CHAPTER 1

1.1 INTRODUCTION

Investment in various types of assets is an interesting activity that attracts people

from all walks of life irrespective of their occupation, economic status, education and family
background. When a person has more money than he requires for current consumption, he
would be considered as a potential investor. The investor who is having extra cash could
invest it in securities or in any other assets like gold or real estate or could simply deposit it in
his bank account. The companies that have extra income may like to invest their money in the
extension of the existing firm or undertake new venture. All of these activities in a broader
sense mean investment.

“Investment is the employment of funds on assets with the aim of earning income or capital
appreciation”.To the economist, “ Investment is the net addition made to the nation’s capital
stocks that consist of goods and services that are used in the production process”.

Financial investment is the allocation of money to assets that are expected to yield some gain
over a period of time. It is an exchange of financial claims such as stocks and bonds for
money.For evaluation of investment avenues, the following attributes are relevant.

• Rate of return
• Risk
• Marketability
• Tax shelter
• Convenience

1.2 STOCK MARKET OF INDIA

Stock markets refer to a market place where investors can buy and sell stocks. The price at
which each buying and selling transaction takes is determined by the market forces (i.e.
demand and supply for a particular stock).

Let us take an example for a better understanding of how market forces determine stock
prices. ABC Co. Ltd. enjoys high investor confidence and there is an anticipation of an
upward movement in its stock price. More and more people would want to buy this stock (i.e.
high demand) and very few people will want to sell this stock at current market price (i.e. less
supply). Therefore, buyers will have to bid a higher price for this stock to match the ask price

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from the seller which will increase the stock price of ABC Co. Ltd. On the contrary, if there
are more sellers than buyers (i.e. high supply and low demand) for the stock of ABC Co. Ltd.
in the market, its price will fall down.

In earlier times, buyers and sellers used to assemble at stock exchanges to make a transaction
but now with the dawn of IT, most of the operations are done electronically and the stock
markets have become almost paperless. Now investors don’t have to gather at the Exchanges,
and can trade freely from their home or office over the phone or through Internet.

Stock exchanges are intricately inter-woven in the fabric of a nation’s economic life without a
stock exchange, the savings of a community the sinews of economic progress remain under –
utilized.

As business and industry expanded and the economy assumed more complex nature, the need
for “permanent finance” arose; Entrepreneurs needed money for long term was as investors
demanded liquidity. The answer was a ready market for investments and this was how the
stock exchange came into being.

Stock exchange means anybody individuals whether incorporated or not, constituted for the
purpose of regulating or controlling business of buying, selling or dealing in securities.
These securities includes

1. Shares, scripts, stock, bonds, debentures, stock or other marketable securities.

2. Government securities,
3. Rights or interest in securities.

1.3 OVER THE COUNTER EXCHANGE OF INDIA (OTCEI)

Promoted by a consortium of leading financial institution of India, including Unit Trust of

India (UTI), Industrial Credit and Investment Corporation of India (ICICI), IDBI, IFCI, LIC,
and others. OCEI is a recognized stock exchange under the securities contract (Regulation)
Act of 1956. It is set up to provide small and medium sized companies access to the capital

Market and to invest a convenient mode of investment. It is a ring less electronic national
exchange listing on entirely new set of companies; those companies will not be listed on the
other stock exchanges. The companies listed on any other exchanges can list companies with
issued capital from Rs. 30 lakhs to Rs.25 Crore.

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Development in India

Many steps have been taken in recent years to reform the secondary market so that it may
function effectively, steps are also being taken to broaden the market and make it function
with greater degree of transparency and in the best interest of investors.

1. Regulation of intermediaries: to improve the functioning of intermediaries in the

capital market, strict control is being exercised on them By SEBI.
2. The intermediaries such as Merchant Bankers, Underwriters, Brokers, Sub-Brokers, to
the issue must be registered with the SEBI.
3. Capital Adequacy norms have been fixed the Brokers are expected to maintain a
minimum capital of Rs. 5 lakhs in major exchanges and Rs.2 Lakhs in minor
exchanges again they have to keep a minimum net worth of 8% of the annual
turnover.
4. Change in Management Structure: the SEBI now require that 50% of the Directors
must be non Broker Directors of Govt. Reprehensive.
5. Insistence of quality securities: SEBI has announced recently norms for companies
accessing the capital market. So that only quality securities are listed and traded in the
stock exchanges.
6. Prohibition of Insider trading: there is a ban on insider trading and hence an insider is
prevented from dealing in securities of any listed company and basis of any
unpublished price sensitive information.
7. Transparency of accounting practices: brokers are of to show the prices, brokerage
services, tax etc., separately in the contact notes and their accounts.
8. Prevention of price rigging: greater power has been given to SEBI to curb price
rigging. All efforts are being taken to protect the interest of the genuine investors.

1.4 TRADING PATTERN OF THE INDIAN STOCK MARKET

Indian Stock Exchanges allow trading of securities of only those public limited companies
that are listed on the Exchange(s). They are divided into two categories:

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Indian stock exchange allows a member broker to perform following activities:

• Act as an agent,
• Buy and sell securities for his clients and charge commission for the same,
• Act as a trader or dealer as a principal,
• Buy and sell securities on his own account and risk

Types of Transactions

The flowchart below describes the types of transactions that can be carried out on the Indian
stock exchanges:

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1.5 DEPOSITORY SYSTEM

Depository is an organization where the securities of shareholder are held in the

electronic form at the request of the shareholder through a medium of Depository Participant
(DP). The principle function of Depository is to dematerialize securities and enable their
transactions in the book entry from electronically. In India the Depository Acts defines a
Depository to mean "A company formed and registered under the company’s act 1956 and

which has been granted a certificate of registration under the sub section (1A) of office
section 12 of the Securities and Exchange Board of India Act 1992."

BROKERS/
DEPOSITORY DP
INVESTORS

BENEFITS AND SAFETY OF DEPOSITORY SYSTEM

In the Depository system, the ownership and transfer of securities takes place by means of
electronic book entries. At the outset, this system rids the capital market of the dangers
related to handling of paper. The benefits that are accrued by this system are:

1. Elimination of Bad Deliveries:

Once the holdings of investors are dematerialized, the question of bad deliveries doesn't arise
because both transfer deed and share certificate are eliminated in a depository system.

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2. Elimination of all Risk Associated with Physical Certificate:

Dealing in physical securities has the associated security risks of stock, mutilation of loss of
certificate during the movements to and from the registers. These expose the investors to the
cost of obtaining duplicate certificates, advertisements, etc; such problems do not arise in the
depository environment.

3. Immediate Transfer and Registration of Certificates:

Once the securities are credited to the investors account on payout, he becomes the legal
owner of the securities.

4. Faster Settlement Cycle:

The exclusive demat segment follow rolling settlement cycle of T+2 which enables faster
turnover of stock and enhance liquidity with the investor.

5. Buyer is secured:

In Physical environment, buyer is not secured since the shares purchased may not be
transferred. This is not the case with depository system.

6. Reduction in Brokerage:

Broker may provide a reduction in brokerage of 0.25%, 0.5% for trading in dematerialized
Securities as it reduces their back office cost of handling paper.

7. Elimination of problems related to Change of Address of Investors, Transmission,

etc:

Investors have to inform the change of address to the DP which will be reflected in the
database of all the companies where the investor is registered holder of securities.

8. Elimination of Problems Related to Selling Securities of Behalf of Minor:

A natural guardian is not required to take court approval for selling demat securities on behalf
of minor.

9. Convenient Consideration of Account:

Investors opened to multiple accounts, all accounts can be consolidated into 1 account by
giving instructions to DP.

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10. Convenient Portfolio Monitoring:

Client can monitor portfolio by checking a single statement of holding/transaction.

11. Increased Volumes:

Due to case and transaction and related costs, many players have entered/increased their
transaction, which increases liquidity.

12. Newer Services:

Opportunities like pledge/hypothecation and stock lending are given specifically by

depository system. Many safety measures like investor grievances, insurance, computer and
communication, infrastructure periodic reviews, certificate of registration were made
necessary to protect the investors.

1.6 GOVERNING BODIES OF DEPOSITORY PARTICIPANTS

1. NATIONAL SECURITIES DEPOSITORY LTD (NSDL)

NSDL is the first depository to be set up in India. It was incorporated on Dec 12th 1995. The
Industrial Bank of India (IDBI) the largest development bank in India, UTI the largest stock
exchange in India, sponsored the setting up of NSDL and subscribed to the initial capital.
NSDL commenced operations on Nov 8th 1996.

