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A Project Report

On
“AN OVERVIEW OF INDIAN STOCK MARKET”

Submitted in Partial fulfillment for the award of the degree


MASTER IN BUSINESS ADMINISTRATION.

(Batch—2008-2010)

Under Guidance Of, Submitted By,

Mr. Gouri sankar moharana Saroj kumar das


(faculty in finance) Roll No-0806998022
MBA 6th trimester

ASTHA SCHOOL OF
MANAGEMENT,BBSR
ORISSA
1
CANDIDATE DECLARATION

I solely declare that the report titled “An Overview


Of Indian Stock Market” is a bonafied record of
work carried by me, submitted partial fulfillment of
requirement for the award of degree Master Of Business

administration under the guidance of MR.GOURI SAN


KAR MOHARANA(FINANCE FACULTY OF
ASTHA SCHOOL OF MANAGEMENT)

This research is solely the work of me based upon


questionnaire, printed material given in bibliography. The
matter embodied in this report has not been submitted for
the award of any other degree.

2
Dated MR.SAROJ
KUMAR DAS
REG,0806998022

ACKNOWLEDGEMENT

Dissertation Report is a bridge connecting the educational


and professional use. It is the path leading to success by
shouldering responsibilities under the careful guidance of
seniors and experienced personnel without fear and failures.

It gives me immense pleasure to take the opportunity to


remember and thanks to the personalities who are involved
with this project work during its study stage during my days
of hard work. I feel that it is my duty to express thanks and
deep gratitude to everyone who is directly or indirectly
associated in the completion of this Dissertation Report

With deep reverence, I offer my deepest regards gratitude to


Mr. Gouri Sankar Moharana who is my finance faculti and
Miss.Nandita Mahapatro, finance faculty of Astha School
Of Management, without whom this Report could not have
been fulfilled.

3
SAROJ KUMAR DAS
Astha school of management

Reg. 0806998022

Executive Summary

Indian securities markets have undergone many changes during the


last decade. Exponential growth in trading volumes is pushing existing
trading systems and processes to capacity and increasing settlement
risk. With Indian market moving to a T+3 rolling settlement cycles in
line with global markets, SEBI is continuing its efforts to increase the
efficiency and transparency in Indian markets. Indeed it has been SEBI
endeavor to make the Indian markets, one of the most competitive and
efficient markets of the world.

Income, Savings mobilization and promotion of investment are


functions of the stock and capital markets which are a part of the
organized financial system in India.

This Project titled ‘An Overview of Indian stock market’ is an


attempt to understand the stock market and role played by Indian retail
Brokerage Firms in stock market. The objective of brokerage firms is to
help the investor to minimize the risk involved in investment and

4
maximize the return. Some of the main characteristics of the brokerage
industry include growth in e-broking; growing derivatives market,
decline in brokerage fees etc. An endeavor was also made to
understand the role played by Indiabulls Securities compared to its
competitors in Indian retail brokerage market.

The role played by Indian retail brokerage industry is of immense


significance, taking into account the health of the capital markets and
the intensity of competition among the brokerage companies.

Table of Contents
Particulars

Chapter 1 Outlook on Indian Stock market................

Chapter 2 Overview of Indiabulls..............................

Chapter 3 Overview of Indiabulls Securities..............

Chapter 4 Financial Analysis....................................

Chapter 5 Understanding Capital market..................

Chapter 6 Derivatives..............................................

Chapter 7 Competitors............................................

Chapter 8 Competitive Analysis...............................

Chapter 9 SWOT Analysis.........................................

Chapter 10 Research Methodology ………………………………

Chapter 11 Findings & Suggestions..........................

5
Questionnare……………………………………………………………

Conclusion ………………………………………………………………

Bibliography...........................................................

Appendix................................................................

Chapter 1

OUTLOOK ON INDIAN STOCK


MARKET
1.1 Introduction

Indian Stock Markets is one of the oldest in Asia. Its history dates back
to nearly 200 years ago. The earliest records of security dealings in
India are meager and obscure. The East India Company was the
dominant institution in those days and business in its loan securities
used to be transacted towards the close of the eighteenth century.

By 1830's business on corporate stocks and shares in Bank and Cotton


presses took place in Bombay. Though the trading list was broader in
1839, there were only half a dozen brokers recognized by banks and
merchants during 1840 and 1850. The 1850's witnessed a rapid
development of commercial enterprise and brokerage business
attracted many men into the field and by 1860 the number of brokers
increased into 60. In 1860-61 the American Civil War broke out and

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cotton supply from United States to Europe was stopped; thus, the
'Share Mania' in India began. The number of brokers increased to
about 200 to 250.

At the end of the American Civil War, the brokers who thrived out of
Civil War in 1874, found a place in a street (now appropriately called as
Dalal Street) where they would conveniently assemble and transact
business. In 1887, they formally established in Bombay, the "Native
Share and Stock Brokers' Association”, which is alternatively
known as “The Stock Exchange". In 1895, the Stock Exchange
acquired a premise in the same street and it was inaugurated in 1899.
Thus, the Stock Exchange at Bombay was consolidated.

The Indian stock market has been assigned an important place in


financing the Indian corporate sector. The principal functions of the
stock markets are
• enabling mobilizing resources for investment directly from the
investors
• providing liquidity for the investors and monitoring
• Disciplining company management.

The two major stock exchanges in India are National Stock Exchange
(NSE) and Bombay Stock Exchange (BSE).

1.2 National Stock Exchange

With the liberalization of the Indian economy, it was found inevitable to


lift the Indian stock market trading system on par with the international
standards. On the basis of the recommendations of high powered

7
Pherwani Committee, the National Stock Exchange was incorporated in
1992 by Industrial Development Bank of India, Industrial Credit and
Investment Corporation of India, Industrial Finance Corporation of India,
all Insurance Corporations, selected commercial banks and others.

The National Stock Exchange (NSE) is India's leading stock


exchange covering various cities and towns across the country. NSE
was set up by leading institutions to provide a modern, fully automated
screen-based trading system with national reach. The Exchange has
brought about unparalleled transparency, speed & efficiency, safety
and market integrity. It has set up facilities that serve as a model for
the securities industry in terms of systems, practices and
procedures.

NSE has played a catalytic role in reforming the Indian securities


market in terms of microstructure, market practices and trading
volumes. The market today uses state-of-art information technology to
provide an efficient and transparent trading, clearing and settlement
mechanism, and has witnessed several innovations in products &
services viz. demutualization of stock exchange governance, screen
based trading, compression of settlement cycles, dematerialization and
electronic transfer of securities, market of debt and derivative
instruments and intensive use of information technology.

Trading at NSE can be classified under two broad categories:

• Wholesale debt market


• Capital market

Wholesale debt market operations are similar to money market


operations - institutions and corporate bodies enter into high value
transactions in financial instruments such as government securities,

8
treasury bills, public sector unit bonds, commercial paper, certificate of
deposit, etc.

Capital market: A market where debt or equity securities are traded.

There are two kinds of players in NSE:

• Trading members
• Participants

Recognized members of NSE are called trading members who trade on


behalf of themselves and their clients. Participants include trading
members and large players like banks who take direct settlement
responsibility.

Trading at NSE takes place through a fully automated screen-based


trading mechanism which adopts the principle of an order-driven
market. Trading members can stay at their offices and execute the
trading, since they are linked through a communication network. The
prices at which the buyer and seller are willing to transact will appear
on the screen. When the prices match the transaction will be
completed and a confirmation slip will be printed at the office of the
trading member.

NSE has several advantages over the traditional trading exchanges.


They are as follows:

• NSE brings an integrated stock market trading network across


the nation.

• Investors can trade at the same price from anywhere in the


country since inter-market operations are streamlined coupled
with the countrywide access to the securities.

9
• Delays in communication, late payments and the malpractice’s
prevailing in the traditional trading mechanism can be done away
with greater operational efficiency and informational
transparency in the stock market operations, with the support of
total computerized network.

NSE Nifty
S&P CNX Nifty is a well diversified 50 stock index accounting for 22
sectors of the economy. It is used for a variety of purposes such as
benchmarking fund portfolios, index based derivatives and index funds.
NSE came to be owned and managed by India Index Services and
Products Ltd. (IISL), which is a joint venture between NSE and CRISIL.
IISL is India's first specialised company focused upon the index as a
core product. IISL have a consulting and licensing agreement with
Standard & Poor's (S&P), who are world leaders in index services. CNX
stands for CRISIL NSE Indices. CNX ensures common branding of
indices, to reflect the identities of both the promoters, i.e. NSE and
CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for
Exchange or Index. The S&P prefix belongs to the US-based Standard &
Poor's Financial Information Services.

1.3 Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in


Asia. It was established as "The Native Share & Stock Brokers
Association" in 1875. It is the first stock exchange in the country to
obtain permanent recognition in 1956 from the Government of India
under the Securities Contracts (Regulation) Act, 1956. The Exchange's
pivotal and pre-eminent role in the development of the Indian capital
market is widely recognized and its index, SENSEX, is tracked
worldwide.

10
SENSEX

The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock
index that subsequently became the barometer of the Indian stock
market.

SENSEX is not only scientifically designed but also based on globally


accepted construction and review methodology. First compiled in 1986,
SENSEX is a basket of 30 constituent stocks representing a sample
of large, liquid and representative companies. The base year of SENSEX
is 1978-79 and the base value is 100. The index is widely reported in
both domestic and international markets through print as well as
electronic media

The Index was initially calculated based on the "Full Market


Capitalization" methodology but was shifted to the free-float
methodology with effect from September 1, 2003. The "Free-float
Market Capitalization" methodology of index construction is regarded
as an industry best practice globally. All major index providers like
MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float
methodology.

Due to is wide acceptance amongst the Indian investors; SENSEX is


regarded to be the pulse of the Indian stock market. As the oldest index
in the country, it provides the time series data over a fairly long period
of time. Small wonder, the SENSEX has over the years become one of
the most prominent brands in the country.

The SENSEX captured all these events in the most judicial manner. One
can identify the booms and busts of the Indian stock market through
SENSEX.

11
The launch of SENSEX in 1986 was later followed up in January 1989 by
introduction of BSE National Index (Base: 1983-84 = 100). It comprised
of 100 stocks listed at five major stock exchanges. The Exchange
launched dollar-linked version of BSE-100 index i.e. Dollex-100 on May
22, 2006.

In order to fulfill the need of the market participants for still broader,
segment-specific and sector-specific indices, the Exchange has
continuously been increasing the range of its indices. The launch of
BSE-200 Index in 1994 was followed by the launch of BSE-500 Index
and 5 sectoral indices in 1999. In 2001, BSE launched the BSE-PSU
Index, DOLLEX-30 and the country's first free-float based index - the
BSE TECK Index. The Exchange shifted all its indices to a free-float
methodology (except BSE PSU index) in a phased manner.

The values of all BSE indices are updated every 15 seconds during the
market hours and displayed through the BOLT system, BSE website and
news wire agencies.

All BSE-Indices are reviewed periodically by the "Index Committee" of


the Exchange.

Chapter 2

OVERVIEW OF INDIABULLS

12
2.1 Introduction

Indiabulls is India’s leading Financial and Real Estate Company with a


wide presence throughout India. Indiabulls Financial Services Limited
was established in the year 2000 by three promoters all of whom are
engineers from Indian Institute of Technology, New Delhi, and has
attracted over Rs 700 million of investments from venture capital firms,
private equity funds and institutional investors.

