A PROJECT REPORT ON A STUDY ON SHARE MARKET (SPECIAL REFERENCE TO SURESH RATHI SECURTIES PVT. LTD.

) Session 2009-2010 Submitted in the partial fulfillment of SECURITIES ANALIYSIS AND PROTFOLIO MANAGEMENT

JAI NARAIN VYAS UNIVERSITY

Submitted By: Arpit jain Enrolment No 06/6875.

CERTIFICATE

This is to be certify that Mr.ARPIT JAIN, Enrolment No. 06/6875

has processed under by supervision his

project report on A STUDY ON SHARE MARKET ( SURESH RATHI SECURTIES PVT. LTD.)

The work embodied in this report is original and is of the standard expected of a SAPM student and has not been submitted in part or full to his or any other university for the award of any degree. He has completed all requirements of guidelines for project report and the work is fit for evaluation.

(Dr. RP SHARMA ) Principal JNVU

UNDERTAKING

I hereby declare that total work of this project entitled A STUDY ON TEXTILE INDUSTRY. in Umaid Mills Ltd is an original work of mine is done during month May-June as part of summer Training under the guidance of S.K. Rajpurohit to the best of my knowledge and beliefs the facts mentioned in the report are true.

ARPIT JAIn Enrollment No. 06/6875 SAPM

CONTENTS

1. OVERVIEW OF INDIAN TEXTILES INTRODUCTION NATURE OF TEXTILE INDUSTRY WORKING CONDITONS EMPLOYMENT OCCUPATIONS IN THE INDUSTRY TRAINING AND ADVANCEMENT OUTLOOK EARNING

2. COMPANY PROFILE BUSINESS PROFILE MANAGEMENT TEAM BUSINESS PHILOSOPHY UMAID FABRIC INFRASTRUCTURE

3. PROJECT PROFILE

SCOPE OF THE STUDY SIGNIFICATION OF THE STUDY LIMITATIONS OF THE STUDY

4. RESEARCH METHODOLOGY USED

5. EXTRAS SOME IMPORTANT PHOTOS QUALITY CONTROL & POLICY CONTROL

6. BIBLIOGRAPHY

Acknowledgements

WE are deeply indebted to the management of Sharekhan for providing me an opportunity to undergo summer internship in the organization.

WE express our deepest sense of gratitude to Mr. Vinod Bhandari (Regional Head) whose intellectual nourishment professional help and generous support was crucial in the preparation of this project.

WE want to give special acknowledgment to Mr. Sunil Kumar Jain (Branch Manager) for generously sharing his insights and experiences with me. WE benefited greatly from the superb talent of Mr. Sunil Jain who shaped our understanding through his rich and varied contribution.

WE also pay our sincere thanks to Miss Kamini Ladha, and all staffs who lent their considerable talent in adding many example and idea to complete this research work within the stipulated time period.

At the very outstanding, WE would like to extend our sincere thanks and regards to the respect director of Jodhpur. WE also take the Opportunity to thank all gentlemen who have directly or indirectly helped me during the project work.

PREFACE

1. The study has been done to know about Sharekhan. This organization is working as stock broking agent.

2. The study helps in understanding and gaining knowledge about the company and stock market environment.

3.

The purpose of report is to know about the performance of Sharekhan in stock market and to

comparatively analyse its performance with other stock broker agents.

4. Through training enough practical knowledge of business world can be obtain which help in exploring skills in future corporate world

INTRODUCTION OF SHARE MARKET

MEANING

Business finance is concerned with the provision of funds for an investor must provide investment in this way, and this means that the investors must forgone consumption and save to provide the funds. Savers and users of the firms come together in the market for finance where the normal rules of supply and demand apply unless there is Govt. interference with interest rate. The price of money is the rate of interest paid for the use. If the demand for the investment funds is greater than the funds offered for investment by savers, than the rate of interest will rise until people in the economy are induced to forgo consumption and make their savings available for investment.

The new issues of securities are made available in the primary market. The securities that are already outstanding and owned by the investors are usually bought and sold through the secondary market. Which popularly known as stock market.

In the stock markets, the outstanding issues are permitted to trade. In this market, a stock or bond issue has already been sold to the public, and it is traded between current and potential owners. The proceeds from a sale in the stock market do not go to the issuing organization but to the current owner of the security.

Once investors have purchased new issues, they change hands in the stock market. There are two broad segments of the stock market (i). The organized stock exchanges (ii). The Over-the-counter (OTC) market.