FUNCTIONS OF NSDL:

NSDL performs the following functions through depository participant (DP):

• Enables the surrender and withdrawal of securities to and from the depository
(Dematerialsation and rematerialisation).
• Maintains investor holding in the electronic form.
• Effects settlement of trades on done on the stock exchange (Off Market trades).
• Transfer of securities.
• Pledging/Hypothecation of companies or corporate.
• Receipt of non-cash corporate benefits like bonus rights in the electronic form.
• Stock lending and borrowing.

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2. CENTRAL DEPOSITORY SERVICES LTD (CDSL):

Introduction: The Stock Exchange Mumbai and Bank of India (BOI) have jointly promoted
the secondary depository in the country for dealing in securities with electronic from by name
CDSL.

Objectives:

1. Accelerate the growth of scrip less trading.

2. To make a major trust in individual investors participation in the depository.

3. Create a comprehensive environment which will be responsive to the user’s interest and
demand.

4. Enhance liquidity.

Detecting speculation in the market

Some amount of speculation is always present in the market, and as said earlier, not all
speculation is necessarily unhealthy for the market. It is only when speculation leads to high
default risk that it begins to cause serious concern to the market participants. In such cases,
the stock exchange authorities usually detect the excessive speculation in a particular security
at any time through wide or unusual by somebody in that security. For example, if somebody
is buying up large quantities of a particular share, the price of that share is bound to go up
steeply, since the demand increases while the supply of the shares remains the same.
Similarly if somebody is selling a large number of a particular share, the price is bound to fall
sharply, since the supply of the share increases in relation to its demand.

Factors leading to large price fluctuations

Not all large price fluctuations may, however, be of speculative origin. In fact, there are
many other factors which may add to large swings in security prices.

Some of these factors are presented below:

• Takeover bid: The price of a share may rise steeply when there is a takeover bid
resulting in large quantities of that share being bought in the market. Once the
knowledge of such a takeover bid becomes public, a whole lot of other investors join
the spree, so that the price of the share is pushed up further. This, in turn, is viewed as
a godsend by the reckless speculators, who further aggravate the situation.

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• Insider trading: sometimes there may be unusual buying or selling activity in the
share of a company on account of inside information, such as a company’s plan to
enter into a profitable collaboration with another company. This fact is bound to be
known to some senior members of the company’s management much ahead of the
general public. Thus, based on this inside information, such members my indulge in
heavy buying of their company’s shares, hoping to sell the shares when the
information about the collaboration becomes public and the price of the company’s
share rises.
• Limited floating stock: Another factor affecting large price fluctuations may be
related to the floating stock available in the market for trading. Consider that in India,
close to 35% of the shares are held by the financial institutions and another 30 to 35%
closely held (in close control, not easily available for sale) by the controlling groups,
only the residual (of about 30 to 35%) can truly regarded as being available for public
trading. It is reasonable to believe that given the increasing public interest in the
capital markets in recent years, the floating shares available to the public for trading
are far from adequate. And then again, when these financial institutions (with or
without inside information), decide to buy or to sell thousands of shares of any one
company at a time, the huge change in the changes in the supply and demand of the
shares involved must doubtlessly add to the fluctuations in its share prices.
• Multiple listing of shares: The situation is further compounded by Governmental
encouragement, rather insistence, on multiple listing of a share (the requirement that a
share be listed in more than one stock exchange), which instead of resulting in active
trading of the shares, scatters the already limited stock of floating shares further. This
too may result in excessive demand in relation to supply of stocks leading to price
imbalances.
• Too much money supply: Too much money supply which might suddenly find its
way into the stock market may be yet another reason for large scale price fluctuations.
The steep hike in prices till March may for instance be attributed at least partially to
the sudden increase in money supply in the capital market. Initially, the increasing
number of mutual funds, NRI funds and other off-shore funds were thought to be the
reason for the large supply of money chasing more or less the same floating stock of
securities resulting in steep price hikes.

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1.7 Securities and Exchange Board of India (SEBI)

The year 1991 witnessed a big push being given to liberalization and reforms in
the Indian financial sector. For sometime thereafter, the volume of business in the primary
and secondary securities markets increased significantly. As a part of the same reform
process, the globalization or internationalization of the Indian financial system made it
vulnerable to external shocks. The multi-crore securities scam rocked the IFS in 1992. All
these developments impressed on the authorities the need to have in place a vigilant
regulatory body or an effective and efficient watchdog. It was felt that the then existing
regulatory framework was fragmented, ill-coordinated, and inadequate and that there was a
need for an autonomous, statutory, integrated organization to ensure the smooth functioning
of the IFS. The SEBI came into being as a response to these requirements.

The SEBI was established on April 12, 1988 through an administrative order, but it
became a statutory and really powerful organization only since 1992.

Objectives of SEBI

The promulgation of the SEBI ordinance in the parliament gave statutory status to SEBI in
1992. According to the preamble of the SEBI, the three main objectives are

- To protect the interests of the investors in securities.

- To promote the development of securities market.
- To regulate the securities market.

Security analysis

The share price movement is analyzed using the technical analysis approach. A
technical Approach analysis is the process of identifying trend reversals at an earlier stage
to formulate the buying and selling strategy. With the help of several indicators they
analyse the relationship between price – volume and supply for the overall market and the
individual stock. Volume is favourable on the upswing i. e. the number of shares traded is
greater than before and on the downside the number of shares traded dwindles. If it is the
other way round, trend reversals can be expected. Basically, technical analysis aims at
GOOD RETURN on investment.

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1.8 BSE (BOMBAY STOCK EXCHANGE)

SENSEX - THE BAROMETER OF INDIAN CAPITAL MARKETS

For the premier Stock Exchange that pioneered the stock broking activity in India,
128 years of experience seems to be a proud milestone. A lot has changed since 1875 when
318 persons became members of what today is called "The Stock Exchange, Mumbai" by
paying a princely amount of Re1.

Since then, the country's capital markets have passed through both good and bad periods. The
journey in the 20th century has not been an easy one. Till the decade of eighties, there was no
scale to measure the ups and downs in the Indian stock market. 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 its 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 (From 1979 onwards). Small wonder, the
SENSEX has over the years become one of the most prominent brands in the-country.

The growth of equity markets in India has been phenomenal in the decade gone by.
Right from early nineties the stock market witnessed heightened activity in terms of various
bull and bear runs. 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.

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1.9 NSE (NATIONAL STOCK EXCHANGE)

The Organization

The National Stock Exchange of India Limited has genesis in the report of the High
Powered Study Group on Establishment of New Stock Exchanges, which recommended
promotion of a National Stock Exchange by financial institutions (FIs) to provide access to
investors from all across the country on an equal footing. Based on the recommendations,
NSE was promoted by leading Financial Institutions at the behest of the Government of India
and was incorporated in November 1992 as a tax-paying company unlike other stock
exchanges in the country.

On its recognition as a stock exchange under the Securities Contracts (Regulation)

Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000.

NIFTY

The Nifty is relatively a new comer in the Indian market. S&P CNX Nifty is a 50
stock index accounting for 23 sectors of the economy. It is used for purposes such as
benchmarking fund portfolios; index based derivatives and index funds.

The base period selected for Nifty is the close of prices on November 3, 1995, which
marked the completion of one-year of operations of NSE's capital market segment. The base
value of index was set at 1000.

S&P CNX Nifty is owned and managed by India Index Services and Products Ltd.
(IISL), which is a joint venture between NSE and CRISIL. IISL is a specialized company
focussed 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.

1.10 BUYING

There are various methods of buying and financing stocks. The most common means is
through a stock broker. Whether they are a full service or discount broker, they arrange the
transfer of stock from a seller to a buyer. Most trades are actually done through brokers listed
with a stock exchange, such as the New York Stock Exchange.

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There are many different stock brokers from which to choose, such as full service brokers or
discount brokers. The full service brokers usually charge more per trade, but give investment
advice or more personal service; the discount brokers offer little or no investment advice but
charge less for trades. Another type of broker would be a bank or credit union that may have
a deal set up with either a full service or discount broker.

There are other ways of buying stock besides through a broker. One way is directly from the
company itself. If at least one share is owned, most companies will allow the purchase of
shares directly from the company through their investor relations departments. However, the
initial share of stock in the company will have to be obtained through a regular stock broker.
Another way to buy stock in companies is through Direct Public Offerings which are usually
sold by the company itself. A direct public offering is an initial public offering in which the
stock is purchased directly from the company, usually without the aid of brokers.

When it comes to financing a purchase of stocks there are two ways: purchasing stock with
money that is currently in the buyers ownership, or by buying stock on margin. Buying stock
on margin means buying stock with money borrowed against the stocks in the same account.