History

• Indiabulls Financial Services Limited was incorporated on January


10, 2000 as Orbis Infotech Private Limited at New Delhi.
• The name of the Company was changed to Indiabulls Financial
Services Private Limited on March 16, 2001 due to change in the
main objects of our Company from Infotech business to
Investment & Financial Services business.
• It became a Public Limited Company on February 27, 2004 and
the name of the Company was changed to Indiabulls Financial
Services Limited.

Indiabulls has over 640 branches all over India. The customers of
Indiabulls are more than 4,50,000 which covers from a wide range
of financial services and products from securities, derivatives
trading, depositary services, research & advisory services, consumer
secured & unsecured credit, loan against shares and mortgage &
housing finance. The company employs around 4000 Relationship
managers who help the clients to satisfy their customized financial
goals. Indiabulls entered the Real Estate business in the year 2005
with its group of companies.

13
Indiabulls Financial Services Ltd is listed on the National Stock
Exchange, Bombay Stock Exchange and Luxembourg Stock
Exchange. The market capitalization of Indiabulls is around USD
2500 million (29th December 2006). Indiabulls and its group
companies have attracted USD 500 million of equity capital in
Foreign Direct Investment (FDI) since March 2000. Some of the large
shareholders of Indiabulls are the largest financial institutions of the
world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan
Stanley and Farallon Capital.

2.2 Growth of Indiabulls

Year 2000-01:

One of India’s first trading platforms was set up by Indiabulls Financial


Services Ltd. with the development of an in-house team.

Year 2001-03: The service offered by Indiabulls was increased to


include Equity, F&O, Wholesale Debt, Mutual fund, IPO
Financing/Distribution and Equity Research.

Year 2003-04: In this particular year Indiabulls ventured into


Distribution and Commodities Trading business.

Year 2004-05: This was one of the most important years in the history
of Indiabulls. In this year:

14
• Indiabulls came out with its initial public offer (IPO) in September
2004.
• Indiabulls started its Consumer Finance business.
• Indiabulls entered the Indian Real Estate market and became the
first company to bring FDI in Indian Real Estate.
• Indiabulls won bids for landmark properties in Mumbai.

Year 2005-06: The world renowned investment banks like Merrill


Lynch and Goldman Sachs increased their shareholding in Indiabulls. It
also became a market leader in securities brokerage industry, with
around 31% share in Online Trading. The world’s largest hedge fund,
Farallon Capital and its affiliates committed Rs. 2000 million for
Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls
Housing Finance Ltd. In the same year, the Steel Tycoon Mr. LN Mittal
promoted LNM India Internet venture Ltd. acquired 8.2% stake in
Indiabulls Credit Services Ltd.

Year 2006-07: In this year, Indiabulls Financial Services Ltd. was


included in the prestigious Morgan Stanley Capital International Index
(MSCI). The company also received an “in principle approval” from
Government of India for development of multi product SEZ in the state
of Maharashtra.

15
Diversified Business Group of Indiabulls

Securities &
Secured
Derivatives
Financing
Broking

Mortgage & Financial


Housing Products
Finance Distribution

Consumer
Financing

Fig 2.1: Diversified Business Groups of Indiabulls

2.3 IndiaBulls Subsidiaries

Indiabulls securities limited: business comprises of Securities &


Derivatives broking.

Indiabulls Credit services limited: business comprises of personal


loans, secured and unsecured loans, and housing and auto loans.

16
Financial products distribution: distribution of mutual funds and
insurance products.

Indiabulls commodities Pvt ltd: deals with commodity brokerage


business

Indiabulls Realities limited: is into development of Real estate and


mining.

Indiabulls housing loans: is into mortgage of properties and housing


loan business.

2.4 Organizational Structure of Indiabulls

The organizational structure of Indiabulls is Functional, which consist of


several departments.

Functioning Online: serving clients primarily through an Internet


based relationship targeted towards clients who value anytime,
anywhere access and can be serviced at low incremental costs.

Functioning Offline: serving clients primarily through an office based


relationship targeted towards clients who value physical interaction.

Online & offline business consist of following departments

• Administration
• Operations & Service quality
• Technology
• Finance
• Corporate affairs
• Human resources
• Marketing

17
• Corporate communications
• Legal

Department based Organizational Structure:

Director-Online Director-Offline

Operations Corporate
Technolog Corporate Human
Administration & Finance Communi Legal
y Affairs Resources cation
Service

Customer
Recruitment Marketing Training
Service

Sr. Vice President

Regional Manager

Branch Manager

Relationship
Manager

18
Figure 2.2 Department based organizational Structure
of Indiabulls

Regional Hierarchy of Indiabulls

19
Senior Vice President

Regional Manager

Branch Manager
Senior Sales Manager

Support System Sales Function

RM/SRM
Back Office Local Compliance
Executive Officer

ARM

Dealer

20
Figure 2.3 Regional hierarchies of Indiabulls

Key Positions

Chairman

CFO & President

Securities Consumer Finance Real Estate

Chief Executive
Executive Director Executive Director
Officer

Figure 2.4 Key Positions

21
2.5 Products and Services of Indiabulls

Indiabulls offer the following products and services in the financial


markets:

• Stocks
• Options and Futures

• Depository Services
• Commodities
• Insurance Products
• Mutual Funds
• Bonds and Debt Products

Services

Commercial Vehicle Loans:

In April 2006 Indiabulls started Commercial Vehicle Finance under the


flagship of Indiabulls Credit Services Ltd. in order to provide refinance
to its commercial vehicle clients. Their fundamentals, competent
management and expertise in financing the transporters are pretty
sound. The company’s unique market position enables it to excel in
client contentment, quick service and growth–led profitability.

.Mortgage Loans:

22
Indiabulls Housing Finance Ltd. which is a flagship of Indiabulls has
started lending of Mortgage Loans to prospective customers. This
company enables the home-seekers to access finance to buy their
homes. They provide different types of loans like plot loans, Loan
against Residential, Commercial and Rental Property, thereby enabling
the borrower to leverage the property owned to fund any genuine
needs be it Business Expansion, Child's Education, Child's Marriage or
for Holiday Abroad.

Consumer Finance:

Indiabulls is a retail focused organization that fulfills the credit needs of


a large percentage of population in India. The key aspect of Indiabulls
business model is to provide an extremely unique customer
experience.

23
Chapter 3

OVERVIEW OF INDIABULLS SECURITIES LTD

3.1 Introduction
Indiabulls Securities Ltd is engaged in the business of Internet based
trading and is registered with SEBI as a stockbroker, trading and
clearing member of NSE, member of BSE and as a depositary
participant with National Securities Depository Limited (“NSDL”) and
Central Depository Services (India) Limited (“CDSL”). ISL is also a
member of the National Securities Clearing Corporation Limited.

History
Indiabulls Securities Limited (ISL) was incorporated as GPF Securities
Private Limited on June 9, 1995.
The name of the company was changed to Orbis Securities Private
Limited on December 15, 1995 to change the profile of the company
and subsequently due to the conversion of the company into a public
limited company; the name was further changed to Orbis Securities
Limited on January 5, 2004.
The name of the company was again changed to Indiabulls Securities
Limited on February 16, 2004 so as to capitalize on the brand image of
the term “Indiabulls” in the company name. ISL is a corporate member
of capital market & derivative segment of The National Stock Exchange
of India Ltd.

24
Trading With Indiabulls

This section will introduce us about the process and instruments used to help
a customer or a client to trade with Indiabulls securities. This process is
almost similar to any other trading firm but there will be some difference in
the cost of brokerage commission.

Trading: It is a process by which a customer is given facility to buy and sell


share this buying and selling can only be done through some broker and this
is where Indiabulls help its customer.
A customer willing to trade with any brokerage house need to have a demat
account, trading account and saving account with a brokerage firm. Any one
having following document can open all the above mentioned account and
can start trading.

Document Required
• 3 photographs ( signed across)
• Photo Identification Proof - any of the following - Voter ID/Driving
License/Passport.
• Address Proof any of the following - Voter ID/Driving License/ Passport/
Bank statement or pass book sealed and attestation by bank official/
BSNL landline bill.
• A crossed Cheque favoring “India bulls Securities Ltd”. of the required
amount. The amount for Demat as well as trading will be Rs. 900/-(free
Demat +900 Trading Account) the minimum amount being Rs. 900 a
cheque can be given for a larger amount.
• Copy of PAN Card is mandatory.
• Registration Kit

25
• CDSL Demat Kit
• Bank and address proof declaration. (Master undertaking)
• PAN name discrepancy form
These documents may not be consumer friendly but it is to avoid illegal
transaction and to prevent black money this ensures that money invested
is accounted.

3.2 Business Model & Operations of Indiabulls


Securities Ltd

The three distinct internal business segments are:

• Online business

• Offline business

• Other Sales

Online business: serving clients primarily through an Internet based


relationship targeted towards clients who value anytime, anywhere
access and can be serviced at low incremental costs. The Online sales
force sells all products and services and follows the relationship
manager model.

Offline business: serving clients primarily through an office based


relationship targeted towards clients who value physical interaction
and are typically larger accounts. The Offline Sales force sells all
products and services and follows the relationship manager model. The
Institutional business serving clients such as mutual funds and pension
funds is considered part of the offline business due to largely similar
client servicing and channel needs as required for high net worth
clients. Indiabulls Securities Limited has established relationships with

26
some large institutional players in India and is qualified broker for
Equities, F&O and Debt markets for 145 such institutional clients.

Other Sales: includes insurance, research services and other offerings

3.3 Basic Requirement for doing Trading

Trading requires Opening a Demat account. Demat refers to a


dematerialized account.

You need to open a Demat account if you want to buy or sell stocks. So
it is just like a bank account where actual money is replaced by shares.
We need to approach the Depository Participants (DP, they are like
bank branches), to open Demat account.

A depository is a place where the stocks of investors are held in


electronic form. The depository has agents who are called depository
participants (DPs).

Think of it like a bank. The head office where all the technology rests
and details of all accounts held is like the depository. And the DPs are
the branches that cater to individuals.

There are only two depositories in India –

• The National Securities Depository Ltd (NSDL) and the


• Central Depository Services Ltd (CDSL).

27
3.4 Trading Products of Indiabulls Securities

Indiabulls
Securities
Trading Products

Cash Account Intraday Account Margin Trading

Fig

showing 3.1 Trading Products of Indiabulls securities

28
Indiabulls Securities provide three products for trading. They are
• Cash account
• Intraday account
• Margin trading (Mantra)

Cash account provides the client to buy 4 times of cash balance in his
trading account.

Intraday product provides the client to buy 8 times of his cash


balance in the trading account.
Mantra account – called as margin trading, is a special account to buy on leverage for a
longer duration

Chapter 4

FINANCIAL ANALYSIS OF INDIABULLS SECURITIES

4.1 Income: Indiabulls Securities Ltd income unit has the following
components

Income from Online business : The contribution of revenue from


Online business have grown from Rs. 31.85 million in FY 2002 to Rs.
242.26 million in FY 2004 and from 24.05% of total business in FY 2002
to 34.85% of business in FY 2004. The rapid growth of the online
business is driven by growth in total clients, increasing product
flexibility and quality, enhanced online-only features such as portfolio
analysis and updates, streaming tickers, enhanced product offering of
Power Indiabulls.