The primary middlemen in the stock market are brokers and dealers. The distinction between them is, the broker acts as an agent, where as the dealer act as a principal in the transaction. Stock market are said to reflect the health of the countrys economy. On the other hand, major economic indicators determine stock market movement to a large extent. From a thorough analysis of the various economic Indicators and its implication on the stock market, it is known that stock market movements are largely influenced by broad money supply, inflation, credit/deposit ratio and fiscal deficit apart from political instability. Besides, fundamental factors like corporate performance, industrial growths etc. always exert a certain amount of influence on the stock markets Because the stock market involves the trading of securities initially sold in the primary market, it is providing liquidity to the individuals who acquired these securities. The trends in stock market will have impact on the primary market. The secondary market in India comprises of 23 stock exchanges on which 9922 listed securities are transacted. Large volumes of transaction on the secondary markets are put through the BSE and NSE. Presently, the BSE and NSE put together account for 83% of the total turnover as compared to 17% by the others stock exchanges. The BSE, which was originally established with 318 members in the year 1875, presently has 711 members. Its location, which originally was Mumbai, has now enlarged to many cities spread over the country through the satellite network. The NSE, of India, which was established in the year 1994, made rapid strides and has strength of 850 members in many cities spread across the length and breadth of the country. The NSE since inception was an electronic exchange. REASONS FOR TRANSACTIONS ON SECONDARY MARKET

There are two main reasons why individuals transact in the secondary market:

INFORMATION MOTIVATED REASONS: Information motivated investors believe that they have superior information about a particular security then other market participants. This

information leads them to believe that the security is currently under priced, and investors with access to such information will want to buy the security. On the other hand, if the information is bad, the security will be and such investors will want to sale their holdings of the security. LIQUIDITY MOTIVATED REASONS: Liquidity motivated investors, on the other hand, transact in the secondary market because they are currently in a position of either excess or insufficient liquidity. Investors with surplus cash holdings (e.g. as a result of an inheritance) will buy securities, where as investor with insufficient cash (e.g. to purchase a car) will sell securities. currently over priced,

LISTING OF SECURITIES

Listing means admission of securities to dealings on recognized stock exchanges of any incorporated company, Central and State Govts.quasi governmental and other financial institutions/corporation, municipalities, electricities, housing board etc. Stock exchange means 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. Every recognized stock exchange i.e. a stock exchange which is for time being recognized by the Central Govt. u/s 4 of the Securities Contracts (Regulation) Act 1956, has the power to make bye-laws for the listing of securities on the stock exchange, the inclusion of any security for the purpose of dealings and the suspension or withdrawal of any such securities and the suspension or prohibition of trading in any specified securities. This power to make bye-laws is subject to the previous approval of the Central Govt. Further, the Central Govt. has the power to make or amend bye-laws of recognized stock exchanges either on a request by the governing body of a stock exchange or on its own motion. Securities are bought and sold

in recognized stock exchanges through members who are known as brokers. The prices at which the securities are bought and sold on a recognized stock exchange is known as official quotation

CENTRAL LISTING AUTHORITY

The compliance wit the listing requirements were being hitherto seen by each stock exchange on which the securities of the company are proposed to be listed. These requirements defer from exchange to exchange. SEBI has initiated steps to set up of a central listing authority, which would accord approval. This approval would enable all the stock exchanges, on which the securities of the companies and Mutual Funds are going to be listed, to list the securities at an early date. The Central listing authority would act as a check on the fly by night operators to float public issues since the listing norms would be uniformly applied as against the current practice where the norms could be flouted, if listing is to take place in a very small exchange where the listing requirements may be lenient.

Listing of Securities- Provisions of the Companies Act, 1956 Section 73 of the Companies Act, 1956 deals with the allotment of shares and debentures to be dealt in on stock exchange: A company, which offers its shares or debentures to the public for subscription by issue of prospectus, shall make an application to one or more stock exchanges for listing of shares or debentures. This application shall be made before the issue of prospectus. The prospectus shall state the names of stock exchanges to whom the listing applications are proposed to be made. If no such applications are made or if the permission for listing has not been granted within 10 weeks from the date of the closing of the subscription lists, any allotment made shall be void.

However, an appeal against the refusal to permit listing by any stock exchange can be preferred under section 22A of Securities Contracts Act, 1956. Such allotment shall not be void until the dismissal of the appeal.

In case the company has not applied for permission to list or the company has made application but the stock exchanges have not granted the permission, the company shall forthwith repay all monies without interest with 8 days after the company becomes liable to repay it.

If permission for listing is granted by the concerned recognized Stock Exchanges, the excess application money received, after making necessary adjustment towards allotment, the company shall refund the excess application money without interest, within 8 days after the company becomes liable to repay it.