These stocks, or collateral, guarantee that the buyer can repay the loan; otherwise, the
stockbroker has the right to sell the stock (collateral) to repay the borrowed money. He can
sell if the share price drops below the margin requirement, at least 50% of the value of the
stocks in the account. Buying on margin works the same way as borrowing money to buy a
car or a house, using the car or house as collateral. Moreover, borrowing is not free; the
broker usually charges 8-10% interest.

SELLING
Selling stock is procedurally similar to buying stock. Generally, the investor wants to
buy low and sell high, if not in that order (short selling); although a number of reasons may
induce an investor to sell at a loss, e.g., to avoid further loss. As with buying a stock, there is
a transaction fee for the broker's efforts in arranging the transfer of stock from a seller to a
buyer. This fee can be high or low depending on which type of brokerage, full service or
discount, handles the transaction. After the transaction has been made, the seller is then
entitled to all of the money. An important part of selling is keeping track of the earnings.
Importantly, on selling the stock, in jurisdictions that have them, capital gains taxes will have
to be paid on the additional proceeds, if any, that are in excess of the cost basis.

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LONG/SHORT EQUITY Is
an investment strategy generally associated with hedge funds. It involves buying long
equities that are expected to increase in value and selling short equities that are expected to
decrease in value. Typically equity long short investing is based on 'bottom up' fundamental
analysis of the individual companies in which investments are made. There may also be 'top
down' analysis of the risks and opportunities offered by industries, sectors, countries and the
macroeconomic situation.

Long short covers a wide variety of strategies. There are generalists, and managers who focus
on certain industries and sectors or certain regions. Managers may specialize in a kind of
stock, for example value or growth, small or large. There are many trading styles, with
frequent or dynamic traders and some longer term investors.

A fund manager typically attempts to reduce volatility by either diversifying or hedging

positions across individual regions, industries, sectors and market capitalization bands and
hedging against un-diversifiable risk such as market risk. In addition to being required of the
portfolio as a whole, neutrality may in addition be required for individual regions, industries,
sectors and market capitalization bands.

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 CHAPTER 2

A systematized study requires proper planning and implementation of the same.

So, this research design includes an outline of the study, which was conducted at “India
Infoline Limited” Bangalore.

2.1 TITLE OF THE STUDY

Project Report on “A Study on investors perception of risk and return and Technical
Analysis of Banking Sector” Bangalore.

2.2 OBJECTIVES OF THE STUDY

The research is undertaken with an objective to know the following aspects:

 To study the investors perception towards risk & return involved in Equities
 To analyse the banking sector of equities with the help of technical analysis.
The banks are: HDFC LTD.,ICICI LTD.,CORPORATION BANK & SBI.
 To project the future trend of Stock Prices of this sector in the capital market.

2.3 SCOPE OF THE STUDY

 Study is conducted to Bangalore city only.

 The study cannot be generalized as it is conducted only on Indiainfoline clients.

 The study relies on the facts given by the respondents.

 The study is not done for a longer duration to know the exact ups and downs in
the market.

2.4 LIMITATIONS OF THE PROJECT

 Actual perception of respondents may differ and Study is restricted to Bangalore city
only.
 The study is confined to technical analysis of only 4 banks.
 An attempt is made to predict the future movement of stock. It contains an element of
guess work.

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2.5 METHODOLOGY OF RESEARCH

I. Type of Research

The research carried out in this study is both exploratory and descriptive in nature.

II. Sample size

Convenience sampling has been adopted for the study. The sample size taken up for
the study was 100 respondents. The respondents include professionals, self Employees in
Government and Private Organizations, Business people, Professionals, Retired people.

III. Tool for data collection

The study was done based on the collection of primary & secondary data.

 Primary Data: Primary data was collected with the use of questionnaire and personal
interaction with the company employees and general public.
 Secondary Data: Secondary data was collected by:
 Referring several books on equities.
 Referring several books and previous project reports in a college library.
 Referring company Broachers, journals, fact sheet etc

2.6 TECHNICAL ANALYSIS

The technical analyst mainly studies the stock movement of the security market. If there is
an uptrend in the price movement investor may purchase the scrip, with onset of fall in price
he may sell it and move from the scrip. In other words, it is a process of identifying trend
reversal at an earliest stage to formulate the buying and selling strategy.

1) TOOLS USED
 MOVING AVERAGE CONVERGENCE AND DIVERGENCE(MACD)
 CHARTS

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 CHAPTER 3

3.1 INTRODUCTION

India Infoline Ltd were originally incorporated on October 18, 1995 as Probity Research and
Services Private Limited at Mumbai under the Companies Act, 1956 with Registration No.11
93797. They commenced their operations as an independent provider of information, analysis
and research covering Indian businesses, financial markets and economy, to institutional
customers. They became a public limited company on April 28, 2000 and the name of the
Company was changed to Probity Research and Services Limited. The name of the Company
was changed to India Infoline.com Limited on May 23, 2000 and later to India Infoline
Limited on March 23, 2001.In 1999, they identified the potential of the Internet to cater to a
mass retail segment and transformed their business model from providing information
services to institutional customers to retail customers. Hence they launched their Internet
portal, www.indiainfoline.com in May 1999 and started providing news and market
information, independent research, interviews with business leaders and other specialized
features.

In May 2000, the name of their Company was changed to India Infoline.com Limited
to reflect the transformation of their business. Over a period of time, they have emerged as
one of the leading business and financial information services provider in India. In the year
2000, they leveraged their position as a provider of financial information and analysis by
diversifying into transactional services, primarily for online trading in shares and securities
and online as well as offline distribution of personal financial products, like mutual funds and
RBI Bonds. These activities were carried on by their wholly owned subsidiaries. Their
broking service was launched under the brand name of 5paisa.com through their subsidiary.
India Infoline Securities Private Limited and www.5paisa.com, the e-broking portal, was
launched for online trading in July 2000. It combined competitive brokerage rates and
research, supported by Internet technology. Besides investment advice from an experienced
team of research analysts, we also of real time stock quotes, market news and price charts
with multiple tools for technical analysis.

3.2 KEY MILESTONES

• Incorporated on October 18, 1995 as Probity Research & Services.

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•Launched Internet portal www.indiainfoline.com in may 1999.
• Commenced distribution of personal financial products like Mutual Funds and RBI
Bonds in April 2000.
•Launched online trading in shares and securities branded as www.5paisa.com in July
2000.
• Started life insurance agency business in December 2000 as a Corporate Agent of
ICICI Prudential Life Insurance.
• Become a Depository participant of NSDL in September 2001.
• Launched stock messaging service in May 2003.
• Acquired commodities broking license in March 2004.
• Launched portfolio management services in August 2004.
• Listed on NSE and BSE on May 17, 2005.
• Acquired NBFC license in May 2005.
•Acquired 75% stake holding in Money tree consultancy services, which is a distributor
of Mortgages and other Loan products, in October 2005.
• Acquired 100% equity of Marchmont Capital Advisors Pvt Ltd in December 2005
through which we have Merchant Banking.
•DSP Merrill Lynch Capital subscribed to convertible bonds aggregating Rs. 80 crores in
December 2005. their current stake in India Infoline is a little over 14% as on 31st
March 2007.
• Bennett Coleman & Co Ltd (BCCL) invested Rs. 20 crores in India Infoline by way
of preferential allotment in December 2005.
• Become a Depository participant of CDSL in June 2006.
• Merger of India Infoline Securities Private Limited with India Infoline Limited in
January 2007.
• IRDA license for Insurance Broking in April 2007.

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3.3 CORPORATE STRUCTURE

The India Infoline group, comprising the holding company, India Infoline Limited
and its wholly-owned subsidiaries, straddle the entire financial services space with offerings
ranging from Equity research, Equities and derivatives trading, Commodities trading,
Portfolio Management Services, Mutual Funds, Life Insurance, Fixed deposits, GOI bonds
and other small savings instruments to loan products and Investment banking. India Infoline
also owns and manages the websites http://www.indiainfoline.com/and
http://www.5paisa.com/

The company has a network of 596 branches spread across 345 cities and towns. It
has more than 500,000 customers. India Infoline Limited is listed on both the leading stock
exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock
Exchange (NSE) and is also a member of both the exchanges. It is engaged in the businesses
of Equities broking, Wealth Advisory Services 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. It is registered with NSDL as well as CDSL as a depository participant,
providing a one-stop solution for clients trading in the equities market. It has recently
launched its Investment banking and Institutional Broking business.

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INDIA INFOLINE MEDIA AND RESEARCH SERVICES LIMITED

The content services represent a strong support that drives the broking, commodities, mutual
fund and portfolio management services businesses. Revenue generation is through the sale
of content to financial and media houses, Indian as well as global.