29
• Brokerage
• Equities
• F&O

Income from Offline Business: The offline business unit has one of
the widest branch networks in India with a pan India presence with
large market share. The revenues have grown from Rs. 96.02 million in
FY 2002 to Rs. 447.25 million in FY 2004 and have changed from
72.52% of total business in FY 2001 to 64.34% of business in FY 2004.
The rapid growth of the Offline business is driven by growth in total
clients, increased geographical presence.

• Brokerage
• Equities
• F&O
• Wholesale Debt Markets

Brokerage Income

Brokerage Income comprises revenues earned from Equities, F&O and


Wholesale debt markets on all stock exchanges.

• The income from brokerage services is driven primarily by the


number of active clients.
• The rapid growth in total clients is driven primarily by increased
geographical presence.
• Equities constitute the largest portion of brokerage business.
• F&O brokerage is becoming an increasingly important component
of its revenues as Futures & Options trading gains more
acceptance.

30
• Wholesale Debt market is focused on institutional clients.

Income from transaction and service charges and


interest income

Related income comprises revenues earned from market related


activities such as transaction charges, service charges and interest
levied on customer transactions. These charges are dependent on
trading volume, number of transactions completed and any ledger
debit amount in the client account.

Income from other Sales including Insurance, Mutual


Fund Sales and Other Products

Other income comprises revenues earned from sale of third party


products such as Insurance, Mutual Funds and new services such as
Research Services. Revenues are a function of volume of mutual funds
sold, the type of fund sold (active managed equity, passive fixed
income etc.) and the commissions paid on the funds sold.

Brokerage Income of Indiabulls Securities

31
Brokerage Income of Indibulls Securities of 3 Years( in Crore)

300
261.11
250
Brokerage Income

200

150
99.65
100
47.2
50

0
2004 2005 2006
Years

Mar-04 Mar-05 Mar-06

Bar Chart 4.1 Brokerage Income of Indiabulls Securities (in


Crore)

Segment wise Sales of Indiabulls securities for March 2005(in


Crore)

32
S e g m e n tw ise S a le s o f In d ia b u lls S e cu ritie s F o r M a rch 2005(in C ro re )

9.88 , 9 %
2, 2% 1 .9 3 , 2 %

0 .8 4, 1 %

B rok erage Inc om e


9 9 .6 5, 86 %
Inc om e F rom D epos itory S ervic e
Inc om e F rom other F inanc ial A c tivity
Interes t
Trans ac tion C harges

Pie Chart 4.2 Segment wise Sales of IndiaBulls Securities for


year 2005

Segment wise Sales of Indiabulls securities for March 2006(in


Crore)

33
Segmentwise sales of Indiabulls Securities For March 2006(in
Crore)
21.16, 7%
23.06, 7%
9.08, 3%

3.57, 1%

261.11, 82%

Brokerage Income Income From Depository Service


Income From other Financial Activity Interest
Transaction Charges

4.2 Financial Ratio Analysis of Indiabulls Securities


Ltd

34
Profitability ratios:

35
Indiabulls Securities Ltd. Mar 2004 Mar Mar 2006
2005
Per cent (Non-Annualized) 12 12 12 months
months months
-
Margins ratios (%)
-
As % of operating income
PBDT 43.05 44.75 58.76
PBT 41.45 42.87 56.7
PAT 25.92 27.25 37.49
PBDT (NNRT) 43.01 44.52 58.72
PBT (NNRT) 41.41 42.63 56.66
PAT (NNRT) 25.88 27.02 37.45
-
Corporate tax as per cent of 35.83 33.69 32.47
PBT
-
Returns ratios (%)
-
As % of total assets
PBDT 18.95 31.35
PBT 18.15 30.25
PAT 11.54 20
PAT (NNRT) 11.44 19.98
Operating cash flow 77.78 65.19
-
As % of net worth
PBDT 53.48 128.77
PBT 51.23 124.25
PAT 32.57 82.16
PAT (NNRT) 32.29 82.07
Operating cash flow 219.53 267.75
-
As % of capital employed
PBDT 47.39 58.11
PBT 45.39 56.06
PAT 28.86 37.07
PAT (NNRT) 28.61 37.03
Operating cash flow 194.53 120.82
-
Appropriation of profits (as %
of PAT)
Dividends 3.89 19.66 0.52

36
Equity dividends 0.44 2.27 0.07
Preference dividends 3.44 17.39 0.45
Retained profits 96.11 80.34 99.48
-
Dividends / net worth 6.4 0.43
Equity dividends / equity capital 3.98 0.45
Equity dividends / equity cap. & sh. 3.98 0.45
prem.

Liquidity ratios:
Indiabulls Securities Ltd. Mar 2004 Mar 2005 Mar 2006
Times (Non-Annualized) 12 12 12 months
months months
-
Short term liquidity
-
Cash / current liabilities & 0.67 0.86 1.7
provisions
Quick ratio 1.6 0.86 1.89
-
Medium to long term liquidity
-
Current ratio 1.776 1.141 2.137
Solvency ratio 1.567 1.561 1.269
Debt equity ratio 1.237 0.848 2.056
-
Interest incidence (%) 11.42 19.13 11.67
-
Interest cover
-
PBIT / interest 3.63 4.01 5.2
PBIT (NNRT) / interest 3.63 4 5.2
Operating cash flow / interest -2.99 11.97 8.91
-
(Rs. Crore)
Current assets 231.47 261.19 914.49
Current liabilities 130.34 228.86 427.87
Working capital 101.13 32.33 486.62
Net worth 83.34 108.43 181.77
Reserves & surplus 20.24 45.33 163.94

37
Asset utilization ratios
Indiabulls Securities Ltd. Mar Mar Mar 2006
2004 2005
Times (Non-Annualized) 12 12 12 months
months months
-
Efficiency ratios
-
Operating cash flow / total assets 0 0.78 0.65
Operating cash flow / gross fixed 0 17.46 14.15
assets
Operating cash flow / capital 0 1.95 1.21
employed
-
Operating income / total assets 0.42 0.53
Operating income / GFA / leased 9.51 11.58
assets
Operating income / capital 1.06 0.99
employed
-
PBDT (NNRT) / total assets 0.19 0.31
PBDT (NNRT) / gross fixed assets 4.23 6.8
PBDT (NNRT) / capital employed 0.47 0.58
-
PBT / total assets 0.18 0.3
PBT / gross fixed assets 4.05 6.56
PBT / capital employed 0.45 0.56
-
PAT / total assets 0.11 0.2
PAT / gross fixed assets 2.57 4.34
PAT / capital employed 0.29 0.37

4.3 Interpretation:

38
Profitability Ratios: Profitability is the net result of a number of
policies and decisions. The ratios examined thus far provide useful
clues to the effectiveness of firms operations.

Liquidity Ratios: liquidity ratios deal with firm’s ability to pay off its
debts. It includes

• Current ratio: The current ratio is calculated by dividing current


assets by current liabilities. The current ratio of Indiabulls
securities is 1.776, 1.441, & 2.137 for year 2004, 2005 & 2006
respectively.

Current ratio = Current assets

Current Liabilities

• Quick ratio (acid test ratio): The quick ratio is calculated by


deducting inventories from current assets and then dividing the
remainder by current liabilities. The quick ratio is a measure of
the firm’s ability to pay-off the short-term liabilities. A large part
of the firms current assets are tied up in slow paying debts. The
industry average for Acid test ratio is 2.1, but for Indiabulls
securities quick ratio is 1.6, 0.86 & 1.89 for year 2004, 2005 &
2006 respectively, which is less than Industry average. The quick
ratio should be high which indicates the company’s ability to pay-
off short term obligations.

Debt equity Ratio:

39
Debt equity ratio is the related contribution of creditors and owners of
the business in its financing.

4.4 Financial performance Year on Year

Increasing Market Share of Indiabulls on NSE Trading Volumes (1)

35
%
30.7
30 %
%
25 22.3
% % 21.9
18.8 %
20 %
% 17.5
%
15
%
10
%
5.5
3.4
5 %
1.1 1.9 2.2 %
%
% % %
0
%
FY200 FY200 FY200 FY200 FY200 (1)
2 3 4 5 6

Share in Online Share in Total


Trading Trading

(1) Source: NSE data from NSE website (Equity Segment)

40
Graph 4.3 Market share of Indiabulls on NSE trading
Volumes

Market Shares of Top Brokers on NSE (2)

40%
35%
35%
30%
24%
25%
20%
20%
14% 12%
15%
10% 7%
5%
0%
Top 5 Top 10 Top 25
FY02 FY05

UNDERSTANDING CAPITAL MARKET

41
5.1 Project Framework

An Outlook on Indian Stock Market

Capital Market Derivative Segment

Intraday Delivery Futures Options

Figure 5.1 Project Framework

42
The Indian capital markets have witnessed a transformation over the
last decade. India now finds its place amongst some of the most
sophisticated and largest markets of the world. With over 20 million
shareholders, India has the third largest investor base in the world after
the USA and Japan. The Indian capital market is significant in terms of
the degree of development, volume of trading and its tremendous
growth potential.

Over the past few years, the capital markets have also witnessed
substantial reforms in regulation and supervision. Reforms, particularly
the establishment and empowerment of SEBI, market-determined
prices and allocation of resources, screen-based nation-wide trading,
dematerialization and electronic transfer of securities, rolling
settlement and derivatives trading have greatly improved both the
regulatory framework and efficiency of trading and settlement.

5.2 Indian Capital markets - Chronology

• 1994- Equity Trading commences on NSE


• 1995- All Trading goes Electronic
• 1996- Depository comes in to existence
• 1999- FIIs Participation- Globalization
• 2000- over 80% trades in Demat form
• 2001- Major Stocks move to Rolling Set
• 2003- T+2 settlements in all stocks
• 2003 - Demutualization of Exchanges

5.3 Capital Market Participants


• Banks

43
• Exchanges
• Clearing Corporations
• Brokers
• Custodians
• Depositories
• Investors
• Merchant Bankers

5.4 Types of Investors


• Institutional Investors- MFs / FI / FIIs / Banks
• Retail Investors
• Arbitrageurs / Speculators
• Hedgers
• Day traders/Jobbers

5.5 Cash Market

The Spot Market or Cash Market is a commodities or securities


market in which goods are sold for cash and delivered immediately.
Contracts bought and sold on these markets are immediately effective.
Spot markets can operate wherever the infrastructure exists to conduct
the transaction. The Spot market for most securities exists primarily on
the internet. The trading in this cash market can be further divided into
Intraday and Delivery.

5.6 Key Terms


• Intraday refers to buying or selling stocks today with an
obligation to sell or buy the stock on the same day. It means
completing the trading cycle in the same day. Here the stocks do
not come to the Demat account.

44
• Delivery refers to buying stocks today with a plan of selling it in
future. In India there is a concept of T+2 settlements. Which
means a stock bought on trade day is credited to your Demat
account (or delivered) into your Demat account after 2 days.

• Square off- making the position nil. Say selling off the stocks.
(or buying back in case of short selling)
• Short selling- selling without having the possession of the
stocks (possible in intraday trade). Selling the stocks initially and
buying them back later. It is a concept used in the falling
markets.

• Demat Account- the account where in the shares are delivered.


Every Demat account is linked to a trading account and a savings
bank account. Demat account are provided by CDSL (central
depository services limited) and NSDL (national securities
depository limited). Indiabulls is a depository participant which
links the depository to the beneficial owner of the account
(client).

• Trading pool/margin account- the place where the stock is


received after the trade, it is the broker’s account called the
broker pool account.

