1.

About Company:-

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd and its subsidiaries, is one of the leading players in the Indian financial services space. IIFL offers advice and execution platform for the entire range of financial services covering products ranging from Equities and derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed deposits, Loans, Investment Banking, GoI bonds and other small savings instruments. Mr. Nirmal Jain founded Probity Research and Services Pvt. Ltd. (later re-christened India Infoline) in 1995; perhaps the first independent equity research Company in India. Promoted by Nirmal Jain and R.Venkataraman. A network of over 2,500 business locations spread over more than 500 cities and towns across India facilitates the smooth acquisition and servicing of a large customer base. HISTORY AND MILESTONES

1995-Commenced operations as an Equity Research firm. 1997-Launched research products of leading Indian companies, key sectors and the economy Client included leading FIIs, banks and companies. 1999-Launched www.indiainfoline.com. 2000-Launched online trading through www.5paisa.com Started distribution of life insurance and mutual fund. 2003-Launched proprietary trading platform Trader Terminal for retail customers 2004-Acquired commodities broking license and Launched Portfolio Management Service. 2005-Maiden IPO and listed on NSE, BSE. 2006-Acquired membership of DGCX and Commenced the lending business. 2007-Commenced institutional equities business under IIFL and Formed Singapore subsidiary, IIFL (Asia) Pte Ltd. 2008-Launched IIFL Wealth and Transitioned to insurance broking model. 2009-Acquired registration for Housing Finance. SEBI in-principle approval for Mutual Fund. Obtained Venture Capital license.

2010-Received in-principle approval for membership of the Singapore Stock Exchange Received membership of the Colombo Stock Exchange. IIFL has been awarded the Best Broker, India by FinanceAsia . The Most improved brokerage, India in the AsiaMoney polls. India Infoline was also adjudged as Fastest Growing Equity Broking House - Large firms by Dun & Bradstreet. MANAGEMENT

Mr. Nirmal Jain(Chairman & Managing Director, India Infoline Ltd)-PGDM from IIM Ahmedabad, a Chartered Accountant and a rank-holder Cost Accountant. Mr. R. Venkataraman(Co-promoter and Executive Director, India Infoline Ltd)- B.Tech (electronics and electrical communications engineering, IIT Kharagpur) and an MBA (IIM Bangalore. Mr. Nilesh Vikamsey(Independent Director, India Infoline Ltd)-practicing Chartered Accountant for 25 years and Senior Partner at M/s Khimji Kunverji & Co. Mr. Sat Pal Khattar(Non Executive Director, India Infoline Ltd). Mr. Kranti Sinha(Independent Director, India Infoline Ltd)-Completed his masters from the Agra University and started his career as a Class I Officer with Life Insurance Corporation of India. Mr. A. K. Purwar(Independent Director , India Infoline Ltd) o Institutional Equities -H.Nemkumar Investment Banking -Ajit Menon,Donald D' Souza o Consumer Finance- Apul Nayyar o Retail Broking -Nandia Vaidya o Wealth Management- Karan Bhagat International Operations- Bharat Parajia Offshore Asset Management- Deepesh Pandey Insurance Distribution- Mukesh Kumar Singh

PRODUCTS AND SERVICES

EQUITIES-IIFL is a member of BSE and NSE registered with NSDL and CDSL as a depository participant and provides broking services in the cash, derivatives and currency segments, online and offline. COMMODITIES-IIFL offers commodities trading to its customers vide its membership of the MCX and the NCDEX. CREDIT AND FINANCE-IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage loans, margin funding, loans against shares) comprise 94% of the loan book. INSURANCE-IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life Insurance Co. Ltds corporate agent. Later, it became an Insurance broker in October 2008. WEALTH MANAGEMENT SERVICES-IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and corporate clients under the IIFL Private Wealth brand. INVESTMENT BANKING-IIFLs investment banking division was launched in 2006

2. Equity Equity is the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid. If liability exceeds assets, negative equity exists. In an accounting context, Shareholders' equity represents the remaining interest in assets of a company, spread among individual shareholders of common or preferred stock. At the start of a business, owners put some funding into the business to finance operations. This creates a liability on the business in the shape of capital as the business is a separate entity from its owners. Businesses can be considered to be, for accounting purposes, sums of liabilities and assets; this is the accounting equation. After liabilities have been accounted for, the positive remainder is deemed the owner's interest in the business. This definition is helpful in understanding the liquidation process in case of bankruptcy. At first, all the secured creditors are paid against proceeds from assets. Afterward, a series of creditors, ranked in priority sequence, have the next claim/right on the residual proceeds. Ownership equity is the last or residual claim against assets, paid only after all other creditors are paid. In such cases where even creditors could not get enough money to pay their bills, nothing is left over to

reimburse owners' equity. Thus owners' equity is reduced to zero. Ownership equity is also known as risk capital or liable capital.

