project of bonanza
TRANSCRIPT
A
Project Study Report
On
Training Undertaken At
“Bonanza Portfolio Limited”
Titled
“Study of Capital Market
&
Fundamental Analysis of Securities ”
Submitted in partial fulfillment for the
Award of degree of
Master of Business Administration
Suresh gyav vihar university,jaipur
Submitted By: - Submitted To:-
Lakhan adsella Ms.pankaj gupta
MBA 1 (2ND SEM)
2009-2011
TABLE OF CONTENTS
Preface …………………………………………………………………………………6
Acknowledgement …………………………………………………..7
Executive summary …………………………………………………8
CHAPTER -1
Introduction of industry ………………………………………………..10
CHAPTER- 2
Introduction of organization ……………………………………………14
2.1 Company profile……………………………………15
2.2 Product & services ………………………………...16
2.3 Bonanza’s affiliation ……………………………….19
2.4 Bonanza’s strength ………………………………...20
2.5 Bonanza’s management team ……………………20.
2.6 Bonanza’s vision ……………………………………22
2.7 Bonanza’s value …………………………………….23
2.8 Bonanza’s research desk ………………………….25
2.9 Bonanza’s technology ………………………………26
2.10 Bonanza’s achievement …………………………..26
CHAPTER-3
Research methodology …………………………………………………28
3.1 Title of the study …………………………………….29
3.2 Duration of the project ……………………………..29
3.3 Objective of study …………………………………..29
3.4 Type of study ………………………………………...30
3.5 Sample size& method of selecting ………………...30
3.6 Scope of study ……………………………………….32
3.7 Limitation of study……………………………………33
CHAPTER-4
Study of capital market and fundamental analysis of securities...………34
4.1 Various type of financial market………………………35
4.2 Capital market……………………………………………35
4.3 Secondary market………………………………….……35
4.4 Stock market transaction issues……………………….40
4.5 Requirements of details for forms………………………42
4.6 Various resources for redressal grievances………….49
4.7 Traditional structure of stock exchange in India….….50
4.8 Demutualization of stock exchange…..……………….51
4.9 Delisting of securities…………………………………..52
4.10 Corporate governance………………………………..54
4.11 Clearing settlement related issues…………………...56
4.12 Demat settlement………………………………………58
4.13 Market participants……………………………………..63
4.14 Fundamental analysis…………………………………..66
CHAPTER-5
Facts and findings……………………… ……………………………………77
CHAPTER-6
Analysis and interpretation of data …………………………………………88
CHAPTER-7
Questionnaire …………………………………………………………………101
CHAPTER-8
SWOT Analysis …………………………………………………………………103
CHAPTER-9
Conclusion ………………………………………………………………………….105
CHAPTER-10
Recommendation …………………………………………………………………...107
CHAPTER-11
Bibliography …………………………………………………………………………109
Suresh gyan vihar university
Preface
Masters of Business Administration is conducted with providing knowledge to the students
regarding various type of management like financial management, marketing management and
production management etc.
MBA being a specific management course there is necessary of practical knowledge to
support other theoretical subject name “practical training”
The practical training is very important of MBA course.
I have done my training in Bonanza Portfolio Limited at kota for 45 days i.e.2-05-10 to 20-07-
10. During this training period I have learned about Back office work, depository work, and
security market and sector analysis. I have come to know that how does security market
function and how one can deal in stock market and how to manage risk and portfolio. Thus it
was really beneficial for me in terms of knowledge and experience.
ACKNOWLEDGEMENT
I express my, sincere thanks to my project guide, Ms. Jyotsana Sharma (Regional HR
Manager) for guiding me right from the inception till the successful completion of the project. I
sincerely acknowledge her for extending their valuable guidance, support for literature, critical
reviews of project and the report and above all the moral support he had provided to me with
all stages of the project.
I would also like to thank the supporting staff of all the departments of the company, for their
help and their cooperation throughout, our project.
Lakhan singh
EXECUTIVE SUMMARY
The Indian stock market have seen various stages of economic cycles if we look at market
condition then we find that at the beginning of the year 2008 the market was on cloud nine (all
time high on 10 January 2008) sensex was 21207.83. But after reaching it’s all time high it has
started to show strong resistance to carry on and the result of the resistance and sharp slump
in the word economy, the bull suddenly turned into bear and all expectations of investors that
market will reach 25000 just turned into dream and according to current situation that is for
away from reality. Investors just shocked due to slump in the market condition, they have
rethink about investment alternatives risk and returns. Capital appreciation and time value of
money.
Since investment become a basic need of everyone so each and every person wants to secure
his investment and willing to get good returns and capital appreciation upon the investment
fund. This study really gives an overview about how and when we invest in various sectors.
That how can invest money for future safety in various markets such as primary market,
secondary market, Govt. security market etc.
Thus the study is providing knowledge about investment scenario and guiding the investors for
safe investment with the help of economic analysis, fundamental analysis, and financial
analysis. One can analysis the market and understand the nature and movement of market for
safe investment and can become wiser investor that is most challenging thing in current
scenario.
INTRODUCTION OF INDUSTRY
Broking industry is growing for last ten year with leaps & bounces to Indian economy and stock
market. Brokerages houses are known as intermediaries between market and investor and
play a key role in execute the functions to carry on the stock market. All the brokerage houses
having different sort of charges and fee according to their facilities and efficiency provided to
investors. They manage the portfolio, risk management and providing guidance to investor for
dealing in security market the major players of Indian broking industry are as follows:-
1. Bonanza Portfolio Limited
2. Sharekhan Limited
3. Religare Limited
4. Hem Securities Limited
5. Angle Broking Limited
6. India bulls Securities Limited
7. Anand Rati Securities Limited
Analysis of players in the industry
Unicon
Unicon has been founded with the aim of providing world class investing experience
to hitherto underserved investor community. The technology today has made it possible
to reach out to the last person in the financial market and give him the same level of
service which was available to only the selected few. We give personalized premium
service with reasonable commissions on the NSE, BSE & Derivative market through our
Equity broking arm Unicon Securities Pvt. Ltd. With our sophisticated technology you
can trade through your computer and if you want human touch you can also deal
through our Relationship Managers out of our more than 100 branches spread across
the nation.
Religare securities
Trading In Equities with Religare truly empowers you for your investment needs. We
ensure you have a superlative trading experience through -
A highly process driven, diligent approach
Powerful Research & Analytics and
One of the “best-in-class” dealing rooms
Further, Religare also has one of the largest retail networks, with its presence In more
than 1800* locations across more than 490* cities and towns. This means, you can
walk into any of these branches and connect to our highly skilled and dedicated
relationship managers to get the best services .
The Religare Edge
Pan India footprint
Powerful research and analytics supported by a pool of highly skilled research
analysts
Ethical business practices
Offline/Online delivery models
Single window for all investment needs through your unique CRN
Anand rathi
AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial
services. The firm, founded in 1994 by Mr. Anand Rathi, today has a pan India presence as
well as an international presence through offices in Dubai and Bangkok. AR provides a breadth
of financial and advisory services including wealth management, investment banking,
corporate advisory, brokerage & distribution of equities, commodities, mutual funds and
insurance, structured products – all of which are supported by powerful research teams.
How Bonanza differ from other in the industry
Bonanza Portfolio Ltd is an emerging leader in the high growth retail financial services sector
in India.
India set to emerge as one of the world’s largest retail financial services markets
* India’s GDP growth has averaged 6.5% since 1994 and expected to continue to grow at 8+%
* Increasing sophistication of financial markets
* Indian consumer’s affinity for equity
Emergence of large domestic retail brokerage houses
*India has nearly 10,000 brokers; most of them are small family businesses
* The last 5-7 years has witnessed the emergence of large institutional players driving
consolidation of the retail financial services market
Global players are starting to make strategic inroads into the retail financial services market
*Foreign broking houses dominate FII based institutional broking
* Some global majors like Citigroup are making inroads into retail by leveraging their network
* E-trade has announced majority ownership of IL&FS Investment
* BNP Paribas has invested in Geojit
*ABN Amro has started its own retail broking network in India
Introduction of Organization
Company Profile
Head office (Delhi)
2/2-A, 1ST Floor, Laxmi insuranceBuilding, Asaf Ali Road,
New Delhi -110002
Corporate office (Mumbai )
Bonanza House, plot no.M-2,Cama Industrial Estate
Walbhat road,Behind ‘the hub’,Goregaon(east)Mumbai-400063
Registered office (Delhi)
4353/4C,Madan Mohan Street,Ansari Road, Drayman,
New Delhi-110002
Regional office Raj. (Jaipur)
410-413,4th floor, Silver Square,
Near Raj MandirCinema,Bhagwandas Road,
Jaipur-01
Bonanza, a leading financial services &brokerage house working diligently since 1994 can be
describe in a single word as a “financial powerhouse”. With acknowledged industry leadership
in execution and clearing services on exchange traded derivatives and cash market products,
bonanza has spread its trustworthy tentacles all over the country with more than 1050 outlets
spread across 350 cities.
It provides an extensive range of services in equity, commodities, currency derivatives,
wealth management, distribution of third party product, etc.
Being at par with the modern tech-savvy world, bonanza makes an integrated and an
innovative use of technology. It also enables its clients to trade online as well as offline the
strategic tie-ups with he latest technology partners has earned bonanza a prestigious place as
one of the top brokerage houses in the country. Client-focused philosophy backed by
membership of all principal Indian stock and commodity exchange makes bonanza stand apart
from competitor as a preferred services provider in the industry for value-based services.
Bonanza Product and Service
Bonanza group of
companies
Bonanza portfolio Limited
Bonanza Commodity Brokers (p)
Ltd.
Bonanza Insurance Broker (p)
Ltd.
Bonanza Global DMCC, Dubai
Sunglow Fin invests Pvt.
Ltd.
Bonanza’s service encompasses the spectrum of wealth creation, management and
preservation. Bonanza offers a wide range of product and services to help client reach their
financial goal.
SAVE Saving & deposited to meet shor t term cash requirement for you
PROTECT Insurance that provides protection to your life
INVEST Medium to long term investment which provides income &capital growth
Bonanza Product
&Services
Brokerage Services
Wealth Management
Demat Distribution
Equity
Commodity
Derivatives
PMS
Advisory
NSDL
CSDL
Insurance
Mutual Fund
IPO’S
Prime Brokerage Services:
Equity and equity derivatives
Trading Platform offers online Equity & Equity Derivatives trading facilities for investors.
This high-end, efficiently integrated application makes trading convenient, quick and hassle
free.