INDIA INFOLINE COMMODITIES LIMITED

India Infoline Commodities Pvt Limited is engaged in the business of commodities broking.
Their experience in securities broking empowered them with the requisite skills and
technologies to allow them to offer commodities broking as a contra-cyclical alternative to
equities broking. They enjoy memberships with the MCX and NCDEX, two leading Indian
commodities exchanges, and recently acquired membership of DGCX. They also have a
multi-channel delivery model, making it among the select few to offer online as well as
offline trading facilities.

INDIA INFOLINE MARKETING & SERVICES

India Infoline Marketing and Services Limited is the holding company of India Infoline
Insurance Services Limited and India Infoline Insurance Brokers Limited

INDIA INFOLINE INVESTMENT SERVICES LIMITED

(a) India Infoline Distribution Company Limited (distribution of retail loan products)

(b) Moneyline Credit Limited (consumer finance)

(c) India Infoline Housing Finance Limited (housing finance)

IIFL (ASIA) PRIVATE LIMITED

IIFL (Asia) Private Limited is wholly owned subsidiary which has been incorporated in
Singapore to pursue financial sector activities in other Asian markets. Further to obtaining the
necessary Regulatory approvals, the company have been initially capitalized at 1 million
Singapore dollars.

3.4 KEY FEATURES

 Membership on the Bombay Stock Exchange Limited and the National Stock
Exchange.

20
  Registered with the NSDL as well as CDSL as a depository participant, providing a
one-stop solution for clients trading in the equities market.

 Broking services in cash and derivative segments, online as well as offline under the
brand of 5paisa.com.

 Presence across 19 states through a 177 strong branch network, with 75,000 online
registered users.

 Provision of free and world-class research to all clients.

3.5 Performance :

21
3.6 OBJECTIVES OF INDIA INFOLINE

 To emerge as the most respected financial service company in India

 To be respected by their stakeholders.
 To provide excellence research and service.
 To adding more product lines, more channels and probably expand overseas as well.
 To motivate and support to their team members to perform better.

VISION

“Their vision is to be the most respected company in the financial services space”.

3.7 THE BOARD OF DIRECTORS

Nirmal Jain, Founder & Chairman, India Infoline

Nirmal Jain, is the founder and the chairman of India Infoline Ltd. He holds an MBA degree
from IIM Ahmedabad, and is a Chartered Accountant and a Cost Accountant. He started his
professional career with HLL in 1989. In 1995, he founded his own independent financial
research company, now known as India Infoline Ltd.

R. Venkatraman, Co-promoter and Executive Director

22
R. Venkatraman has done his Bachelors in Technology (B. Tech) in Electronics, Electrical
Communications Engineering from IIT Kharagpur and an MBA from IIM Bangalore. He has
held senior managerial positions in ICICI Limited. He has also held the position of Assistant
Vice President with G E Capital Services India Limited in their private equity division.

Other Key Executives:

• Sat Pal Khattar - Non Executive Director

• Sanjiv Ahuja - Independent Director
• Nilesh Vikamsey - Independent Director
• Kranti Sinha - Independent Director

COMPETITION

• Broking – They face competition from small local brokers (traditional) and pan India
brokers like Kotak Securities Limited, S. S. Kantilal Ishwarlal Securities Private
Limited, India bulls Securities Limited, ICICI Web Trade Limited, Geojit Financial
Services Limited etc. Our strengths are our content and research, online technology
platform and customer service.

• Distribution – They face competition from small retail distributors (typically single
outlet unorganized units), brokers who have a distribution set up, old and established
distribution companies like Blue Chip Corporate Investment Centre Limited, Bajaj
Capital Limited, Karvy Securities Limited and banks including their PMS and Wealth
Management desks.

23
 CHAPTER 4

4.1 PRODUCT PROFILE

1. Investor Terminal (IT)

Investor Terminal is recommended for infrequent investors, who fall into the "Buy
and Hold" school of investing, made very popular by Warren Buffet - the Oracle of Omaha.
A typical retail investor is a busy corporate executive or a businessman who makes equity
investments for long term and does not trade everyday. He prefers a trading interface which
works behind proxy and firewalls as they access the Internet and the stock markets from their
work place, where a direct connection is difficult because of corporate IT security policies.
This product does not have intra-day tick by tick charts.

2. Trade Terminal (TT)

Trader Terminal is for the dedicated day traders, who churn their portfolio on minor
movements in the market, sometimes several times a day. Their rapid and high volume
trading requires a powerful interface for lightning fast order execution. They monitor marked
to market positions on a minute-to-minute basis, with facilities for panic exit. They need all
the analysis - fundamental and technical, market gossip, price and volume information and
much more - all at one click.

4.2 SERVICES OFFERED BY INDIA INFOLINE

( A ) EQUITIES SERVICE

India Infoline provided the prospect of researched investing to its clients, which was
hitherto restricted only to the institutions. Research for the retail investor did not exist prior to
India Infoline. India Infoline leveraged technology to bring the convenience of trading to the
investor’s location of preference (residence or office) through computerized access. India
Infoline made it possible for clients to view transaction costs and ledger updates in real time.

( B ) PMS SERVICE

Their Portfolio Management Service is a product wherein an equity investment

portfolio is created to suit the investment objectives of a client. They at India Infoline invest
your resources into stocks from different sectors, depending on your risk-return profile. This
service is particularly advisable for investors who cannot afford to give time or don't have
that expertise for day-to-day management of their equity portfolio.

( C ) RESEARCH SERVICE

24
 Sound investment decisions depend upon reliable fundamental data and stock selection
techniques. India Infoline Equity Research is proud of its reputation for, and they want you
to find the facts that you need. Equity investment professionals routinely use our research and
models as integral tools in their work. They choose Ford Equity Research when they can
clear your doubts.

( D ) COMMODITIES SERVICE

India Infoline’s extension into commodities trading reconciles its strategic intent to
emerge as a one-stop solutions financial intermediary. Its experience in securities broking has
empowered it with requisite skills and technologies. The Company’s commodities business
provides a contra-cyclical alternative to equities broking. The Company was among the first
to offer the facility of commodities trading in India’s young commodities market (the MCX
commenced operations only in 2003). Average monthly turnover on the commodity
exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities market has several
products with different and non-correlated cycles. On the whole, the business is fairly
insulated against cyclical gyrations in the business.

( E ) MORTGAGES SERVICE

During the year under review, India Infoline acquired a 75% stake in Money tree
Consultancy Services to mark its foray into the business of mortgages and other loan products
distribution. The business is still in the investing phase and at the time of the acquisition was
present only in the cities of Mumbai and Pune. The Company brings on board expertise in the
loans business coupled with existing relationships across a number of principals in the
mortgage and personal loans businesses. India Infoline now has plans to roll the business out
across its pan-Indian network to provide it with a truly national scale in operations.

( F ) INVEST ONLINE SERVICE

India Infoline has made investing in Mutual funds and primary market so effortless.
All you have to do is register with us and that’s all. No paperwork no queues and No
registration charges.

( G ) INVEST IN MF
India Infoline offers you a host of mutual fund choices under one roof, backed by in-depth
research and advice from research house and tools configured as investor friendly.

( H ) SMS SERVICE

25
Stay connected to the market
The trader of today; are constantly on the move. But how do you stay connected to the market
while on the move? Simple, subscribe to India Infoline's Stock Messaging Service and get
Market on your Mobile!

There are three products under SMS Service:

• Market on the move.

• Best of the lot.
• VAS (Value Added Service )

( I ) INSURANCE SERVICE

An entry into this segment helped complete the client’s product basket; concurrently,
it graduated the Company into a one-stop retail financial solutions provider. To ensure
maximum reach to customers across India, we have employed a multi pronged approach and
reach out to customers via our Network, Direct and Affiliate channels.

Following the opening of the sector in 1999-2000, a number of private sector insurance
service providers commenced operations aggressively and helped grow the market. The
Company’s entry into the insurance sector derisked the Company from a predominant
dependence on broking and equity-linked revenues. The annuity based income generated
from insurance intermediation result in solid core revenues across the tenure of the policy.

( J ) WEALTH MANAGEMENT SERVICE

Imagine a financial firm with the heart and soul of a two-person organization. A
world-leading wealth management company that sits down with you to understand your
needs and goals. We offer you a dedicated group for giving you the most personal attention at
every level.