Equity Investments An equity investment generally refers to the buying and holding of shares of stock on a stock market by individuals and firms in anticipation of income from dividends and capital gains, as the value of the stock rises. It may also refer to the acquisition of equity (ownership) participation in a private (unlisted) company or a startup company. When the investment is in infant companies, it is referred to as venture capital investing and is generally understood to be higher risk than investment in listed going-concern situations. The equities held by private individuals are often held via mutual funds or other forms of collective investment scheme, many of which have quoted prices that are listed in financial newspapers or magazines; the mutual funds are typically managed by prominent fund management firms, such as Schroders, Fidelity Investments or The Vanguard Group. Such holdings allow individual investors to obtain the diversification of the fund and to obtain the skill of the professional fund managers in charge of the fund. An alternative, which is usually employed by large private investors and pension funds, is to hold shares directly; in the institutional environment many clients who own portfolios have what are called segregated funds, as opposed to or in addition to the pooled mutual fund alternatives. A calculation can be made to assess whether an equity is over or underpriced, compared with a long-term government bond. This is called the Yield Gap or Yield Ratio. It is the ratio of the dividend yield of an equity and that of the long-term bond.

Shareholder Equity When the owners are shareholders, the interest can be called shareholders' equity; the accounting remains the same, and it is ownership equity spread out among shareholders. If all shareholders are in one and the same class, they share equally in ownership equity from all perspectives. However, shareholders may allow different priority ranking among themselves by the use of share classes and options. This complicates both analysis for stock valuation and accounting.

3. Initial Public Offering An initial public offering (IPO), referred to simply as an offering or flotation, is when a company (called the issuer) issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO the issuer obtains the assistance of an underwriting firm, which helps determine what type of security to issue , best offering price and time to bring it to market Reasons for listing:When a company lists its securities on a public exchange, the money paid by investors for the newly-issued shares goes directly to the company (in contrast to a later trade of shares on the exchange, where the money passes between investors). An IPO, therefore, allows a company to tap a wide pool of investors to provide it with capital for future growth, repayment of debt or working capital. A company selling common shares is never required to repay the capital to investors. Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public. There are several benefits to being a public company, namely: Bolstering and diversifying equity base Enabling cheaper access to capital Exposure, prestige and public image Attracting and retaining better management and employees through liquid equity participation Facilitating acquisitions Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans, etc. Increased liquidity for equity holder Disadvantages of IPO There are several disadvantages to completing an initial public offering, namely: Significant legal, accounting and marketing costs

Ongoing requirement to disclose financial and business information Meaningful time, effort and attention required of senior management Risk that required funding will not be raised Public dissemination of information which may be useful to competitors, suppliers and customers

Procedure IPOs generally involve one or more investment banks known as "underwriters". The company offering its shares, called the "issuer", enters a contract with a lead underwriter to sell its shares to the public. The underwriter then approaches investors with offers to sell these shares. The sale (allocation and pricing) of shares in an IPO may take several forms. Common methods include:

Best efforts contract Firm commitment contract All-or-none contract Bought deal Dutch auction

A large IPO is usually underwritten by a "syndicate" of investment banks led by one or more major investment banks (lead underwriter). Upon selling the shares, the underwriters keep acommission based on a percentage of the value of the shares sold (called the gross spread). Usually, the lead underwriters, i.e. the underwriters selling the largest proportions of the IPO, take the highest commissionsup to 8% in some cases. Multinational IPOs may have many syndicates to deal with differing legal requirements in both the issuer's domestic market and other regions. For example, an issuer based in the E.U. may be represented by the main selling syndicate in its domestic market, Europe, in addition to separate syndicates or selling groups for US/Canada and for Asia. Usually, the lead underwriter in the main selling group is also the lead bank in the other selling groups. Because of the wide array of legal requirements and because it is an expensive process, IPOs typically involve one or more law firms with major practices in securities law, such as the Magic Circle firms of London and the white shoe firms of New York City. Public offerings are sold to both institutional investors and retail clients of underwriters. A licensed securities salesperson ( Registered Representative in the USA and Canada ) selling

shares of a public offering to his clients is paid a commission from their dealer rather than their client. In cases where the salesperson is the client's advisor it is notable that the financial incentives of the advisor and client are not aligned. In the US sales can only be made through a final Prospectus cleared by the Securities and Exchange Commission. Investment Dealers will often initiate research coverage on companies so their Corporate Finance departments and retail divisions can attract and market new issues. The issuer usually allows the underwriters an option to increase the size of the offering by up to 15% under certain circumstance known as the green shoe or overallotment option.