• T+2= Transaction + 2 days

45
Chapter 6

DERIVATIVES
By far the most significant event in finance during the past decade has
been the extraordinary development and expansion of financial
derivatives. These instruments enhance the ability to differentiate risk
and allocate it to those investors most able and willing to take it

6.1 Definition:
Derivatives are instruments whose value is ‘derived’, in whole or in
part, from the value of one or more underlying assets.

History of Derivatives

The history of derivatives is surprisingly longer than what most people


think. Some texts even find the existence of the characteristics of
derivative contracts in incidents of Mahabharata. Traces of derivative
contracts can even be found in incidents that date back to the ages
before Jesus Christ. However, the advent of modern day derivative

46
contracts is attributed to the need for farmers to protect themselves
from any decline in the price of their crops due to delayed monsoon, or
overproduction.

The first 'futures' contracts can be traced to the Yodoya rice market in
Osaka, Japan around 1650. These were evidently standardized
contracts, which made them much like today's futures.

The Chicago Board of Trade (CBOT), the largest derivative exchange in


the world, was established in 1848 where forward contracts on various
commodities were standardized around 1865. From then on, futures
contracts have remained more or less in the same form, as we know
them today.

Derivatives have had a long presence in India. The commodity


derivative market has been functioning in India since the nineteenth
century with organized trading in cotton through the establishment of
Cotton Trade Association in 1875. Since then contracts on various other
commodities have been introduced as well.

Exchange traded financial derivatives were introduced in India in June


2000 at the two major stock exchanges, NSE and BSE. There are
various contracts currently traded on these exchanges. National
Commodity & Derivatives Exchange Limited (NCDEX) started its
operations in December 2003, to provide a platform for commodities
trading.

The derivatives market in India has grown exponentially, especially at


NSE. Stock Futures are the most highly traded contracts on NSE

47
accounting for around 55% of the total turnover of derivatives at NSE,
as on April 13, 2005.

6.2 Understanding Derivatives

The primary objectives of any investor are to maximize returns and


minimize risks. Derivatives are contracts that originated from the need
to minimize risk.

The word 'derivative' originates from mathematics and refers to a


variable, which has been derived from another variable. Derivatives are
so called because they have no value of their own. They derive their
value from the value of some other asset, which is known as the
underlying.

Derivatives are specialized contracts which signify an agreement or an


option to buy or sell the underlying asset of the derivate up to a certain
time in the future at a prearranged price, the exercise price. The
contract also has a fixed expiry period mostly in the range of 3 to 12
months from the date of commencement of the contract. The value of
the contract depends on the expiry period and also on the price of the
underlying asset.

For example, a farmer fears that the price of soybean (underlying),


when his crop is ready for delivery will be lower than his cost of
production.

Let's say the cost of production is Rs 8,000 per ton. In order to


overcome this uncertainty in the selling price of his crop, he enters into
a contract (derivative) with a merchant, who agrees to buy the crop at

48
a certain price (exercise price), when the crop is ready in three months
time (expiry period).

In this case, say the merchant agrees to buy the crop at Rs 9,000 per
ton. Now, the value of this derivative contract will increase as the price
of soybean decreases and vice-a-versa.

If the selling price of soybean goes down to Rs 7,000 per ton, the
derivative contract will be more valuable for the farmer, and if the price
of soybean goes down to Rs 6,000, the contract becomes even more
valuable.

This is because the farmer can sell the soybean he has produced at Rs
9000 per ton even though the market price is much less. Thus, the
value of the derivative is dependent on the value of the underlying.

6.3 Difference between Commodity Derivative & Financial


Derivative

If the underlying asset of the derivative contract is coffee, wheat,


pepper, cotton, gold, silver, precious stone or for that matter even
weather, then the derivative is known as a commodity derivative.

If the underlying is a financial asset like debt instruments, currency,


share price index, equity shares, etc, the derivative is known as a
financial derivative.

49
Derivative contracts can be standardized and traded on the stock
exchange. Such derivatives are called exchange-traded derivatives. Or
they can be customized as per the needs of the user by negotiating
with the other party involved.

Such derivatives are called over-the-counter (OTC) derivatives.


Continuing with the example of the farmer above, if he thinks that the
total production from his land will be around 150 quintals, he can either
go to a food merchant and enter into a derivatives contract to sell 150
quintals of soybean in three months time at Rs 9,000 per ton. Or the
farmer can go to a commodities exchange, like the National Commodity
and Derivatives Exchange Limited, and buy a standard contract on
soybean.

The standard contract on soybean has a size of 100 quintals. So the


farmer will be left with 50 quintals of soybean uncovered for price
fluctuations.

However, exchange traded derivatives have some advantages like low


transaction costs and no risk of default by the other party, which may
exceed the cost associated with leaving a part of the production
uncovered.

In India we have several derivatives, two of the most famous


derivatives traded on National stock exchange are

• Futures
• Option

50
Futures and options are traded on the NSE platform, with a normal
IndiaBulls trading account the client get the access to trade in the
F&O contracts.

6.4 Futures and Forwards

As the name suggests, futures are derivative contracts that give the
holder the opportunity to buy or sell the underlying at a pre-specified
price some time in the future.

They come in standardized form with fixed expiry time, contract size
and price. Forwards are similar contracts but customizable in terms of
contract size, expiry date and price, as per the needs of the user.

6.5 Options

Option contracts give the holder the option to buy or sell the underlying
at a pre-specified price some time in the future.

• An option to buy the underlying is known as a Call Option.


• An option to sell the underlying at a specified price in the future
is known as Put Option.

In the case of an option contract, the buyer of the contract is not


obligated to exercise the option contract. Options can be traded on the
stock exchange or on the OTC market.

6.6 Futures Terminology

51
• Spot Price: the price at which an asset trades in the spot
market.
• Futures Price: the price at which the futures contract trades
in the futures market
• Contract Cycle: The period over which the contract trades.
The index futures contracts on the NSE have a one-month,
two-month and three-month expiry cycles which expire on the
last Thursday of the month. On the Friday following the last
Thursday, a new contract having a three-month expiry is
introduced for trading.
• Expiry Date-the date specified in the futures contract. It is
the last Thursday of the month
• Contract Size: the amount of asset that has to be delivered
less than one contract. For instance, the contract size on NSE
futures market is 100 Niftiest. It is prescribed by NSE for
stocks. Each stock had a different lot size.
• Basis – the futures price minus the spot price. There will be a
different basis for each delivery month for each contract. In a
normal market, basis will be positive. This reflects that futures
prices normally exceed spot prices.
• Cost of Carry – the storage cost plus the interest that is paid
to finance the asset less the income earned on the asset.
• Initial Margin – the amount that must be deposited in the
margin account at the time the futures contract is first entered
into. These margins are prescribed by the exchange. It varies
from stock to stock.
• Marking to Market – the adjustment made at the end of
each trading day to the investor’s margin account to reflect
the investor’s gain or loss depending upon the futures closing
price. It is the difference between today’s closing price and
yesterdays closing. The MTM profit /loss are credited to the

52
client account on day to day basis. Thus we call this a T+0
settlement.
• Maintenance Margin – somewhat lower than the initial
margin; the balance in the margin account must never
become negative and in case it does, the investor receives a
margin call that must top-up the account to the initial margin
level before trade commences the following day.

Difference between Long Position & Short Position

A long position is an agreement to buy. You take a long position


on a stock when you are bullish or have a feeling that the stock
will move up.

LONG => BUY

A short position is an agreement to sell. You take a short position


on a stock when you are bearish or have a feeling that the stock
will move down.

SHORT => SELL

There are around 152 companies which are underlying for future
and options in NSE. There are

• index Futures (Nifty futures, Bank Nifty, CNX IT futures)


• Stock Futures (Infosys futures. ITC futures, etc linked to specific
stocks)
• Index options (linked to indices)
• Stock option (linked to specific stocks).

53
6.7 Option Contracts: The owner of an option has the OPTION to buy
or sell something at a predetermined price. Option provides the buyer
of the contract the right but not the obligation to exercise.

Right to BUY / OWN – CALL OPTION

Or Right to SELL / WRITE – PUT OPTION

You buy a call option when you are bullish or have an upward
target.

You buy a put option when you are bearish or have a downward
target.

6.8 Options Terminology

• Stock options – options on individual stocks. A contract gives


the buyer the right to buy or sell shares at the specified price
• Buyer of an option – the one who by paying price (premium)
buys the right but not the obligation to exercise his/her option on
the seller/writer
• Writer of an option – the one who by receiving premium, is
obliged to sell/buy the asset if the buyer exercises on him
• Call Option – gives the buyer the right but not the obligation to
buy an asset by a certain date for a certain price
• Put Option – gives the buyer the right but not the obligation to
sell an asset by a certain date for a certain price
• Spot Price – the price at which an asset trades in the spot
market.

54
• Strike Price – the target price or the expected price.
• Contract Cycle – the period over which the contract trades.
There are three month contracts just like the futures.
• Expiry Date – the date specified in the option contract. It is the
last Thursday of the month, just as in futures.
• Contract Size – the amount of asset that has to be delivered
under one contract.
• In-The-Money Option (ITM) – an option that would lead to a
positive cash-flow to the holder if it were exercised immediately.
• A call option on the index is said to be ITM if the current index
stands higher than the strike price (Spot Price > Strike Price).
• A put option is ITM if the index is below the Strike price (Spot
Price < Strike Price).
• At-The-Money (ATM) – an option that would lead to zero cash
flows to the holder if it were exercised immediately.
• Out-Of-The-Money Option (OTM) – an option that would lead
to a negative cash-flow to the holder if it were exercised
immediately.
• A call option on the index is said to be OTM if the current index
stands at a level which is less than the strike price (Spot Price <
Strike Price).

55
Chapter 7

THE COMPETITORS
7.1 Major Competitors of Indiabulls Securities Ltd
Indiabulls Securities faces significant competition from companies
seeking to attract client financial assets, including traditional and
online brokerage firms, mutual fund companies and institutional
players having wide presence and a strong brand name. They are;

• ICICI Securities Ltd.


• Kotak Securities Ltd.
• India Infoline
SSKI Ltd.
• Motilal Oswal Securities
• Karvy
• Geojit Securities
• HDFC Securities

7.2 India Infoline Ltd


India Infoline Ltd is listed on both the leading stock exchanges
in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock
Exchange (NSE). The India Infoline group, comprising the holding
company, India Infoline Ltd and its subsidiaries, straddles the entire
financial services space with offerings ranging from Equity research,
Equities and derivatives trading, Commodities trading, Portfolio

56
Management Services, Mutual Funds, Life Insurance, Fixed deposits
and other small savings instruments to loan products and Investment
banking. India Infoline also owns and manages the websites,
www.indiainfoline.com and www.5paisa.com .

India Infoline Securities Pvt Ltd

India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline


Ltd, which is engaged in the businesses of Equities broking and
Portfolio Management Services. It offers broking services in the Cash
and Derivatives segments of the NSE as well as the Cash segment of
the BSE.

A choice of technologically advanced trading that is with the help of


5paisa.com. 5 paisa also represents the availability of world class
service to investors at the lowest possible rate - 5 paisa for every trade
of Rs100, i.e., a brokerage rate of 0.05%.

Features of 5 paisa.com:

Paisa sense - They offer a good value for money proposition. Their
brokerage rates are very competitive, charging only 5 paise for Rs100
of trade done, which is 0.05% brokerage. They offer the most
reasonable rates, independent of your net worth or volumes. In case of
trades that result in delivery, they charge an additional 0.20% for back
office and securities handling.

