIL’s Product:

SHCIL's Product Frequency (in %)RBI Bonds 45

Stock Direct 26Fund invest 19

Insure 10

0

10

20

30

40

50

Freq

uenc

y (in

%)

RBIBonds

StockDirect

Fundinvest

Insure

SHCIL's Product

Investors' Preference in SHCIL's Product

69

Interpretation:SHCIL’s clients are given more preference to invest in RBI Bonds than

any other products of SHCIL. And the second preference was ‘Stock Direct’

which is followed by ‘Fund Invest’ and ‘Insure’ respectively.

10. Comparison between investor’s investment option in Bangalore and Bhubaneswar:

Investment Avenues Bangalore BhubaneswarEquity 44 21Debenture / Bonds 9 12Bank Deposits 18 39Insurance 13 15PPF 7 8Gold & Real Estate 5 3Others 4 2

0

10

20

30

40

50

frequ

ency

(in

%)

Equi

ty

Deb

entu

re/ B

onds

Bank

Dep

osits

Insu

ranc

e PPF

Gol

d &

Rea

lEs

tate

Oth

ers

Investment Avenues

Investors' preference in Bangalore and Bhubaneswar

Bangalore

Bhubaneswar

Interpretation:The above graph reveals that, the investors of Bangalore are prefer to investing

more in equity, where as in Bhubaneswar investors are prefer to invest more in

70

bank deposits, postal savings etc. In both city investment in insurance is the third

preference of the investors.

11. Comparison of Investment in SHCIL’s Product in Bangalore and Bhubaneswar:

Year Bangalore BhubaneswarFund Invest Stock Direct Fund Invest Stock Direct

2003 368 1123 265 4152004 640 1345 500 5282005 900 1516 735 630

0

200400

600800

1000

12001400

1600

Num

ber o

f Acc

ount

s

FundInvest

StockDirect

FundInvest

StockDirect

Bangalore Bhubanesw ar

Investment in SHCIL's Product in Bangalore and Bhubaneswar

2003

2004

2005

Interpretation:The above graph reveals that, there are more accounts in Stock Direct than Fund

Invest in both Bangalore and Bhubaneswar. And there are more account holders

in both of these products at Bangalore than Bhubaneswar.

71

72

Summary and Findings

5.1 Findings

5.1.1 On the products and services of SHCIL

5.1.2 On investment decision of investors

5.2 Suggestions

5.3 Limitation and scope for further research

PART V

73

5.1 Findings:

5.1.1 On the Products and services of SHCIL

SHCIL is India’s largest and oldest DP service, which is customer friendly

and it is free from any misappropriation, scandals. Recently SEBI warns

some DP services for involving illegal activities.

SHCIL providing wide range of products and services but all the products

and services of SHCIL is not aware to the client.

SHCIL Bangalore recently starts the broking service. But only 25% of

clients are aware about the broking service according to observation and

most of them are not aware about it.

In SHCIL, 75% clients are using DP service only where as 15 to 20 % are

availing the other products and services.

5.1.2 On investment decision of investor

Income level of an investor is an impotent factor which affects portfolio of

the investor.

45 per cent of investors are preferred to invest in long term avenues

where as 30 per cent of investors are preferred to invest in both long term

and short term avenues.

55 percent of the investors are preferred to invest in either monthly or

quarterly basis.

60 per cent of the investors are investing on the basis of self-analysis.

74

Business paper is an important source of study for the investor. Apart from

this, business channels and web sites are some other important sources

of study. .

Return on investment and risk involved is most important factor for the

investor before taking any investment decisions.

Return on investment and credit rating are two important factors for those

investor who are interested to invest in Bonds/Debenture.

Past record, dividend record and future growth of the firm are the

important factor for those investors who are interested to invest in equity.

Higher income level groups and risk taking investors are preferred to

invest in equity rather than any other investment avenues.

Middle age group investors are preferred to invest in equity, where as the

old age group investors are preferred to invest in RBI Bonds or any other

type of tax saving bonds.

Lower income level groups are not preferred to take risk and they choose

bank deposits, post office savings and insurance as a better investment

option. They also look for tax saving investment avenues.

Generally those investors who are invested in equity, are personally follow

the stock market frequently i.e. in daily basis. But those who are invested

in mutual funds are watch stock market weekly or fortnightly.

In Bangalore, investors are more aware about various investment avenues

and the risk associated with that. But in Bhubaneswar, investors are more

conservative in nature and they prefer to invest in those avenues where

risk is less like bank deposits, small savings, post office savings etc.

5.2 Suggestions: Client awareness program has to be conducted by SHCIL for Stock

Brokering Services, because most of the clients are unaware about this

new service.