4. National Stock Exchange The National Stock Exchange (NSE) is a stock exchange located at Mumbai, India. It is the 9th largest stock exchange in the world by market capitalization and largest in India by daily turnover and number of trades, for both equities and derivative trading. NSE has a market capitalization of around US$1.59 trillion and over 1,552 listings as of December 2010. Though a number of other exchanges exist, NSE and the Bombay Stock Exchange are the two most significant stock exchanges in India, and between them are responsible for the vast majority of share transactions. The NSE's key index is the S&P CNX Nifty, known as the NSE NIFTY (National Stock Exchange Fifty), an index of fifty major stocks weighted by market capitalisation. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. There are at least 2 foreign investors NYSE Euro next and Goldman Sachs who have taken a stake in the NSE. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%.

5. Bombay Stock Exchange The Bombay Stock Exchange (BSE) is a stock exchange located on Dalal Street, Mumbai and is the oldest stock exchange in Asia. The equity market capitalization of the companies listed on the BSE was US$1.63 trillion as of December 2010, making it the 4th largest stock exchange in

Asia and the 8th largest in the world. The BSE has the largest number of listed companies in the world. As of December 2010, there are over 5,034 listed Indian companies and over 7700 scrips on the stock exchange, the Bombay Stock Exchange has a significant trading volume. The BSE SENSEX, also called "BSE 30", is a widely used market index in India and Asia. Though many other exchanges exist, BSE and the National Stock Exchange of India account for the majority of the equity trading in India. While both have similar total market capitalization (about USD 1.6 trillion), share volume in NSE is typically two times that of BSE.

6. Financial system

The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a balanced budgetary situations. There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. claims and liabilities. A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and

Financial System:-The financial system is the system that allows the transfer of money between savers and borrowers. It comprises a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions. Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms they allow intertemporal smoothing of consumption by households and expenditures by firms and they enable households and firms to share risks. These functions are common to the financial systems of most developed economies. Yet the form of these financial systems varies widely.

FINANCIAL MARKETS A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend.

Money Market- The money market ifs a wholesale debt market for low-risk, highly-liquid, shortterm instrument. Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions. Capital Market - The capital market is designed to finance the long-term investments. The transactions taking place in this market will be for periods over a year. Forex Market - The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe.

Credit Market- Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals.

Constituents of a Financial System

FINANCIAL INTERMEDIATION Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor in order to garner the requisite amount. When the borrower of funds approaches the financial market to raise funds, mere issue of securities will not suffice. Adequate information of the issue, issuer and the security should be passed on to take place. There should be a proper channel within the financial system to ensure such transfer. To serve this purpose, Financial intermediaries came into existence. Financial intermediation in the organized sector is conducted by a wide range of institutions functioning under the overall surveillance of the Reserve Bank of India. In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower. This service was offered by banks, FIs, brokers, and dealers. However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened. Some of the important intermediaries operating ink the financial markets include;

investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers financial consultants, primary dealers, satellite dealers, self regulatory organizations, etc. Though the markets are different, there may be a few intermediaries offering their services in move than one market e.g. underwriter. However, the services offered by them vary from one market to another.

Financial instruments Money Market Instruments:-The money market can be defined as a market for short-term money and financial assets that are near substitutes for money. The term short-term means generally a period up to one year and near substitutes to money is used to denote any financial asset which can be quickly converted into money with minimum transaction cost. Some of the important money market instruments are briefly discussed below;

1. Call/Notice Money 2. Treasury Bills 3. Term Money

4. Certificate of Deposit 5. Commercial Papers

1. Call /Notice-Money Market Call/Notice money is the money borrowed or lent on demand for a very short period. When money is borrowed or lent for a day, it is known as Call Money. Intervening holidays and/or Sunday are excluded for this purpose. Thus money, borrowed on a day and repaid on the next working day, is Call Money. When money is borrowed or lent for more than a day and up to 14 days, it is Notice Money. No collateral security is required to cover these transactions.