57
Personalized service - At 5paisa.com, they are committed to provide
you with unparalleled service, using e-mail, call centers and support
staff. They have also invested in physical infrastructure.

Protection – All transactions of 5paisa.com are secure and


confidential. The orders are electronically routed via sophisticated
trading systems for execution. They follow a world class security
system that enables them to protect from any fraud or hacking.

Pedigree - 5paisa.com is a brand renowned for quality of information


and services, they are professionally managed, with a skill set which is
of high standard. Their top management has years of experience in
financial services with leading banks and institutions.

7.3 Sharekhan Securities

Sharekhan was created when SSKI Investor Services Pvt. Ltd., a


company in the securities and equities segment decided to harness the
power of the Internet and offer services to its customers through an
online stock trading portal. Sharekhan brings and provides a user-
friendly online trading facility. They also have an extensive all-India
ground network of franchisees across the country.

The company offers its services through a combination of online and


offline channels. The online model comprises a portal, chat facilities,
and 'speed trade' terminals. And the offline model uses a combination

58
of an IVR infrastructure and a team of customer agents to receive
orders over the telephone.

7.4 Motilal Oswal

Motilal Oswal Securities Ltd. was founded in 1987 as a small sub-


broking unit, with just two people running the show. Motilal Oswal
Securities Limited has established itself as the Best Local Brokerage
House in India (Asia Money Brokers’ Poll 2005). Their Institutional
Equities Division combines the efforts of the Research and Sales &
Trading departments to best serve clients' needs. Consistent delivery
of high quality advice on individual stocks, sector trends and
investment strategy has established them as a reliable research unit
amongst leading Indian as well as international investors.

Their sales & trading team, comprising top equity professionals,


translates the research findings into actionable advice for clients,
based on their specific needs. Sophisticated computerized tools are
used to understand client investment profile and objectives, which
ensures proactive and timely service.

FEATURES
Integrity: A company honoring commitment with highest ethical and
business practices.
Team Work: Attaining goals collectively and collaboratively.

59
Meritocracy: Performance gets differentiated, recognized and
rewarded in an apolitical environment.
Passion & Attitude: High energy and self motivated with a “Do It”
attitude.
Excellence in Execution: Time bound results within the framework of
the company’s value system.

7.5 Karvy

The birth of Karvy was on a modest scale in the year 1982. It began
with the vision and enterprise of a small group of practicing Chartered
Accountants based in Hyderabad, who founded Karvy. They started
with consulting and financial accounting automation, and then carved
inroads into the field of Registry and Share Transfers. Karvy has built a
reputation as an integrated financial services provider, offering a wide
spectrum of services for over 20 years.

In 1982, a group of Hyderabad-based practicing Chartered Accountants


started Karvy Consultants Limited with a capital of Rs.150, 000 offering
auditing and taxation services initially. Later, it forayed into the
Registrar and Share Transfer activities and subsequently into financial
services.

Karvy made inroads into a host of capital-market services, - corporate


and retail - which proved to be a sound business synergy. In January
1998, Karvy became the first Depository Participant in Andhra Pradesh.

60
Karvy Securities Limited
Deals in distribution of various investment products, viz., equities,
mutual funds, bonds and debentures, fixed deposits, insurance policies
for the investor.

7.6 Kotak Securities

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the


stock broking and distribution arm of the Kotak Mahindra Group. Kotak
Mahindra is one of India's leading financial institutions, offering
complete financial solutions that encompass every sphere of life. From
commercial banking, to stock broking, to mutual funds, to life
insurance, to investment banking, the group caters to the financial
needs of individuals and corporate.

Kotak Securities was set up in 1994. Kotak Securities is a corporate


member of both The Bombay Stock Exchange and the National Stock
Exchange of India Limited.

Its operations include stock broking and distribution of various financial


products - including private and secondary placement of debt and
equity and mutual funds. Currently, Kotak Securities is one of the
largest broking houses in India with wide geographical reach. The
company has four main areas of business:

• Institutional Equities,
• Retail (equities and other financial products),
• Portfolio Management and
• Depository Services.

61
Kotak Securities Ltd is also a depository participant with National
Securities Depository Limited (NSDL) and Central Depository Services
Limited (CDSL), providing dual benefit services wherein the investors
can use the brokerage services of the company for executing the
transactions and the depository services for settling them.

Kotak Securities has 195 branches servicing more than 2, 20,000


customers and coverage of 231 Cities. Kotaksecurities.com, the online
division of Kotak Securities Limited offers Internet Broking services and
also online IPO and Mutual Fund Investments.

Features of Kotak Securities

• AKSESS Kotak securities Electronic Search Service: AKSESS


offers you an easy way to get to Kotak Securities' institutional
research. On this online archive you will be able to access
estimates, company reports, sector reports, strategy reports and
a bunch of other products including the daily India Market Flash
produced by Kotak Securities.
• High Quality of software (KEAT): K.E.A.T is special software
that Koataksecurities.com provides its customers using which
they can view live market rates of scrip’s on both the NSE and
BSE.
• Research Reports: Kotak Securities provide Different reports to
investors which include

• Intraday calls
• Daily Technical View
• Daily Morning Brief
• Weekly Technical Report
• Sectoral Reports

62
• Stock Ideas
• Derivative Reports
• SMS Alerts: Kotak Securities also provides SMS alerts to
customers providing useful tips about stocks & shares.

7.7 ICICI SECURITIES

ICICI Securities, A subsidiary of ICICI Bank, was set up in February 1993


to provide investment-banking services to investors in India. As on date
ICICI Bank holds 99.9% of the share capital of ICICI Securities.

ICICI Securities Limited is India’s leading full service investment bank


with a dominant position in all segments of its operations –
• Corporate Finance
• Fixed Income and
• Equities.

Features of ICICI securities ICICI provides multiple channels in


banking like, which is unique feature.

• Internet Banking
• Mobile Banking
• ATM banking
• Phone Banking
• ICICI Securities is amongst the largest arranger of funds in Debt
and Equity segments and also amongst the leading advisors in
Mergers and Acquisitions.

63
Chapter 8

COMPETITIVE ANALYSIS FOR INDIABULLS


SECURITIES

8.1 Indian Retail Brokerage Market


The Indian retail brokerage industry consists of companies that
primarily act as agents for the buying and selling of securities (e.g.
stocks, shares, and similar financial instruments) on a commission or
transaction fee basis.

It has two main interdependent segments: Primary market and the


Secondary market.

64
Indian Retail Brokerage Market

Interdepende
nt

Segments

Primary Market Secondary Market

Figure 8.1 Interdependent Segments of Brokerage Market

Objective: The main objective is to


• Analyze retail brokerage industry taking into account the health
of the capital markets, Derivative Market and the intensity of
competition among the brokerage companies.
• Doing Competitive Analysis for Indiabulls

8.2 Major growth drivers for brokerage revenue and trading


volume are:

• Continuous fall in brokerage fees


• Adoption of technology — screen-based trading, electronic
matching, and paperless securities.
• Centralized operations, effective risk management, and control on
large interconnected operations spanning multiple locations, which

65
is enabled by telecom connectivity and low costs
• Increasing access to capital and the ability to provide margin
finance

8.3 Parameter Assessment for Doing Competitive analysis


A differentiating aspect is a comparative assessment of the top retail
brokerages on various value indicators, comprising of
• Product
• Pricing
• Service
• Unique Value proposition.

Competitive analysis

Product Price 66 Service Value Proposition


8.4 Customers need to analyze the Brokerage Firms Based on
these 5 Parameters.
• Brokerage & Miscellaneous charges
• Quote Software
• Execution Platform
• Demat Account, and finally
• Back office Support.

Brokerage & Miscellaneous charges: This accounts for all the


charges that you incur for your trading/investing. A few examples
would be: Demat Account maintenance, Brokerage, Annual account
Fee, Telephone based trading charges, trading software usage charges,
etc.

Quote Software: This is used mainly for technical study and for live
quotes. Many people don’t evaluate quote software. Some Investors
don’t pay attention to the quality of data (how accurate it is). Or how
fast and often it refreshes. Does it allow us to back test our strategy?
Does it allow customizing technical signals/parameters?? Does it allow
us to see historic data? For, what period is intra day data available?
They might need all this information. They should be clear on what
they need and ensure quote software provides it all.

Execution Platform: It’s nothing but a platform that allows us to

67
execute our trade fast. It should automate trade management and
execution, and should automatically give protection against human
errors.

Demat Account: Demat account should only be opened with a well


known and established brokerage firm in the market.

Back office Support: People while trading face lots of problem


because of lack of good back office support. Relationship Managers
trading without their client’s knowledge, funds not being transferred,
trades not being executed, slow execution etc are a few examples.

8.5 Brokerage Charges

Intraday Brokerage charges of the Competitors of Indiabulls


Securities Ltd

68
In tra d a y B ro ke ra g e C h a rg e s
0.3
0.25
0.25

0.2
Charges

0.15
0.1 0.1 0.1 0.1
0.1
0.05 0.05
0.05

0
Indiabulls K o tak India-infolineIC IC I direc t K arvy M otilal S harek han
S ec urities os w al
F in a n c ia l B ro k e ra g e F ir m s

Indiabulls K otak S ec uritiesIndia-infoline IC IC I direc t K arvy M otilal os w alS harek han

Graph 8.2 Intraday Brokerage Charges

Delivery Brokerage charges of the Competitors of Indiabulls


Securities Ltd

69
Delievery Brokerage Charges

0.8 0.75

0.7

0.6
0.5 0.5 0.5 0.5 0.5
0.5 0.45
Charges

0.4

0.3

0.2

0.1

0
Indiabulls Kotak India- ICICI Direct Karvy Motilal oswal Sharekhan
Securities infoline
Financial Broke rage Firms

Indiabulls Kotak Securities India-infoline ICICI Direct Karvy Motilal oswal Sharekhan

Graph 8.3 Delivery Brokerage Charges

8.6 Analyzing the Blogs from Web Site Traderji.com (online


community for Indian Investors & Traders)

70
We were interpreting the blogs written by customers, their experiences
and their review on brokerage firms.
In this web site they have conducted opinion poll on broker preferences
of customers & reasons for choosing the particular brokerage firm. In
this poll opinion, customers have shared their viewpoint about pros &
cons of different brokerage firms.

Experiences of Customers

Poll Options

Which online broker u prefer and why - chose one


5paise
ShareKhan
Motilal Oswal
ICICI Direct
HDFC
India Bulls
Kotak
Any other (mention name)
Vote Now
View Poll Results

Poll Results of Blogs: Total Number of Voters =457

71
Which Online Broker You Prefer? Poll Results of Blog(Voters 457)

Any other Mention,


India-Infoline(5paisa),
(58), 13%
(68), 15%

Kotak, (34), 7%
Sharekhan, (83), 18%

Indiabulls, (75), 16% Motilal Oswal, (16),


4%
ICICI direct, (109), 24%

HDFC, (14), 3%

India-Infoline(5paisa) Sharekhan Motilal Oswal ICICI direct


HDFC Indiabulls Kotak Any other Mention

Pie chart 8.4 showing Poll results

8.7 Competitive Strength of Indiabulls Securities


Indiabulls securities Ltd have a distinct set of competitive advantages
that make it uniquely capable of winning in the marketplace against its
competitors
• Diverse Branch Network
• Bouquet of financial products and services
• Advanced technology team that delivers market leading product
innovation
• Strong sales and marketing teams with continuous reinvestment
and training
• Strong cross-selling opportunities.
• Strong and experienced promoters
• Leading product innovation and marketing strategies

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• Well capitalized player, with strong banking relationships and
credit ratings
• Ability to combine people and technology in unique ways
• Strong market presence and increased market share leading to a
virtuous cycle of growth and Profitability.