In case of default in refunding the company and every director and every officer of the

company who is in default, shall jointly and severally liable to repay all such monies with interest at the rate 15%. If excess application money is not refunded within 8 days, the company and every

officer of the company who is in default shall be punishable with a fine, which may extend to Rs. 50,000. If excess application money is not refunded within 6 months from the expiry of 8 th day,

every officer of the company shall be punishable with an imprisonment, which may extend to one year. All monies received aforesaid shall be kept in a separate Bank account maintained with a

Scheduled Bank until the listing permission is granted or until the disposal of any appeal preferred against the refusal to grant permission for listing. If default is made in connection with the above provision, the company and every officer of the

company who is in default shall be punishable with fine, which may extend to Rs. 50,000.

Monies standing to the credit of the separate Bank account shall be utilized only for the purposes

mentioned below: -Adjustment against allotment of shares, if listing permission is granted by the all the stock exchanges mentioned in the prospectus. -Repayment of monies received if listing permission is not granted or if the allotment of shares is not made. Any conditions that waive compliances of the above provisions shall be void. If the application for listing permission is not disposed of within the specified time, it shall be

deemed that permission has not been granted. Prospectus shall state that application for listing has been made to a recognized stock exchange.

Listing of Securities- Provisions of Securities Contracts Act, 1956

Sections 21 and 22A deal with the provisions of listing of securities in a recognized stock

exchange. The companies, which obtain listing permission of its securities, shall comply with the

conditions of the listing agreement. If the recognized stock exchange refuses to list the securities, the company shall be entitled to

be furnished with reasons for such refusal. The company may prefer an appeal to the Securities Appellate Tribunal:

-Within 15 days from the date on which reasons for such refusal is furnished, or -If the stock exchange has omitted or failed to dispose of application with in the time specified in section 73 of the Companies Act, 1956, within 15 days from the date of expiry of specified time or within such further period, not exceeding 1 month, the Securities Appellate Tribunal allow on sufficient causes shown to it.

The concerned stock exchanges shall act in conformity with the said order of the Securities

Appellate Tribunal. Every appeal made to Securities Appellate Tribunal shall be in such form and be accompanied by such fee as may be prescribed. The Securities Appellate Tribunal shall deal with the appeal expeditiously and shall dispose of within 6 months from the date of receipt of the appeal. Section 22B deals with the procedure and powers of Securities Appellate Tribunal. Section 22C deals with the Right to legal representation. Under section 22F, any person aggrieved by any decision or order of the Securities Appellate Tribunal may file an appeal to the High Court within 60 days from the date of communication of the decision or order of the Securities Appellate Tribunal. The High Court may, if it is satisfied that the appellant was prevented by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period not exceeding 60 days. The Securities Appellate Tribunal may, after giving the stock exchange an opportunity of being heard: -Vary or set aside the decision of the stock exchange or -Where the stock exchange has omitted or failed to dispose of the application within the specified time, grant or refuse the permission.

Conditions as to Listing

Rule 2(b) of the Securities Contracts Rules, 1957 specified the following conditions shall be satisfied: At least 10% of each class or kind of securities issued by a company was

offered to the public for subscription through advertisement in newspapers for a period not less than 2 days and that applications received in pursuance of such offer were allotted subject to the following conditions: -Minimum 20 lakh securities was offered to the public. This shall exclude reservations, firm allotment and promoter contribution. -The size of the offer to the public i.e. the offer price multiplied by the number of securities offered to the public was minimum Rs. 100 crores and -The issue was made only through book building method with allocation of 60% of the issue size to the qualified institutional buyers as specified by SEBI. If a company does not fulfill the above conditions, it shall offer at least 25% of

each class or kind of securities to the public for subscription through advertisement in a newspaper for a period not less than 2 days and that application received in pursuance of such offer were allotted. Recognized Stock Exchange may release any of the above conditions with the

previous approval of SEBI in respect of Government Company within the meaning of section 617 of the Companies Act 1956. This shall be subject to such instructions as SEBI may issue in this behalf from time to time. Where any part of the securities sought to be listed have been agreed to taken up

by the following, it shall not form part of the 10% or 25% of the securities which are offered to the public: -Central Government -State Government

-Development or Investment agency of State Government -Industrial Development Bank of India -Industrial Finance Corporation of India -Industrial Credit and Investment Corporation of India Ltd. -Life Insurance Corporation of India -General Insurance Corporation of India and its subsidiaries namely National Insurance Company Ltd., New India Assurance Company Ltd., The Oriental Fire and General Insurance Company Ltd., and the United Fire and General Insurance Company Ltd -Unit Trust of India.

Advantages of Listing Listing of securities on the stock exchanges is advantageous to the company as well as to the investors as will be seen here under:

To the Company The company enjoys concessions under Direct Tax Laws as such companies are known as

companies in which public are substantially interested resulting in lower rate of income-tax payable by them. The company gains national and international importance by its share value quoted on the stock

exchanges. Financial institutions and banks extend term loan facilities In the form of rupee currency and foreign currency loan. It helps the company to mobilize resources from the shareholders through Rights Issue for

progrrammes of expansion and modernization without depending on the financial institutions line with the government policies.