( K ) NEWSLETTERS SERVICE

The Daily Market Strategy is your morning dose on the health of the markets. Five
intra-day ideas, unless the markets are really choppy coupled with a brief on the global
markets and any other cues, which could impact the market. Occasionally an investment idea
from the research team and a crisp round up of the previous day's top stories. That's not all.
As a subscriber to the Daily Market Strategy, you even get research reports of India Infoline

26
research team on a priority basis. The India Infoline Weekly Newsletter is your flashback for
the week gone by. A weekly outlook coupled with the best of the web stories from India
infoline and links to important investment ideas, Leader Speak and features is delivered in
your inbox every Friday evening.

4.3 DEMATERIALIZATION

One of the methods for preventing all the problems that occur with physical securities is
through Dematerialization (demat). The share certificates are shredded (i.e., its paper form is
destroyed) and a corresponding credit entry of the number of securities (written on the
certificates) is made in the account opened with the Depository Participant (DP).Each
security is identified in the depository system by ISIN and short name.

Steps in Dematerialization of shares

1. Client/Investor submits the DRF (Demat Request Form) and physical certificates to
DP. DP checks whether the securities are available for Demat. Client defaces the
certificate by stamping ‘Surrendered for Dematerialization’. DP punches two holes on
the name of the company and draws two parallel lines across the face of the
certificate.

2. DP enters the demat request in his system to be sent to NSDL. DP dispatches the
physical certificates along with the DRF to the R&T Agent.

3. NSDL records the details of the electronic request in the system and forwards the
request to the R&T Agent.

4. R&T Agent, on receiving the physical documents and the electronic request, verifies
and checks them. Once the R&T Agent is satisfied, Dematerialization of the
concerned securities is electronically confirmed to NSDL.

5. NSDL credits the dematerialized securities to the beneficiary account of the investor
and intimates the DP electronically. The DP issues a statement of transaction to the
client.

4.4 REMATERIALISATION

Rematerialisation is the exact reverse of dematerialization. It refers to the process of issuing

physical securities in place of the securities held electronically in book-entry form with a
depository. Under this process, the depository account of a beneficial owner is debited for the

27
securities sought to be re-materialized and physical certificates for the equivalent number of
securities is/are issued. The beneficial owner desiring to receive physical security certificates
in place of the electronic holding should make a request to the issuer or its R&T Agent
through his DP in the prescribed Rematerialisation request form (RRF).

TRADING AND SETTLEMENT

One of the basic services provided by NSDL is to facilitate transfer of securities from one
account to another at the instruction of the account holder. In NSDL depository system both
transferor and transferee have to give instructions to its depository participants [DPs] for
delivering [transferring out] and receiving of securities. However, transferee can give
'Standing Instructions' [SI] to its DP for receiving in securities

Transfer of securities from one account to another may be done for any of the following
purposes:

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

transaction.
• Transfer arising out of a transaction done on a stock exchange.
• Transfer arising out of transmission and account closure.

4.5 SETTLEMENT OF OFF-MARKET TRANSACTION

Steps in settlement of off-market transaction

1. Seller gives delivery instructions to his DP to move securities from his account to the
buyer's account.

2. Buyer automatically receives the credit of the securities into his account on the basis
of standing instruction for credits.

3. Buyer receives credit of securities into his account only if he gives receipt
instructions, if standing instructions have not been given.
28
 4. DP needs to be extra careful in verifying the signature of the client if unusual
quantities of securities are being debited to the account

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

SETTLEMENT OF MARKET TRANSACTION

The movement of funds takes place outside the NSDL system.

1. Seller gives delivery instructions to his DP to move securities from his account to
his broker's account.

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

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

4. Buying broker gives instructions and securities move to the buyer's account.
5. Transfer of securities towards settlement of transactions done on a stock exchange is
called settlement of market transaction.

4.6 SCHEDULE OF BROKERAGE CHARGES OF INDIA INFOLINE

29
 Lifetime scheme Renewable scheme

(standard brokerage) ( Special brokerage)

Brokerage

Intra-day 0.10% 0.05%

Delivery: Normal settlement 0.50% 0.25%

Delivery: Trade –to-trade 0.75% 0.75%

Futures 0.10% 0.05%

Options 1% of premium or Rs.100/ 1% of premium or Rs.

WIH 100/ WIH

Minimum per share

Intra-day 5paisa 1paisa

Delivery 5paisa 5paisa

CHAPTER 5

5.1 TABLE SHOWING THE NUMBER OF MALE & FEMALE RESPONDENTS

30
 GENDER NO OF RESPONDENTS % OF RESPONDENTS

MALE 77 77%

FEMALE 23 23%

TOTAL 100 100%

Analysis:

From the above table we can see that out of 100 respondents, 77% of the respondents are
male and 22% of the respondents are females. Hence we can infer that Males have more urge
to invest in equities than females. This is in purview of the 100 samples selected.

5.1 ( A ) GRAPH SHOWING THE NUMBER OF MALE AND FEMALE

RESPONDENTS

Chart showing the gender of respondents

female

23%

male

77%

5.2 TABLE SHOWING THE AGE GROUP OF RESPONDENTS

AGE GROUPS NO OF RESPONDENTS % OF RESPONDENTS

31
 BELOW 20 0 0%

21-30 57 57%

31-40 29 29%

41-50 14 14%

TOTAL 100 100%

Analysis:

From the above table, it can be analyzed that no respondents belong to below 20
years age group because they feel that they don’t know much about investments, 57% of the
respondents belong to 21-30 years of age as they aim for savings, 29% of the respondents
belong to 31-40 years as they feel investing in equities is more flexible, 14% of the
respondents in the age group of 41-50 years because of the liquidity factor.

5.2 ( A ) GRAPH SHOWING THE AGE GROUP OF THE RESPONDENTS

chart showing age of investors

41-50

14%

31-40 21-30

29% 57%

5.3 TABLE SHOWING THE OCCUPATION OF RESPONDENTS

OCCUPATION NO OF RESPONDENTS % OF RESPONDENTS

BUSINESS 13% 13%

EMPLOYEE 63% 63%

32
 PROFESSION 24% 24%

RETIRED PERSON 0% 0%

TOTAL 100 100%

Analysis:

From the above table, it can be analyzed that 13% of the respondents are
businessmen, 63% of the respondents are in the employee sector, and 24% of the respondents
are professionals. As such employees sector are more likely to invest in equities than other
sectors of employment.

5.3 ( A ) GRAPH SHOWING THE OCCUPATION OF RESPONDENTS

chart showing occupation of investors

business

13%
professional

24%

employee
63%

5.4 TABLE SHOWING THE ANNUAL INCOME PROFILE OF THE

RESPONDENTS

ANNUAL INCOME NO OF RESPONDENTS % OF RESPONDENTS

50000-1lakh 7% 7%

1lakh-3lakh 34% 34%

3lakh-5lakh 37% 37%

33
 5lakh-10lakh 18% 18%

10lakh & more 3% 3%

Total 100 100%

Analysis:

The above table indicates that, 7% of respondents annual income is between 50000-
1lakh, 34% of respondents annual income is between 1lakh-3lakh, 37% of respondents
annual income is between 3lakh-5lakh, 18% of respondents annual income is between 5lakh-
10lakh and 3% of respondents annual income is more than 10lakh.Hence people with
moderate income invest more than those with high income.

5.4 ( A ) GRAPH SHOWING THE ANNUAL INCOME OF THE RESPONDENTS

chart showing income of investors

above 10 lakhs

3% 50000-1 lakh
7%

5-10 lakhs

18%

1-3 lakhs

34%

3-5 lakhs
37%

5.5 TABLE SHOWING THE MONTHLY SAVINGS OF RESPONDENTS

SAVINGS NO OF RESPONDENTS % OF RESPONDENTS

BELOW 10000 24 24%

10000-20000 43 43%

20000-30000 23 23%

30000-40000 9 9%

34
 ABOVE 50000 0 0%

TOTAL 100 100%

Analysis:

The above table clearly shows that, out of 100 respondents, 24% of them save
money below Rs 10,000, 43% respondents are saving between Rs 10,000 to Rs 20,000, 23%
respondents saves Rs 20,000 to 30,000 and 9% respondents saves Rs 30,000 to 40,000, and
there is no respondent who saves above 50000. Therefore investments increase when there is
no much savings.

5.5 ( A ) GRAPH SHOWING THE MONTHLY SAVINGS OF RESPONDENTS

chart showing savings of investors

30000-40000

9%

below 10000
24%
20000-30000

23%

10000-20000

43%

5.6 TABLE SHOWING THE SOURCES OF INFORMATION CREATED

AWARENESS TO THE RESPONDENTS ON EQUITIES

SOURCES NO OF RESPONDENTS % OF RESPONDENTS

T.V 7 7%

NEWS PAPER 19 19%

FRIENDS 33 33%

FINANCIAL ADVISOR 40 40%

TOTAL 100 100%

35
Analysis:

The above table gives us the information about various sources through which the
investors are aware of equities. 40% of the investors got to know about equities through the
medium of their financial advisors. Their knowledge about equities was purely because of the
recommendations and information given by their advisors. 33% of the respondents from their
friends and relatives and 19% from the means of news paper. Only 7% got to know about
equities through other sources like CNBC , NDTV etc.