Core pillars of Business strategy


• Increase the number of Client Relationships.
• Offer Diversified Financial Products & Services.
• Multiple Channels – Enhance Customer Experience and
Opportunities.
• Low cost and highly scalable business.

Merits of Indiabulls Securities


• Low brokerage charges (Competitive) with 0.10 for Intra-day
and 0.50 % for delivery.
• Indiabulls securities provide 8 times margin for Intra-day and 4
times margin for delivery.
• Indiabulls is suitable for both Day trading & Long term
investment
• IndiaBulls has software called Power IndiaBulls. It is a Java
based application, with real-time streaming quotes. It is fast in
terms of speed and execution
• Research reports are free of cost to trading members.
• They Provide 3 in 1 interface, i.e. Demat Account, Trading
account & bank account all are linked in one interface.

73
De-Merits of Indiabulls Securities
• You have to open a bank account with the banks mentioned
in Indiabulls site for Credit/ Debit Facility as they don’t have their
own bank. And In ICICI direct , you have a direct debit/credit
facility with the bank
• Most customers feel that it is difficult to understand the
ledger reports of Indiabulls securities, so proper customer
guidance should be given.
• Lack of Banking arm
• Rural market is yet to be tapped.
• More importance should be given to promotions &
advertisements.

Value Proposition of Indiabulls Securities


• ISL provide a very good Trading tools like Power Indiabulls &
Indiabulls market trader.
• Power Indiabulls: A desktop Trading application offering clients
sophisticated trading tools accessible at lightning fast speed.
• Indiabulls Market Trader: Browser based trading application
built for retail investor.
• Indiabulls Equity Analysis: Premium research on 400 plus
companies.
• Indiabulls Professional Network: Offers real-time prices,
detailed data and news, intelligent analytics and electronic
trading capabilities.
• Relationship manager: Indiabulls securities robust technology
is integrated with knowledgeable and customer-focused

74
relationship managers who are available 24X7 to assist the
clients.
• In Depth Market Analysis and Research
Their special research cell bring you intensive research reports
on how the stock market is faring, when is the right time to
invest, when to execute your order and more. Depending on what
kind of investor you are, they bring you fundamental or basic
research and technical research.

8.8 Number of Branches of Competitors compared with


Indiabulls securities

Branches of Competitors of Indiabulls as per the Year 2005-06

800 750
Number of Branches

667
700
600
500
500
400
400
306 257
300 250
200
100
0
Kotak Indiabulls ICICI Sharekhan India- Motilal- Karvy
Infoline oswal
Competitors

Kotak Indiabulls ICICI Sharekhan India-Infoline Motilal-oswal Karvy

Number of Customers of competitors compared with


Indiabulls

75
Number of Customers Using Online Trading Terminal as per Year 2005

800,000
Number of Customers using Online Trading 675,000
700,000

600,000

500,000

400,000
Terminal

300,000
140,000
200,000
75,000 60,000 90,000
100,000

es
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In
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Broke rage Firms

8.9 Merits & De-merits of Competitors

ICICI securities: It provides products & services in fixed income,


equity & corporate finance.
Merits of ICICI Securities
• ICICI Direct is considered best for long term investment.
( Indiabulls is suitable for both Day trading & Long term
investment)
• A direct debit/credit facility with the bank.
• All facilities available under one umbrella.
• BTST (Buy today & sell tomorrow) is available; this facility is
available only in ICICI Direct.
• Can apply for IPO online (we can’t do this in Indiabulls).

76
• Can apply for mutual funds online and can also sell them online.
• Internet banking demo which gives customers an opportunity to
learn.

De-Merits of ICICI Securities


• Brokerage charges are high - intraday 0.3% and 0.75% delivery
compared to other brokerage firms (is considered as highest in
the market).
• Day trading is a night mare in ICICI because of Web based
terminal, which is very slow. Orders placed at or around 10.00 hrs
may be queued for a while. So
intra-day Margin trading could be annoying now & then. It's not
much of a hassle for Cash trading though.
(Indiabulls offers you a trading terminal 'powerIndiabulls', which
is java based software. It is fast in terms of speed and execution).
• ICICI Direct brokerages are not negotiable ( Where as Indiabulls
Brokerage Charges are negotiable)
• While opening Demat account, three accounts are opened ,the
saving bank account, trading account and Demat account and
you have to maintain minimum of rs5000 in case if it is not a
salaried account. (That Rs5000 sleeps without earning any
money)
• Other banks account cannot be linked with the ICICI trading
account.
• They charge an annual maintenance charges are Rs540.

Value Proposition of ICICI Securities

• E-Instructions: You can transfer securities 24 hours a day, 7


days a week through Internet & Interactive Voice Response (IVR)

77
at a lower cost. Now with "Speak to transfer", you can also
transfer or pledge instructions through our customer care officer.

• Mobile Request: Access your Demat account by sending SMS to


enquire about Holdings, Transactions, Bill & ISIN details.

• The equities research team tracks over 15 key sectors of the


Indian economy and publishes in-depth research reports every
year.

• The equities team at ICICI Securities comprises of research desk,


sales desk and the trading desks.

ShareKhan
Merits of ShareKhan Securities
• Low brokerage charges, intraday 0.1% and 0.5% for
delivery.
• Live streaming quotes
• Customer support is good
• No monthly charges
• Can trade in both BSE and NSE
De-Merits of ShareKhan Securities
No BTST (buy today sell tomorrow), in ShareKhan you can’t sell a share
today which you bought yesterday.
• You have to open a bank account with the banks mentioned
in ShareKhan site.
• Streaming quotes requires JVM (Java Virtual Machine); this
may be big headache for customers.
• Annual charges are Rs330.

78
• Their trading terminals are certainly not for "investors",
only for active traders. That is because, you have to trade a
certain volume every month, otherwise you end up paying a fine

Comparing ShareKhan & ICICI Direct

Sharekhan ICICI Securities

Live Streaming quotes No live streaming quotes

but streaming quotes require JVM

No BTST facility BTST facility is available

(Buy today sell tomorrow)

Annual Maintenance charge Rs 330 Annual Maintenance charge


Rs 540
You have to open a bank account other banks account cannot
be
With the banks mentioned in linked with ICICI trading
ShareKhan site account
Can apply IPO online Can apply IPO online

Not necessary while opening a Demat


account you
Need to maintain a minimum
of Rs 5000
Can trade in BSE & NSE Can Trade in BSE & NSE

No Monthly Charges No Monthly Charges

Cannot apply can apply mutual funds


online

79
India Infoline
Merits of India Infoline (5 Paisa.com) Securities
• Low brokerage charges, intraday 0.10% and 0.50% for
delivery and it is negotiable.
• Minimum brokerage per share will be 1 paisa for trading
transactions and 5 paisa for delivery based transactions.
• 5 paisa provides 6 times margin for Intraday & 8 time’s
margin for Delivery.
• All customers will get Digital Contract Notes. Physical
contract notes could be provided on request which would entail a
nominal charge.

De- Merits of India Infoline (5 Paisa.com) Securities


• Registration Fees (one time) Rs.500/ and is non-refundable.
• Software License Fee Rs.799/- per month or 7999/- per
annum and is non-refundable.
• There is lot of Hidden costs.
• Annual Service Charges Rs.250.
• Customers who just want to have a depository relationship
will be required to pay Rs.1000/-, for each Demat account, which
will be adjusted against service charges.
• The information in their web based terminal is too much
compressed in one screen.
• Trader terminal is good, but the interface is too
complicated

Kotak Securities

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Merits
• They provide streaming quote software free.
• Low Brokerage charges with 0.05% for Intra-day & 0.45% for
delivery.
• Kotak Securities will offer small-time retail investors with invest
able surpluses as low as Rs.5, 000 a chance to invest in capital
markets.
• Transactions are transparent with effective back office support.
• They provide Simple Ledger reports, which customers feel easy
to understand than any other brokerage firms.

Mutual fund & IPO facility is available online.


• Flexibility of products - Once you invest with Kotak Securities,
you can enjoy access to a wide range of products and services to
help you make the most of your investments.

De-Merits
• Unethical act: Geojit Securities Ltd has accused kotak securities
stock broking firm of hacking into its account to steal critical
business information and blocking information access. (Report:
dated 2002, Ref: www.domain-b.com).
• Some investors have bad experience with accounts opening &
they complain that it takes a long time for opening accounts.
• Some customers are not happy with customer care of Kotak
securities.

Value Proposition of Kotak Securities

• Kotak Securities have a definite policy on brokerage, and they


have different slabs for different clients based on their turnover.

81
You can always choose your brokerage based on your style and
quantum of trading.
High Quality of software (KEAT)
K.E.A.T is a special software that Koataksecurities.com provides its
customers using which they can view live market rates of scrip’s on
both the NSE and BSE, create a watch list and simultaneously place
orders, view order reports, research companies etc. It is a complete
online trading terminal.
Mobile trading
The facility is exclusively designed to give you instant access to
the stock market through mobile phone.
• Phone Trading – Call and Trade
Call & Trade is a service offered by Kotak Securities for its
customers, which provides customers with a facility to trade over
the phone. Kotak Securities provides you a toll free number that
you can call from anywhere in India.

Chapter 9

SWOT ANALYSIS OF INDIABULLS SECURITIES

82
9.1 STRENGTHS
• Integrated technology platform: - Since the launch of their
website, www.indiabulls.com their online trading platform, they
have invested in building a technology platform. They have also
developed software called “power Indiabulls”. Their trader
terminal is an application which allows customers to trade on
both the BSE and the NSE, has features like live intra-day tick by
tick charts, historical charts, price alerts and other features. The
features allow them to seamlessly integrate across delivery
channels, online or offline through branches or telephone.
• Pan India distribution network: - They have 640 branches
across India. These branches help in customer acquisition as well
as customer service. Their distribution network is well spread to
capture the target audience and cater to the needs of their
potential customers.
• Relationship manager facility: - This is one of the unique
services that Indiabulls offer’s its customers. Every customer is
provided with a relationship manager, where in the customers
can contact these managers at anytime of the day to get
information on the market or get their queries clarified.
• Growth rate: - The Company is growing at a very rapid rate,
from 25 branches in the year 2003 it has grown to 650 branches
in the beginning of 2007. Not only has it seen a fast growth rate
in the number of branches but also it has grown in the number of
clients and the employee strength. They have a customer base of
more than 450,000 and over 4500 relationship managers.
Indiabulls has been rated as the “Fastest Growing Large Cap
Company” in India in a report by Business Today magazine in
April, 2006.