Added advantages - Having access to resources like research charts, advice, live quotes
online assistance - to take well-versed decisions. Trading through our branch network or
phone available, by simply registering with us.
Commodity Derivatives
We offer access to future trading via multiple exchanges in wide-ranging commodities
agricultural commodities, base metals, energy and precious metals.
We also provide investment opportunities in gulf commodities futures and currency market.
Currency Derivatives
Known as being predecessors in contributing to unique financial products, we have now added
to our stable - currency Derivative.
This service, we provide both offline and online.
Asset Management:
Portfolio Management Services (PMS)
Our team of portfolio managers design portfolios to suit every customers needs. Constantly
scrutinizing the developments in market and moving stocks, we aim for maximum
capitalization.
We suggest the most appropriate product to customers, based on factors like their investment
spheres, return expectation and risk tolerance. Our experience, expertise and research helps
us give our customer’s investments the best upshots.
Advisory
Bonanza guides and supports its clients to re-structure and streamline their portfolios based on
changing market conditions and client objectives.
Depository Services:
Bonanza is a depository participant with NSDL and CDSL.
We provide an array of Depository Services to make share transactions quicker, easier and
cheaper for both Equity and Commodity.
Distribution:
Insurance
Bonanza offers insurance products in Life and General Insurance.
Our IRDA certified advisors offer prudent advice on policy selection and assists through the
claim redressal process.
Our advisory team matches the insurance products to financial profiles of customers to offer
the best solution options, maintaining transparency and professionalism.
Mutual Funds
Bonanza is one of the largest distributors of mutual fund in India.
With the help of our in-depth research across categories covering 20 parameters and our
expertise, we guide our clients to take appropriate investment decisions.
Keeping in mind customers' budgets, needs and securities, our AMFI certified investment
advisors offer the best deals.
Initial Public Offer (IPO)
We offer our customers online investment access for Public offerings.
In-depth research advice for the forthcoming IPO’s.
Bonanza’s Affiliations
Equity
National Stock Exchange of India Ltd. (NSEIL)
The Bombay Stock Exchange Ltd. (BSE)
OTC Exchange of India Ltd (OTCEIL)
Commodities
Multi Commodity Exchange (MCX)
National Commodity and Derivatives Exchange Ltd (NCDEX)
Dubai Gold Commodities Exchange (DGCX)
National Multi Commodity Exchange (NMCE)
Currency
National Stock Exchange of India Ltd.
The Bombay Stock Exchange Ltd. (BSE)
MCX-SX Ltd.
Depository participant with CDSL and NSDL
Bonanza’s Strengths
Bonanza has over 1050 outlets in more than 350 cities in India. (as on March 2009)
Bonanza has more than 2 lakh clients comprising of Corporate Financial Institution Investors,
Mutual Funds, High Net-worth Individuals and Retail Investors.
Bonanza has a young dynamic team of 1900 professionals.
Strong infrastructure supporting over 3000 trading terminal supporting more than 350 VSAT's
to support geographic reach and servicing capabilities.
24x7 service and support via our federal support system.
Bonanza’s Pillars: Management Team
Meet the minds behind the corporation Bonanza - the Directors who are leading this gigantic
force.
S.P. Goel
The Founder Director of Bonanza who has been instrumental in chartering critical and strategic
initiatives. With an experience of 25 years in the finance business, Mr. Goel has also been
appointed as the director of the OTC Exchange of India.
He represents NSEIL for the SEBI constituted Dr. J R Verma Advisory committee for the
development of the derivatives market in India.
He started his career as a CA in 1987 and soon after he embodied several prominent
committees on settlement issues (COSI), a policy generating body at the NSE of India Ltd and
Dispute Resolution Committee (DRC) of National Stock Exchange Clearing Corporation
Limited (NSCCL).
Shivkumar Goel
Being the Founder Director of Bonanza, he has been handling IT & risk initiatives since
inception. Formerly, designated as the CEO of SRF Finance Limited, Delhi; Mr. Shivkumar
Goel had also spearheaded the IT committee of the DELHI Stock Exchange.
A CA & CS with more than 30 years of experience, he recently was nominated as the
executive committee member of Depository Participants Association of India. He is currently a
functional member with Association of National Exchanges Members of India - NR
S.K. Goel
Has been Bonanza’s Founder Director and a prominent CA for more than 35 years now.
Being actively involved in managing the Business initiatives and Accounting across India; Mr.
S.K.Goel has been mainly heading Bonanza’s northern and eastern zone. He was formerly
with the Modis & OSWALS - one of the leading manufacturing companies, in addition to being
empanelled with various major banks as their Internal Auditor.
Vishnu Kumar Agarwal
The Founder Director of Bonanza with over 30 years of experience; Mr. Vishnu has
proficiently taken charge of Administration, Real Estate Investments and Initiatives for all the
group companies of Bonanza.
Anand Prakash Goel
He has been playing a pivotal role as Bonanza’s Founder Director by resourcefully managing
Taxation, Compliance and DP. A qualified CA with more than 30 years of experience in his
stride, he has undertaken audits for leading banks across India.
Saurabh Shukla
He plays a pivotal role as the Group COO and one of the Directors of Bonanza Commodity
Brokers Ltd. He has been actively involved in varied key strategic functions and management
of retail business.
Previously, designated as Head of Marketing for the Refco Group, he has also worked
for Merchant and Investment Banking and Corporate Finance. He was also ardently involved in
developing and servicing corporate / institutional customers at Blue Blends Finance Ltd. and
Natsons Pvt. Ltd.
Bonanza’s Vision
To be one of the most trusted and globally reputed financial Distribution companies.
Bonanza Values
Transparency
Honesty is our forte. We believe in dealing on thoroughly ethical grounds, being fair and
transparent with our customers
We recognize and appreciate efforts put in by our employees. And we, as a matter of fact,
reward and distinguish each one of them, ceaselessly.
Solidarity
We believe in sharing a forthright and respectful relationship with our business partners and
employees. We consider them both as our team associates, who work together. Succeed
together.
Started at zero
Its biggest strength is that it started its business with a zero level, merely as sub broker then
taken the self trading membership, hence it understand the needs of its clients and business
partners very well.
Integrated and transparent services
It values integrity and transparency in client’s transaction and providing the best value for
money to its clients.
Value of client service
Its dedicated relationship managers are trained to provide excellent services and complete
satisfaction to all their clients, strongly believes that success is only the end result of client’s
growth.
All the service is one umbrella
All the memberships are in one company name, no hassle of account transfer, deliveries
adjustments, and buy stock in one exchange and sale in another, get arbitrage opportunities.
Accurate and timely research
It is always endeavored to provide timely research based advice to its clients, its research
team comprises of experienced fundamentals and technical analysis, sector specialist and
derivatives strategist, who are constantly looking for new trading and investment opportunities.
Wide range of services:-
It is offering Sock broking, Investment Advisory Services, Depository Services, Commodities
Trading, Portfolio Management, IPO & Mutual Fund Distribution etc. to its esteemed clients.
24*7 online back office software
Web enabled centralized back office software installed at head office, having direct access to
all branches. Business associates, sub broker and client to have online information about their
transaction, account derivatives, open position and so many things live updated. Its all client
can obtain up to date information online at click of a button on their desktop PC.
Bonanza’s growth:
Clientele growth
After spreading our wings across varied segments, we are now growing in all direction with
more than 2 lakh clients under the banner.
Bonanza Research Desk
Bonanza Research desk has a dedicated team of research analysts and experts that have an
in-depth knowledge of the market place. They offer value perspectives, focus on opportunities
for investment and growth and endeavor to reduce risk potential. It's premium advisory
services are based on technical and fundamental views and strategies.
Equity
- SMS alert
- Daily market strategy
- Weekly market strategy
- Monthly market strategy - 'Equity talk'
- Daily derivative strategy
Commodity
- SMS alert
- Daily report
- Weekly report
- Monthly report: Commodity Review
Mutual funds
- Daily Performance Sheet
- Weekly Mutual Fund Report – 'The Edge'
- Monthly free News Letter – 'The Perspective'
Regular updates on products, performance and new launches.
Currency Derivatives
-Daily Forex Insight report
Bonanza’s Technology
Single VSAT Connectivity for NSE/BSE/F&O/NCDEX /MCX/MCX-SX through Virtual Private
Network (VPN) Other connectivity links to branches through Leased Lines, ISDN, Radio
Frequency and Broadband.
High Speed and Streaming live quote access via Internet for NCDEX/MCX/MCX-SX for
branches and retail clients.
Internet based Depository access (Speed-e/Easiest) to offer DP services to Retail investors.
24x7 online access to a centralized support structure for all products offerings.
Bonanza’s Achievement
Top Equity Broking House in terms of branch expansion for 2010
3rd in terms of Number of Trading Accounts for 2008
6th in terms of Trading terminals in for two consecutive years 2007- 2008
9th in terms of Sub Brokers for 2007
Awarded by BSE 'Major Volume Driver 07-08,08-09,09-10.
Nominated among the Top 3 for the "Best Financial Advisor Awards '08" in the category of
National Distributors – Retail instituted by CNBC-TV18 and Opti Mix.
3.1 Title of study
“Study of capital market & Fundamental analysis of Securities
3.2 Duration of project
2-06-10 to 20-07-10
3.3 Objective of the study
The objective of the present study can be accomplished by conducting a systematic market
survey. Market Research is a systematic design, collection, analysis and reporting of data and
finding that are relevant to different market situation facing by the company.
As I have done my project training in Bonanza Portfolio Limited. The following are the
objectives, which I kept in mind while doing summer training:
1. To know practical concept about equity research and portfolio management.
2. To study the general operation of the Bonanza Portfolio Limited.
3. Analyzing the market survey and thereby finding out the investment pattern of the consumer.
4. To impart knowledge about the general working of the stock exchange and PMS.
The marketing research processes that will be adopted in the present study consist of the
following stages:
Defining the problem and research objective:
The research objective state that what information is needed to solve the problem. Here the
objective of other research is awareness and Investigation of investor’s overconfidence and
familiarity and Challenges faced by Reliance Money.
Developing research plan:
Once the problem is defined, the next step is to prepare a plan for getting the information
needed for the research. The present study will adopt exploratory approach where in there is a
need to gather a large amount of information before making a conclusion if required. The
descriptive and casual approaches may also be used. We can summarize objective as:-
To understand the Stock market and process from account opening to settlement of securities.
To understand the securities, securities market, function of securities market and who regulates
the securities market.
To know the types of sectors available in the security market and methods for analysis.
To gain the knowledge, how one can invest in securities.