It ensures wide distributions of shareholding thus avoiding fears of easy takeover of the organization

by others.

To the Investors Since the securities are officially traded, liquidity of investment by the investors is well ensured. Rights entitlement in respect of further issue can be disposed of in the market. Listed securities are well preferred by bankers for extending loan facility. Official quotations of the securities on the stock exchanges corroborate the valuation taken by the investors for the purposes of tax assessments under Income-tax Act, Wealth-tax Act etc. Since securities are quoted, there is no secrecy of the price realization of securities sold by the investors. The rules of the stock exchange protect the interest of the investors in respect of their holdings. Listed companies are obliged to furnish unaudited financial results on the quarterly basis. The said details enable the investing public to appreciate the financial results of the company in between the financial periods. Takeover offers concerning the listed companies are to be announced to the public. This will enable the investing public to exercise their discretion on such matters.

.NATIONAL STOCK EXCHANGE OF INDIA LTD (NSEI)

The National Stock Exchange Of India Limited was promoted by IDBI, ICICI, IFCI, GIC, LIC, SBI Capital market limited. SHCIL, IL, and FS as a joint stock company under the Companies Act 1956, on November 27 1992. The government of India has granted recognition with effect from April 26 1993 initially for the period of 5 years. The GOI has appointed IDBI as a lead promoter. To form the infrastructure of NSE, IDBI had appointed a Hong Kong Bound consulting firm M/s International Securities Consulting Ltd for helping in setting of the NSE.

OBJECTIVE The main objective of NSE is to ensure comprehensive nation wide securities trading facilities to the investors through automated screen based trading and automatic post trade clearing and settlement facilities. The NSE will be encouraging corporate trading members with dealers network, computerized trading and short settlement cycles. It proposes to have two segments, one dealing with whole side debt instruments and the other dealing with capital market instrument. The Electronic Clearing and Depository System proposed to be set up by the Stock Holding Corporation of India Ltd would provide the requisite clearing and settlement system. SENSEX:

SENSEX is India's first Index compiled in 1986. It is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of BSE-SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. Due to its wide acceptance amongst the investors, SENSEX is

regarded to be the pulse of the Indian stock market. All leading business newspapers and the business channels report SENSEX, as it is the language that all investors understand.

As the oldest index in the country, it provides the time series data over a fairly long period of time (from 1979 onwards) to be used for various research purposes. The Index Cell of the exchange is responsible for the day-to-day maintenance of the index within the broad index policy set by the Index Committee. The Index Cell ensures that the SENSEX and all other BSE indices maintain their benchmark properties by striking a delicate balance between frequent replacements in index and maintaining its historical continuity.

NIFTY :

The Nifty is relatively a new comer in the Indian market. S&P CNX Nifty is a 50 stock index accounting for 23 sectors of the economy. It is used for purposes such as benchmarking fund portfolios; index based derivatives and index funds. The base period selected for Nifty is the close of prices on November 3, 1995, which marked the completion of one-year of operations of NSE's capital market segment. The base value of index was set at 1000. S&P CNX Nifty is owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is a specialized company focussed upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services. 2. Index size

While constructing an index, one of the important considerations is its size. Internationally, an index can use any number of stocks ranging from 10 to 5000. The index is strictly a sample of stocks that represents the universe of stocks in the market. Some studies support the notion that a sample with a minimum of 30 observations is statistically proven to be representative of the underlying population. Any number less than 30 is too less to represent a large population of observations.

In a portfolio a greater diversification is better because it provides a two-way benefit. From an investment perspective, diversification reduces risk and from an information perspective, diversification cancels out stock noise. Therefore an Index that is more diversified is better than one less diversified. But diversification has its own limitations. Going beyond a certain point in order to diversify, the index may end up including illiquid stock and thus negatively affect the benchmarking properties of the index.

SENSEX has 30 stocks while Nifty has 50 stocks. It is seen that due to the manner in which Nifty is constructed and with an obvious bias for PSU Oil companies, the index has been rendered rather vulnerable to the fortunes of the PSU Oil companies. More specifically the inclusion of ONGC Ltd. in Nifty has literally made it prone to the fluctuations in the Oil companies as evident in the month of May, 2004. The Table below logically supports the above argument.

Significant days in May 2004 : Date S&P Nifty CNX ONGCs SENSEX ONGCs Contribution

Contribution Change

Change in fall (%) 14th 17th 19th 28th May May May May (%) -7.9 -12.2 4.2 -4.9 25.9 16.1 32.7 19.8 (%) -6.1 -11.1 2.6 -4.4 in fall (%) 11.2 6.1 18.3 7.9

Thus Nifty even being a more diversified portfolio does not reflect the overall market movements accurately because of its bias for PSU Oil companies.