83
• Power Indiabulls has developed into brands: -
Indiabulls.com and power Indiabulls which is their software are
well known brands amongst retail investors across India. In all the
cities that they have expanded into, they have been able to
leverage upon brand awareness and have established a customer
base.
• Strong sales and marketing teams that deliver market
leading product innovation: - their relationship manager
channel offers a single point contact to all their retail customers.
These managers offer personalized services to their customers
and help to build strong and continuing relationships with them.
The marketing associates help the company in client acquisition
at minimal cost and they also help the company and its
subsidiaries in increasing their penetration into smaller towns and
cities.
• Strong banking relations and credit ratings: - Indiabulls has
banking relation with some of the major banking institutions in
the country such as HDFC Bank, ICICI Bank, Standard Chartered
Bank, etc, for easy mobilization of funds of the customers.
• Strong market presence and increased market share: -
Their growing client base and market share have increased their
market presence and brand recognition has enhanced their
profitability. Their brand and profitability allows them to recruit
good and efficient employees, compensate them attractively and
provides the flexibility for them to invest in the business and
technology systems these attributes in turn has a positive effect
on the growth of the company.

84
9.2 WEAKNESSES

• Lack of a banking arm: - Indiabulls does not have a banking


arm of its own which otherwise would have helped the company
to a large extent. Whereas a few of its competitors like HDFC
securities, ICICI securities, Kotak securities, etc have their own
banking arms which make the transactions easier and simpler.
• Loss of relationship managers leads to loss of clients: -
Their business is dependent on the team of relationship
managers who directly manage client relationships. Any events
that harm these relationships including the loss of their
relationship managers may lead to the loss of client.

9.3 OPPORTUNITIES

• Changing demographics with higher disposable income: -


India is one of the fastest growing economies in the world. It has
a large and rapidly growing middle class of 300 million people
with increasing levels of discretionary income available for
consumption and investment purposes. The options they have for
investments are fixed deposits, post office deposits etc,. This
gives them a limited interest rate on their investment; where as
the stock market provides a good scope for making good returns.
The evolution in India’s demographic setup with a median age of
24 years and higher consumption expenditure is expected to

85
have a virtuous cycle effect by improving the economic growth
and per capita income which would result in higher savings and
investments.

• Rapid penetration of internet and computers: -Technology


is vastly used in stock market trading. Now, with the use of the
computers and internet the stock market trading has become
fast. The traders can place orders through the internet and
execute them. This saves the time of the investors, who earlier
had to make calls to their brokers in order to trade. These people
are willing to use advanced communication tools, such as
computers and telephones, and want to take charge of their
personal investment decisions. The use of technology is
influencing more people to invest in the stock market.

• Market size and Characteristics: -India is a large and growing


economy with rapidly expanding financial services sector. The
sector has witnessed a transformation over the last decade as a
result of the economic liberalization which started in 1991. India
is the world’s 12th largest economy in dollar terms and the 4th
largest in PPP terms. The projected growth rate of real GDP is
greater than 9% per annum with higher growth in many sectors
such as financial services. Indian financial sector presents a huge
retail finance opportunity. As a result of falling interest rates,
bank deposits, other traditional investment opportunities are
losing their attraction. Thus, Indian investors are getting
attracted towards alternate investments such as the equity
markets and are looking for newer financial products.

• Diversified business model: -Our Company and our


subsidiaries offer various financial services and products ranging

86
from equity, F & O and wholesale debt, insurance and IPO
distribution, depository services to cater to the specific needs of
the retail and institutional investors thus providing all these
services in a single platform. Thus Indiabulls is not dependent on
any single of its subsidiary for survival and failure of any one
subsidiary will not have an adverse effect on the company as a
whole.

9.4 THREATS

• Economic slowdown: - Terrorist attacks and other acts of


violence or war, including those involving India or other countries
could adversely affect national economy or world economy as a
whole. Such act may also result in a loss of business confidence.
Travel restrictions as a result of such incidents may have adverse
affect on the ability to operate effectively. This will result in an
economic slowdown (example: the 9/11 attack on the World
Trade Centre, New York).
• Political instability in the country: - The government of India
has pursued the policy of economic liberalization, including
relaxing restriction on the private sector. With the change in
government, there is no assurance that these liberalization
polices will continue in the future. Any political instability could
delay the economic reforms and could have adverse effect on the
market.
• Volatile movement in market indices: - The Indian stock
market is very volatile in nature and is capable of shedding or
gaining several points in a single day. Unless and until the market
stabilizes the investors will be very hesitant to invest in the

87
market. Stock market falls will have a cascading effect on the
investors and economy of the country.

• Competition: - Indiabulls faces significant competition from


companies seeking to attract client’s financial assets, including
traditional and online brokerage firms, mutual fund companies,
etc, which are having a wide presence and strong brand name.
As the company enters new markets their bound to face
additional competition from those who have longer operating
history have grater retail and brand presence than Indiabulls. If
the company is unable to manage its business it might impede
their competitive position and their profitability.
• Substitutes: - Various alternative forms of investment including
fixed deposits with banks and post offices etc act as substitutes
to retail broking products and services. The stock market is very
unpredictable with fluctuations; this may prompt many people to
invest in fixed deposits, posy office deposits, etc in order to avoid
risk.
• Low product differentiation: - The retail broking services
provided by the various companies are homogeneous with very
low product differentiation. This does not allow the company to
freely fix their prices due to the threat of competition, which in
turn reduces their profit.

88
CHAPTER 10

RESEARCH METHODOLOGY

Research in common paralance refers to a search for knowledge. One can


also define research as a scientific and systematic search for pertinent
information on a specific topic. Research is an art of investigation. The Advance
Learner’s Dictionary of Current English lays down the meaning of research as “a
careful investigation or inquiry especially through search for new facts in any
branch of knowledge “. Some people consider research as a movement, a
movement from known to unknown .it is actually a voyage of discovery
Research methodology mean what's method apply to do any type of
research and. how can you collect the data from the field'. Before conducting any
type of research and analysis and inference based on it, the first and the foremost
thing is to collected the date and after the proceeding in a systematic manner to
finally reach at result. There are the various steps to be followed such as:
 What should be the sample size?
 From where it can be taken?
 Compilation of data
 Presentation of data

89
 Analysis and presentation of data
 Making inference
Research can be conducted by researcher by:-

1. UNDERSTANDING THE ORGANIZATION:

An in depth study of the Organization's working was done. The motive was to
know the working of the Organization and why INDIA BULLS is considered as
number one. Current status of the competitors is considered as to analyse their
competitive situation.

2. DEVELOP A SURVEY QUESTIONNAIRE:

A questionnaire was developed to understand the comfort and investment level of


customer in any Security and stock Market and his preference with the
Organization. To know the areas where INDIA BULLS lack so that the
Organization can improve upon its weak areas and be able to extract best
business.

3. CONDUCT SURVEY:

After finalizing the sample, who may be old or new, meetings were scheduled and
survey conducted. We contacted the Customers, fixed appointment with them
and collected data. Data obtained was then analyzed.

4. ANALYSIS AND INTERPRETATION OF INFORMATION

The collected data should be properly analysed ,so that some fruitful information
can be yield out of it. The data must then be interpreted in a manner that the
analysis may be easily presented before anyone and easy to understand.

90
TYPES OF RESEARCH:-

1. Descriptive and Analytical Research:-


Descriptive research include survey and fact finding enquiries
of different kinds.
In analytical research, the research has to use facts or
information already available, and analyze these to make a critical evaluation of
the material.

2. Applied and fundamental Research:-


Applied research aim at finding a solution for an immediate
problem facing a society or an industrial /business organization.
Fundamental research is mainly concerned with
generalizations and with the formulation of a theory.

3. Quantitative and Qualitative Research:-


Quantitative research is based on the measurement of
quantity or amount.

91
Qualitative research is concerned with qualitative
phenomenon, i.e., phenomena relating to or involving quality or kind.

4. Conceptual and Empirical Research:-


Conceptual research is used by the philosophers and thinkers
to develop new concepts or to reinterpret existing ones.
Empirical research relies on experience or observation alone,
often without due regards for system and theory.

The type of research adopted to perform the project work is Descriptive


Research as the information is collected through survey by questionnaire, without
giving regards to any theory and concepts. The need of primary information
required for the project topic can be done through Descriptive Research. The
facts and information was surveyed and various fact finding enquiries of different
kinds. The description of current state of affairs in the current situation of the
stock market may be analysed.

The comparison of INDIA BULLS and other stock market companies


depends on the customer’s investment criteria and not in the hands of the
company itself. The performance of share market do not depends on the
companies wish to earn profit, but the investors wish to invest in share market
and to earn profits.

The secondary information required to support the project topic findings is


being colleted through Analytical Research, in which the researcher has to use
facts and information already available, and analyse these to make a critical

92
evaluation of the material. In analytical research, the research has to use facts or
information already available, and analyze these to make a critical evaluation of
the material.

The data colleted to conduct this type of research has been prepared from
Magazines , newspaper annual and weekly issues, books on stock exchanges.

Websites:-

“Bombay Stock Exchange" Bseindia. 20 Mar. 2007 <http://www.bseindia.com>.

" Indiabulls Securities” Indiabulls.Com. 15 Mar. 2007

<http://www.Indiabulls.com>.

"National Stock Exchange” nseindia. 25 Mar. 2007 <http://www.nseindia.com>.

"Share khan Securities” Sharekhan.Com. 25 Mar. 2007

<http://www.sharekhan.com>.

“India Infoline Securities” India-Infoline.Com. 26 Mar. 2007

<http://trade.indiainfoline.com>.

" India Infoline Securities” 5paisa.Com. 26 Mar. 2007

<http://www.5paisa.com>.

" Kotak Securities” kotak securities.Com. 26 Mar. 2007

<http://www.kotaksecurities.com>.

"ICICI Securities” ICICI securities.Com..25 Mar. 2007

<http://www.ICICIsecurities.com>.

93
" Karvy” Karvy.Com. 25 Mar. 2007 <http://www.karvy.com>.

“Online Investors & Traders” 2 Apr. 2007 <http://www.traderji.com>.

" Motilal Oswal Securities” . 25 Mar. 2007

<http://www.motilaloswal.com>.

94
METHOD AND PRINCIPLE USED:

INFORMATION REQUIRED IN DETAIL

PRIMARY INFORMATION:
To know why INDIA BULLS is standing at a reputative position among stock
exchanges and its competitive advantage. The competitor companies were also
analysed to find out their current status and how close competition exists.

SECONDARY INFORMATION:
To present the specialities of INDIA BULLS which are shown through secondary
data analysis.

METHOD OF DATA COLLECTION

The task of data collection begins after research problem has been defined
and research design /plan checked out. While deciding about the method of data
collection to be used for the study, the researcher should keep in mind the two
types of data viz. primary and secondary.
.
Primary Data

They are those which are collected a fresh and for the first time, and thus
happened to be in original in character. Data is collected by:-
-Survey
-Observation method
-Interview Method—personal interview, telephonic interview.

95
Secondary Data

Are those which has already been collected by someone else and which have
already been past through the statisal process. Data is collected by:-
-Publications of central state and local govt.
-Publication of foreign.
-Journal
-Books, magazines and newspaper
-Reports and publication of business house
-Reports and publication of scholars and universities.
-Public records

RESEARCH INSTRUMENT USED IN DETAIL:

PRIMARY

 Questionnaires: A formal list of the questions answered by the people


who are thought to have the desired information and later analyzing the
responses is the questionnaire method. It can be used to get some data
relative to most problems. We have used structured questionnaires as a
formal list of questions produces more reliable results.

For collecting the data we used questionnaire method. The questionnaire was
design mainly of objective nature and partially of descriptive nature to get
suggestion regarding housing finance compares. We visited various government
department and business organization and also to individuals for required
information according to our Performance knowing the views of the people and
get their suggestions.

96
 Personal Interviews: Personal interview is the most versatile and flexible
kind of technique. Direct face-to-face conversation helps in getting
accurate data. Personal interview were done with the people in order to
get the required information.

