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  • Research on Indian capital markets

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    The Indian capital markets industry has grown significantly over the past few decades. The Bombay Stock Exchange (BSE) was established in 1875 and is the oldest stock exchange in Asia. The National Stock Exchange (NSE) was incorporated in 1992 as a modern electronic exchange and has become the largest exchange in India. Both exchanges have expanded their platforms to include cash equities, derivatives, and other financial instruments. Liberalization of the Indian economy since 1991 has accelerated the growth of the capital markets as more companies have listed and more investors have participated. Studies have found mixed results on the relationship between stock market development and economic growth, with some finding a positive correlation and others being more skeptical.

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    The Indian capital markets industry has grown significantly over the past few decades. The Bombay Stock Exchange (BSE) was established in 1875 and is the oldest stock exchange in Asia. The National Stock Exchange (NSE) was incorporated in 1992 as a modern electronic exchange and has become the largest exchange in India. Both exchanges have expanded their platforms to include cash equities, derivatives, and other financial instruments. Liberalization of the Indian economy since 1991 has accelerated the growth of the capital markets as more companies have listed and more investors have participated. Studies have found mixed results on the relationship between stock market development and economic growth, with some finding a positive correlation and others being more skeptical.

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    Attribution Non-Commercial (BY-NC)
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    Signaler comme contenu inapproprié
    142 vues103 pages

    Research on Indian capital markets

    Transféré par

    9267616146
    The Indian capital markets industry has grown significantly over the past few decades. The Bombay Stock Exchange (BSE) was established in 1875 and is the oldest stock exchange in Asia. The National Stock Exchange (NSE) was incorporated in 1992 as a modern electronic exchange and has become the largest exchange in India. Both exchanges have expanded their platforms to include cash equities, derivatives, and other financial instruments. Liberalization of the Indian economy since 1991 has accelerated the growth of the capital markets as more companies have listed and more investors have participated. Studies have found mixed results on the relationship between stock market development and economic growth, with some finding a positive correlation and others being more skeptical.

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    Signaler comme contenu inapproprié
    sur 103

    A PROJECT REPORT

    ON RESEARCH ON INDIAN CAPITAL MARKET

    Summer Training Report Submitted in The partial fulfillment of Master of Business Administration of Session 20010-12

    Submitted by: Satendra Singh


    MBA IInd Year Roll No. 1042570015

    Under guidance of Mr.Megha Bansal


    Faculty of MBA Deptt.

    MEERUT INTERNATIONAL INSTITUTE OF TECHNOLOGY, MEERUT

    INDEX

    Sr.
    I II III 1. 2. 3. 4.1 4.2 4.3 4.4 4.5 4.6 4. 5. 6. 7. 8. 9. 10`

    PARTICULAR
    Preface Declaration Acknowledgement Abstract Industry Profile Company Profile Objective & Scope Indian capital market Broking sector in India Basic of Stock & Capital Market Stock exchange & trading Product Profile Research Methodology Data Analysis Findings Recommendation & Suggestion Result Conclusion Bibliography

    PAGE No.
    3 4 6 7 9-17 18-24 25-27 28-42 43-51 52-57 58-66 67-72 73-79 80-89 90-91 92-95 96-97 98-100 100-102

    PREFACE

    Every individual who is undergoing any management course has to go under a summer training. As we know that without practical exposure one can not qualify & is not capable to work in any organization. Hence to fulfill the requirement, I completed my summer training at INDIA INFO LINE Ltd . to improve my practical & professional skills.

    STUDENT DECLARATION

    I Satendra Singh student of MBA here by declared that the research report entitled REASEARCH ON INDIAN CAPITAL MARKET WITH SPECIAL

    REFERENCE TO INDIA INFOLINE is completed and submitted under the guidance of Mr. AMAN CHADDHA is my original work. The imperial finding in this report is based on the data collected by me. I have not submitted this project report to Mahamaya Technical University Noida or any other University for the purpose of compliance of any requirement of any examination or degree. DATE: SATENDRA SINGH PLACE: MBA II Year ROLL NO. 1042570015

    CERTIFICATE

    This is to certify that Mr satendra Singh student of MBA II year MIIT, Meerut has under gone a summer training project on RESEARCH ON INDIAN CAPITAL MARKET and submitted a report based on the same as a mandatory requirement the degree of MASTER OF BUSINESS ADMINISTRATION , U.P, Technical University , Luckhnow.

    (R K AGERWAL) Director MIIT (Meerut)

    Date:

    ACKNOWLEDGEMENT
    I would like to express my deep sense of gratitude towards few people who have supported & helped me to complete the research . First of all I would like to thank my project company guide Mr.Aman Chadha. He guided me immensely during the training period. And, secondly my project faculty guide Mr. Megha Bansal He motivated me to carry out this research report. And last but not the least my friends who helped me at the time of training.

    (SATENDRA SINGH)

    ABSTRACT
    The project work entitled a study of RESEARCH ON INDIAN CAPITAL MARKET with special reference to INDIA INFO LINE Ltd (MEERUT) is mainly conducted to identify how to handle all the parameters related to the STOCK MARKET and how to do the work on ONLINE TRADING in India info line ltd. Trading system / stock exchange works by 2 parameters: 1 BSE (Bombay stock exchange ) 2 NSE ( National stock exchange) The Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE) are also a depository participant with NSDL. The National Stock Exchange of India 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. Share market where dealing of securities is done is known as share market .The Broking Houses not only act as an intermediate link for the Equity Market but also for the Commodity Market. Today lot of investors depend on TV channel for recommendation about stocks to sell, or buy or hold. Channels like CNBC offer array of experts from economist to brokers to analyst. Most of these people have vested interest in stocks they recommend and promote. In this perspective this study examines the nature of relationship between stock market and growth through capital accumulation in India.

    The data needed for the study has been collected from the employees through questionnaire. And, data has been presented through diagrams, charts & tables.

    INDUSTRY PROFILE

    INDUSTRY PROFILE
    ORIGIN AND DEVELOPMENT OF THE INDUSTRY
    The Bombay Stock Exchange (BSE) is known as the oldest exchange in Asia. It traces its history to the 1850s, when stockbrokers would gather under banyan trees in front of Mumbais Town Hall. The location of these meetings changed many times, as the number of brokers constantly increased. The group eventually moved to Dalal Street in 1874 and in 1875 became an official organization known as The Native Share & Stock Brokers Association. In 1956, the BSE became the first stock exchange to be recognized by the Indian Government under the Securities Contracts Regulation Act.

    The Bombay Stock Exchange developed the BSE Sensex in 1986, giving the BSE a means to measure overall performance of the exchange. In 2000 the BSE used this index to open its derivatives market, trading Sensex futures contracts. The development of Sensex options along with equity derivatives followed in 2001 and 2002, expanding the BSEs trading platform. Historically an open-cry floor trading exchange, the Bombay Stock Exchange switched to an electronic trading system in 1995. It took the exchange only fifty days to make this transition. Capital market reforms in India and the launch of the Securities and Exchange Board of India (SEBI) accelerated the integration of the second Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a few years of operations, the NSE has become the largest stock exchange in India.

    10

    Three segments of the NSE trading platform were established one after another. The Wholesale Debt Market (WDM) commenced operations in June 1994 and the Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures and Options segment began operating in 2000. Today the NSE takes the 14th position in the top 40 futures exchanges in the world. In 1996, the National Stock Exchange of India launched S&P CNX Nifty and CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a diversified index of 50 stocks from 25 different economy sectors. The Indices are owned and managed by India Index Services and Products Ltd (IISL) that has a consulting and licensing agreement with Standard & Poors. In 1998, the National Stock Exchange of India launched its web-site and was the first exchange in India that started trading stock on the Internet in 2000. The NSE has also proved its leadership in the Indian financial market by gaining many awards such as Best IT Usage Award by Computer Society in India (in 1996 and 1997) and CHIP Web Award by CHIP magazine (1999). The National Stock Exchange of India was promoted by leading financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a taxpaying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