SHCIL should be start NSE trading and derivative trading.

75

Since the intent and web based communication is getting popular SHCIL

should update web site frequently and provide information up to date

SHCIL can rethink on its tariff rate. Because the charges are

comparatively little higher than the service charged by its competitors and

also customers are expressing dissatisfaction towards its tariff rate.

Since the investors expect better services from SHCIL, it should provide

more value added services like derivative trading, NSE trading etc.

As investors’ investment decision is based on the study of different

sources, SHCIL should start giving advertisement in business newspaper

and in business magazine.

Most of the investor’s portfolio is diversified so there is huge scope in

various new services. So SHCIL should come with new intermediaries

services like add more mutual funds in to its ‘Fund Invest’ etc.

SHCIL should expand its business by setting up of new branches in

various places where they have lot of client for example Bijapure.

5.3 Limitation and scope for further research:The study is conducted by taking a limited number of sample size which is

stated earlier. And this study reflects the perceptions of those investors who are

residing in Bangalore and Bhubaneswar. There might be a chance that the

perceptions of the investors’ of different cities are varied due to diversity in social

life, living pattern, income level etc.

76

Learning Outcomes

6.1 On investment avenues

6.2 On DP services

PART VI

77

78

Learning Outcomes

This project has helped me to learn how to use theoretical knowledge in

practical world and to know the methods followed by the corporate world to deal

with different situation. I also learnt the following aspects related to investment

avenues and DP

6.1 On investment avenues: Different type of investment avenues

Risk involved in different investment avenues

Benefits and profits by investment

6.2 On DP Service: Facts related to depository

Basic function of Depository Participants

79

References and Bibliography

7.1 Articles

7.2 Books

7.3 Websites

PART VII

80

References & Bibliography:

7.1 Article

Capital Market Review 2003-04, Published by SHCIL

7.2 Books

Financial Management, PRASANNA CHANDRA, 6th edition

Financial Management, KHAN & JAIN, 3rd edition

Security Analysis and Portfolio Management , FISCHER & JORDAN

Research Methodology, David .R. Cooper and Schindler

7.3 Websites

www.shcil.com

www.icicidirect.com

www.nseindia.com

www.economictimes.com

81

Annexure

8.1 Questionnaire

PART VIII

82

Annexure

QUESTIONNAIRE

Kindly fill up the following questionnaire.

1. Name :

2. Educational level

PUC Graduation Post-Graduation

Professional Others (Please Specify) …………..

3. Age

Less than 20 20 – 30 31 – 40 41 – 60

More than 60

4. Number of persons in the family

1 2 3 4 More than 4

5. Occupation

Employed

Private Sector

Public Sector

Self employed

Business

Profession (CA/Lawyer/Doctor/Others ……………)

Not employed

Retired

6. Annual income and savings

a. Annual income (in Rs.)

Less than 1 lakh

1 – 2 lakhs

2 – 3.5 lakhs

3.5 – 5 lakhs

More than 5 lakhs

83

b. Annual savings (in Rs.)

Less than 10,000

10,000 – 20,000

20,001 – 30,000

30,001 – 40,000

40,001 & above

7. Investment avenues that you like to choose

Equity FI Bonds Corporate Debenture

Company Fixed Deposits Bank Deposits

PPF Life Insurance Small / Post-office Savings

Gold Real Estate Mutual Funds

Others ………….

8. Average amount (in Rs.) invested in a year in the following avenues

Equity FI Bonds Corporate Debenture

Company Fixed Deposits Bank Deposits

PPF Life Insurance Small / Post-office Savings

Gold Real Estate Mutual Funds

Others ………….

9. Are you a short term or long term investor?

Short term Long term Both

10.State reason behind choice of your investment options

Self – Awareness Financial Advisors Broker’s Advice

Friends’ or Relatives’ Advice Media

11.What is your frequency of investments?

Weekly Monthly Quarterly

Half-yearly Yearly

12.Do you personally follow the stock market?

Yes No

13. If yes, then how frequently do you watch market?

Daily Twice a week Weekly Fortnightly

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14.Have you invested in the SHCIL’s Product?

Yes No

15. If yes, then how much (in Rs.) you invested in SHCIL’s Product?

Fund Invest RBI Bonds Stock Direct Insure

16.What kind of new product/service would you want SHCIL to provide?

a. …………….. b. ………………. c. …………………..

17.Do you have any suggestion to make SHCIL’s product/service better?

…………………………………………………………………………………

…………………………………………………………………………………

…………………………………………………………………………………

………………………………………………………………………………...

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