SECONDARY

 Websites.
 Brochures
 and Company Magazines.

CANOPY PROGRAM

The conducted a five days canopy program in which we were asked get
questionnaire filled by the individuals. The activity was conducted in groups. Each
group was allotted a definite area for it’s work .Every evening the response of the
day was given to the reporting officer in INDIA BULLS. The reporting officer was
Mr. Maya Sarin (Relationship Manager).
The data collected from it was of 50 persons (in round figures). The area allotted
to us was at Noida, Greater noida, and in delhi at Lakshmi nagar.The response
was good. This program enabled them as a feedback program which would help
them in further innovation and make nessary changes

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RESEARCH DESIGN

The formidable problem that follows the task of defining the research is
preparation of the design of the research project, popularly known as research
design. Decisions regarding what, where, when, how much by what means
considering an inquiry or research study constitute a research design .

Types:-

Research Design in case of exploratory research study .


Research Design in case of descriptive and diagnostic research study.
Research Design in case of hypothesis-testing research study.

RESEARCH STUDIES CONSIDERED :-

 EXPLORATORY RESEARCH

Exploratory research is based on secondary data and survey of knowledgeable


persons., This research is usually designed to obtain the investigations of the
investors prospective of comparing the stock exchanges for his investment
decision.Wide-ranging and versatile approaches are employed. Exploratory
research is appropriate for situations where Management is searching for
solutions and seeks new insights regarding the situation or desires a more
precise formulation of the problem. We have made use of exploratory research in
our project because it served our purpose to the maximum information.A new
knowledge is being discovered ,although it exists in the environment.

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 DESCRIPTIVE RESEARCH

Descriptive research studies are those studies which are concerned with
describing the characteristics if a particular individual ,or of a group.this type of
study is concerned with specific predicitions, with narration of facts and
characteristics considering individual and groups. The decision regarding what to
measure and find adequate method of measuring along with the clear cut
definition of ‘population’. “As data collected, they should be examined for
completeness, comprehensibility, consistency and reliability.”
This type of research design is adopted since it takes into account all the steps
involved in a survey concerning a phenomenon to be studied. This type of study
makes enough provision for protection against bias and must maximize reliability.

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SAMPLING PLAN

Research is basically depend up on the data and that data depend upon
the size of sample we want. So deciding of sample size is mainly based on the
nature of objective of the research. Sample size has to . confirm the objective on
each and every respect.Suppose we are going to decide any effective decision
on the base of this report or set up any new facts. On that position we have
require large size of sample on comparison to find out a trend.
Here our objective is simply go to "comparative analysis and make an overview of
Indian Stock Market "So we preferred to go with a sample size of only 250 data.

SAMPLING TECHNIQUES USED

 Systematic Sampling
In some instances , the most practical way of sampling is to select every
next item on the list. Sampling of this type is known as systematic sampling. An
element of randomness is introduced into this kind of sampling by using random
numbers to pick up the unit with which to start.
In the project the samples are drawn from different zone including 50
persons in each zone constituting 250 persons all together.

 Stratified Sampling
If a population from which as ample is to be drawn does not constitute a
homogenous group stratified sampling technique is generally applied in order to
obtain a representative sampling. Under stratified sampling the poplation is
divided into several sub population that are individually more homogenous than

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the total population (the different sub population are called ‘STRATA’ and then we
select item from each stratum to constitute a sample.
In the project ,the population was selected randomly from each zone
having equal chances to be selected as a sample. The population in each zone is
called strata which includes 25 persons from each zone.

 Sequential Sampling
This sampling design is somewhat complex sample design the number of sample
one more than two but it is neither certain nor decided in advance this type of
system is often referred to as sequential sampling. thus in brief we can say that in
sequential sampling one can go on taking samples one after another as long as
one desire to do so.
In the project, the samples are being surveyed in a sequential manner from
every zone.

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SAMPLE DESIGN

The selected respondents constitute what is technically called a sample and the
selection process is called sampling technique. the survey so conducted is known
as sample survey.

Researcher must prepare a sample design for his study i.e., he must plan
how a sample should be selected and of what size such a sample would be.

1. Types of universe: - The sample design is clearly define the set of objects,
technically called the universe. The total population of India is universe for INDIA
BULLS. The population of the whole country may be considered as the sampling
population.

2. Sampling unit: - Sapling unit may be a geographically one such as state,


district, village, etc. The sampling unit is decided by dividing into central, eastern,
western, northern and southern zones

3. Source list: - It is also known as sampling frame from with sample is to be


drawn. It is decided by considering the people who know about SHARE
MARKET.

4 Size of sample: - This refers to the number of items to be selected from the
universe to constitute a sample size. The sample size chosen by me is 125
persons, 25 persons in every zone.

5. Sampling procedure:-It decides about the technique to be used in selecting


the items for the sample. The procedure of deciding the sample is done zone
wise.

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Measurement and Scaling Techniques

Measurement is relatively complex and demanding task, specially so when it


concerned qualitative and abstract phenomena. By measurement we mean the
process of assigning numbers to objects or observation, the level of
measurement been a function of the rules under which the numbers are
assigned. Measurement is a process of mapping aspects of the domain onto
other aspects of a range according to some rules of correspondence.

The method used to represent the collected data is tables, graphs, charts,
pie charts, bar graphs, supported by written statement.

Measurement technique are deliberately selected by the researcher.During


the research the researcher has to be quite alert about this aspect while
measuring properties of objects or of abstract concept.

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Chapter 11

FINDINGS & SUGGESTIONS


Aggressive Promotions: Indiabulls Securities compared to its
competitors concentrates less on advertising and promotions,
especially through electronic media. Its competitors like Sharekhan,
ICICI and Kotak are advertising aggressively through media. Hence
Indiabulls should concentrate more on advertising through print and
electronic media.

Tapping Rural Market: The Indian rural investors market are


relatively untapped, with only small and private firms meeting the
current demand. Indiabulls Securities can gain the “First Mover
Advantage” over its competitors, especially in areas were commercial
crops are grown and the standard of living is high. These people do not
have much option to invest other than banks and post offices.

Reduce the initial account opening charges: The charge for


opening a trading and demat account in Indiabulls securities is high
compared to its competitors. This influences the potential investors to
open their account with another company which provides the same at
lower prices. Thus it acts as a mental barrier for potential customers,
who tend to overlook all other benefits offered by Indiabulls. Hence
Indiabulls should consider reducing their account opening charges.

Bring in more product differentiation: Product differentiation here


means that Indiabulls securities should bring in more customized
services and more value proposition for large investors. It can reduce

104
the brokerage charges for large investors which will encourage them to
invest more in the company.

Invest more on R&D: Indiabulls should concentrate on its research


and development since most of its competitors are investing on R&D.
This will help the company to read the market better and will also be in
a better position to understand the needs of the customers. This can be
extremely beneficial for Indiabulls in the long run.

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APPENDIX

Profit & loss Summary

Mar
Mar 2004 2005 Mar 2006

Rs. Crore (Non- 12


Annualized) 12 months months 12 months
-
Income 69.48 114.59 317.97
Leasing & hire
services 0 0 0
Security transactions 0.18 0 0
Dividend income 0 0.29 0
Interest income 15.36 1.93 21.16
Others 53.94 112.37 296.81
Other income 0 0 0
Non-recurring income 0.03 0.27 0.13
-
Expenditure
Loss on security
transactions 0 0.28 0.04
Other operating
expenses 3.58 7.92 13.84
Personnel cost 10.72 20.88 50.24
Other expenses 11.33 13.71 21.24
Finance charges 13.97 21.48 46.7
Lease rent 2.19 3.89 3.08
Less: expenses
capitalized 0 0 0
Non-recurring
expenses 0 0 0
-
Profits / losses
PBDT 29.91 51.28 186.85

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Depreciation 1.11 2.16 6.57
PBT 28.8 49.12 180.28
Tax provision 10.79 17.89 61.06
PAT 18.01 31.23 119.22
-
Appropriation of
profit
Dividends 0.7 6.14 0.62
Retained earnings 17.31 25.09 118.6

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QUESTIONNAIRE

Format of Questionnaire For Doing Promotions

The format of Questionnaire given to people is as follows:

Name of Person:

Contact Number:

E-mail Id

Are you interested in Share Market? Yes No

Do you invest in Share market? Yes No

Are you aware of Indiabulls? Yes No

Do you have a Demat Account? Yes No

Presently in which security are you trading?

Signature

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Brokerage & Tax break up format of Indiabulls
(For Security reasons all data are not revealed)

Intraday (%) Delivery (%) Futures (%)


Buy Sell Buy Sell Buy Sell

Brokerage Charges 0.1 0.1 0.5 0.5 0.1 0.1

Security Transaction 0 0.025 0.125 0.125 0 0.017


Tax (STT)

Service Tax (12.24% on brokerage)

Turn over Tax (TOT)

Stamp duty

Total

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CONCLUSION

Indiabulls faces significant competition from companies seeking to


attract clients’ financial assets including traditional and online
brokerage firms, mutual fund companies and institutional players,
having wide presence and a strong brand name. As Indiabulls enter
newer markets, they are likely to face additional competition from
those who may be better capitalized, have longer operating history,
have greater retail and brand presence, and better management than
Indiabulls. As new players like Reliance Money enters the market the
competition will only get more intense. If they are unable to manage
their business it might impede their competitive position and
profitability.
Hence they should continue to compete vigorously to capture more
market share and should add more management personnel to manage
their growth in an optimal way.

Post economic liberalization in 1991 the Indian financial services


industry has experienced significant growth. Exposure to global
practices has made the Indian customer more demanding. As a result
of falling interest rates, bank deposits, other traditional investment
opportunities are losing their attraction. Thus, Indian investors are
getting attracted towards alternate investments such as the Retail
Security Market and are looking for newer financial products.

As the Indian Retail Security Market is still in a nascent stage and as a


lot of potential for growth, it’s a very good opportunity for companies
like Indiabulls to increase their market presence. They will have to
concentrate more on the Research and Development and come up with
strategies which are beneficial for the company. Thus for the purpose

110
of Applied Research Projects in the company, they can do more
research on the market and identify the major factors which will drive
the market in the future.

BIBLIOGRAPHY

“Bombay Stock Exchange" Bseindia. 20 Mar. 2007 <http://www.bseindia.com>.

" Indiabulls Securities” Indiabulls.Com. 15 Mar. 2007

<http://www.Indiabulls.com>.

"National Stock Exchange” nseindia. 25 Mar. 2007 <http://www.nseindia.com>.

"Share khan Securities” Sharekhan.Com. 25 Mar. 2007

<http://www.sharekhan.com>.

“India Infoline Securities” India-Infoline.Com. 26 Mar. 2007

<http://trade.indiainfoline.com>.

" India Infoline Securities” 5paisa.Com. 26 Mar. 2007

<http://www.5paisa.com>.

" Kotak Securities” kotak securities.Com. 26 Mar. 2007

<http://www.kotaksecurities.com>.

"ICICI Securities” ICICI securities.Com..25 Mar. 2007

<http://www.ICICIsecurities.com>.

" Karvy” Karvy.Com. 25 Mar. 2007 <http://www.karvy.com>.

“Online Investors & Traders” 2 Apr. 2007 <http://www.traderji.com>.

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" Motilal Oswal Securities” . 25 Mar. 2007

<http://www.motilaloswal.com>.

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