    11

    Since the early 1950s till the early 1990s, Indian policy makers had been nourishing the goal of Socialist pattern of society. They had been following the development planning strategy of the former Soviet Russia in a mixed economic framework. From July 1991, in the face of an unprecedented foreign exchange crisis, Indian economy started experiencing an IMF-World Bank dictated regime of liberalisation. One aspect of this is financial liberalisation. There is a move towards privatisation of nationalised banks these banks are selling their shares in the stock market. Transnational banks are encouraged to operate in the Indian banking sector. Attempts are made to attract foreign direct investment in different sectors. There is an increasing entry of foreign portfolio capital due to stock market liberalisation. People are encouraged to invest in stocks through income tax benefits and abolition of capital gains tax. There is a move to develop a national pension fund which will be invested in different stocks to get returns out of which pension will be provided to retired people. It is expected that boosting up of stock market will accelerate the process of capital accumulation and growth. Stock market development has been an important part of financial liberalisation in the less developed countries (LDCs). In the pro-liberalisation circle, stock market is assigned to play an important role in the capitalist development of LDCs. There are many studies supporting the positive link between stock market development and growth. Let us mention some of the recent studies. One important study was undertaken by Levine and Zervos (1998). Their cross-country study found that the Development of banks and stock markets has a positive effect on growth. In another study Levine (2003) argued that although theory provides ambiguous relationship

    12

    between stock market liquidity and economic growth, the cross-country data for 49 countries over the period 1976-93 suggest a strong and positive relationship (see also Levine, 2001). Henry (2000) studied a sample of 11 LDCs and observed that stock market liberalisations lead to private investment boom. Recently, Bekaert et al (2005) analysed data of a large number of countries and observed that the stock market liberalisation leads to an approximate 1 % increase in annual real per capita GDP growth. There are some economists who are sceptical. Long time back Keynes (1936) compared the stock market with casino and commented: when the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done. Referring to the study of World Bank (1993) Singh (1997) pointed out that stock markets have played little role in the post-war industrialisation of Japan, Korea and Taiwan. He argued that the recent move towards stock market liberalisation is unlikely to help in achieving quicker industrialisation and faster long-term economic growth in most of the LDCs. In this perspective this study examines the nature of relationship between stock market and growth through capital accumulation in India.

    13

    GROWTH AND PRESENT STATUS OF THE INDUSTRY


    The ever-growing and fast-maturing 'India Market' is a lucrative business destination for developed countries. With 7-8% of GDP growth, huge analytical, young and English speaking work force the 'pull' for opportunities are luring. The bandwidth of 'India Market' is enviably wide and very deep. 'Markets in India' are well protected by legal guidelines and efficient administrators. With a liberal and proactive government at the center the road ahead for 'Markets of India' is very rosy. 'Market India' has witnessed exponential growth over past one and half decade. Liberal and transparent financial policies has effected free-in-flow of FII and as a result of which 'India Market' has grown to a colossal monster in the international market. Foreseeing sure and substantial returns on investments (ROI) companies are pro- actively listing on the stock market indexes. Government agencies once much hated for red tape and bribes has shed its image. Professionalism is their new mantra. Public Enterprises like IOC, ONGC, BHEL, NTPC, SAIL, MTNL, BPCL, HPCL and GAIL, SBI, LIC, Hindustan Antibiotics Limited, Air India etc. to name a few, are giving Private Indian companies a good run for their money. Private giants like Reliance Industries Limited, Infosys, Tata, Birla Corporation, Jet Airways, Ranbaxy, Biocon, Bajaj Auto, ICICI are breaking their own records every financial years.

    14

    'Markets

    in

    India'

    has

    witnessed

    meteorite

    rise

    of

    the

    Indian

    Software,

    Telecommunication and Banking Industry. This has propelled growth of Urban Indian class which, in turn has increased consumerism. Today, each and every type of industry of 'Market India' like Infrastructure, Pharmaceutical & Biotechnology, Banking & Insurance, Electronics, FMCG etc. has tremendous growth potential. Retail Industry along with Agriculture & Food industry are yet to contribute their share to the growth story of 'Market India'. Today considering the stock markets, Reliance Industries Limited is at the top. The SENSEX today has rose from 1000 levels to 8000 Indian Equity Market at present is a lucrative field for the investors and investing in Indian stocks are profitable for not only the long and medium-term investors, but also the position traders, short-term swing traders and also very short term intra-day traders. In terms of market capitalization, there are over 2500 companies in the BSE chart list with the levels providing a profitable business to all those who had been investing in the Indian Equity Market. There are about 22 stock exchanges in India which regulates the market trends of different stocks. Generally the bigger companies are listed with the NSE and the BSE, but there is the OTCEI or the Over the Counter Exchange of India, which lists the medium and small sized companies. There is the SEBI or the Securities and Exchange Board of India which supervises the functioning of the stock markets in India. Thus, the growing financial capital markets of India being encouraged by domestic and foreign investments is becoming a profitable business more with each day. If all the economic parameters are unchanged Indian Equity Market will be conducive for the

    15

    growth of private equities and this will lead to an overall improvement in the Indian economy. Indian Stock Market including both NSE-National Stock Exchange and the BSE-Bombay Stock Exchange have certainly taken a tremendous beating in the past few weeks. We are sure most of us here knew that the correction in the trading curve was round the corner which would be healthy, and the markets would bounce back from 18k levels with the help of mutual fund investments & buying of Indian stocks again. However the anticipation went wrong, and the US recession story along with global and Indian commodity prices have added fuel to the global equity market turmoil on a whole.

    16

    Future of the industry


    The stock market is booming in spite of the low agriculture output. The monsoon is good in an overall sense but still the question remains who takes the credit? The answer is the karma of the people. I appreciate the Indian politicians and the industrialists who being pawns of destiny are doing things positive and productive. India, as a country is running a very good period and the position of planets in the transit are giving wonderful results. Less than one percent of population own stocks and less than 1000 individuals control the market, the majority being the FIIS, the promoters of the company. The credit should go to media for making stock market headlines. The question many people in the market ask: Will the bull run continue? What heights we can reach? First of all, mark my words Indian bourses in the future will be one of the best investments in the world. There will be a time when it can even reach 3000 points in the nifty. India will begin one of the best dasas of the Sun, which will work in its favour. So before 2009 Indian bourses should see an all time high. Now this bull run will continue. There can be some correction in the BSE sensex in the 7500 points level. The market will hover between the 6000- 7000 till mid august. There will be huge fluctuations.

    Investors and new entrants to the market to cool down a bit and come well below 7000. In any case if you are long terms players then step-in and buy now and forget for another 10 years. You will make a killing in the Indian markets.

    17

    COMPANY PROFILE

    18

    COMPANY PROFILE
    About India Infoline:
    India Infoline ltd. is one of the countrys leading player in the business of investment advisory and intermediation. This group has presence across India in various businesses through its wholly owned subsidiary businesses are broking in equities and commodities (where company is popular known by the brand name, (5paisa.com) and distribution of mutual fund and other personal investment products .Company is also the no. 1 corporate agent of the no.1 private life insurance company, ICICI Prudential Life Insurance company. India Info Line is members of both the leading stock exchanges of India viz. The Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE) and also a depository participant with NSDL. India Infoline also has seats on both the leading commodity exchanges of the country, MCX and NCDEX.They also undertake research; which is treasured by Institutions, Indian as well as global as well as retail investors across the country. For all the investment needs the compa close to you owing to our network ofInvestors points across the country. Founded in 1995, ours is a professionally managed company, with world-class investors such as Intel Capital, CDC of the UK, Reeshanar, TDA Capitals patterns, ICICI Econet among others

    19

    PILLARS OF THE ORGANIZATION


    Unlike others, India Info line has the concept of an Investment Team. The brains behind all the investment strategies and decisions regarding Wealth Management Services are:

    Mr. Nirmal Jain MBA: IIM-A, Chartered & Cost Accountant

    Mr. R Venkataraman MBA: IIM-B, B.Tech: IIT Kharagpur

    Mr. Anand Tandon Subramaniam MBA: IIM-A, B.Tech: IIT Kanpur

    Mr. Venkat

    B.sc, chartered

    accountant

    20

    India Infoline: The beginning


    Set up by a group of professionals in October 1995. Began with research assignments for FIIs, corporate and banks. Extended its offering to products in September 1996. Client list read like whos who of business. A small team of 5-6, grew to 15-20 by 1999.

    Embracing the web:


    Early 1999, we decided to deliver content only through net. Expanded breadth of content considerably. Rapid rounds of funding (Intel Capital, CDC, ICICI Venture, TDA). Www.indiainfoline.com launched on May 11, 1999.

    Focus on Transactions
    India Infoline changed business model from information to transaction oriented in Year 2000. India Infoline Distribution Company Ltd. India Infoline Securities Ltd. (5paisa.com) . Paid research report on Indiainfoline.com.

    21

    India Infoline Group Co. Online Trading (5paisa.com)


    Overwhelming response to 5paisa.. Full service discount brokerage option to customers .

    Distribution of PFPs (Investor Point)


    Brick & Click model established . Whole spectrum of Personal Finance Products (PFPs) available .