3.4) Type of Research
Exploratory
3.5) Area of research
Bonanza Portfolio Ltd
3.6) Sampling Plan
Sampling unit: The market of securities in baran city is so large so I will include the area
randomly.
Sampling size: A survey will be conduct for the investors in securities. The size will depend on
customer base in baran
3.7) Type of sampling
Stratified sampling
3.8) Data type
To collect the data, relevant information is necessary as regards to the project; as a result data
was collected by using two ways:
Primary Data
Secondary Data.
Primary Data:
In this the information is being possessed with first hand information, which is new and fresh.
The tools used by us for the primary data are:
Questionnaire
Face-to-Face Interview
Observation
Secondary data:
The information that is received with the help of Journals, Magazines, Financial reports or
which is already present with the company.
References used from management books
Gathered information through World Wide Web (www).
Support and knowledge provided by Faculty and Company guide.
3.9) Data collection technique
Questionnaire and Personal interview
Analyze the collected information:
This involves converting raw material in to useful information. It involves tabulation of data and
using statically measures on them for developing frequency distribution and calculating the
averages and dispersions.
Report research findings:
This phase will mark the culmination of the marketing research efforts. The report with the
research finding is a formal written document.
3.10) Scope of Study
This study is giving an overview about the Capital market and available various functions and
security market as it is evident from the title of work. It has given insight into the functioning
and components of primary and secondary market. It made clear the meaning of stock
exchange which provides a platform to enlist the company’s securities and facilitates the
buying and selling of various securities like shares, debentures, bonds, and government
securities etc. after going through the report one can easily know about the available various
sectors and methods of their analysis and investment. We can summarize as follows:
Multiple Invoice tracking
Duplicate Vendor Payment Tracking
Strategic Sourcing
Supplier Risk Analysis
Supplier Tracking
Reduce Inventory Level
Contract Compliance
Financial Regulation Compliance Analytics (Acts such as SOX, Basel II)
Supplier Management Analytics
Optimal Credit Period Analytics (Discounts vary based on credit periods)
3.11) Limitation of the Study
Some of the limitations of this study may be summarized as follows:
Getting accurate responses from the respondents due to their inherent problems is difficult.
They may be partial, and refuse to cooperate.
Sample size is limited.
Time constraint.
Convincing people.
Weather conditions.
3.1 Various type of financial market
The financial markets can be divided into money and capital market:-
Money market:-money market is a market of debt securities that pay off in the short term
usually less than one year, for e.g. the market for 90 days treasury bills. This market
encompasses the trading and insurance of short term non equity debt instruments including
treasury bills commercial paper, banker’s acceptance, certificates of deposits, etc.
Capital Market: - Capital market is a market for long term debt and equity shares. In this
market the capital funds comprising of both equity and debt are issued and traded. This also
includes private placement sources of debt and equity as well as organized market like stock
exchanges. Capital market can be further divided into primary and secondary market.
3.2 Capital market
The capital market is the market for securities, where companies and governments can raise
long term fund. It is a market in which money is lent for periods longer than a year. The capital
market includes the stock market and the bond market.
3.3 Secondary market
Secondary market refers to the market where securities are traded after being initially offered
to the public in the primary market and / or listed on the stock exchange. Majority of the trading
is done in the Secondary market. Secondary market comprises of equity market and debt
markets. For the general investor, the secondary market provides an efficient platform for
trading on his securities. For the management of the company Secondary equity markets
serve as a monitoring and control conduit-by facilitating value enhancing control activities,
enabling implementation of incentives-based management contracts and aggregating
information(via price discovery) that guides management decisions.
Difference between the Primary and secondary market
In the primary markets, securities are offered to public for subscription for the purpose of
raising capital or fund. Secondary market is an equity trading in which already exists/pre-
issued securities are traded among investors. Secondary market could be either action or
dealer market. While Stock exchange is the part of an action market, over the counter (OTC) is
a part of dealer.
SEBI and its role
The SEBI is the regulatory authority in India established under Section 3 of SEBI act to protect
the interest of the investors in the securities and to promote the development of, and to
regulate, the securities market and for matters connected therewith and incidental thereof.
Products dealt in Secondary market
Following are the main financial products/instruments dealt in the Secondary market:-
Equity:-The ownership interest in company of the holders of its common and preferred stock.
The various kinds of equity shares are as follows:-
Equity Shares :- an equity share, commonly referred to as ordinary shares also represents
the form of fractional ownership in which a shareholder, as a fractional owner undertakes the
Treasury bills
Bond
Coupon
Commercial paper
Debenture
Equity
Products dealt in secondary
market
maximum entrepreneurial risk associated with a business ventures. The holder of such shares
is a member of the company and has voting rights. A company may issue such share with
differential as to voting, payment of dividend etc.
Rights issue/ Rights Shares: - The issue of new securities to existing shareholder at a
ratio to those already held.
Bonus Share: - shares issued by the companies to their shareholders free of cost by the
capitalization of accumulated reserves from the profit earned in the earlier year.
Preferred Stocks/ Preference Shares: - Owners of this kind of shares an entitled to a
fixed dividend calculated at a fixed rate to be paid regulatory before dividend can be paid in
respect of equity shares. They also enjoy priority over the equity shareholder in payment of
surplus, but in the event of liquidation, their claims rank below the claims of the company’s
creditors, bondholders/ debentures holder.
Cumulative Preference Shares: - A type of preference share on which dividend
accumulates if remains unpaid. All arrears of preference dividend have to be paid out
before dividend on equity share
Cumulative Convertible Preference Shares:- A type of preference share where the
dividend payable on the same accumulates, if not paid. After a specified date, these shares
will be converted into equity capital of the company.
Participating Preference Shares:- The right of certain preference shareholder to
participate in profits after a specified fixed dividend contracted for is paid. Participation right
in linked with quantum of dividend paid on equity shares over and above a particular
specified level.
Bond: - A negotiable certificate evidences indebtedness. It is normally unsecured. A debt
security is generally issued by a company, municipality or government agency. A bond investor
lends money to the issuer’s promises to repay the loan amount on a pacified maturity date.
The issuer usually pays the bond holder periodic interest payment over the life on the loan.
The various types of bonds are as follows:
Zero coupon bonds: - bond issued at a discount and repaid at a face value. No periodic
interest is paid. The difference between the issue prices and redemption price
represents t5hereturn to the holder. The buyer of these bonds receives only one
payment, at the maturity of the bond.
Convertible bonds: - a bond giving the investor the option the convert the bond into
equity at a fixed conversion price
Debentures: - Bond issued by a company bearing a fixed rate of interest usually payable
half yearly on specified dates and principal amount repayable on particular date on redemption
of the debentures. Debentures are normally secured/ charged against the assets of the
company in favor of debenture holder.
Commercial papers: - A short term promise to repay a fixed amount that is placed on the
market either directly or through a specialized intermediary. It is usually issued by companies
with a high credit standing in form of a promissory note redeemable at par to the holder on
maturity and therefore doesn’t require any guarantee. Commercial Paper is a money market
instrument issued for the tenure of 90 days.
Coupon: - Tokens for payment of interest attached to bearer securities.
Treasury bills: - Short term (up to one year) bearer discount security issued by government
as a mean of financing their cash requirements.
3.4Contact for stock market related transactions
You can contact a broker or a sub broker registered with SEBI for carrying out your transaction
pertaining to the capital market.
Broker
A broker is a member of a recognized stock exchange, who is permitted to do trades on the
floor of the exchange. He is enrolled as a member with concerned exchange and is registered
with SEBI.
Sub broker
A sub broker is a person who is registered with SEBI as such and is affiliated to a member of
a recognized stock exchange.
Broker, sub broker registered or not
You can confirm it by verifying the registration certificate issued by SEBI. A broker’s
registration number being with the letters “INB” and that of a sub broker with the letters “INS”.
Requirement to sign any agreement with the broker or sub broker
Yes, you have to sign the “Member-Client agreement / “Sub-broker-Client agreement” for the
purpose of engaging a broker to execute trades on your behalf for time to time and furnish
details relating to yourself for enabling the member to maintain client registration form. The
model agreement between the broker-client/ sub-broker client and know your client.
Form can be viewed from SEBI Website at www.sebi.gov.in . The model agreement has to be
executed on the non judicial stamp paper. The agreement contains clauses defining the rights
and responsibilities of client vies a vies broker/sub broker. The broker/sub broker can also add
further clauses in the module agreement as per their requirements.
Member-client agreement form
This form is an agreement entered between client and broker in presence of witness where the
client agrees (is desirous) to trade / invest in the securities listed on the concern exchange
through the broker after being satisfied of brokers capabilities to dealt in securities. The
member on the other hand, agrees to be satisfied by the genuineness and financial soundness
of the client aware of his (broker’s) liability for the business to be conducted
3.5 Requirements of details in client registration form
The brokers have to maintain a database of their client, for which you have to fill client
registration form. In case of individual client registration, you have to broadly provide following
information:-
o Your name, address, educational qualification, residential status (resident Indian/ NRI
/others)
o Particulars of bank account
o Income tax No (PAN/GIR), which also serve unique client code.
o If you are registered with any other broker, then the name of the broker and concerned
Stock exchange and concerned Client Code Number.
o Proof of identity submitted either as passport number/driving license/ration card /voters
identity card.
o Each client has to use one registration form. Incase of joint name/family members, a
separate form has to be submitted from each person.
Incase of corporate client, following information has to be provided:
o Name, address of the company/firm
o Date of incorporation and date of commencement of business
o Copy of memorandum and articles of the Association/Partnership deed.
o Details of promoters/partners/key managerial personnel.
o Company/firm in specified format.
o Copies of annual report of last three years
o Net worth pf the company
o Particulars of the bank account
o Income tax number of the company
o Annual income in last three years and market value of portfolio
o If you are registered with any other broker, then the name of broker and concerned
Stock exchange and Client Code Number
Unique Client Code
In order to facilitate maintaining database of their clients, it is necessary for all brokers to use
unique client code, which will act as an exclusive identification for the client. For this purpose,
PAN number/ passport number/ driving license/ voter ID number/ ration card number coupled
with the frequently used bank account number and the depository beneficiary account can be
used for identification, in the given order, based on availability.
Placing order with the broker or sub broker
You can go to the broker/ sub broker office or place an order on the phone/ internet or as
defined in the Model Agreement given above.
Confirmation of order placement
The stock exchange assign a Unique Order Code Number to each transaction, which is
intimated by broker to his client and once the order is executed, this order code number is
printed on the contract note. The broker member has to also maintain the record of time when
the client has placed order and reflect the same in the contract note along with the time of
execution of the order.