5.6 ( A ) GRAPH SHOWING THE SOURCES OF INFORMATION CREATED

AWARENESS TO THE RESPONDENTS ON EQUITIES.

tv
7%

newspaper

fin advisor 19%

40%

friends

33%

5.7 TABLE SHOWING THE RESPONDENTS INVESTMENT IN DIFFERENT

SECTORS

SECTOR NO OF RESPONDENTS % OF RESPONDENTS

BANKING 44 44%

INSURANCE 23 23%

FMCG 16 16%

IT & INFRASTRUCTURE 16 16%

OTHERS 1 1%

TOTAL 100 100%

Analysis:

36
 The above table shows that, 44% of respondents have invested in banking sector , 23%
in insurance sector,16% in FMCG & IT sector & 1% in other sectors. Hence the respondents
feel that banking sector is more secured than other sectors.

5.7 GRAPH SHOWING THE RESPONDENTS INVESTMENT IN SECTORS OF

EQUITIES

IT

16%

banking
FMCG
44%
16%

insurance

23%

5.8 TABLE SHOWING THE RESPONDENTS OPINION ABOUT RISK INVOLVED

IN EQUITIES

OPINION NO OF RESPONDENTS % OF RESPONDENTS

YES 66 66%

NO 34 34%

TOTAL 100 100%

Analysis:

The above table shows that, 66% of respondents opinion is that investment in
equities is risky and remaining 34% of respondents opinion is that investment in equities is
not risky.This is based on the investors perception on equities.

37
 5.8 ( A ) GRAPH SHOWING THE RESPONDENTS OPINION ABOUT RISK
INVOLVED IN EQUITIES

no

34%

yes

66%

5.9 TABLE SHOWING THE RESPONDENTS MAIN OBJECTIVE ABOUT

INVESTMENT IN EQUITIES

OBJECTIVES NO OF RESPONDENTS % OF RESPONDENTS

RISK 7 7%

RETURN 37 37%

TAX BENEFITS 17 17%

CAPITAL 12 12%
APPRECIATION

SAFETY 25 25%

LIQUIDITY 1 1%

TOTAL 100 100%

Analysis:

38
 In order to understand the behaviour of the equity investors, it is necessary to know
the reasons for their investment in the same. The above table gives the data about why the
investors prefer to invest in equities. According to the survey, majority of 37% of the
investors opt for investing in equities because the returns expected on them are reasonable.
7% opt because of the fact that the risks in this case are distributed across the portfolio, 17
% of them invest to avail tax benefits in the long run. An investor has the advantage of selling
their shares in hand at any time as they are as liquid as stocks. Hence 1% of them have opted
for it. Another 12% investors want to have appreciation in their present capital or networth.
The fund is professionally managed hence gives security to the investors on their
investments. As a result 25% of them have opted because of the safety factor.

5.9 ( A ) GRAPH SHOWING THE RESPONDENTS MAIN OBJECTIVE ABOUT

INVESTMENT IN EQUITIES

liquidity

1%

risk
7%

safety

25%

returns

37%

capital appreciation
12% tax benifits

17%

5.10 TABLE SHOWING THE RESPONDENTS TYPE OF TRANSACTION

UNDERTAKEN

TYPE NO OF RESPONDENTS % OF RESPONDENTS

39
 INTRADAY 55 55%

DELIVERY 42 42%

BUY TODAY SELL 3 3%

TOMORROW

TOTAL 100 100%

Analysis: The above table shows that 55% of respondents prefer intraday trading to earn
more profits , 42% of respondents prefer delivery mode of trading to have security for their
investments , and 3% of respondents prefer buy today sell tomorrow type of trading to know
the volatility of market and earn minimum profits.

5.10 ( A ) GRAPH SHOWING THE RESPONDENTS PREFERENCE FOR SCHEME OF

INVESTMENT

buy today sell 2rw

3%

delivery intraday
42% 55%

5.11 TABLE SHOWING THE PARAMETER OBSERVED BY THE RESPONDENTS

WHILE INVESTING

PARAMETER NO OF RESPONDENTS % OF RESPONDENTS

OTHERS 0 0%

PAST RECORD 26 26%

40
INDUSTRIAL SCENARIO 62 62%

PERSONAL 12 12%
SENTIMENTS

TOTAL 100 100%

Analysis:

The above table shows that 26% of respondents observe past record of a
company,62% of them observe the industry scenario and 12% go for personal sentiments
while investing. Thus we can infer that respondents mostly observe the industrial scenario
and then proceed with investment decision.

5.11 ( A ) GRAPH SHOWING THE PARAMETERS OBSERVED BY

RESPONDENTS BEFORE INVESTING

personal sentiments

12%

past records

26%

industry scenario

62%

5.12 TABLE SHOWING THE RESPONDENTS OPINION ABOUT THE RETURN IN

THEIR PORTFOLIO

OPINION NO OF RESPONDENTS PERCENTAGE OF

RESPONDENTS

YES 94 94%

NO 6 6%

TOTAL 100 100%

41
Analysis:

The above table shows that 94% of respondents received good return in equity and 6%
of respondents are not received good return in equity.This is because of the market volatility.

5.12 ( A ) GRAPH SHOWING THE RESPONDENTS OPINION ABOUT THE

RETURN IN THEIR PORTFOLIO

no

6%

yes
94%

5.13 TABLE SHOWING THE TERM OF INVESTMENT OF THE RESPONDENTS

TYPE NO OF RESPONDENTS % OF RESPONDENTS

SHORT TERM 24 24%

MEDIUM TERM 68 68%

LONG TERM 8 8%

TOTAL 100 100%

From the above table we can observe that 24% of the respondents prefer short term
investments,68% prefer medium term investment and 8 % prefer long term investment.This is
because of the risk and liquidity factor the term of investment is fixed by the respondents.

42
5.13 ( A ) GRAPH SHOWING THE TERM OF INVESTMENTS OF RESPONDENTS

more than a year

8%

6 months

24%

6 mnths- 1 yr

68%

5.14 TABLE SHOWING THE RESPONDENTS OPINION ABOUT EQUITY HAS

TAX SAVING PLAN & RETURN IS TAX FREE

OPINION NO OF RESPONDENTS % OF RESPONDENTS

YES 94 94%

NO 6 6%

TOTAL 100 100

Analysis:

The above table showing that 94% of the respondents opinion is that equity
investment has a tax saving plans and total return is tax free but remaining 6% of the

43
respondents opinion is that equity investment has no tax saving plans and total return is not
tax free.

5.14 ( A ) GRAPH SHOWING THE RESPONDENTS OPINION ABOUT EQUITY

INVESTMENT TAX SAVING PLANS & TOTAL RETURN IS TAX FREE

no

6%

yes
94%

5.15 TABLE SHOWING THE RESPONDENTS TRADING TERM ON EQUITY

TERM NO OF RESPONDENTS % OF RESPONDENTS

DAILY 9 9%

ALTERNATE DAYS 27 27%

WEEKLY 41 41%

FORTNIGHTLY 10 10%

MONTHLY 12 12%

TOTAL 100 100%

Analysis:

The above table shows that 9% of the respondents trade daily,27% trade on alternate
days,41% of the respondents trade on weekly basis,10% trade fortnightly & 12% trade on
monthly basis. Hence we can infer that most of the respondents trade weekly.
44
 5.15 ( A ) GRAPH SHOWING THE RESPONDENTS TRADING PATTERN ON
EQUITY

daily
monthly
9%
12%

fortnightly

10%
alternate days
27%

weekly

41%

5.16 TABLE SHOWING THE RESPONDENTS OPINION ON THEIR

INVESTMENTS LOSING VALUE

OPINION NO OF RESPONDENTS % OF RESPONDENTS

NO DECREASE 42 42%

LESS THAN 5% 40 40%

BETWEEN 5 & 10% 16 16%

BETWEEN 10 & 20% 1 1%

OVER 20% 0 0%

TOTAL 100 100%

Analysis:

The above table shows that 42% of the respondents cannot bear any decrease in the
value of their investments,40% can bear less than 5% decrease,16% can bear between 5 &
10%, 1% can bear between 10&20% and no respondents can bear decrease in the value above
20%.