    Online Financial Portal


    Leader in business and finance space in India. Strong brand with top-of-mind recall .

    22

    India Infoline Ltd. Research and Online Media Property (wholly-owned Subsidiary)
    India Infoline Securities Pvt. Ltd. Secondary market securities trading & portfolio management services. India Infoline.com Distribution Company Ltd. Mobilization of Mutual Funds & other personal investment products. India Infoline Insurance Services Ltd. Corporate agent for ICICI Prudential Life Insurance Company. India Infoline Commodities Pvt. Ltd. Commodities Trading. India Info line Investment Services Pvt. Ltd Margin Funding.

    23

    Corporate Mutual Fund-Key Relation

    ACC Bank Of Baroda Bayer India Canara Bank Indian Bank Indian Overseas Bank UTI Venture Fund IDFC I Gate Solutions L&T Financial Services Karnataka Bank

    24

    OBJECTIVE OF THE STUDY


    The objective of the project is to identify, understand and analyze the comparison of stock market. The main focus will be on understanding, analyzing and providing a valid explanation both theoretically and technically, that how various comparisons in between the Indian stock market and foreign stock market. By undertaking this study I would like to keep my first step in the field of research. This project will help me in enhancing my analytical skills and will give me a better understanding of how things move on and are to be studied. At the same time with this study I will be providing the organization a list of factors that affect the market, so that they can keep a watch on the same and use the same for the benefit of clients and company and also increase their accuracy and profits. This will be my contribution to this huge company.

    25

    PURPOSE, SCOPE & LIMITATIONS PURPOSE


    The PURPOSE of the report is to analyze the comparative study of stock market. It is of great importance to understand, learn and analyze the same. Thus, this report is a move in path of understanding those factors and analyzing the impact of the same. Stock market are a major part of any economic system. They provide a strong base to Indian economy too. In share markets, the performance of bank shares is of great importance. This is justified by the proof that in both BSE and NSE we have separate index for Shares. for our study we have taken only Nifty which is a part of NSE and SENSEX which is a part of BSE. Thus, the performance of share market, the rise and the fall of market is greatly affected by the performance of Banking Sector Shares also and this report revolves around all those factors, their understanding and a theoretical and technical

    analysis of the same.

    SCOPE OF STUDY
    It gave me an opportunity to study the stock market in a detailed manner. I got knowledge of prevailing Market Scenario.

    It helped me in learning the market dynamics, study the movement of share prices and to give a proper justification for the same, theoretically and technically. It helped me in understanding and learning the corporate culture

    26

    And above all, the concerned organization can get some valuable recommendations, which can definitely improve the performance of the organization.

    LIMITATIONS OF THE STUDY Though the resources seem sufficient enough to achieve high standard for this research, still we foresee the following limitations of study. The Sector is very vast and it was not possible to cover every nook and corner of this sector.

    The objective which we want to fulfill in this project is really good, but the major demerit to our study is the availability of time for our search and analysis, but then also, I have tried my level best to show a glimpse of my Research in twith the objectives.

    27

    INDIAN CAPITAL MARKET

    28

    History of Indian Capital Markets


    Controller of Capital Issues Act (CCI) was passed in 1947. The stock markets have had many turbulent times in the last 140 years of their existence. The imposition of wealth and expenditure tax in 1957 by Mr. T.T. Krishnamachari, the then finance minister, led to a huge fall in the markets. The dividend freeze and tax on bonus issues in 1958-59 also had a negative impact. War with China in 1962 was another memorably bad year, with the resultant shortages increasing prices all round. This led to a ban on forward trading in commodity markets in 1966, which was again a very bad period, together with the introduction of the Gold Control Act in 1963. and this led to aresurgence of interest in the capital markets, only to be punctured by the Harshad Mehta scam in 1992. The mid-1990s saw a rise in leasing company shares, and hundreds of companies, mainly listed in Gujarat, and got listed in the BSE. The end1990s saw the emergence of Ketan Parekh and the information, communication and entertainment companies came into the limelight. This period also coincided with the dotcom bubble in the US, with software companies being the most favoured stocks. There was a melt down in software stock in early 2000. Mr. P Chidambaram continued the liberalization and reform process, opening up of the companies, lifting taxes on long-term gains and introducing short-term turnover tax. The markets have recovered since then and we have witnessed a sustained rally that has taken the index over 13000. Several systemic changes have taken place during the short history of modern capital markets. The setting up of the Securities and Exchange Board (SEBI) in 1992 The history of the Indian capital markets and the stock market, in particular can be traced back to 1861 when the American Civil War began. The opening of the Suez Canal during the 1860s led to a tremendous increase in exports to the United Kingdom and United States. Several companies were formed during this period and many banks came to the fore to handle the finances

    29

    relating to these trades. With many of these registered under the British Companies Act, the Stock Exchange, Mumbai, came into existence in 1875. It was an unincorporated body of stockbrokers, which started doing business in the city under a banyan tree. Business was essentially confined to company owners and brokers, with very little interest evinced by the general public. There had been much fluctuation in the stock market on account of the American war and the battles in Europe. Sir Premchand Roychand remained a kingpin for many years. Sir Phiroze Jeejeebhoy was another who dominated the stock market scene from 1946 to 1980. His word was law and he had a great deal of influence over both brokers and the government. He was a good regulator and many crises were averted due to his wisdom and practicality. The BSE building, icon of the Indian capital markets, is called P.J. Tower in his memory. The planning process started in India in 1951, with importance being given to the formation of institutions and markets The Securities Contract Regulation Act 1956 became the parent regulation after the Indian Contract Act 1872, a basic law to be followed by security markets in India. To regulate the issue of share prices, the The markets have witnessed several golden times too. Retail investors began participating in the stock markets in a small way with the dilution of the FERA in 1978. Multinational companies, with operations in India, were forced to reduce foreign share holding to below a certain percentage, which led to a compulsory sale of shares or issuance of fresh stock. Indian investors, who applied for these shares, encountered a real lottery because those were the days when the CCI decided the price at which the shares could be issued. There was no free pricing and their formula was very conservative. The next big boom and mass participation by retail investors happened in 1980, with the entry of Mr. Dhirubhai Ambani. Dhirubhai can be said to be the father of modern capital markets. The Reliance public issue and subsequent issues on various Reliance companies generated huge interest. The general public was so unfamiliar with share certificates that Dhirubhai is rumoured to have distributed them to educate people. Mr. V.P. Singhs fiscal budget in 1984 was pathbreaking for it started the era of liberalization. The removal

    30

    of estate duty and reduction of taxes led to a swell in the new issue market and there was a deluge of companies in 1985. Mr. Manmohan Singh

    INTROODUCTION OF STOCK MARKET


    In most industrialized countries, a substantial part of financial wealth is not managed directly by savers, but through a financial intermediary, which implies the existence of an agency contract between the investor (the principal) and a broker or portfolio manager (the agent). Therefore, delegated brokerage management is arguably one of the most important agency relationships intervening in the economy, with a possible impact on financial market and economic developments at a macro level. As the per-capita-income of the city is on the higher side, so it is quite obvious that they want to invest their money in profitable ventures. On the other hand, a number of brokerage houses make sure the hassle free investment in stocks. Asset management firms allow investors to estimate both the expected risks and returns, as measured statistically. There are mainly two types of Portfolio management strategies. Passive Portfolio Strategy Active Portfolio Strategy

    1.

    Passive Portfolio Strategy: A strategy that involves minimal expectation


    input, and instead relies on diversification to match the performance of some

    31

    market index. A passive strategy assumes that the marketplace will reflect all available information in the price paid for securities.
    2.

    Active Portfolio Strategy: A strategy that uses available information and


    forecasting techniques to seek a better performance than a portfolio that is simply diversified broadly.

    Indian Stock Market


    Share or stock is a document issued by a company, which entitles its holder to be one of the owners of the company. A share is issued by a company or can be purchased from the stock market. Share market where dealing of securities is done is known as share market. There are two ways in which investors gets share from market: Primary market: markets in which new securities are issued are known as primary market. This is part of the financial market where enterprises issue their new shares and bonds. It is characterized by being the only moment when the enterprise received money in exchange for selling its financial assets. Secondary Market: Market in which existing securities are dealt is known as secondary market. The market where securities are traded after, they are initially offered in the primary market. Most trading is done in the secondary market.

    32

    The Stock Market is an invisible market that trades in stocks of various companies belonging to both the public and private sectors. The Indian Stock Market is often referred to as the Share Market since it deals primarily with shares of various companies.