Documents obtained from broker on the execution of trade
You have to ensure receipt of the following documents for any trade executed on the
Exchange:-
A) Contract note in Form A to be given within stipulated time.
B) Purchase/ sale note or confirmation memo in the case of a sub broker.
It is the contract note/ purchase or sale note (confirmation memo) that gives rise to contractual
rights and obligations of parties of the trade. Hence you should insist on contract note from
stock broker and purchase/sale note (confirmation memo) from sub broker. The contract note
displays the order number, order time, and unique trade number. The quantity and the price of
the trade executed ay the exchange can be verified by the exchange. The contract note also
contains arbitration clause for raising dispute with the Arbitrators as per the byelaws of the
exchange.
Required details to be mentioned on the contract note issued by the Stock
Broker
A broker has to issue a contract note to clients for all transaction in the form of specified by the
Stock exchange. The contract note inter-alias should have following:-
Name, address and SEBI Registration number of the Member broker.
Name of partner /proprietor/Authorized Signatory
Dealing Office Address/ Tel no/Fax No, code number of the member given by the
exchange.
Contract number, date of issue of contract note, settlement number and time period of
settlement.
Constituent (client) name/ code number.
Order number and order time corresponding to the trades.
Trade number and trade time.
Quantity and type of security brought/ sold by the client.
Brokerage and purchase/ sale rate are given separately.
Service tax rates and any other charges levied by the broker
Appropriate stamps have to be affixed on the original contract note or it is mentioned that
the consolidated stamp duty is paid.
Signature of the Stock broker/ Authorized Signatory.
Incase of purchase and sale note provided by the sub broker, following additional information
is provided:
Name and SEBI registration no. of the sub broker.
Name of affiliating trading member.
Purchase/sale note number.
Corresponding contract note issued by the broker for relevant trade number along with
the date of contract.
Both contract note and purchase/ sale note provided for the recourse to the system of
arbitrators for settlement of disputes arising out of transactions
Pay-in-day and pay-out-day
Pay in day is the day when the brokers shall make payment or delivery of securities to the
exchange. Pay out day is the day when the exchange makes the payment or delivery of
securities to the broker. Since settlement cycle has been reduced from T+3 rolling settlement
to T+2 w.e.f. April 01, 2003, the exchange have to ensure that the pay out of funds and
securities to the client is done by the broker within 24 hours of the payout. The exchange will
have to issue press release immediately after pay out.
Time period to receive money for a sale transaction and shares for a buy
transaction
Brokers were required to make payment or give delivery within two working days of the pay-out
day. However, as settlement cycle has been reduced from T+3 rolling settlement to T+2 w.e.f.
April 01,2003, the pay out of funds and securities to the clients by the broker within 24 hours of
the pay out.
Provision for getting faster delivery of shares in account
The investors /clients can get direct delivery of the shares in their beneficiary accounts. To
avail this facility, you have to give details of your beneficiary account and the DP-ID of your DP
to your broker along with the Standing Instruction for ‘Delivery-In’ to your Depository participant
for accepting shares in your beneficiary account. Given these details, the clearing corporation/
clearing house shall send pay out instructions to the depositories so that you receive pay out of
securities directly into the beneficiary account.
Timing of payment to broker in case of purchase of shares
The payment for the shares purchased is required to be done prior to the pay in date for the
relevant settlement or as otherwise provided in the rules and regulations of the Exchange.
Timing of giving shares to broker in case of selling shares
The delivery of shares has to be done prior to the pay in date for the relevant settlement or as
otherwise provided in the rules and regulations of the Exchange and agreed with the
broker/sub broker in writing.
Maximum brokerage, a broker/sub broker can charge
The maximum brokerage that can be charged by a broker is decided by the Stock Exchange
as per the Exchange regulation. The SEBI (Stock brokers and sub brokers) ,1992 stipulates
that sub broker can not charge from its clients a commission which is more than 1.5% of the
value mentioned in the respective purchase or sale note.
Charges that can be levied on the investor by a stock broker/ sub broker
The trading member can charge:
1. Brokerage charged by member broker.
2. penalties arising on specific default on behalf of client(investor)
3. service tax as stipulated
The brokerage and service tax is indicated separately in the contract note.
Not making the payment on pay-in-day
In case of purchase on your behalf, the member broker has the liberty to close out transactions
by selling securities in case you fail to make full payment to the broker for the execution of the
contract before pay in day as fixed by Stock Exchange for the concerned settlement periods
unless you already have an equivalent credit with the broker.
Not making the delivery of shares on pay-in-day
In case of sale of shares on your behalf, the member broker has the liberty to close out the
contract by effecting purchases if you fail to deliver the securities sold with valid transfer
documents, if any before delivery day as fixed by Stock Exchange for the concerned
settlement period.
In both the cases, any loss in transactions will be deductive from the margin money paid by
you.
The shortage are met through auction process and the differences in price indicated in contract
note and price received through auction is paid by member to the Exchange, which is then liable
to be recovered from the client.
When shares are not bought in the auction
If the shares could not be bought in the auction i.e. if shares are not offered for sale in the
auction, the transactions are closed out as per SEBI guidelines. The guidelines stipulates that
“the close out price will be the highest price recorded in that scrip on the exchange in the
settlement in which the concerned contract was entered into and up to the date of auction
/close out OR 20% above the official closing price on the exchange on the day on which
auction offers are called for (and in the event of there being no such closing price on that day,
then the official closing price on the immediately preceding trading day on which there was an
official closing price), whichever is higher”
Not getting money or shares on the due date
In case a broker fails to deliver to you in timely and proper payment of money/ shares or you
have complaint against conduct of the stock broker, you can file a complaint with the
respective stock exchange. y\the exchange is required to resolve all the complaints. To resolve
the dispute, the complaint can also resort arbitration as provide on the reserve of conduct note/
purchase or sale note. However, if the complaints along with supporting documents may be
forwarded to Secondary Market Department of SEBI. Your complaint would be followed up
with the exchanges for expeditious redressed. In case of complaint against may be forwarded
to the concerned broker with whom the sub broker is affiliated for redressal
3.6 Various resources for redressing grievances
You have following resources available:
Investor Grievance Redressal Cell (IGG):-You can lodge complaint with IGG cell of SEBI
against companies for delay, non receipt of shares, refund orders etc and with Stock
Exchanges against broker on certain trade disputes or non receipt of payment/ securities.
Arbitration: - if no amicable settlement could be reached, then you make application for
references to arbitration under the Bye Laws of concerned Stock exchange.
Arbitration
Arbitration is an alternative dispute resolution mechanism provided by a stock exchange for
resolving disputes between the trading members and their clients in respect of trades done on
the exchange.
Process of preferring arbitration
The byelaws of the exchange provided procedures for Arbitration. You can procure a form for
filling arbitration from the concerned stock exchange. The arbitral tribunal has to make the
arbitral award within 3 months from the date of entering upon the reference. The time taken to
make an award can not be extended beyond three times up to maximum period of three months.
Appointer of arbitrators
Every exchange maintains a panel of arbitrators. Investors may choose the arbitrator of their
choice from the panel. The broker also has an option to choose an arbitrator. The name(s)
would be forwarded to the member for acceptance. In case of disagreement, the exchange
shall decide upon the name of arbitrator
Some general Questions
3.7 Traditional structure of stock exchange in India
In terms of legal structure, the stock exchanges in India could be segregated into two broad
groups-20stock exchanges that were set up as companies, either limited by guarantees or by
shares, and the 3 stock exchanges which are functioning as association of persons (AOP) viz.
BSE, ASE and Madhya Pradesh Stock Exchange. The 20 stock exchanges which companies
are: stock exchange of Bangalore, Bhuvneshwar, Calcutta, Cochin, Coimbatore, Delhi,
Guvahati, Hyderabad, interconnected SE, Jaipur, and Ludhiana, madras, Magadha,
Mangalore, NSE, pune, OTCEI, saurashtra-kutch, Uttar Pradesh and vadodara. Apart from
NSE, All stock exchanges whether established as corporate bodies or associations of persons
(AOPs), are non profit making organizations.
Coropratisation of stock exchanges
Corporatisation is the process of converting the organizational structure of the stock exchange
from a non corporate structure to a corporate structure. Traditionally, some of the stock
exchanges in India were established as “Association of persons”, e.g. BSE, ASE and MPSE.
Corporatisation of such exchanges is his process of converting them into incorporated
companies.
3.8 Demutualization of stock exchange
Demutualization refers to the transition process of an exchange from a “mutually-owned”
association to a company “owned by shareholders”. in other words,transforming to the legal
structure of an exchange from mutual form to a business corporation form is referred to as
demutualization. The above, in effect means that after demutualization, the ownership, the
management and the trading rights at the exchange are segregated from one another.
Difference between Demutualised Exchange and Mutual Exchange
In a mutual exchange, the three functions of ownership, management and trading are
intervened into a single group. Here, the broker members of the exchange are both the owners
and the traders on the exchange and they further manage the exchange as well. A
demutualised exchange, on the other hand, has all these three functions clearly segregated,
i.e. the ownership, management and trading are in separate hands.
Currently Demutualised Stock Exchange in India
Currently, two stock exchanges in India, the national stock exchange (NSE) and over the
counter exchange of India (OTCE) are not only corporative but also demutualised with
segregation of ownership and trading rights of members.
Steps taken by SEBI of demutualization in India
SEBI has constituted a group on coropratisation and demutualization of stock exchanges
under the chairmanship of justice M H Kalia, former chief justice of India, for advising SEBI on
coropratisation and demutualization of exchanges and to recommend the steps that need to be
taken to implement the same. The group had submitted its report to SEBI on august 28, 2002.
SEBI has taken up with central government to amend the SC (R) A to effect coropratisation
and demutualization. The amendment is to be introduced in the house of parliament.
3.9 Delisting of securities
The term “delisting” of securities means permanent removal of securities of a listed company
from a stock exchange. As a consequence of delisting, the securities of that company would
no longer be traded at that stock exchange.
Difference between Voluntary Delisting and Compulsory Delisting
Compulsory delisting refer to permanent removal of securities of a listed company from a stock
exchange as a penalizing measure at the behest of the stock exchange for not making
submissions/comply with various requirements set out in the listing agreement within the time
frames prescribed. in voluntary delisting, a listed company decides on its own permanently
remove its securities from a stock exchange.