5.16 ( A ) GRAPH SHOWING THE RESPONDENTS OPINION ON INVESTMENTS

LOSING VALUE
45
 between 10% & 20%

1%

between 5% & 10%

16%

no decrease

42%

less than 5%

40%

5.17 TABLE SHOWING THE RESPONDENTS LEVEL OF KNOWLEDGE ON

INVESTMENTS

LEVEL NO OF RESPONDENTS % OF RESPONDENTS

LITTLE 9 9%

BASIC 74 74%

GOOD 17 17%

TOTAL 100 100%

Analysis:

The above table shows that 9% of respondents have little knowledge,74% know the
basics of investments and 17% know a good deal on investments.

5.17 ( A ) GRAPH SHOWING THE RESPONDENTS LEVEL OF KNOWLEDGE ON

INVESTMENTS

46
 little
good 9%
17%

basic
74%

5.18 TABLE SHOWING THE RESPONDENTS CONCERN ON INVESTMENTS

CONCERN NO OF RESPONDENTS % OF RESPONDENTS

LOSING VALUE 6 6%

GAIN & LOSE 38 38%

GAIN VALUE 56 56%

TOTAL 100 100%

Analysis:

The above table shows that 6% of respondents have little concern on investments losing
value,38% are equally concerned about gain and loss and 56% are purely concerned about
investments gaining value.

5.18 ( A ) GRAPH SHOWING THE RESPONDENTS CONCERN ON INVESTMENTS

47
 lose value

6%

gain and lose

gain value
38%
56%

From the above analysis made in the previous chapters the following findings are derived.

• The trading process is very reliable.

• There is always risk involved in the equity market, so the various risk management

techniques can be used to minimize the risk for benefit from the price movements.

• The equity market is experiencing tremendous growth in the recent past. This can be
emphasized by the fact that everyday we have the sensex reaching new heights and
some or the other company is going in for Initial Public Offering..

• Banking Sector is widely accepted because it is not always volatile.Banking sector

has steady earnings.

CHAPTER 6

48
6.1 ABOUT THE INDUSTRY

The growth in the Indian Banking Industry has been more qualitative than quantitative and it
is expected to remain the same in the coming years. Based on the projections made in the
"India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report
forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The
total assets of all scheduled commercial banks by end-March 2010 is estimated at Rs
40,90,000 crores. That will comprise about 65 per cent of GDP at current market prices as
compared to 67 per cent in 2002-03.

The Indian Banking Industry can be categorized into non-scheduled banks and scheduled
banks. Scheduled banks constitute of commercial banks and co-operative banks. There are
about 67,000 branches of Scheduled banks spread across India. As far as the present scenario
is concerned the Banking Industry in India is going through a transitional phase.

The Public Sector Banks (PSBs), which are the base of the Banking sector in India account
for more than 78 per cent of the total banking industry assets. Unfortunately they are
burdened with excessive Non Performing assets (NPAs), massive manpower and lack of
modern technology. On the other hand the Private Sector Banks are making tremendous
progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far
as foreign banks are concerned they are likely to succeed in the Indian Banking Industry.

In the Indian Banking Industry some of the Private Sector Banks operating are IDBI, ING
Vyasa Bank, SBI Commercial and International Bank Ltd, Bank of Rajasthan Ltd. and banks
from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental
Bank, Allahabad Bank among others. ANZ Grindlays Bank, ABN-AMRO Bank, American
Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking
Industry.

Internet banking and mobile banking made it convenient for customers to do their banking
from geographically diverse places. Banks also sharpened their focus on rural markets and
introduced a variety of services geared to the special needs of their rural customers.

Banking activities also transcended their traditional scope and new concepts like personal
banking, retailing and banc assurance were introduced.The sector was also moving rapidly

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towards universal banking and electronic transactions, which were expected to change the
way banking would be perceived in the future.

6.2 HDFC BANK

HDFC Bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. The Bank commenced operations as a Scheduled
Commercial Bank in January 1995.

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to
receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the
private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994.

Headquartered in Mumbai, HDFC Bank, has a network of over 531 branches spread over 228
cities across India. All branches are linked on an online real-time basis. Customers in over
120 locations are serviced through Telephone Banking. The Bank also has a network of about
over 1054 networked ATMs across these cities. HDFC Bank's ATM network can be accessed
by all domestic and international Visa / MasterCard, Visa Electron / Maestro, Plus / Cirrus
and-American-Express-Credit/Charge-cardholders.

HDFC Bank has won many awards for its excellent service. Major among them are "Best
Bank in India" by Hong Kong-based Finance Asia magazine in 2005 and "Company of the
Year" Award for Corporate Excellence 2004-05.

GRAPH OF MAY & JUNE

The MACD line moves above the zero line during mid April and later moves towards the
zero line at the end of May 2008.This indicates a selling opportunity and in the early weeks
of june 2008 again recovering through the bearish market moving along the bullish market
with line moving below the zero line.The RSI too is facing a downtrend since mid may and in
june signalling a bearish market. The RSI is reflecting the ongoing consolidation in
prices.The MACD has generated a buy signal which is likely to see prices gaining
momentum once they cross the key resistance levels. A move past the key resistance level
backed by strong volumes will see prices heading towards expected hikes.

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6.3 ICICI OVERVIEW

ICICI Bank is India's second-largest bank with total assets of Rs. 3,767.00 billion (US$ 96
billion) at December 31, 2007 and profit after tax of Rs. 30.08 billion for the nine months
ended December 31, 2007. ICICI Bank is second amongst all the companies listed on the
Indian stock exchanges in terms of free float market capitalisation*. The Bank has a network
of about 955 branches and 3,687 ATMs in India and presence in 18 countries. ICICI Bank
offers a wide range of banking products and financial services to corporate and retail
customers through a variety of delivery channels and through its specialised subsidiaries and
affiliates in the areas of investment banking, life and non-life insurance, venture capital and
asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and
Canada, branches in Unites States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and
Dubai International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has
established branches in Belgium.

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ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National
Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed
on the New York Stock Exchange (NYSE).

MAY & JUNE GRAPH

The stock has been a strong out performer over the past few years.It had earlier corrected
from an all time high of Rs 450 in April 2008 to a low of Rs308 in May 2008. Since then, it
rallied smartly to the key resistance range of Rs300-350 levels. This is a sign of weakness
and suggests further decline in the trend.The daily RSI is currently in the sell mode. Daily
MACD has also generated a strong sell signal, which indicates that the downtrend will gather
momentum in the coming days. Keeping in mind the above mentioned technical evidences, it
is recommended to the investors to take profit on their investment positions as the stock is
expected to test again some low levels.

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6.4 STATE BANK OF INDIA
SBI, started as Imperial Bank then named State Bank of India commenced its operations from
the year 1955, is the largest commercial bank in India in terms of profits, assets, deposits,
branches and employees. As of March 2008, the bank has had 21 subsidiaries and 10,000
branches. SBI offering the services of banking and as well as non- banking services to their
customers. It provides a whole range of financial services which includes Life Insurance,
Merchant Banking, Mutual Funds, Credit Cards, Factoring, Security Trading & Primary
dealership in the Money market. The Bank is actively involved in non-profit activity called
community services banking apart from its normal banking activity.

The bank also concentrate in agriculture, for that it took initiative spotlight kharif and
spotlight rabi campaigns for higher disbursement. It introduced Automated Teller Machine
with Kishan Credit Cards in all circles to assist agriculture peoples, cumulatively the bank
has credit linked 7.68 lac Self Help Groups and disbursed loans to the extent of Rs 3,468 crs,
so far. In the year 2001 the SBI Life was started. SBI is the only Bank to have been permitted
a 74% stake in the insurance business. The Bank's insurance subsidiary "SBI Life Insurance
53
Company" is a joint venture with Cardif S.A holds 26% stake. SBI Life enjoys the unique
distinction of being the first private sector life insurance company in India to make profits for
two-consecutive-years.

The strategic initiatives that SBI have launched business groups in 2007 namely rural and
agri business; treasury and marketing; corporate strategy and new business; and fourth mid
corporate group is on the anvil. They also introduced new products and services such as web-
based remittance, instant fund transfer, online-trading, comprehensive cash management.

SBI opened its 10,000th branch in March 2008, it becomes only the second bank in the world
to have more than 10,000 branches after China's ICBC. SBI is pursuing aggressive IT policy,
where the Automated Teller Machines are now also enabled to pay utility bills, college fees,
book air-line tickets and accept donations, further bilateral sharing of ATMs was extended to
thirteen banks covering 15,700 Automated Teller Machines and an Memorandum of
Understanding has been signed with the Indian railways for installing ATMs at 682 railway
stations. Infrastructure fund, private equity, venture capital and pension fund management are
under in process to assist the customer in time. SBI is targeting to emerge as the best rated
bank among public, private, foreign and state -owned banks by the end of the next fiscal.
Employee Stock Option Scheme, where employees have the option to pick up shares as per
their needs is avail in SBI. SBI plans to implement the mobile banking technology will soon
with aim of customer will no be just "Branch customers" but will be "Bank customers".