    A Stock Exchange is a place where the stocks are listed and traded. Such exchanges may be a corporation or mutual organization which specializes in the business of introducing the sellers with the buyers of stocks and securities. The Indian Stock Market in India comprises of two stock exchanges: Bombay Stock Exchange (BSE) National Stock Exchange (NSE)

    BSE
    The Bombay Stock Exchange (BSE) was established in 1875.The BSE India Stock Exchange serves as the most important for companies to raise money. The chief function of the Stock Market of India is to help raise money as capital for the growth and expansion of various private and public sector enterprises. Besides, the Stock Market of India provides able assistance to the individual investors through daily updates on current position of the stocks of the respective companies that are enlisted in the Stock Index in which the movement of prices in a section of the market are captured in price indices. The popular acronym for Stock Index is Sensitive index or sensex. Moreover, the liquidity provided by the exchange enables the investors to sell securities owned by them

    33

    easily and quickly. Hence a person, who is subjected to sudden dearth of funds, can immediately sell his shares for cash in India Stock Market. The BSE Sensex, also known as BSE 30 is a widely used market index not only in India but across Asia. In terms of volume of transactions, it is ranked among the top five stock exchanges in the world. Sensex goes on a free fall in 2008 During CY03-CY07 the Indian equity markets experienced impressive growth and grew by leaps and bounds. The strong momentum in the equity market was in line with the robust economic growth witnessed during the last few years. Foreign inflows into the

    country swelled to more than Rs 2,301 billion in stock markets during FY04- FY08, which was equal to almost 80% of the net cumulative FII investments in India at the end of FY08, as India turned into one of the fastest growing economies across the world, and India Inc reported robust performance year after year. The phenomenal surge in FII investments and stock indices reflected the future value and quick growth opportunities in India.

    34

    In FY08, the average market capitalisation of companies listed on Bombay Stock Exchange (BSE) was Rs 53.5 trillion, almost 9% more than the countrys GDP during the same year. The market capitalisation to GDP ratio rose from just 21.9% in 2002-03 to over 109.0% during 2007-08. The surge in activity and participation at the Indian stock exchange reflects in the total turnover to GDP ratio shown in the table below. The foreign investment in India grew more than 24 times during FY03 to FY08. The sharp surge in market capitalisation-to-GDP ratio and the continuous boom in stock market were synchronous with the robust GDP growth that the Indian economy witnessed. The number of companies listed on the stock exchanges increased to 1,381 in FY08, up by around 68% as compared with FY03.

    In terms of movement of stock indices, the trend set in 2008 turned out to be a sharp contrast to the trend seen in preceding years as volumes dropped amid global sell-off triggered by the crisis in the global financial markets and the fall out of major banks 35

    across the world. After climbing up to 21,206 on Jan 10, 2008, the Sensex went on a free fall of more than 50% and ended the year at 9,903.

    India Inc looks towards public capital markets for funds Riding high on the wave of economic boom, India Inc opted strongly for the initial public offer (IPO) route to raise finances during FY05-FY08. The burgeoning size of the Indian IPOs increased the borrowers access to capital, offered more efficient prices, and increased opportunities for risk sharing. The bull-run in Indias capital markets encouraged a shift in financing from banks to public capital markets; there was a surge in large IPOs worth few billion dollars in the last few years. In FY08 larger issues made way into the market, and more than 30 mega issues (issue size of above Rs 3 billion) hit the stock exchanges, including the Rs 115.63-billion ($3 billion) Reliance Power IPO. In FY08, 124 public issues (including rights issue) garnered Rs 870.29 billion while in FY07 the same number of issues could collect only Rs 335.08 billion. The average size of the issue was Rs 7,020 million in

    FY08 as compared with Rs 2,700 million in FY07, which was an indication of both the growing size as well as the attractive valuations earned by Indian companies. However, the scene changed drastically in 2008, when on an average, only three IPOs per month were raised as compared with eight IPOs in a month raised during 2007. Moreover, few large high profile IPOs like that of Emaar MGF, Wockhardt Hospitals withdrew or failed during the year.

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    FIIs sell equity worth Rs 477 billion during FY09 Foreign institutional investments (FII) increased significantly during FY03 and FY08, especially in FY04, when the surge in net foreign investment in the equity market reached a record Rs 458 billion as compared with just Rs 27 billion in FY03. The net FII investment was at an all-time high of Rs 662 billion during FY08; to reach a cumulative investment of Rs 2,914 billion. During the same year, the FII turnover on the capital market segment of NSE was close to 17.9% of the total market turnover.

    However, an abrupt reversal in trend was observed in 2008, as the worlds financial woes widened and so did the credit crunch. The failure of large banks worldwide prompted large outflows from almost all emerging markets including India. India registered a net outflow in equity investments by foreign investors way back in FY99, when approximately 5% of the cumulative net investment by FIIs was liquidated. After ten years, the Indian markets currently are witnessing some FII outflow due to global

    recession and a depression worse than the Great Depression that hit the developed countries in 1920s. In FY09, the FII investment was negative at Rs 477 billion, whereas the number of registered FIIs increased by 316 (24%) to 1,635 and the number of registered sub-accounts increased by 1,051 (27.4%) to 5,051.

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    As the FIIs shied away from the Indian markets, the domestic institutional investors comprising banks, domestic financial institutions, insurance and mutual funds came into the picture and purchased huge amount of shares sold by FIIs throughout 2008. The data on the investor category-wise turnover shows that the domestic financial institutions bought aggressively in 2008 when the FIIs were selling heavily. The FII turnover on the capital market segment of NSE was close to 17.9% of the total market turnover. Investors poorer by Rs 167.4 billion on each trading day

    The Indian markets witnessed a fantastic year of business in 2007 when the market was at its bullish best and cash counters were ringing across the emerging markets. The

    financial markets were on an upswing and the premier stock exchanges recorded a total turnover of Rs 25,123 billion in Oct 2007 as compared with a turnover of Rs 9,011 billion in Jan 2007. 38

    However, there was a reversal in trend in 2008, when the markets entered one of the

    worst bearish modes seen in recent times. During this year, the markets were characterised by high volatility following a decline in volumes and consequent decrease in liquidity. The financial markets in India lost nearly Rs 41,190.1 billion in 2008, as they mirrored the global trend. Even though the crises had originated in the US and other European countries the slowdown did mar the Indian markets. Consequently, on an average, the financial markets in India lost close to Rs 499.8 million for every trading minute in 2008, which made investors poorer by Rs 167.4 billion on each trading day of 2008. The ripple effects of this loss were seen in the rising numbers of illiquid securities and the sharply decreasing traded turnover. The number of illiquid securities rose to 1,923 in Feb 2009 as compared with 1,641 in July 2008. The rise in the number of illiquid securities is a concern as it mirrors the fact that more than half of the securities are illiquid. 39

    The volume of shares traded declined by 25% and to a certain extent this decline could be attributed to the fall in stock prices. In 2008, the number of shares traded declined by just 2.83% to 222,726 million as compared with 2007. The volume of shares traded fell by 12.1% on the BSE and it climbed up by 3.4% in the National Stock Exchange (NSE). The NSE not only garnered almost the entire market share in equity derivatives but also increased its market share in the cash market segment. A closer scrutiny of the equity

    cash and equity derivative segments of the stock exchanges indicate that in Dec 2008 the derivative market of BSE was almost deserted as the exchange witnessed a total traded turnover of just Rs 0.3 billion as compared with a traded turnover of Rs 222.8 billion in Jan 2008. In the cash market segment also, the market share of the BSE fell from 29.3% in Jan 2008 to 27.5% during Dec 2008. Investors are bound to trade in markets that are more liquid and exit the illiquid markets during liquidity crisis, and the investor behaviour in the derivative segment of BSE probably follows this reason.

    Volatility of international stock market indices during 2007-08 The movement of stock indices to a certain extent depends on market sentiments one of the indicators of volatility, as increase and decrease in volatility is always a signal of extent of fear within the sentiment. The volatility in stock markets is high when fear is high. The volatility index generally starts rising during times of financial stress and decreases as investors become complacent. The rise in volatility index also reflects the panic demand for puts as a hedge against decline in stock portfolios; therefore, there is

    40

    less need for portfolio managers to buy puts during a bull run.

    The stock markets across the world remained turbulent during the whole of 2008 and closed the year with significant declines, and high volatility. During FY08, China recorded high volatility as compared with other BRIC countries (See table below). The

    volatility increased sharply in the second half of FY08 (OctMar). In fact for almost all the countries, volatility almost doubled during the second half of FY08 as compared with the start of the year.