Exit Opportunity for Investors In Case Of Delisted Company
SEBI (Delisting of Securities) Guidelines, 2003 provide an exit mechanism, whereby the exit
price of securities is determined by the promoter of the concerned company which desires to
get delisted, in accordance to book building process. The offer price has a floor price, which is
average of 26 weeks average of traded price quoted on the stock exchange where the shares
of the company are most frequently traded preceding 26 weeks from the date public
announcement is made. There is no ceiling on the maximum price.
In case of infrequently traded securities, the offer price is as per regulation 20 (5) of SEBI
(substantial Acquisition and Takeover) regulations. for this purpose, infrequently traded
securities are determine in the manner as provided in regulation 20(5) of SEBI(substantial
Acquisition and Takeover) regulations.
Central Listing Authority
The central listing authority (CLA) is set up to address the issue of multiple listing of the same
security and to bring about the uniformity in the due diligence exercise in scrutinizing all listing
applications on any stock exchanges. The function of CLA as enumerated in SEBI (Central
Listing Authority) regulations, 2003 include:
* Processing the application made by any body corporate, mutual fund or collective investment
scheme for the letter of recommendation to get listed at the stock exchange
* Making recommendation as to listing condition, and
* Any other that may be specifying by the SEBI Board from time to time.
Established code of corporate governance
The code may be divided into supranational, national or institutional course depending on the
author. Some of the selected examples of super national codes are: OECD,
ICGN(International Corporate Governance Network),CACG(Commonwealth Association For
Corporate Governance); selected examples of national codes are :Vienot Report from France,
the Cadbury, Greenbury and hampel reports and the Combined code from the UK , the
Malaysian code; and selected institutional codes are ; Calpers, Hemes Investment
Management, the CLL code on desirable corporate governance.
SEBI has also laid down certain codes like Kumar Mangalam, Birla Committee Report, and
Clause 49 of Listing Agreement for good governance of listed companies with the purpose of
enhancing wealth creation, wealth management and distribution
3.10 Corporate Governance
As Kumar Mangalam Committee report on Corporate Governance enumerates, the
fundamental objective of corporate governance is the “enhancement of shareholder value,
keeping in view the interest of other stakeholders”. This definition harmonizes the need for a
company to strike a balance at all times between the need to enhance shareholders’ wealth
whilst not in any way being detrimental to interest of the other shareholders in the company.
Independent Directors
As per Clause 49 of the listing agreement ,”independent director” means a director who apart
from receiving directors remuneration, do not have any other material pecuniary relational ship
or transactions with the company, its promoters, its management or its subsidiaries, which in
judgment of the board may effect the independence of judgment of the director.
EDIFAR
“ Electronic Data information filing and Retrieval System” (EDIFAR) is a website launched by
SEBI in association with National Informatics Center (NIC) in July 2002 to facilitate filing of
certain material information/ documents/ statements by the listed companies on line in the
EDIFAR web site- www.sebiedifar.nic.in. EDIFAR would enable electronic filing of information
in a standard format by the companies and expedite dissemination of information to various
classes of market participants like investors, regulatory organization, research institutions, etc.
Financial System=Financial Market + Financial Assets+ Financial Services+ Financial
Institutions
The capital market comprises institutions and mechanism through which long term funds and
midterms funds are pooled and made available to companies, govt. etc. Capital market is a
market for long term debt and equity shares. In this market, the capital funds comprising of
both equity and debt are issued and traded. This also includes private placement sources of
debt and equity as well as the organized markets like stock exchanges.
Documents to be given by trading member
Order confirmation slip – after the order has been place.
Trade confirmation slip – after the trade has been executed
Contract note- within 24 hours of the trade being executed
Purchases/Sale note – there deal is routed through a registered sub-broker of a NSE
Investor should always insist on getting is contract notes or purchases/ sale not from his
trading member or sub-broker respectively.
Contract not is a confirmation of trade (s) done on a particular day for and on behalf of a client.
A contract not issued in the format and manner prescribed by NSE establishes a legally
enforceable relationship between the trading member and the client in respect of settlement of
trades executed on the exchange as stated in the contract not. Contract note are made in
duplicate, and the member and client both keep one copy of each.
The Said contract not should be signed by a trading member or by authorized signatory of the
trading member.
After the verifying the details contain therein, the second copy of the contract note should be
written to the trading member duly acknowledged by investor.
To ensure that the contract note issued by the trading member is a valid one, one must verify
the following details:
The contract note should be in prescribed format
Name and address of the trading member
The SEBI registration no of the trading member
Detail of the trade viz order no. trade no.. trade time, security name quantity, rate
brokerage, settlement no, detail of other levies.
The trade price should be shown separately from the brokerage changed
Signature of authorized signatory and the arbitration clause stating that the trade is
subject to the jurisdiction of Mumbai must be present on the face of the contract
note.
3.11 Clearing and settlement related issue
What is account period settlement?
An account period settlement is a settlement where the trade’s pertaing to a period stretching
over more than one day are settled. For e.g. Trades for the Monday to Friday, the obligations
for the account period are settled on a net basis. Account period settlement has been
discontinued since January 1 2002, pursuant to SEBI directives.
What is Rolling settlement?
In a rolling settlement trades executed during the day are settled base on the net obligations of
for the day. In NSE. The trade pertaining to the rolling settlement are settled on a T+2 day
basis where T stands for the trade day. Hence, trades executed on a Monday are typically
settled on the following Wednesday (considering two working days from the trade day).The
funds and securities pay-in and pay-out are carried out on T+2 days
What are pay-in and pay-out of funds and securities?
Activity Day
Trading Rolling settlement trading T
Clearing Custodial confirmation T+1 working
days
Delivery generation T+1 working
days
Settlement Securities and funds pay in T+2 Working
days
Security and fund pay out T+2 working
days
Post
settlement
Valuation debit T+2 working
days
Auction T+3 working
days
Bad delivery reporting T+4 working
days
Auction settlement T+5 working
days
Close out T+6 working
days
Rectified bad delivery pay-in and
pay-out
T+6 working
days
Re-bad delivery reporting and
pickup
T+8 working
days
Close out re-bad delivery T+9 working
days
Investors have to deliver the securities to the trading member immediately upon getting the
contract not for sale but in any case before the prescribed securities pay in day. If they have
bought securities, they have to pay amount to the trading member in such a manner that the
amount paid is relised before the funds pay- in day. The securities and the funds are paid out
to the trading member on the pay out day.
The NSE regulation stipulates that the trading member should pay the money or security to the
investor within 48 hours of the pay out. The pay in and pay out days for funds and securities
are prescribed as per the settlement cycle. A settlement cycle of normal settlement is given
below.
3.12 Demat Settlement
One should instruct his depository participant (DP) to give “Delivery out “instructions to
transfer the shares from his beneficiary account to the pool account of his trading member
through whom he have sold the share. The details of the pool account (CM-BP-ID) of his
trading member to which share are to be transferred, scrip quantity etc. should be mentioned
in the delivery instructions given by him to his DP. The instruction should be given well before
the prescribed securities pay-in day. SEBI has advise that the delivery out instruction should
be given at least 24 hours prior to the cut off time for the prescribed securities pay – in to avoid
and rejections of instructions due to the date entry error, network problem etc.
The four main legislations governing the securities market are
Securities contract (regulations) Act. 1956
The companies act 1956
Securities and Exchange Board of India Act. 1992
The Depositories Act 1996.
Role of securities contract (regulation) Act. 1956
It provide for direct and indirect control of virtually all aspects of securities trading and running
of stock exchange and aim to prevent undesirable transaction in securities. It gives Central
govt. regulatory jurisdiction over.
* Stock exchange through a process of recognition and continued supervision.
* Contract in securities, and
* Listing of securities on stock exchanges.
As a condition of recognition, a stock exchange complies with conditions prescribed by Central
Govt. organized trading activity in securities takes place on a specified recognized stock
exchange. The stock exchange determines their own listing regulations which have to confirm
to the minimum listing criteria set out in the rules.
Securities and exchange board of India act, 1932
The SEBI act 1992 was enacted to empower SEBI with statutory powers for
Protecting the interest of investors in securities,
Promoting the development of the securities market, and
Regulating the securities market
Its regulatory jurisdiction extends over corporate in the issuance of capital and transfer of
securities, in addition to all intermediaries and persons of capital and persons associated with
securities market. It can conduct enquiries, audits and inspection of all concerned and
adjudicate offences under the act. It has power to register and regulate all market
intermediaries and also to penalize them in case of violations of the provisions of the act, rules
and regulations made here under. SEBI has full autonomy and authority to regulate and
develop an orderly securities market. The following departments of SEBI take care of the
activities in the secondary market.
Role of Depositories act, 1996
s.
no
Name of the department Major activities
1 market intermediaries
registration and
supervision
department(MIRSD)
Registration, supervision, monitoring
and inspections of all market
intermediaries in respect of all
segments of the markets viz. equity,
derivatives, debt and related
derivatives
2 Market regulation
department
Formulating new policies and
supervising the functioning and
operations (except relating to
derivatives) of securities
exchanges, their subsidiaries,
and market institutions such as
clearing and settlement
organizations and
depositories( Collectively
referred to as “Market SRO’s)
3 Derivatives and new
products
department(DNPD)
Supervising trading at
derivatives segments of stock
exchanges, introducing new
products to be traded, and
consequent policy changes
The depository’s act 1996 provides for the establishment of securities with speed, accuracy
and securities by
* Making securities of public ltd.companies freely transferable subject to certain exception.
* Dematerializing the securities in the depository mode; and
* Providing for maintenance of ownership records in a book entry form.
In order to streamline the settlement process, the act envisages transfer of ownership of
securities of securities electronically by book entry without making the securities move from
one person to person.
The act has made the securities of all public ltd. Companies freely transferable, restricting the
company’s right to use discretion in effecting the transfer of security and the transfer deed and
other procedural requirement under the company act has been dispensed with.
Role of Stock Exchanges
The stock exchange has an interesting side effect, because all the buying and selling
concentrated in one place, it allows the price of a stock to be known every second of the day.
Therefore, investor can watch as a stocks price fluctuate based on news from the company,
media report, economic news and a range of other sector. Smart buyer and sellers take all of
these factors into account before making decision.
There are 24 reconigned stock exchanges in India, Mangalore; Stock exchange was refuse to
renewal of recognition wide SEBI order dated August 31, 2004. In term of legal structure, the
stock exchanges in India could be segregated into two broad groups – 19 stock exchanges
which were setup as company, either limited by guarantees or by shares, and the three
exchanges which were associations of persons (AOP) viz BSE, ASE and Madhya Pradesh. .