MAY & JUNE GRAPH

The stock has corrected sharply from a high of Rs2,388 levels in January 2008 to a low of
Rs1,582.25 in March 2008. Since then, it has registered a small pullback to a high of Rs1,840
levels in early May 2008 but the pullback failed to take the stock even closer to the 200
DMA.The Daily oscillators like the RSI and MACD are in sell mode indicating more
weakness in the trend. Fridays close has been at an all time low which suggests the possibility
of further breakdown in prices in the coming weeks. Keeping in mind the above mentioned
technical evidences, it is recommended to investors to review their long holdings as the stock
is likely to be an underperformer in the coming months and has the potential to test target of
Rs1,500 followed by Rs1,350-1,400 levels in the coming months.

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6.5 CORPORATION BANK
Founded in March 1906, Corporation Bank (CBL) (formerly Canara Banking Corporation) is
a 99 year old bank. The bank had its origin in the temple town of Udupi in Dakshina Kannada
Dist. of Karnataka.

The growth in the operations and scale of activities of the bank is accompanied by
commensurate growth in its financial strength. Throughout its history, the bank has
maintained a consistent track record of growth and profitability. Through strategic business
planning, technology upgradation, focus on core competencies and good house-keeping, the
bank has emerged as a financially sound, profitable and well capitalised organisation.

At Present, the bank has got one subsidiaries i.e Corpbank Securities Ltd. Corp Bank Homes
Ltd, the wholly owned subsidiary of the bank has merged with Corporation Bank vide
Honourable High Court of Karnataka order dated 11th August, 2006 and the merger was
effective from 04.10.2006.

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The Bank offers a wide range of products and services designed to suit every financial need
of the customers. It is also an large provider of credit, inter-alia, to domestic industries, with a
well-diversified credit portfolio consistent with national needs. Its products and services are
marketed under the theme 'Advantage Corp Bank'. The Bank is also on the threshold of
implementation of further advanced technology and the bank's Internet Banking initiatives
are already underway. It has a significant contribution towards enhancing civic amenities in
the city of Mangalore, it took up construction of Road Dividers.

MAY & JUNE GRAPH

The stock has been in a continuous downtrend from a high of Rs350 in march 2007 to touch a
low of Rs251 levels in june 2008, which is historically, a strong support level. The daily
Oscillators 10-day RSI is exhibiting multiple positive divergences suggesting that the
downtrend is running out of steam at the current levels.The daily MACD is also exhibiting a
Buy signal suggesting gradual build up of upside momentum. In addition, volumes have
picked up in the last few weeks suggesting buying interest is coming back at these price
levels. The suggested ranges are on the wider side. Tight ranges and stop losses are not likely
to work out as the broad indices are witnessing volatile movement.

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6.6 FINDINGS TROM TECHNICAL ANALYSIS
1. Based on each scripts,

a. HDFC bank script has frequent ups and downs so the investor should go for
short selling and intra day trading to have steady earnings. Profits can be
increased based on current market trend and hence holding for long term
perspective is not reliable.

b. ICICI bank scrip has a bearish market hence the investors can earn profits
because the bearish period is likely to be present for a few more days of the
coming month. It’s a period showing profits on investors investment position.

c. SBI scrip is an underperformer hence the investor can go for long holdings for
the coming days and go for selling once the market shows some strong
recovery indices.

d. Corporation bank scrip is showing a bullish market hence keeping holdings of

these stocks is beneficial as there exists minimum time for the scrip to
represent bearish market.

CHAPTER 7

7.1 SUGGESTIONS TO THE COMPANY

• Equities is not a new concept, it is there from quite a long time but the awareness

level among the layman the general public is very little. So awareness has to be

created by the existing investors among their friends and family members and in

return they to other people. This is done through exchange of thoughts through talks

on market volatilities, banners and through tv programmes.

• As the price quoted through the bidding process for the equity is high and there is a

huge amount of risk. People shy away, so the price should be reduced.

• Better analytical tools should be used to make better predictions.

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• The client must be advised not to make their opinions while trading as a wrong

position can prove to be very risky. This can be reduced by sending regular SMS

alerts to the clients during the trading hours.

• More females should be induced to invest in equity market. This can be done by

providing attractive schemes while opening of a demat account. Yearly charges for

the first year is made free to the females investors so as to boost them to invest in

equities.

• All age groups of people must be induced to invest in equity market so that

heterogeneous information could be got. Awareness programmes and weekly wrap of

trading process must be sent to all investors.

• One should invest in equity market from a long term perspective. It is recommended

that, investors should invest more in equity market, because when they do so, they are

assured of huge returns..

7.2 SUGGESTIONS TO THE INVESTORS

 Investors should be aware of Equities investment.

 An investment decision should be to maximize the return and minimize the risk.
 The regularity of investment is most important. The systematic investment is one of
the best ways of savings because it makes investment a habit.
 Investors should have systematic plan before going for any investment.
 Investor should analyze his needs and wants accordingly.
 We have lot of agents and advisors to give awareness regarding Equities but before
going to invest in any type of investment you gather information and take your
investment decision.

 If share price shows a slight upward trend, then it is advisable to buy the shares during
this kind of market condition and sell it later when the trend goes down.

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  There is a high rate of fluctuations in all the 4-scrip’s Rate of Change. Therefore it is
advisable for the speculators to anticipate the price of the stocks and invest, depending
upon the risk and return that he takes.
 When the ROC reached the highest or lowest historic value then it is possible to
anticipate the script’s price.
 The speculator can sell the scrip in the over bought region and purchase in the over
sold region.
 In case of an upward trend the speculator buys the share in order to sell at a higher
price in the short run.

When considering the purchase of a stock, investors should find answers to some key
questions :

Fundamentals What is the company's business, is it

financially sound -- and is it growing?

Price History How much have other investors been willing

to pay for the stock in the past?

Price Target How much are investors likely to pay for the
stock in the future?

Catalysts What catalysts will change investors'

perceptions of the stock in the future?

Comparison How does the stock compare to others in its

industry?

Recent Developments Check out what are the recent developments

in the company

 Companies are judged by their sales and earnings growth rates than on the absolute
value of their sales and earnings. Look for companies that consistently grow faster
than there peers.

 Investors prefer companies that increase profit margins -- the percentage of sales that
they keep -- every year. This is accomplished either by lowering expenses or raising
prices. Look for companies that consistently find ways to squeeze more profits out of
sales than their peers.

 The financial health of a company is dependent on a combination of profitability,

short-term liquidity and long term liquidity. Companies, which are profitable, but
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 have poor short term or long term liquidity measures, do not survive the troughs of
the trade cycle. Also firms, which are not profitable but are cash rich, do not survive
in the long term either. Such companies are taken over for their cashflow or by others
who believe that they can improve the profitability of the business. Thus, those
companies that do succeed and survive over the long term have a well-rounded
financial profile, and perform well in all aspects of financial analysis. Profitability
ratios reflects the business environment of the time.

 Investors need to know how a stock has performed relative to all other
stocks.Generally they attempt to hold the markets top-performing securities-those that
have done better over the past year than majority of stocks in their industrial group
and all stocks in the database. Look for a positive trend in 12-month,6-month and 3-
month periods.

 Investors should note that the average prices at which a stock traded over the past 50-
and 200-day periods. These "moving averages" tend to provide a floor,or support,for
stocks trading above them and a ceiling,or resistance,for stocks below them.Stocks
that sink below support are in danger of further weakening;stocks that rise above
resistance have a shot at new highs.

 Latest news of the company its Corporate Announcements and how does the company
stack up against it peers have to be noticed.

CHAPTER 8

CONCLUSION

Saving money is not enough. Each of us need to invest our savings intelligently in
order to have enough money available for funding the higher education of one’s children, for
buying a house, or for one’s own golden years. The study will guide the new investor who
wants to invest in equity by providing knowledge about how to measure the risk and return of
particular script.

From the analysis I found that most of the people are interested to invest in equities because
of high returns and liquidity and they are serve as the best future investment option.Investors
are well aware of the market and they make their own decisions and invest in stocks that has
a good brand Image and attracts more number of investors which has indeed proved to be the
advantageous factor for promotional activities of every companies.

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 Investors look forward for the returns in an investment which is directly related with the
risk factors in an investment. Thus we can conclude that the investor can have a better return
and stabilise their savings by investing in the banking sector when compared to other sectors.

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