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    Brokers cautious about client funding The dismal performance at the stock markets and the steep fall in trading volumes was a result of liquidity issues, deleveraging of markets, and the credit crunch coupled with the most severe bear market in recent history. Due to the current bearish phase, revenue from related businesses in equity broking is also expected to have taken a huge hit. The uncertain events and rise in uncovered debits have turned brokers extra cautious in terms of lending without security.

    According to the data on the NSE, the institutional clients accounted for a major chunk of the amount funded during CY08. The amount funded through margin funding accounts formed close to 20% of the total client funding. A margin trading agreement allows the traders to borrow up to 50% of the total money required for a stock purchase from the broker at a pre-agreed rate of interest (18-20%).

    Client funding by brokers on the NSE, which comprises of temporary margin, margin trading, and funding for institutional and non-institutional clients, declined since Jan 2008. The total amount funded in Dec 2008 was Rs12,829.5 million, down by about 55% as compared with the amount funded in Jan 2008. The phasing in of the bear market from Jan 2008 suggests that the declining trading activity, low market volumes, liquidity issues, and credit crunch had caused a ripple effect and resulted in a decline in client funding.

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    STOCK BROKING SECTOR IN INDIA


    The Indian broking industry is one of the oldest trading industries that have been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its way towards sustainable growth. In this section our purpose will be of gaining a deeper understanding about the role of the Indian stock broking industry in the countrys economy.

    Mean of stock exchange


    The Securities Contract (Regulation) Act, 1956 [SCRA] defines Stock Exchange as anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. Stock exchange could be a regional stock exchange whose area of operation/jurisdiction is specified at the time of its recognition or national exchanges, which are permitted to have nationwide trading since inception. NSE was incorporated as a national stock exchange.

    Mean of equity share


    Total equity capital of a company is divided into equal units of small denominations, each called a share. The holders of such shares are members of the company and have voting rights.

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    Debt Instrument
    Debt instrument represents a contract whereby one party lends money to another on predetermined terms with regards to rate and periodicity of interest, repayment of principal amount by the borrower to the lender. In the Indian securities markets, the term bond is used for debt instruments issued by the Central and State governments and public sector organizations and the term debenture is used for instruments issued by private corporate sector.

    Derivative
    Derivative is a product whose value is derived from the value of one or more basic variables, called underlying. The underlying asset can be equity, index, foreign exchange (forex), commodity or any other asset. Derivative products initially emerged as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives came into spotlight in post-1970 period due to growing instability in the financial markets.

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    Mutual Fund
    A Mutual Fund is a body corporate registered with SEBI (Securities Exchange Board of India) that pools money from individuals/corporate investors and invests the same in a variety of different financial instruments or securities such as equity shares, Government securities, Bonds, debentures etc. Mutual funds can thus be considered as financial intermediaries in the investment business that collect funds from the public and invest on behalf of the investors. Mutual funds issue units to the investors. The appreciation of the portfolio or securities in which the mutual fund has invested the money leads to an appreciation in the value of the units held by investors. The investment objectives outlined by a Mutual Fund in its prospectus are binding on the Mutual Fund scheme. The investment objectives specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities. The schemes offered by mutual funds vary from fund to fund. Some are pure equity schemes; others are a mix of equity and bonds. Investors are also given the option of getting dividends, which are declared periodically by the mutual fund, or to participate only in the capital appreciation of the scheme.

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    Index
    An Index shows how a specified portfolio of share prices is moving in order to give an indication of market trends. It is a basket of securities and the average price movement of the basket of securities indicates the index movement, whether upwards or downwards.

    A Depository
    A depository is like a bank wherein the deposits are securities (viz. shares, debentures, bonds, government securities, units etc.) in electronic form.

    Dematerialization
    Dematerialization is the process by which physical certificates of an investor are converted to an equivalent number of securities in electronic form and credited to the investors account with his Depository Participant (DP).

    Securities
    The definition of Securities as per the Securities Contracts Regulation Act (SCRA), 1956, includes instruments such as shares, bonds, scrips, stocks or other marketable securities of similar nature in or of any incorporate company or body corporate, government securities, derivatives of securities, units of collective investment scheme, interest and rights in securities, security receipt or any other instruments so declared by the Central Government.

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    Function of Securities Market


    Securities Markets is a place where buyers and sellers of securities can enter into transactions to purchase and sell shares, bonds, debentures etc. Further, it performs an important role of enabling corporate, entrepreneurs to raise resources for their companies and business ventures through public issues. Transfer of resources from those having idle resources (investors) to others who have a need for them (corporate) is most efficiently achieved through the securities market. Stated formally, securities markets provide channels for reallocation of savings to investments and entrepreneurship. Savings are linked to investments by a variety of intermediaries, through a range of financial products, called Securities.

    Securities one can invest in


    Shares Government Securities Derivative products Units of Mutual Funds etc.

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    Securities Market need Regulators


    The absence of conditions of perfect competition in the securities market makes the role of the Regulator extremely important. The regulator ensures that the market participants behave in a desired manner so that securities market continues to be a major source of finance for corporate and government and the interest of investors are protected.

    Regulates the Securities Market


    The responsibility for regulating the securities market is shared by Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).

    SEBI & role of SEBI


    The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c ) regulating the securities market. Its regulatory juridiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for:

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    Regulating the business in stock exchanges and any other securities markets Registering and regulating the working of stock brokers, subbrokers etc. Promoting and regulating self-regulatory organizations Prohibiting fraudulent and unfair trade practice. Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self- regulatory organizations, mutual funds and other persons associated with the securities market.

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    Broking Houses In India


    India is a country having a big list of Broking Houses. The Equity Broking Industry in India has several unique features like it is more than a century old, dynamic, forward looking, and good service providers, well conversant, highly innovative and even adaptable. The regulations and reforms been laid down in the Equity Market has resulted in rapid growth and development. Basically, the growth in the equity market is largely due to the effective intermediaries.

    The Broking Houses not only act as an intermediate link for the Equity Market but also for the Commodity Market, Foreign Currency Exchange Market, and many more. The Broking Houses has also made an impact on the Foreign Investors to invest in India to certain extent. In the last decade, the Indian brokerage industry has undergone a dramatic transformation. From being made of close groups, the broking industry today is one of the most transparent and compliance oriented businesses. Long settlement cycles and large scale bad deliveries are a thing of the past with the advent of T+2 settlement cycle and dematerialization. Large and fixed commissions have been replaced by wafer thin margins, with competition driving down the brokerage fee, in some cases, to a few basis points. There have also been major changes in the way business is conducted. Technology has emerged as the key driver of business and investment advice has become research based. 50

    At the same time, adherence to regulation and compliance has vastly increased. The scope of services have enhanced from being equity products to a wide range of financial services. Investor protection has assumed significance,.

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    SOME BASICS OF STOCK AND CAPITAL MARKET Investment


    The money we earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle , may like to use savings in order to get return on it in the future. This is called Investment. Why should one invest? Earn return on your idle resources Generate a specified sum of money for a specific goal in life Make a provision for an uncertain future One of the important reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases. The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or a service in the future as it does now or did in the past.

    Takes these care for investing


    Obtain written documents explaining the investment. Read and understand such documents. Verify the legitimacy of the investment. Find out the costs and benefits associated with the investment. Assess the risk-return profile of the investment. 52

    Know the liquidity and safety aspects of the investment. Ascertain if it is appropriate for your specific goals. Compare these details with other investment opportunities available. Examine if it fits in with other investments you are considering. Deal only through an authorized intermediary. Seek all clarifications about the intermediary and the investment. Explore the options available .

    Interest
    When we borrow money, we are expected to pay for using it this is known as Interest. Interest is an amount charged to the borrower for the privilege of using the lenders money. Interest is usually calculated as a percentage of the principal balance (the amount of money borrowed). The percentage rate may be fixed for the life of the loan, or it may be variable, depending on the terms of the loan.

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    Factors determine interest rates


    When we talk of interest rates, there are different types of interest rates - rates that banks offer to their depositors, rates that they lend to their borrowers, the rate at which the Government borrows in the Bond/Government Securities market, rates offered to investors in small savings schemes like NSC, PPF, rates at which companies issue fixed deposits etc. The factors which govern these interest rates are mostly economy related and are commonly referred to as macroeconomic factors. Some of these factors are: Demand for money. Level of Government borrowings. Supply of money. Inflation rate. The Reserve Bank of India and the Government policies.

    Various options available for investment One may invest in:


    Physical assets like real estate, gold/jewellery, commodities etc. Financial assets such as fixed deposits with banks, small saving instruments with post offices, insurance/provident/pension fund etc. securities market related or instruments like shares, bonds, debentures etc.