The 20 stock exchanges which companies are: stock exchange of Bangalore, Bhuvneshwar,
Calcutta, Cochin, Coimbatore, Delhi, Guvahati, Hyderabad, interconnected SE, Jaipur, and
Ludhiana, madras, Magadha, Mangalore, NSE, pune, OTCEI, saurashtra-kutch, Uttar Pradesh
and vadodara. Apart from NSE, All stock exchanges whether established as corporate bodies
or associations of persons (AOPs), are non profit making organizations.
Functions
The first function is to provide to companies with a way of issuing of shares to people who
want to invest in the company. This can be illustrated by en example – suppose a company
has mining lease over and area with some rich ore deposits. It wants to exploit these
deposits, but it cannot have any equipment. To buy the equipment its needs money. One
way to raise money through stock market. The company issues a prospect, which is the
sort of advertisement informing people about the prospects of the company and inviting
them to invest some money in it. When the company is “floated” (Established) on the stock
market, interested investors can become part owners of the company by buying “shares”. If
the company operates at a profit shareholders benefit in two ways-through the issuing of
dividend in the form of cash or more shares, and through growth in the value of the shares.
On the other hand, if the company does not operate at a profit (e.g., if the price of the
product dips), the shareholders will probably lose money.
The second function of the stock market, related to the first, is to provide a venue for the
buying and selling of shares.
What is De Mutualisation of stock exchanges?
Demutualization refers to the transition process of an exchange from a “mutually-owned”
association to a company “owned by shareholders”. in other words, transforming to the legal
structure of an exchange from mutual form to a business corporation form is referred to as
demutualization. the above, in effect means that after demutualization, the ownership, the
management and the trading rights at the exchange are segregated from one another.
Currently, two stock exchanges in India, the National Stock Exchange (NSE) and other the
Counter Exchange of India (OTCEI) are not only corporative but also de-mutualised with
segregations of ownership and trading rights of members.
The corporation and de-metualisation schemes of 19 stock exchanges (other than NSE,
OTCEI, Mangalore Stock Exchange and Coimbatore Stock Exchange) have been notified by
SEBI and are at various stages of implementation.
Who are Promoters?
Leading Financial institutions, banks, insurance companies & other financial intermediaries
such as have promoted NSE.
IDBI
IFCI
SBI
ICICI bank limited
Stock Holding Corporation of India limited
Corporation bank
Indian bank
Union bank of India
3.14 Market participants
Members who participate in the whole clearing and settlement process are as follows:
1. Clearing Member
2. Clearing Banks
3. Depository participants
4. Professional Clearing members
Clearing Members
Definition: - Clearing members means a member of the Clearing Corporation who clears and
settles deals through the clearing corporation. The clearing members clear and settle deals for
a segment in a manner and mode and subject to such terms and conditions and procedures
prescribed for them.
Mechanism: - Further, a clearing member may clear and settle deals either on their own
account or on behalf of their clients subject to eh terms and conditions prescribed by the
clearing corporation. In the capital market segment, all trading member of the Exchange are
required to become the Clearing Member of the Clearing Corporation.
In F&O segment, trading members need not necessarily clear their own deals but can select
another clearing member or a professional clearing member to clear and settle their dues.
Trading members, who are also Clearing Members, can clear and settle their deals and also
deals of other trading member who opt to settle their deals through the said clearing members,
“self clearing members” may clear and settle only their own proprietary trades and their client’s
trades but cannot clear and settle trades of other trading members.
Role of Clearing Banks
Definition: - Clearing banks holds the fund of customer and helps in fund pay in and out with
clearing corporation. Banks are required to provide all the facility to a customer in a following
way.
1. Branch network in cities that cover bulk of the trading cum clearing members
2. High level automation including electronic funds transfer (EFT) facilities. Facilities like
(a) Dedicated branch facilities (b) software to interface with the clearing corporation
(c) Access to accounts information on a real time basis.
3. Value-added services to members such as free of cost funds transfer across centers
4. providing working capital funds
5. stock lending facilities
6. services as professional clearing members
7. Services as D.P.
8. Other capital market facilities
9. All other banking facilities like issuing bank guarantees/credit facilities etc.
Depository participant
They are members of depository namely NDSL and CDSL and they work like a branches of a
bank to hold a share in a demat form for a client in their respective accounts.
Professional Clearing Members
Clearing corporation admits a special category of members’ namely professional clearing
members. Professional clearing members are clearing member who are not trading member.
They are typically banks custodians etc. who clear and settle trade executed for their client
(individuals, institutions etc.) in such an event, the function and responsibilities of the PCM
would be similar to custodians. PCMs may also undertake clearing and settlement
responsibility for trading member. In such a case, the PCM would settle the trade carries out
by the trading members connected to them. The bonus for settling the trade would be thus on
the PCM and not the trading members.
3.15 Fundamental analysis
Fundamental analysis is a technique that attempts to determine a securities value by focusing
on underlying factors that effect a company’s actual business and its future prospect. On a
broader scope, fundamental analysis on industries or the economy as a whole. The terms
simply refer to the analysis of the economic well being of a financial entity as opposed to only
its price movements. Fundamental analysis serves to answer questions such as
is the company’s revenue growing
is it actually making a profit
is it in a strong enough position to bear out its competitor in the future
is it bale to repay its debts
is management trying to “cook the books’
Quantitative and Qualitative
The various fundamentals factors can be good into two category quantities and qualitative. The
financial meaning of these terms is not all the different from their regular definitions. Here is
how the MSN Encarta dictionary defines the items.
Quantitative: - capable of being measured or expressed in numerical terms, quantitative
fundaments are numeric, measurable characteristics about the business.
The quantitative information gleaned from financial statements to make investment decisions.
Before we jump into the specifics the three most important financial statements-income
statements, balance sheet and cash flow statement
Balance sheet
The balance sheet represents a record of a company’s assets, liabilities and equity at a
particular point in time. The balance sheet is named by the fact that a business’s financial
structure balances in the following manner:
Assets= liabilities+ shareholder’s equity
Income statement
While the balance sheet takes a snapshot approach in examining a business, the income
statement measures a company’s performance over a specific time frame. The income
statement presents information about revenues, expenses and profit that was generated as a
result of the business’ operation for the period
Statement of cash flows
The statement of cash flows represents a record of a business’ cash inflow and outflow over a
period of time. Typically, a statement of cash flows focuses on the following cash related
activities:
Operating Cash Flow (OCF). Cash generated from day to day business operations.
Cash from investing (CFI). Cash used for investing in assets, as well as the proceeds
from the sale of other businesses, equipment or long term assets.
Cash from financing (CFF) cash paid or received from the issuing and borrowing of
funds.
The cash statement is important because it’s very difficult for a business to manipulate its cash
situation. There plenty that aggressive accountants can do to manipulate earnings, but it’s
tough to take cash in the bank. For this reason some investors use the cash flow statement as
a more conservative measure of a company’s performance.
Step-1: Politico-Economic Analysis
1. Politico-economic factors affect an industries and a country
2. Stable political environment necessary for steady, balanced growth.
3. International events impact industries and companies.
4. Countries need foreign exchange reserves to meet its commitments, pay for import and
services foreign debts.
5. The possibility of the devaluation of one’s currency/ the appreciation of another currency is a
real risk. One can hedge this by entering into forward contracts.
6. Restrictive practices or cartels imposed by countries can affect companies and industries.
Investors must determine how sensitive a company is to governmental policies and restrictive
policies.
7. Foreign debt can be an enormous burden which would eat into a company’s results.
8. Inflation erodes purchasing power. Low inflation indicates stability and companies prosper at
such time.
9. Low interest and taxation rates stimulate investment and industry.
10.Domestic saving can accelerate economic growth.
11.Development of a country is depending on its infrastructure.
12.Budgetary deficits resulting from excess governmental spending stimulate the economy.
It also gives rise to increasing demand and increasing inflation.
Economic cycle
1. Business or economic cycle has direct impact on industry and individual companies. It affects
investment decision, employment, demand and profitability.
2. Four stages of economic cycle are depression, recovery, boom and recession.
3. Investors should determine the stage of the economic cycle before investing. Investors should
disinvest just before or during a boom.
Step-2: Industry analysis
1. Importance of the industry can never be understated. State of industry will affect company
performance.
2. It is important to determine cycle .these are entrepreneurial or sunrise, expansion or growth,
stabilization or maturity and decline or sunset stages.
3. investors should purchase in the first two stages and disinvest at the maturity stage
4. it is better to invest in evergreen industries. Results of cyclical industries are volatile.
5. Investors should consider competition as the greater than competition the lower the profits.
6. It is safer to invest in industries not subject to govt. control.
7. Export oriented currently favored by “the govt.
Step-3: Company Analysis
1. Final stage of fundamental analysis is company analysis.
2. Areas to be examined are the company, the results, ratios and cash flow.
Management
1. Management is the single most important factor to consider in a company. Upon its quality
rests the future of the company.
2. In India two main types of management-family and professional.
3. Investors must check on integrity of managers, proven competence, how high is it rated by its
peers, how it performed at times of adversity, the man agent’s depth of knowledge, its
innovativeness and professionalism.
The Company
1. It is important to check how company is perceived by its competition and whether it is the
market leader in its products or in its segment.
2. The investors must determine the policy a company follows and its plans for growth.
3. Labor relations are important.
The Annual Report
1. The annual report is the primary and most important source of information on a company.
2. The investors must read between and beyond the lines of an annual report to determine the
state of the company being considered.
3. The annual report is broken into the directors `report, the auditor’s report, the financial
statement and the schedules.
The Directors’ Report
1. This report gives investors insights into the company.
2. It explains the performance of the company, the industry and the political situation.
3. It explains the performers of the company, its plans for diversification, modernization and
expansion. It discusses the profits earned and states the dividends proposed.
4. The report, if read properly, can give the investor a good grip of the working of the company
The Auditor’s Report
1. The auditor represents shareholders and report to them on the stewardship of the directors
and whether the accounts presents do present a true and fair view of the company.
2. Auditors will comment on any changes made in accounting principles and the effect of these
changes on the results.
3. Auditors will also comment on any action or method of accounting they do not agree with.
4. Investors must read the auditor’s report in detail and in depth as the results can materially
change if adjustment is made based on the notes or comments in the auditors report.
Financial Statements
1. Financial statement of a company in an annual report consists of the balance sheet and the
profit and loss account. These detail the financial health and performance of the company.
2. The balance sheet details all the assets and liabilities a company has on particular date.
Assets are those that the company owns such as fixed assets (buildings, cars etc.),
investments and current assets (stock, debtors and cash).Liabilities are those that the
company owes (trade creditors, loans, etc.)And the shareholder investment in the company
(share capital and reserves.