SENSEX on the other hand is said to reflect the overall market movements more accurately as it neatly avoids the sector bias and includes blue chip companies. 3. Index construction: Nifty is calculated on the "Full Market Capitalization" methodology. SENSEX is the only Broad market index in India that is constructed on the "Free-Float Market Cap methodology. This is the globally accepted methodology that is followed by most of the leading index providers. SENSEX was initially calculated based on the "full market capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float market capitalization" methodology of index construction is regarded as an industry best practice globally. Merits of the free-float methodology: A free float index reflects the market trends more rationally as it takes into consideration only those shares that are available for trading in the market. Free float methodology makes the index more broad based by reducing the concentration of top few companies in index.

Free float index aids both active and passive investing styles. It aids active managers by enabling them to benchmark their fund returns vis--vis an investable index. Being a perfectly replicable portfolio of stocks, a free float adjusted index is best suited for the passive managers as it enables them to track the index with the least tracking error. Free float methodology improves index flexibility in terms of including any stock from the universe of listed stocks. This improves the market coverage and sector coverage of the index. For example, under a full market capitalization methodology, companies with large market capitalization and low free float cannot generally be included in the index because they tend to distort the index by having an undue influence on the index movement. However, under the free float methodology, since only the free float market capitalization of each company is considered for index calculation, it becomes possible to include such closely held companies in the index while at the same time preventing their undue influence on the index movement. SENSEX being the only broad based index in India that is "free float market capitalization weighted", it reflects the market trends more rationally and takes into consideration only those shares that ar available for trading in the market. 4. Industry representation The index should be fairly representative of the entire market. All or at least most sectors should be represented in the index in the same weight as they are in the market cap of entire market. SECTOR Oil & Gas IT Finance FMCG Transport Equipment SENSEX 19.5 14.9 18.6 10.8 8.6 Nifty 29.2 13.4 12.6 8.9 7.6

The analysis of above table shows interesting results: The largest sector in SENSEX, Oil & Gas, represents 19.5% of the index. The largest sector represented in Nifty is Oil & Gas which covers nearly 29.2% of index. ONGC alone accounts for 50% of this weight, as ONGC enjoys a weight of around 14% in Nifty. It is interesting to note here that in the investable universe of listed stocks, the Oil & Gas sector enjoys a weight of around 17%, which is reasonably reflected by SENSEX. It may not be inaccurate to state that the Nifty is skewed towards the Oil & Gas sector and more specifically to ONGC Ltd., which had already made the Nifty dance to its tunes in the month of May 2004.

SENSEX on the other hand, neatly avoids sector bias and includes blue chip companies. The wide and balanced industry representation in the SENSEX thus makes it the ideal benchmark for fund managers to compare the performance of their fund.

5. Volatility

Volatility is a measure of deviation of current price of an asset from its average past prices. Greater this deviation, greater is the volatility. Since volatility is a standard measure of financial vulnerability, it plays a key role in assessing the risk & return trade-offs. Comparative Volatility (1 std.dev.) :

3 Months 6 Months SENSEX 1.66 1.48 Nifty 1.78 1.56 for all the calculated periods

The volatility of SENSEX is lower as 1 Year 1.35 compared to the volatility of Nifty 1.43 of 3 months, six months and one year.

Anticipated Volatility in Future :

The volatility has been worked out by assuming the current index composition of the SENSEX and the Nifty from the period Apr 03 to Mar 04. Index SENSEX Nifty 3 Months 6 Months 9 Months 1 Year 1.69 1.51 1.48 1.4 1.95 1.67 1.65 1.53

The anticipated volatility of SENSEX as compared to Nifty is also lower for all the calculated periods. Intra-day Volatility : Intra day volatility nowadays has assumed considerable significance because of its influence on the decision of the market participants and its impact on other instruments such as Derivatives. High- Low volatility is a measure of intra- day volatility.

High-Low Volatility : High -Low volatility conveys extreme movements and dispersion during the trade time. A very high High-Low volatility is likely to scare investors and lead sometimes to panic conditions in the market place.

FEATURES OF NSE

NSE is promoted by Financial Institutions, Mutual Funds, and financed on a self-sustaining basis through levy of membership fees.

It is the trading on medium sized securities of equity shares and debt instrument. NSE is making its debut with the debt market. The debt market predominately a market in Government Securities.

It is having full support from the National Clearing and settlement divisions, SHCIL and the Securities Facilities Support Corporation.

Better transparency system for the securities.

OTC EXCHANGE OF INDIA (OTCEI) The OTC Exchange of India (OTCEI) has been set up to provide a cost effective and convenient platform for raising finance from the capital market. It had started its operation in 1992. Its brings investor and promoters closer together.