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    Various Short-term financial options available for investment


    Broadly speaking, savings bank account, money market/liquid funds and fixed deposits with banks may be considered as short-term financial investment options: Savings Bank Account is often the first banking product people use, which offers low interest (4%-5% p.a.), making them only marginally better than fixed deposits. Money Market or Liquid Funds are a specialized form of mutual funds that invest in extremely short-term fixed income instruments and thereby provide easy liquidity. Unlike most mutual funds, money market funds are primarily oriented towards protecting your capital and then, aim to maximize returns Fixed Deposits with Banks are also referred to as term deposits and minimum investment period for bank FDs is 30 days. Fixed Deposits with banks are for investors with low risk appetite, and may be considered for 6-12 months investment period as normally

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    Various Long-term financial options available for investment


    Post Office Savings Schemes, Public Provident Fund, Company Fixed Deposits, Bonds and Debentures, Mutual Funds etc. Post Office Savings: Post Office Monthly Income Scheme is a low risk saving instrument, which can be availed through any post office. Public Provident Fund: A long term savings instrument with a maturity of 15 years and interest payable at 8% per annum compounded annually. A PPF account can be opened through a nationalized bank at anytime during the year and is open all through the year for depositing money. Tax benefits can be availed for the amount invested and interest accrued is tax-free. A withdrawal is permissible every year from the seventh financial year of the date of opening of the account and the amount of withdrawal will be limited to 50% of the balance at credit at the end of the 4th year immediately preceding the year in which the amount is withdrawn or at the end of the preceding year whichever is lower the amount of loan if any. Company Fixed Deposits: These are short-term (six months) to medium-term (three to five years) borrowings by companies at a fixed rate of interest which is payable monthly, quarterly, semi10 annually or annually. They can also be cumulative fixed deposits where the entire principal along with the interest is paid at the end of the loan period. Bonds: It is a fixed income (debt) instrument issued for a period of more than one year with the purpose of raising capital. The central or state government, corporations and 56

    similar institutions sell bonds. A bond is generally a promise to repay the principal along with a fixed rate of interest on a specified date, called the Maturity Date.

    Mutual Funds: These are funds operated by an investment company which raises
    money from the public and invests in a group of assets (shares, debentures etc.), in accordance with a stated set of objectives. It is a substitute for those who are unable to invest directly in equities or debt because of resource, time or knowledge constraints

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    STOCK EXCHANGE AND TRADING

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    INTERNATIONAL STOCK EXCHANGE AND TRADING


    International Online Trading Scenario
    Here we will have a comprehensive look taking the international share-trading scenario as a whole. We have considered those particular continents, nations; those usually have major influence in the various economic aspects of India. So, the United States of America, United Kingdom and the entire European Union, Australia, New Zealand and African countries as a whole.

    UNITED STATES OF AMERICA


    Let us start with the United States. A brief set of information consisting of Stock Exchanges functioning, online share broking firms, and the latest technology they are offering for hassle free service for their customers etc.

    The prominent online share broking firms are The Wall Street Journal, DxDollars, Power Pointers Page, Xdrive, Saxo Bank etc. These firms are providing online as well as offline facilities to their customers. The salient features the organizations are offering are as:

    1. Online Broker List - This section contains a comprehensive list of brokers that
    will allow you to trade online. Make sure to investigate them thoroughly before choosing an online share-trading firm.

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    2. Broker Ranking Resources - We have their own broker performance data and
    rankings, if you're looking for info on a single specific broker, or just want another opinion.

    3. After Hours Resources- In this section to get information about how and where
    to trade stocks after the markets have closed for the day.

    4. After Hours Online Trading - This listing contain sites that will allow you to
    trade stocks after hours.

    5. Exchanges - This section contains a listing of stock exchanges throughout the US


    and around the world. The sites can often be used to investigate stocks that are traded on a given exchange. This can be especially useful for international stocks that may be difficult to research due to a lack of readily available information.

    6. International Online Trading - Thanks to the Internet, it has become much


    simpler to analyze and participate in international investment opportunities. Once you have thoroughly researched global opportunities, use the sites in this section to trade stocks around the world.

    7. ECNs - Electronic Communications Networks (ECNs) represent orders in Nasdaq


    stocks, internally matching buy and sell orders or representing the highest bid prices and lowest ask prices on the open market. The benefits of trading with an ECN include after hours trading, avoiding market makers (which charge a spread), and anonymity (which is often important for large trades). This section contains a listing of ECNs that are available for your trading needs.

    8. Scripophily - This section contain links to sites that specialize in old stock
    certificates and collectibles. 60

    9. Traders World - Offers articles, software, and newsletters on the financial


    markets for subscribers.

    10. Domestic Securities ATTAIN System - An order display alternative to the


    traditional market making price quote system on the Nasdaq. The ATTAIN ECN allows its subscribers immediate and direct posting of orders to the ATTN book.

    11. Day Trader - Brings insight, ideas, trading techniques, and innovative thinking to
    investors looking to trade the financial markets. This is all shown to you via the actual trading journals, diaries, or so-called "trade blotters" of an experienced Day Trader.

    12. Day Traders Online - Fee-based site offering a morning stock market report,
    access to their real-time trading room, and access to their news desk. free trial is available.

    13. Daytradingstocks.com - A virtual community for day traders that offers


    message boards, book reviews, and brokerage reviews. Free registration is required for some of the site's features.

    AFRICAN SCENARIO

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    Strategic Alliances and Mergers of Financial Exchanges: The Case of the SADCs
    Over the last year or so, there has been increased speculation in Europe and elsewhere as to the benefits or otherwise of merging a number of national and international financial exchanges. Several countries in the SADC region have a financial exchange. However the vast majority of these exchanges have a small number of listed securities, low capitalization and low liquidity. The design, size, scope, institutional and regulatory framework of a financial exchange determines its relative costs and benefits. Seen in this light, without the appropriate scale, liquidity, social and technological infrastructure, it is unlikely that a financial exchange will be able to efficiently meet its strategic objectives. This research suggests that there is a strong economic case for establishing an SADC financial exchange and the most efficient and least costly way of accomplishing this is for the national exchanges in the SADC region to merge with the Johannesburg Securities Exchange (JSE).

    Introduction and Background


    The presence of bid ask spreads, serial correlation patterns in security and index returns and unresolved issues regarding the returns of small firms seems to suggest that securities markets prices are not set via Walrasian auction and that trading does not take place at equilibrium prices. In the main, prior to the development of market microstructure analysis, financial economists assumed a frictionless trading process. The field of market microstructure attempts to examine issues or friction in markets which might influence the outcomes of those markets. As electronic trading has grown, the debate has centered on number of broad questions . These include inter alia questions such as; are auction 62

    markets cheaper than dealer markets? Is screen based trading cheaper and more efficient than an open cry system? Is the cost of trading on certain exchanges influenced by the size of the company? Does the cost of trading influence the liquidity of the stock and vice versa? And as a corollary, to what extent does the design of financial exchanges influence liquidity and other variables? A survey by economist Madhavan indicates most of the answers to the above questions have been based on studies in the United States. However this is an issue which other regions of the world need to examine carefully. In Europe, there has been some debate as to the most appropriate design of exchanges for the trading of equities. This has been compounded by the increase in online share trading and the perception that the trend is likely to increase. Although very few mergers have actually taken place relative to the amount of time and effort that has been put into the discussions, the large exchanges in Europe are still planning to merge their trading, clearing and settlement platforms. An estimate from the European Securities Forum indicates that the costs of cross border trading in the European Union are ten times higher than the costs in the United States. Settlement and clearing is a significant component of the total cost in dealing in equities.

    INDIAN SCENARIO
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    HURDLES FOR ONLINE SHARE TRADING 1. Internet fraud


    In India, we see this kind of frauds happening in different way due to nature of our society. Here when we talk to broker's staff while buying or selling, we will usually advise to buy share which he has bought and plans to dump when price goes up. We have seen enough of PUMP and DUMP even without help of internet in cases of Harshad Mehta boom of 1992 and Ketan Parekh boom of 2000 (he even had cult following with Index of 10 shares called K-10). Today lot of investors depending on TV channel for recommendation about stocks to sell, or buy or hold. Channels like CNBS offer array of experts from economist to brokers to analyst. Most of these people have vested interest in stocks they recommend and promote. One of the most common forms of securities fraud on the Internet involves an imposter who attempts to manipulate the price of a stock by disseminating phony press releases or information, or creating phony websites. A recent example of this scheme is the hoax perpetrated against US based, PairGain Technologies.