3. The profit and loss account details numerically the activities the company had undertaken
during the accounting period and the result of these activities (profit and loss).
4. Contingent liabilities are also details. These are liabilities that may arise on the happing of an
event that may never arise (guarantees, bills discounted).The liabilities crystallize on the
happening of the event.
5. The profit and loss account also details the dividend given (interim) and proposed.
Schedules and Notes to the Account
1. Schedules and notes to the account are found after the financial statement in an annual report.
2. The schedules detail pertinent information about the items of the balance sheet and profit and
loss account.
3. the notes are even more important as they give very important information such as the
accounting policies that the company has followed the contingent liabilities of the companies
and the like.
4. It is imperative that the schedules and notes to the accounts be read for a clearer
understanding of the company’s financial condition.
Ratio
1. No investment should be made without analyzing the financial statements of a company and
comparing the company’s result with that of earlier year.
2. Ratios express mathematically the relationship between performance figures and/or
assets/liabilities in a form that can be easily understood and interpreted.
3. No single ratio tells the complete story.
4. Ratio can be broken into 4 broad categories:
(a) Profit and loss ratio
(b) Balance sheet ratio
(c) Balance sheet and profit and loss ratio, and
(d) Financial statement to market ratio.
5. Ratios may also be grouped into categories that will enable investors to easily
determine the company’s strengths and weaknesses .
(a) Market value ratios reflect the market regards for a share and the period it would take an
investor to recover his investment .The common indicators are the price/earning ratio and the
market to book ratio.
(b) Earning ratio are used to determine the fair market value investment .The ratio
calculated are earning per share ,cash earning per share ,dividend per share and dividend
payout ratio.
(c) Profitability is of prime importance and these ratios, return on total assets, return on
equity, pre-interest return on assets, pre-interest after tax return on assets and return on total
invested capital, assistant investor in determining how well a company is doing vis-à-vis other
companies within the same industry and with reference to its own performance in previous
years.
(d)Liquidity ratio determines how liquid the company’s assets are and whether it can
easily meet its obligation. The ratios calculated are the current ratio, the quick or asset test, net
current assets, defensive interval and current liability coverage.
(e)Leverage ratio indicates the extent a company is dependent on borrowings in the
form of debentures, short/long term loans and bank overdraft. The ratios calculated to
determine leverage are liabilities to assets ratio, debt to assets ratio, debt to net worth ratio
liabilities to net worth and incremental gearing.
(f)Debt services capacity ratio indicate whether a company can service its debts. The
ones commonly computed are debt coverage, liability coverage, interest cover, fixed charge
cover and cash flow surplus.
(g)Assets management ratio s is used to determine how efficiently a company is
managing its assets. The more important determents are the stock utilization ratio, the average
collection period, the average payment period, net working investment ratio, total asset
utilization and fixed asset utilization.
(h)Margins indicate the earning a company makes on its sales. The margins calculated
are the gross margin, operation margin, and breakeven margin, refinancing margin, pretax
margin and the net profit margin.
Cash Flow
1. Cash flow statement will enable investors to determine how the company’s cash is earning,
how the company is being financed and how it uses the finance received.
2. The statement begins with the cash in hand at the beginning of the period. It then details the
sources and amount of funds received and the manner they were applied ending with the final
cash in hand.
3. Its main use is that it strips the accounting statement of creative accounting.
Fundamental Analysis: Quick Check List
1. Check the political situation. Is it safe? Are there problems? Could the govt. be overthrown and
could there be difficulties as a consequence?
2. What is revealed by the economic indicators? Is the growth rate reasonable? Have exports
improved? How comfortable is the balance is the balance of payments position?
3. Check the industries or industries in which the company operates. At what stage of the cycle is
the company in? What is its competition? How easy is it to enter or exit the business?
4. Than check the company. The factors one should look at are its management and its annual
report. The ratios should be analyzed and the cash flow checked.
5. Finally, before purchasing or selling a share, check its intrinsic value. a decision should only be
taken after this is done.
FINANCIAL BANKS
Inaugurated by father of the Nation at the onset of 20th century, Union Bank of India has
traversed the long road of successful Banking of 85 years. We trace our origin to the profound
thoughts of Mahatma Gandhi. “We should have the ability to carry on a big bank, to manage
efficiently crores of rupees in the course of our national activities. Though we have not many
banks amongst us, it doesn’t follow that we are not capable of efficiently managing crores and
tens of crores of rupees.”
Union Bank of India is committed to maintain its identity as a leading innovative commercial
Bank, alive to changing need of the society. Union Bank has offered vast and varied services
to its entire valuable clientele taking care of there needs. Today, with its efficient customer
services, consistent profitability & growth, adoption of new technologies and value added
services, Union Bank truly lives up to the image of, “GOOD PEOPLE TO BANK WITH”.
Anticipative banking is an integral part of value based services. This ability to gauge the
customer’s needs long before he realizes, best reduces the gap between expectations and
deliverance.
Corporate Mission
A logical extension of the vision statement is the Mission of the Bank, which is to gain market
recognition in the chosen areas.
To build a sizeable market shares in each of the chosen areas of business through effective
strategies in terms of pricing, product packaging and promoting the product in the market.
To facilitate a process of restructuring of branches to support a greater efficiency in the retail
banking field.
To sustain the mission objective through harnessing technology driven banking and delivery
channels. To promote confidence and commitment among the staff members, to address the
expectations of the customer efficiently and handle technology with ease.
MANAGEMENT PROFILE
CHAIRMAN & MANAGING DIRECTOR Shri M.V. Nair
DIRECTOR Mr. A.N. Rao
EXECUTIVE DIRECTOR R.S. Readdy
STATE BANK OF INDIA
The origin of the State Bank of India goes back to first decade of the nineteenth century with
the establishment of the Bank of Calcutta in Calcutta on 2 June1806. Three years later the
Bank received its charter and was re-designed as the bank of Bengal (2 January 1809). A
unique institution, it was first joint stock bank of British India sponsored by the Government of
Bengal. The Bank of Bombay (15April1840) and the Bank of Madras (1July1843) followed the
bank of Bengal. These three banks remained at the apex of modern banking in India till their
amalgamation as the Imperial Bank of India on 27January 1921.
On 1st July State Bank of India was constituted under the State Bank of India Act 1955, for the
purpose of taking over the understanding and business of the Imperial Bank of India. The
Imperial Bank of India was founded in 1921 under the Imperial Bank of India Act 1920. The
Bank transacts general banking business of every description including, foreign exchange,
merchant banking and mutual funds.
All the branches of the Bank are now fully computerized. There are 5290 ATMs on the ATM
Network. These ATMs are located in 1721 centers spread across the length and breadth of the
country, thereby creating a truly national network of ATMs with an unparalleled reach.
MANAGEMENT PROFILE
HDFC was incorporated in 1977 with the primary objective of meeting a social need- that of
promoting home ownership by providing long-term finance to households for their housing
needs. HDFC was promoted with an initial share capital of Rs. Million.
CHAIRMAN Mr. Arun Kumar Purwar
MANAGING DIRECTOR Mr. K. Ashok Kini
MANAGING DIRECTOR Mr. Shri T.S. Bhattacharya
DIRECTOR Mr. K.P. Jhunjhunwala
The primary objective of HDFC is to enhance the residential housing stock in the country
through the provision of housing finance in systematic and professional manner, and to
promote home ownership. Another objective is to increase the flow of resources to the housing
sector by integrating the housing finance sector with the overall domestic financial markets.
The Housing Development Finance Corporation (HDFC) was amongst the first to receive an ‘in
principle’ approval from the Reserve Bank of India (RBI) to set up a bank in the private sector,
as part of the RBI’s liberalization of the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of ‘HDFC Bank Limited’, with its registered office in
Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in
January 1955.
RECENT AWARDS GOT BY THE BANK
* Asian money award- Best local cash management bank for the large and medium segment.
* European award for the Best Bank of India.
* HDFC bank has won the 'Dun & Bradstreet -American Express Corporate Best Bank Award
* The Bombay Stock Exchange and Nasscom Foundation's Business for Social Responsibility
Awards
* Best Corporate Social Responsibility Practice' Award
MANAGEMENT PROFILE
CHAIRMAN Mr. Jagdish Capoor
MANAGING DIRECTOR Mr. Aditya Puri
EXECUTIVE DIRECTOR Mr. Venkat Rao Gadwal
EXECUTIVE DIRECTOR Mrs. Renu Karnad
THE SCOREBOARD
Sector- Finance Bank
Information Company STATE BANK
OF INDIA
HDFC UNION BANK
OF INDIA
FACE VALUE (In Rs.) 10 10 10
BOOK VALUE 457.4 145.3 68.2
RETURN ON NET
WORTH(%)
19.4 18.5 25.1
TOTAL INCOME (in Rs
crores)
41227.96 5599.32 6488
INCOME VARIANCE (In %) 7.41 4.95 13.11
NET PROFIT (In Rs Crores) 4406 870.78 675.18
CAPITAL ADEQUACY
RATIO
13.65 10.75 11.41
RETURN ON ASSETS .79 .68 .84
NON PERFORMING
ASSETS (in %)
.87 1.49 1.56
PRICE EARNING RATIO 16.4 34.7 9.2
CURRENT MARKET
PRICE(In Rs As On
30/3/2008 )
1209.25 1086.4 132.90
EARNING PER SHARE(Rs) 67.52 26.33 14.58
52 WEEK HIGH(In Rs As On
30/3/2008 )
1244 1150 142
52 WEEK LOW(In Rs As On
30/3/2008 )
684 620 81
PROMOTERS HOLDING
(In Percentage)
59.73 21.90 55.43
INSTITUTIONAL HOLDING
(In Percentage)
11.95 39.99 26.49
OTHERS HOLDING
(In Percentage)
28.32 38.1 18.08
THE ANALYSIS
Three companies which were taken from each sector were provided to me by the company
guide.
1. STATE BANK OF INDIA
2. HDFC BANK
3. UNION BANK OF INDIA
The face value of their share is Rs 10 each.
ON THE BASIS OF BOOK VALUE
Book Value per share is derived by dividing Sum Total of Equity Capital and reserves by the
number of Equity shares. It’s a kind of guarantee to shareholders that in any case their share
will not fall below the book value of the shares as they as they have the right to the Capital and
reserves of the Company as they are the owners of the company.