FEATURES OF OTCEI

NATION WIDE LISTING: The OTEC network is spread allover India through members, dealers, and representative office counter.

SPONSORSHIP: The companies get seek listing on OTC have to approach on e of the members appointed by the OTC for acting as the sponsor to the issue. The sponsor appraises the project.

BOUGHT-OUT DEALS: Through the concept of bought out deals, OTC allows companies to place its equity meant to the offered to the public with the sponsors member at a mutually agreed upon price.

LIQUIDITY THROUGH MARKET MAKING: the sponsor member is required to give twoway quotes for the scrip for 18 months from the date of commencement of trading. The market makers continually analyses companies and provide information about them to their investors.

RINGLESS AND SCREEN BASED TRADING: The OTC Exchange has introduced automated, screen based trading. The network of on line computers provides all relevant information on the computers screens of the market participants.

TRANSPARENCY OF TRANSACTION: At the OTC Exchange, the investor can see the available quotations on the computer screen at the dealers office before placing the order. By this investors interest is totally safeguarded and transaction is done at the best prevailing prices.

FASTER DELIVERY AND PAYMENT: On the OTC Exchange, the transaction is settled within an incredibly short span of 7 days.

TECHNOLOGY: The OTC Exchange uses computers and telecommunications technologies to bring members/ dealers to trade with one another over computers.

ELIGIBILITY CRITERIA FOR LISTING IN OTCEI- The issued equity capital of the

company should be between Rs 30 lakhs and Rs 25 crores. The company should make a minimum public offer of Rs 20 lakhs or 25% of its capital whichever is higher. The company should not be listed in any other stock exchange in India.

NATURE OF TRANSACTIONS IN STOCK MARKETS

TRANSACTIONS IN CASH MARKET- The transactions entered into in the cash segment are peculiar form of forward trading, as these are not settled immediately on the same day. These transactions are usually called hand delivery contracts i.e. for and payment within the time or on the date stipulated when entering into contract which time or date shall not be more than 14 days following the date of the contracts. CARRY FORWARD TRANSACTION- These transactions are popularly known as forward trading which were prohibited by the SEBI in the year 2001. READY FORWARD TRANSACTIONS- A ready forward transaction, usually known as repo, allows a holder of securities to sell with a commitment to repurchase them at a predetermined price and date. --There must be a sale or purchase with the commitment to repurchase or resell in future. --The contract must be between two parties. --It must be in respect of some kind of securities, and for the same quantum of securities. --It must be entered into on the same day and the price of resale or repurchase would be fixed at the stage of first leg itself. FORWARD TRADINGForward trading is simply an arrangement between two parties to buy or sell a certain quantity of securities at a certain future time for a certain price. The

contract is settled at maturity when the sellers delivers the securities to the buyer in return for the consideration for settlement at a further future time. MARGIN TRADINGMargin trading is purchasing securities by borrowing a position of the transaction value and using the securities in the portfolio. It increases the purchasing power of the investors. This would lead o leveraging and expansion of portfolio.

SCRIPLESS TRADING

Scripless trading is a method of securities trading in which the settlement of transaction takes place via book entry instead of physical exchange and delivery of securities certificate. The major objective of introducing scripless trading is to ensure the safety of securities certificates and to improve the liquidity position of the stock markets both in primary and secondary markets. The major advantages of this are as follows: Reduction in paper work of stockbroker and stock exchanges. Ensure the safety of certificates from theft, fake, certificates, mutilation, department etc. Greater speed in exchange and delivery of securities certificates. Improves liquidity of both the individual scrips and stock market position. Reduction in cumbersome share transfer procedures.

HISTORY & ORGANISATIONAL STURTURE OF SHAREKHAN LIMITED.

INTRODUCTION OF COMPANY

Sharekhan is Indias leading retail financial services company, which has over 250 share shops across 115 cities in India. While our size and strong balance sheet allows us to provide various products and services at very attractive prices. Our over 750-client relationship managers are dedicated to service your unique needs.

Sharekhan is lead by a highly regarded management team that has invested crores of rupees into a world-class infrastructure that provides our clients with real time services and 24/7 across to tell information and product. Our flagship Share Khan professional network offers real time prices, detailed data and news, intelligent analytics and electronic trading capabilities right at your fingertips. This powerful technology complemented by our knowledgeable and our customer focused relationship managers. we creating a world of smart investor.

Sharekhan offers a full range of financial services and products ranging from equites to derivatives enhance and hence, achieve your financial goals.

Sharekhan client relationship managers are available to help with your financial planning and investment needs. To provide the highest possible quality of services, Sharekhan provides full access to all our products and services through multi channels.

PURPOSE FOR INVESTING

We want to invest in order to create wealth. While investing is relatively painless, it rewards are plentiful. The value of rupees decrease every year due to inflation. So we need invest to create wealth.