    2. Volatility of Indias Stock Markets


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    Recent market developments have once more focused attention on the volatility that has come to characterise Indias stock markets. Movements in the Sensex during the two years have clearly been driven by the behaviour of foreign institutional investors (FIIs), who were responsible for net equity purchases of as much as $6.6 and $8.5 billion respectively in 2003 and 2004. These figures compare with a peak level of net purchases of $3.1 billion as far back as 1996 and net investments by FIIs of just $753 million in 2002. In sum, the sudden FII interest in Indian markets in the last two years account for the two bouts of medium-term buoyancy that the Sensex recently displayed.

    Given the presence of foreign institutional investors in Sensex companies and their active trading behaviour, their role in determining share price movements must be considerable. Indian stock markets are known to be narrow and shallow in the sense that there are few companies whose shares are actively traded. Thus, although there are more than 4700 companies listed on the stock exchange, the BSE Sensex incorporates just 30 companies, trading in whose shares is seen as indicative of market activity. This shallowness would also mean that the effects of FII activity would be exaggerated by the influence their behaviour has on other retail investors, who, in herd-like fashion tend to follow the FIIs when making their investment decisions.

    3. Rampant Speculation
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    The Indian stock markets are perhaps the only place in the world where you can buy shares without having to put money on the table and sell shares you do not own. This extraordinary situation has facilitated rampant speculation by all sorts of operators the indigenous variety, FIIs and even our own native financial institutions (FIs) as the massive UTI scandal of recent years has demonstrated. So, when the stock markets were made to collapse by a record 800-plus points on May 17 under the pretext that the Left is opposed to divestment, the profits reaped by short sellers were astronomical and incalculable. `Could this situation have been avoided? As aforesaid, the answer is yes. The electronic monitoring system in both the Bombay Stock Exchange and the bigger National Stock Exchange automatically stopped trading for half-an-hour when the two markets respectively collapsed by 10 percentage points. Thereafter when trading resumed and the markets fell further to another stipulated lower level, the electronic system automatically stopped all trading again for another two hours.

    A similar situation had occurred on Tuesday, September 11, 2001, the day of the terrorist attacks in New York City. At the end of the day the stock exchange authorities of both the New York Stock Exchange and the heavily-weighted software exchange called NASDAQ suspended all trading for the remainder three working days during that fateful week to safeguard investor interests. So, advanced capitalism does know how to intervene "politically" in the markets when fundamental interests are in danger of violation by short sellers.

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    PRODUCT PROFILE

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    PRODUCTS PROFILE
    EQUITIES
    Trading in Equities with Religare truly empowers our investment needs. A highly process driven, diligent approach backed by powerful Research & Analytics and one of the best in class dealing rooms ensures that we have a superlative experience. Further, Religare also has one of the largest retail networks, with its presence in more than 900 locations across more than 320 towns & cities. This means, we can walk into any of these branches and connect to our highly skilled and dedicated relationship managers to get the best services. We could also choose to enjoy the freedom to execute own trades through our online mechanism.

    COMMODITIES
    Religare Commodities Limited (RCL) was initiated to spearhead Exchange based Commodity Trading. As a member of NCDEX, MCX and NMCE, RCL is a trade facilitator providing the platform to trade in commodities. Grounded in the Religare philosophy, highly skilled and dedicated professionals strive to offer the clients "best-fit" investment solutions in the country.

    - 68 -

    The Operating Fabric-Commodities Business


    In terms of the business structure, RCL caters to retail clients; it has a structured arbitrage desk which focuses on spot futures arbitrage, RCL is also present in close to 40 Mandi locations across the country and also caters to the Corporate / Institutional business through one of the best in class Corporate Desks. Companys business philosophy is to treat each client situation as unique, requiring customized solutions. Company list of corporate clients reads like a Whos one of the Indian Industry and company has been successful in providing customer with practical customized solutions for customer requirements. Company is propelled by group vision and desire to strive tirelessly and aim to be the best within this category.

    - 69 -

    Online Investment Portal


    Investing online will never be the same again with companies 360 degree portal www.religareonline.com Now customer can not just invest online in Equities, IPOs, Mutual Funds, Commodities and much more but, also get trade rewards each time investment. Besides this, Company also offers customer a host of other revolutionary features such as Zero Percent Brokerage; Interest on cash margin, exposure upto 20 times cash margin etc... depends upon the select product schemes available through customer highly sophisticated and customized platform R-ACE (Religare Advanced Client Engine). So get empowered, enrich customer experience of investing online and open to a whole new world of possibilities.

    - 70 -

    Personal Financial Services


    India Infoline has recently entered into personal financial advisory services. It caters to the financial needs of individuals by advising on various financial plans. India infoline Personal financial advisors, also called financial planners or financial consultants, use their knowledge of investments, tax laws, and insurance to recommend financial options to individuals in accordance with the individuals short-term and long-term goals. Some of the issues that planners address are general investments, retirement and tax planning.

    - 71 -

    PROCESS

    - 72 -

    RESEARCH METHODOLOGY

    - 73 -

    RESEARCH METHODOLOGY.

    Research is a systematic method of finding solutions to problems. It is essentially an investigation, a recording and an analysis of evidence for the purpose of gaining knowledge. According to Clifford Woody, research comprises of defining and redefining problem, formulating hypothesis or suggested solutions, collecting, organizing and evaluating data, reaching conclusions, testing conclusions to determine whether they fit the formulated hypothesis

    Process Of Research
    There are many steps of Research process. 1 .Formulating The Research Problem 2 .Extensive Literature Survey. 3 .Developing The Hypothesis 4 . Preparing The Research Design 5 . Determining The Sample Design 6 . Collecting The Data 7 . Execution Of The Report 8 . Analysis Of Data 9 . Hypothesis Testing 10 . Genernalisation And Interpretation And 11 . Preparation The Report

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    Sampling Design.
    A sample design is a finite plan for obtaining a sample from a given population. Simple random sampling is used for this study. - The number of group & subgroup should be analyzed - The sample size should be neither too large nor too small

    Universe.
    The universe chooses for the research study is the employees of India Info line Ltd.

    Sample Size.
    Number of the sampling units selected from the population is called the size of the sample. Sample of 50 respondents were obtained from the population. Sample should be acceptable error. It should be cost effective.

    Sampling Procedure.
    The procedure adopted in the present study is probability sampling, which is also known as chance sampling. Under this sampling design, every item of the frame has an equal chance of inclusion in the sample. There are many steps of sampling procedure. 1. Define the universe. 2. Make a sample frame. 3. Specifying the sampling unit.

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    4. Selection of sample design. 5. Determination of sample size. 6. Select the sample.

    Methods of Data Collection.


    The datas were collected through Primary and secondary sources.

    Primary Data
    Primary data are in the form of raw material to which statistical methods are applied for the purpose of analysis and interpretations. The primary sources are discussion with employees, datas collected through questionnaire. Primary data recorded by the researcher for the first time to their knowledge

    Methods Of Primary Data Collection.


    1. Observation Method 2. Interview Method 3. Questionnaire 4. Schedule Method

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    Secondary Data
    Secondary datas are in the form of finished products as they have already been treated statistically in some form or other. The secondary data mainly consists of data and information collected from records, company websites and also discussion with the management of the organization. Secondary data was also collected from journals, magazines and books.

    Methods Of Secondary Data Collection


    1 . Books 2 . Internet 3 . Journals 4 . Research Association

    Nature of Research.
    Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. Descriptive research answers the questions who, what, where, when and how.

    Although the data description is factual, accurate and systematic, the research cannot describe what caused a situation. Thus, descriptive research cannot be used to create a causal relationship, where one variable affects another. In other words, descriptive research can be said to have a low requirement for internal validity.

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    Questionnaire A well defined questionnaire that is used effectively can gather


    information on both overall performance of the test system as well as information on specific components of the system. A defeated questionnaire was carefully prepared and specially numbered. The questions were arranged in proper order, in accordance with the relevance.

    Nature of Questions Asked.


    The questions are following types. 1. Open ended Questions 2. Dichotomous, 3. Rating and Ranking Questions.

    4. Multiple Choice Question

    Sample
    A finite subset of population, selected from it with the objective of investigating its properties called a sample. A sample is a representative part of the population. A sample of 50 respondents in total has been randomly selected. The response to various elements under each questions were totaled for the purpose of various statistical testing.

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    Variables of the Study.


    The direct variable of the study is the employee motivation & Indirect variables are the incentives, interpersonal relations, career development opportunities and performance appraisal system.

    Presentation of Data
    The data are presented through charts and tables. Data should be under the limit Data presentation should be clear in charts We can use Bar Chart, Bar Diagram Table etc

    Tools and Techniques for Analysis


    Correlation is used to test the hypothesis and draw inferences.There are some requirement for data analysis. 1.Editng , 2. Coding , 3. Tabulation So,These are the technical term for analyzing the data.