2. Inter-Bank Term Money Inter-bank market for deposits of maturity beyond 14 days is referred to as the term money market. The entry restrictions are the same as those for Call/Notice Money except that, as per existing regulations, the specified entities are not allowed to lend beyond 14 days. 3. Treasury Bills. Treasury Bills are short term (up to one year) borrowing instruments of the union government. It is an IOU of the Government. It is a promise by the Government to pay a stated sum after expiry of the stated period from the date of issue (14/91/182/364 days i.e. less than one year). They are issued at a discount to the face value, and on maturity the face value is paid to the holder. The rate of discount and the corresponding issue price are determined at each auction. 4. Certificate of Deposits

Certificates of Deposit (CDs) is a negotiable money market instrument and issued in dematerialised form , for funds deposited at a bank or other eligible financial institution for a specified time period. Guidelines for issue of CDs are presently governed by various directives issued by the Reserve Bank of India, as amended from time to time. CDs can be issued by (i) scheduled commercial banks excluding Regional Rural Banks (RRBs) and Local Area Banks and (ii) select all-India Financial Institutions that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI. Banks have the freedom to issue CDs depending on their requirements. An FI may issue CDs within the overall umbrella limit fixed by RBI, i.e., issue of CD together with other instruments viz., term money, term deposits, commercial papers and inter corporate deposits should not exceed 100 per cent of its net owned funds, as per the latest audited balance sheet. 5. Commercial Paper CP is a note in evidence of the debt obligation of the issuer. On issuing commercial paper the debt obligation is transformed into an instrument. CP is thus an unsecured promissory note privately placed with investors at a discount rate to face value determined by market forces. CP is freely negotiable by endorsement and delivery. A company shall be eligible to issue CP provided - (a) the tangible net worth of the company, as per the latest audited balance sheet, is not less than Rs. 4 crore; (b) the working capital (fund-based) limit of the company from the banking system is not less than Rs.4 crore and (c) the borrowal account of the company is classified as a Standard Asset by the financing bank/s. The minimum maturity period of CP is 7 days. The minimum credit rating shall be P-2 of CRISIL or such equivalent rating by other agencies.

Capital Market Instruments The capital market generally consists of the following long term period i.e., more than one year period, financial instruments; In the equity segment Equity shares, preference shares, convertible preference shares, non-convertible preference shares etc and in the debt segment debentures, zero coupon bonds, deep discount bonds etc.

Hybrid Instruments Hybrid instruments have both the features of equity and debenture. This kind of instruments is called as hybrid instruments. Examples are convertible debentures, warrants etc.

Conclusion In India money market is regulated by Reserve bank of India and Securities Exchange Board of India (SEBI) regulates capital market. Capital market consists of primary market and secondary market. All Initial Public Offerings comes under the primary market and all secondary market transactions deals in secondary market. Secondary market refers to a market where securities are traded after being initially offered to the public in the primary market and/or listed on the Stock Exchange. Secondary market comprises of equity markets and the debt markets. In the secondary market transactions BSE and NSE plays a great role in exchange of capital market instruments.

7. Derivative
In finance, a derivative is a financial instrument whose value depends on other, more basic, underlying variables Such a variable is called an "underlying" and can be a traded asset, for example, a stock or commodity, but can also be something which is impossible to trade, such as the temperature, unemployment rate, or any kind of index. A derivative is essentially a contract whose payoff depends on the behavior of some benchmark. The most common derivatives are futures, options, and swaps. Among the oldest of these are rice futures, which have been traded on the Dojima Rice Exchange since the eighteenth century.

Derivatives are usually broadly categorized by: The relationship between the underlying asset and the derivative (e.g., forward, option, swap);

The type of underlying asset (e.g., equity derivatives, foreign exchange derivatives, interest rate derivatives, commodity derivatives or credit derivatives); The market in which they trade (e.g., exchange-traded or over-the-counter); and Their pay-off profile.

Derivatives can be used for speculating purposes ("bets") or to hedge ("insurance"). For example, a speculator may sell deep in-the-money naked calls on a stock, expecting the stock price to plummet, but exposing him self to potentially unlimited losses. Very commonly, companies buy currency forwards in order to limit losses due to fluctuations in the exchange rate of two currencies. Uses:Derivatives are used by investors to:

Provide leverage , such that a small movement in the underlying value can cause a large difference in the value of the derivative; Speculate and make a profit if the value of the underlying asset moves the way they expect (e.g., moves in a given direction, stays in or out of a specified range, reaches a certain level); hedge or mitigate risk in the underlying, by entering into a derivative contract whose value moves in the opposite direction to their underlying position and cancels part or all of it out; Obtain exposure to the underlying where it is not possible to trade in the underlying (e.g., weather derivatives); Create option ability where the value of the derivative is linked to a specific condition or event (e.g., the underlying reaching a specific price level).