The Various Investment Options :

Option Stock market Bank Fixed Deposit Gold During this time inflation grew at -

Return on Investment 17% pa. 9% pa. 5.7% pa.

7.1% pa

One can invest in various financial instrument like equities, bank fired deposits National Saving Certificates etc. as well as in gold. Out of there shares give best return on investment.

Why Shares are the Best Option

Shares are the best investment option for individual investors due to the following benefits :-

Possibility of high return Easy liquidity Unbeatable tar benefit Income from dividend.

High return :- Shares have given returns of about 17% in a year (1980-2005) in comparison of

other option.

Easy liquidity :- Shares can also be mode liquid any time from any where

and the investment can be realized in just two working day.

Tax advantage :- The dividend income from shares in tax free. Dividend Income:- Investment in shares are attractive as much for the appreciation in the share

prices as the dividends their companies pay out.

Considering the return, the tax advantages and highly option to create wealth.

The list of services offered by the Group includes the entire spectrum of financial services covering everything from: Equities Commodities Derivatives Portfolios management Mutual funds

ROLE OF SHAREKHAN IN INVESTORS IN EDUCATION & GUIDANCE

To provide education and guidance to the investors, SHAREKHAN cell has been made

Personal Counseling

A personal counseling, analysis and research cell has been established by SHAREKHAN at all its offices which provides information about the queries of investors. During the period of research, the investors and other persons in general asked following questions and the replies made by SHAREKHAN to them has been compiled as follows-

Q.1 What are stocks and securities? Ans - Stocks or Securities are generic in terms that stand for instruments of ownership like shares, as well as instruments of lending like debentures, which are issued publicly. Just as a share represents the smallest unit of ownership, a debenture or a bond represents the smallest unit of lending. Shares and debentures may be of various kinds.

Q.2 What is an ordinary share? Ans. -An ordinary share represents the form of fractional ownership in which a shareholder (one who holds ordinary shares), as a fractional owner, undertakes maximum entrepreneurial risk associated with a business venture. This risk has several dimensions. During the life of a business, in general, an ordinary shareholder receives dividends out of operating surplus. This surplus is the residual from the revenue, after subtracting all the operating expenses, the interest charges on all kinds of borrowings, various taxes, and dividends due to the non-ordinary shareholders. Now, various economic factors, government policies, market conditions, the labour situation, managements efficiency, etc may affect revenues, expenses, interest, taxes,etc. in such way that in any given period, there may or may not be adequate surplus left for ordinary shareholders.

Again, even when a business is at the verge of closing, all other stakeholders, such as employees, creditors, lenders, government, preference shareholders, etc must be paid their claims first and only the residual can be shared by the ordinary shareholders. Then, for various reasons, there may or may not be enough residual left for the ordinary shareholders to get their investment back. Thus, both during the life and death of a business, the ordinary shareholders are the last to receive their claims. In this sense, ordinary shareholders are exposed to the highest risk amongst all the stakeholders in a business. If they are lucky and times are good, a big surplus may be left for them; if not, they may suffer a loss. It is this possibility of variation in their earnings, which constitutes the entrepreneurial risk. And since the ordinary shareholders undertake this risk, they reasonably look forward to being compensated for this risk in the long run through higher earnings. Also, in view of the entrepreneurial risk assumed by them, ordinary shareholders have a voting right in the proportion to the number of shares held by them. They may exercise this right to shape the affairs of the company in a suitable manner. The vote is usually exercised on resolutions placed before the company, in there Annual General Meeting or Extraordinary General Meetings.

Q3. What does the issue of shares at a par and at a premium mean? Ans. - in general, an ordinary share in India is said to have a par value of Rs.10, though some shares issued earlier still carry a par value of Rs.100. par value implies the value at which a share is originally recorded in the balance sheet as equity capital. Equity capital is the same as ordinary share capital. The SEBI guidelines for public issues by new companies established by individual promoters and entrepreneurs require all new companies to offer their shares to the public at par i.e. at Rs.10. However, a new company set up existing companies with a track record of a track record of at least five years of consistent profitability are allowed by the SEBI guidelines to issue shares at a premium.

It should be noted that when a company issues shares at a premium, it is able to raise the required amount of capital from the public by issuing a fewer number of shares. For eg. While a new company promoted by

first time entrepreneurs intending to raise say, Rs. 1 Crore, has to offer 10 lakh ordinary shares at Rs.10 each (at par) an existing company may raise the same amount by offering only 2.5 lakh shares at Rs.40 each. The latter is said to have issued its shares at a subscription price of Rs.40 (Rs.10 in the former case), at a premium of Rs.30 (being the excess of subscription price over par value). In such a situation in India, the companys books of account will show Rs.10 towards share capital account and Rs.30 towards share premium account.