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    DATA ANALYSIS

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    DATA ANALYSIS
    1.Are you offering these products \ services to your existing customer?

    Fund Services Religare Securities ICICI Direct India Infoline Security Pvt. Ltd. HDFC Securities Indiabulls Reliance Money Sharekhan Securities
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    Yes No

    Yes

    Yes Yes Yes No

    Mutual

    Yes Yes

    No

    No Yes Ye No

    Insurance

    Yes Yes

    Yes

    Yes No No Yes

    PMS

    Yes Yes

    Yes

    Yes Yes Ye Yes

    Back office

    Yes Yes

    Yes

    Yes Yes Ye Yes

    Advisory E-Broking

    Yes Yes

    Yes

    Yes Yes Yes Yes

    Investment

    Yes No

    No

    No No No No

    M-Connect

    No Yes

    No

    Yes No No No

    Loans Funding

    Yes Yes

    Yes

    Yes Yes Yes Yes

    Personal

    Yes Yes

    Yes

    Yes Yes Yes Yes

    Software

    Yes No

    No

    No No No No

    E-Choupapa

    Motilal Oswal Anand Rathi

    No No

    Yes Yes Yes

    No Yes Yes

    Yes Yes Yes

    Yes Yes Yes

    Yes Yes Yes

    No No No

    No No No

    Yes No No

    Yes Yes Yes

    No No No

    Securities Hem Securities Yes

    2.How many clients are you having active?

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    Showing the activeness of client

    20%

    Active Client Non active client

    80%

    In ,India Infoline Ltd 80% client are active . who do the online trading regular bases. But, 20% client are not and they do not active for the trading.

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    3. How many sub Broker is your company having?

    Showing The Presence of Sub Broker

    10%

    Sub Broker Non Sub Broker

    90%

    In, India Info line Ltd 10% brokers are sub broker and 90% are not Sub Broker.

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    4.What is the Brokerage on intraday of different companies?

    -India infoline Ltd,Motilal Oswal Securities, Kotak Securities, India Bulls, Anand Securities charges Rs.3 brokerage on Intraday. - Angel Broking Ltd, Religare Securities charges Rs.2 brokerage on Intraday. - ICICI Direct charge Rs.7.5 brokerage on Intraday -Sharekhan Securities charges Rs.5 brokerage on Intraday - Hem Securities charges Rs.1.5 brokerage on Intraday

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    5.What is the Charges the opening of DEMAT Account of different companies?

    Value in Rs. 1200 1000 800 600 400 200 0 Angel Broking Ltd. Indiabulls Securities 560

    Account opening Charges

    999 900 750 865 700 460 350

    Religare Securities

    ICICI Direct

    Sharekhan Securities

    Comapny Name

    Anand Rahti Securtites

    India Infoline

    Hem Securities

    -Angel Broking charges Rs.560, India bulls Securities charges Rs.900, Religare Securities charges Rs.999, ICICI Direct charges Rs.750, Sharekhan Securities charges Rs.350, Anand Rathi Securities charges Rs.460, India Infoline Ltd charges Rs.865, Hem Securities charges Rs.700. for opening the DMAT Account.

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    6.What is the Market share of different companies?

    Market Share Of Companies

    11% 26%
    Angel Broking Ltd Religare Indiabulls

    28% 19% 16%

    Anand Rathi Others

    - Angel Broking Ltd have the 26% Market Share of total -Religare have the 19% Share of total Market Share -India info line have the 11% Share -Indiabulls have the 16% Share -28% have the others

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    7. Are you organizing any event or survey for customer awareness ?

    Customer Awareness
    90 80 70 60 Value 50 40 30 20 10 0 Aware Awareness of people Not Aware

    Yes, Company regularly contact the customers ,that customer properly aware to the company scheme and company also contact to the new client knowning the detail through survey.In this, I take the sample size 50.

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    8. Any special service which you provide makes different your company

    in market.

    Customer Awareness of extra Services


    60 50 40 Value (%) 30 20 10 0 Not Aware to the Service Slightly Aware to the Service Customer Awareness Full Aware to the Service

    Yes , These are as followed :Some special and confidential scheme which access only through company data. Some company kit , which have some prizes . Some time company provide offer related to the Intraday Brokerage etc.

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    FINDINGS

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    FINDINGS
    India infoline is the second in charging lowest brokerage. Reliance Money is having 32% market share in Meerut (Market Leader) because of lowest brokerage whereas Angel Broking is performing best on country level. Company is having 75 Sub-brokership in Meerut which provides a major part of revenue. Despite three branches India infoline has 10000 clients whereas Hem Securities has 70 branches and only 12000 clients. India info line is providing free of cost softwares for online clients. Company is providing M-connect software whereas other companies are not having this service. India info line has the highest market coverage with respect to channel sales. This is because Angel has the highest number of sub-brokers. There are 140 sub-brokers in Meerut.

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    RECOMMENDATION

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    RECOMMENDATIONS
    India infoline has to decrease its margin money up to Rs. 3000 it attracts more new clients and for sub-brokership company should decrease its security up to Rs. 50,000. There should be two more branches of India Info Line Limited in Meerut as well as in Rajasthan so that clients will get its services easily. There should be more public awareness programmed and advertisement related to companys product and services so that people should be more aware about India info line. Company should organise customer happiness survey for both active and inactive clients . Company has to more aggressive toward its existing clients feedback and for their services after giving them products because it can increase company loyalty as well its brand name. Company should provide demo version of software and its training for each clients.

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    SUGGESTION

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    SUGGESTIONS
    Commitment should be equalized for every person. Provide the facility of free demonstrations for all. Improvement in the opening of De-mat & contract notice procedure is required. Company should have a limited number of clients under the relationship manger. So that they can handle new as well as old customer properly. Some promotional activities are required for the awareness of the customer. People at young age should be encouraged to invest in stock market. Seminars should be more held for providing information to prospective and present customers. In the organization, Company must me be in co-operation with other department and other branches . Company should make more promotional activities by giving advertisements and publicity. Give more demonstration to customers so that they can get complete knowledge about online trading. Give the complete information about products and services offered by the company to the customers. The number of branches it has at present should be increased all over the country, which will attract a large number of customers.

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    RESULT

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    RESULT
    According to the first problem many of the companies as India Info Line, Reliance Securities, ICICI provides many of facilities as-Banking, Software, Loan Advisory, funds etc. According to the second problem 80% are active and 20% are inactive client. According to the third 10% are company sub-Broker. There are different- different companies , which provides different - different Intra day Brokerage as- 5, 7.5, 2. In this company different- different amount for opening the DMAT Account. In this all companies have different market share as- India Info Line-11%. In this we analyse that 20% customer are aware to the extra services . This is the result after analyzing the data.

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    CONCLUSION

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    CONCLUSION
    On the basis of the study it is found that India infoline is better services provider than the other stockbrokers because of their timely research and personalized advice on what stocks to buy and sell. India infoline provides the facility of Trade tiger as well as relationship manager facility for encouragement and protects the interest of the investors. Company also provides the information through the internet and mobile alerts that what IPOs are coming in the market and it also provides its research on the future prospect of the IPO. Study also concludes that people are not much aware of commodity market and while its going to be biggest market in India. From the above survey and observation it is found that most of the people who are trading in share market belongs to the employee group, next comes the business men and other class of income people. As the share market value goes on increasing day by day the investor who wants to invest in shares also increasing. But investing in shares is as risky as earning yield.

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    Trading in online trading firm is easy as it all delivered with internet and within a few minutes the customer can buy and sell shares which save time as well as reduction of paper work. Hence trading in share market is increasing day by day and investors are ready to invest their investment in share market only.

    I got the knowledge about the customers needs and their references for having a particular product. The need of customers differs from person to person, area, locality and occupation. Customer always wants more service by paying less. Company expect all the information such less rates, less brokerages, highly returns and better service level without delay.

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    BIBLIOGRAPHY

    - 101 -

    BIBLIOGRAPHY
    Websites
    www.usectrade.com www.angeltrade.com www.indianshareshistory.com www.bseindia.com www.nseindia.com www. India infoline.com

    News Papers
    Times of India Business Standard Market Express Business Standard

    Books
    Kothari C. R Research Methodology ( New Age International( P) , II Edition,2004) Brochures and Pamphlets of India infoline Pandey I M Financial Management ( Vikas, IX Edition 2004)

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    Prasanna Chandra- Fundamentals of Financial Management (TMH, 2004)

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