Types of Derivatives:-

There are mainly four types of derivatives i.e. Forwards, Futures, Options and swaps

FORWARD:A forward contract is a customized contract between two entities, where settlement takes place on a specific date in the future at todays pre-agreed price. Forwards are contracts customizable in terms of contract size, expiry date and price, as per the needs of the user. FUTURES: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

OPTIONS:Options are a right available to the buyer of the same, to purchase or sell an asset, without any obligation. It means that the buyer of the option can exercise his option but is not bound to do so. Options are of 2 types: calls and puts. 1. CALLS:Call gives the buyer the right, but not the obligation, to buy a given quantity of the underlying asset, at a given price, on or before a given future date. Example:- A, on 1st Aug. buys an option to buy 600 shares of Reliance Ind. Ltd. @ 450 Rs 450 on or before 1st Sep. In this case, A has the right to buy the shares on or before the specified date, but he is not bound to buy the shares.

2. PUTS:Put gives the buyer the right, but not the obligation, to sell a given quantity of the underlying asset, at a given price, on or before a given date

SWAPS:Swaps are private agreement between two parties to exchange cash flows in the future according to a pre arranged formula. They can be regarded as portfolios of forward contract. The two commonly used swaps are
1. Interest rate swaps:-

These entail swapping only the interest related cash flows between the parties in the same currency. 2. Currency swaps:These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction PARTICIPANTS OF THE DERIVATIVE MARKET Market participants in the future and option markets are many and they perform multiple roles, depending upon their respective positions. A trader acts as a hedger when he transacts in the market for price risk management. He is a speculator if he takes an open position in the price futures market or if he sells naked option contracts. He acts as an arbitrageur when he enters in to simultaneous purchase and sale of a commodity, stock or other asset to take advantage of misruling. He earns risk less profit in this activity. Such opportunities do not exist for long in an efficient market. Brokers provide services to others, while market makers create liquidity in the market. Hedgers Hedgers are the traders who wish to eliminate the risk (of price change) to which they are already exposed. They may take a long position on, or short sell, a commodity and would, therefore, stand to lose should the prices move in the adverse direction.

Speculators If hedgers are the people who wish to avoid the price risk, speculators are those who are willing to take such risk. These people take position in the market and assume risk to profit from fluctuations in prices. In fact, speculators consume information, make forecasts about the prices and put their money in these forecasts. In this process, they feed information into prices and thus contribute to market efficiency. By taking position, they are betting that a price would go up or they are betting that it would go down. The speculators in the derivative markets may be either day trader or position traders. The day traders speculate on the price movements during one trading day, open and close position many times a day and do not carry any position at the end of the day. They monitor the prices continuously and generally attempt to make profit from just a few ticks per trade. On the other hand, the position traders also attempt to gain from price fluctuations but they keep their positions for longer durations may is for a few days, weeks or even months Arbitrageurs Arbitrageurs thrive on market imperfections. An arbitrageur profits by trading a given commodity, or other item, that sells for different prices in different markets. The Institute of Chartered Accountant of India, the word ARBITRAGE has been defines as follows:Simultaneous purchase of securities in one market where the price there of is low and sale thereof in another market, where the price thereof is comparatively higher. These are done when the same securities are being quoted at different prices in the two markets, with a view to make profit and carried on with conceived intention to derive advantage from difference in prices of securities prevailing in the two different markets Thus, arbitrage involves making risk-less profits by simultaneously entering into transactions in two or more markets.

Benefits of Derivative:The use of derivatives also has its benefits: Derivatives facilitate the buying and selling of risk, and many people[who?] consider this to have a positive impact on the economic system. Although someone loses money while someone else gains money with a derivative, under normal circumstances, trading in derivatives should not adversely affect the economic system because it is not zero sum in utility. Former Federal Reserve Board chairman Alan Greenspan commented in 2003 that he believed that the use of derivatives has softened the impact of the economic downturn at the beginning of the 21st century

References 1. www.google.com 2. http://en.wikipedia.org/wiki/Derivative_(finance) 3. www.bse.com 4. www.nse.com 5.