The Book Value of State Bank of India is Rs 457.4
The Book Value of HDFC Bank is Rs 145.3
The Book Value of Union Bank of India is Rs 68.2
Now if we take a worst case of the winding up of these companies the biggest losers will be
the shareholders of the HDFC Bank Ltd because the current market price of the HDFC Bank
Ltd. is Rs 678 and the Book Value is Rs 145.3. Similarly the loss of the State Bank of India and
Union Bank of India will be 51.59% and 49.10% respectively.
RETURN ON NET WORTH BASIS
Return on Net worth is calculated when only the latest full year annual report is available.
It is derived by dividing the difference of Net Profit and Preference share dividing by the sum of
Equity Share Capital and Free Reserves except Revaluation Reserve.
Union Bank of India is leading with 25.1% Return on Net worth. State Bank of India is following
at 19.4%, HDFC Bank is at third place with 18.5% Return on Net Worth.
SALES BASIS
State Bank of India has registered highest sales of Rs 41227.96 crores.
Union Bank of India is at the second place with sales of Rs 5863 crores.
HDFC Bank is at the third place with sales of Rs 5599.32 crores.
NET PROFIT BASIS
State Bank of India is at first place with the Net Profit of Rs 4406 crores.
HDFC Bank is second place with the Net Profit of Rs 870.78 crores.
Union Bank of India is at last place with the Net Profit of Rs 2020.48 crores.
EARNING PER SHARE BASIS
The earning per share (EPS) ratio indicates the earning of the common share in a year this
ratio enables investors to actually quantify the income earned by a share and to determine
whether it is reasonably priced. The ratio is arrived at by dividing the income attributable to
common shareholders by the weighted average of the common shares.
In countries including India where employees are given stock options, investors check a
company’s fully diluted earning per share. This is the earning per share of the company after
all shares options, warrants and convertible securities outstanding at the end of an accounting
period are exchanged for shares.
State Bank of India is the first place with the EPS of Rs 67.2
HDFC Bank is the second place with the EPS of Rs 26.33 and
Union Bank of India is the last place with the EPS of Rs 14.58.
PRICE EARNING RATIO BASIS
This indicates the no of times the earning per share is covered by its market price.
It is derived by dividing market price per Equity share by earning per share.
This is the most commonly quoted ratio it is because it reduces to an arithmetical figure the
relationship between the market price & earning per share & thereby allows one the
opportunity to determine whether the share is under priced & over priced. In addition it
Reflects the opinion of the investing public about the company i.e. whether the company is
growing or declining & will happen with the price.
The P.E Ratio of the companies is as follows:
INSTITUTIONAL HOLDING BASIS
Institutional holding shows the faith of the institutions like Mutual Fund, Unit Trust Of India,
Banks, Financial Institutions, Insurance Companies and Foreign Institutional Investors. It even
effects the intra day trading also whenever any institution buys any shares the intra traders
also start buying with the believe that if the institution has bought this shares they would
mantel.
HDFC Bank 34.7
State Bank of India 16.4
Union Bank of India 9.2
While State Bank of India enjoys the faith of the institutional buyers 11.95% holding is in the
hands of the institutions.
HDFC Bank enjoys the faith of the institutional buyers 39.9% holding is in the hands of the
institutions.
Union Bank of India has 26.49% of their holdings in the hands of the institutions buyers.
CONCLUSION
Although the whole Banking sector is seeming attractive for the year 2006-07. But among the
three stocks discussed above I will suggest to buy SBI which has highest EPS at Rs 67.52.
While institutions have faith in HDFC Bank.
ANALYSIS & INTERPRETATION OF THE DATA
Knowing the awareness and perception of the provide insight into the customer behavior and
his expectation from the industry players. A proper understanding of the awareness and
perception would definitely benefit the players. This survey attempt to know the Stock market
investor better. It examines some interesting choices of the investor including the reasons
behind investing in stock market and the risk tolerance levels of the investors. The investor
knowledge about the stock market and what according to him are customers is very important
in any industry. This kota city survey was conducted to know the investor awareness and
perception about stock market.
The total sample for the study was 100 across Kota city.
Salary of the respondent:
less than 10000 23%
10000 to 20000 19%
20000 to 30000 24%
more than 30000 34%
less than 10000
10000 to 20000
20000 to 30000
more than 30000
Interpretation:
Above table shown that no. of the respondents belonging to different income groups like 23%
of persons belongs to the income level of below 10000 rupees per month. Maximum Percent of
investors are those who lies in the income group of above 30000.
How much portion of your saving do you invest /would invest in share market?
upto 20%
20%-40%
40%-60%
above 60%
Interpretation:
Majority of respondent say that they would like to invest in share market up to 20% to40% of
their savings.
You invest/would invest in stock market because
up to 20% 30%
20%-40% 32%
40%-60% 25%
above 60% 13%
Higher returns
faster returns
easy return
depends on market
Interpretation:
Majority of respondent say that they would like to invest in share market because of higher
returns
Taking the factors like securities, rates of returns and time in
consideration which among the following you rate as per the best option?
Higher returns 47%
faster returns 10%
easy returns 25%
depends on market 18%
Bank FD's
Small saving schemes
Bond
Equities/derivatives
Mutual fund
Interpretation:
Majority of respondent rated equities/ derivatives as the best option among the factor like
securities, rate of return and time consideration.
What are the bases upon which people decide to invest in stock
market?
Bank FD's 13%
Small saving schemes 5%
Bond 15%
Equities/derivatives 42%
Mutual fund 25%
Technicasl analysis
Market calls/tips
Popularity of security
Goodwill of thecompany
Interpretation:
Majority of respondent took goodwill of the company as the basis to decide to invest in stock
market.
Which one you prefer most?
Technical analysis 32%
Market calls/tips 13%
Popularity of security 8%
Goodwill of the company 47%
Technical analysis 70%
Market tips/Market calls 30%
Technical analysis
Market tips/Marketcalls
Interpretation:
Majority of respondent preferred technical analysis the most than the market tips.
How much you believe on technical analysis of stock or how much
right result can be acquired by doing the technical analysis of any scrip?
up to 40%
40%-50%
more than 50%
does not believe at all
Interpretation:
Majority of respondent believe on technical analysis of stock about more than 50%.
If your base to choose the scrip is market calls/market tips, and then what
are the sources you trust upon most?
up to 40% 13%
40%-50% 17%
more than 50% 62%
does not believe at all 8%
Market tips bysecurities based co.son mobiles
TV channels like CNBC
Stock brokers
Interpretation:
Majority of respondent say that if their base is to choose the scrip is market call/market tips,
then the sources they will trust upon are share broker
Up to what percent market tips are correct according to you?
Market tips by securities based co’s on
mobiles 8%
TV channels like CNBC 45%
Stock brokers 47%
30%or less
30%-50%
50%-60%
more than 60%
Interpretation:
Majority of respondent say that 30% or less percent of market tips are correct according to
them.
Do you think will securities market grow as the awareness of equity
research will be more popular?
30%or less 67%
30%-50% 10%
40%-50% 10%
more than 60% 13%
Yes 80%
No 20%
yes
no
Interpretation:
More of the respondents believe that securities market will grow as the awareness of equity
research will be more popular.
QUESTIONNAIRE
Name: _______________________ Age: _______________
Mobile No.:___________________ landline no.:___
Address: ______________________ Occupation: _______________
______________________.
Salary 1) Less than 10000 2) 10000 to 20000
3) 20000 to 30000 4) More than 30000
Q.1 How much portion of your saving do you invest /would invest in share market?
a) 20% b) 20%-40%
c) 40%-60% d) Above 60%
Q.2 you invest/would invest in stock market because
a) Higher returns b) faster returns
c) Easy returns d) depends on market
Q.3 taking the factors like securities, rates of returns and time in consideration which among
the following you rate as per the best option?
a) Bank FD's b) Small saving schemes
c) Bond d) Equities/derivatives
e) Mutual fund
Q.4 what are the basis upon which people decide to invest in stock market?
a) Technical analysis b) Market calls/tips
c) Popularity of security d) Goodwill of the company
Q.5 which one you prefer most?
a) Technical analysis b) Market calls/tips
Q.6 How much you believe on technical analysis of stock or how much right result can Be
acquired by doing the technical analysis of any scrip?
a) Up to 40% b) 40%-50%
c) More than 50% d) does not believe at all
Q.7 if your base to choose the scrip is market calls/market tips, and then what
Are the sources you trust upon most?
a) Market tips by securities based co on mobiles
b) TV channels like CNBC c) Stock brokers
Q.8 Up to what percent market tips is correct according to you?
a) 30% or less b) 30%-50%
c) 40%-50% d) more than 60%
Q.9 Do you think will securities market grow as the awareness of equity
Research will be more popular?
a) Yes b) no
Strength
Quality provider
Advisory service
Reputation of company
Strong management
Weakness
In the sense of weakness no one is complete, and mostly in this sector, it is a booming sector,
earlier it was not like now. It is growing like rising moon. Weakness is only that every company
has a wide product range.
Opportunity
Top equity broking house in branch expansion
3rd in terms of trading account
6th in term of trading terminal
Threats
Tough competition in sector
Same service provider companies
Reduction in prices by various competitors
Conclusion
This securities market is about to grow in future very much with the growth of equity research.
There is very high competition in this market , there are many companies which are providing
different type of services to there clients and, this market is centre of attraction to new
entrepreneur because it is already successful market and it is for sure that it will grow further,
and there are many opportunities lying ahead in the way.
Bonanza portfolio Limited is an active and well known participant of this securities market, this
is achieving great success by working very hard with dedication. There is very good staff in this
organization so it may facilitate its clients in many ways, although there is competition but still it
is doing its own work and providing services to their clients up to the best extent.
Equity analysis is very important service of Bonanza Portfolio Ltd that it is providing to its client
.It provides the suggestion that which security is good for the purpose of investment.
For this project purpose, i have been gone through with a research that has been conducted in
Jaipur with a sample size of 160 investors and on the basis of this research; I can conclude
that most of the people believe that technical analysis can provide more suitable and desirable
results to them .People are interested to now about this technical analysis part, for this we just
need to aware and encourage them.
There should be more awareness made about the portfolio management services by giving
more advertisement.
The bonanza PMS should go for tie-ups with the corporate to increase business.
Bonanza portfolio limited should organize some events to build its Brand Image in the minds of
the people towards PMS.
As per customer’s point of view, they feel that bonanza portfolio limited should open more
number of branches for the convenience of people.
Books:
NCFM books:
Capital market
Derivatives
Newspaper & Magazines:
Economic times
Business standard
Business world
Business today
Money times
Websites :
www.nseindia.com
www.google.com
www.yahoo.com
www.bonanzaonline .com