In India, no company is allowed to issue shares at discount i.e. at a price below par. Again in India, once a company has issued the shares it cannot easily reduce its capital base i.e. buy-back or redeem its own share. This means that ordinary shares capital is more or less permanent source of capital, which normally a company is never under an obligation to return to the investors. This is because a shareholder who wishes to disinvest can always do so by selling the shares to other buyers in the secondary market. Also, in India a company receives no tax benefit for the dividend distributed. In other words, dividends are paid by the companies out of the earnings left after taxes and they get taxed once again at the hands of the investors.

A company cannot raise equity capital in excess of the limit authorized in its Memorandum of Association at any time, without undergoing certain legal Formalities. This limit is known as authorized capital. At any point of time, the actual amount of capital issued by a company may be only a part of the authorized capital, and is known as issued capital. Again, not the entire capital issued by a company is necessarily required to be fully paid up at any time. This is because a company may choose to ask for only a fraction of the value of the share initially, to call the balance in installments, called calls. For eg, a company may issue a Rs 10 share, and require the investors to pay up only Rs 5 initially. The remaining Rs 5 may be called in one or more calls. The amount of capital paid up at any point in time is known as the paid-up capital. Again, while an investor may apply for say 100 shares at a subscription price of Rs.20, fully paid-up. He may be allotted only, say, 10 shares by the company. The

application money of the investors on the 100 shares applied is Rs.2, 000(100*20). The company would refund the balance of Rs.1800 (Rs.2000-200) to the investor, since he is allotted shares only worth Rs200 (10*20)

Q4-Why should a company try to price its public issue of shares as high as possible? Ans - In fact, any company trying to price its public issue higher than its market price is being silly. For that matter any company trying to price any of its products higher than the market price is being silly. it should be obvious , that in such a case the investor will reject the offered share outright , unless the higher price is qualitatively justified or he is ill informed. True, there have been many instances following the free pricing policy where companies have priced their issues higher than the market price. But these are errors of judgments, which a company soon comes to learn and learns to correct. However, one important reason for the propensity of companies to price their shares unduly high may be attributed to their mistaken notion that the higher the price at which a company issues its shares, the lower its cost of capital.

Men, who should know better, for eg, our chief executives of companies and development banks, have frequently gone on records saying that under free pricing it is cheaper to raise equity than debt. Such statements are made on the argument that while a debenture issue involves a cost of around 18% to 19%, the cost of raising equity can be as low as 3%(for example, when a company paying 30% dividend on a share with a par value of Rs10 is issued at Rs 100, that is at or near the market price of the share.) According to this notion, the abolition Controller of Capital Issues has reduced the cost of raising capital significantly! Hence the abolition of CCI is considered welcome. This is one reason why some companies have issued shares at prices higher than their prevailing market prices! Let us see if this view is tenable.

Let us consider a situation where a share of par value of Rs 10 has been issued at Rs 100. If the company has been paying a dividend of Rs 3 per share, implying a 30% dividend, the dividend yield translates to a mere 3%. Is the cost of equity 3%? The answer is NO. The concept of cost of equity has to be understood properly. If the cost of equity is interpreted as 3%, this implies that the equity holders investing in the companys shares are prepared to accept a return of 3% on their investment! This is clearly absurd. If the debentures holders receive a return of 17% or 18%on their investment, clearly the shareholders must be expecting a higher return, to compensate for their higher level of risk on their investment. Let us say that the shareholders expect a return of 24% on their investment. However, they receive a dividend yield of mere 3%. So how do they receive their remaining 21% return? Obviously this must come in the form of capital appreciation on their share .In other words, If a rupees 100share were worth RS121at the end of a year after paying RS 3 as dividend, then together with the dividend, they earn a return of 24%. But then under what circumstance would a share worth RS 100 in the market appreciates to RS121 a year later , after paying a dividend of RS 3 ?Alternatively put , when will the value of a share appreciates forms RS 100 to RS 124 ? This would be the case only if the company has been able to earn a return of 24%on the original investment of RS100 . Thus, in an on going system , If the share holder continues to receive a 3% yield as dividend , he must continue to receive a capital appreciations of 21%annually to earn an over all expected return of 24%.This would be feasible only if the company continued to earn a minimum return of 24%on shareholders funds . thus the cost of equity in this case is said to be 24%which is the expected return of the shareholder . And the expected return of the shareholders is quite independent of the price at which a company may make its public issue !

What happens, if a company raises capital from the public at RS100 per share and deploys the capital in operations earning a returns of 24%? The situation implies that the company earns a stream of only RS 15

per share . This stream of earning per share capitalized at RS 24%implies a market value per share of only RS 62.50 .In other words , an investors who wants 24 % of return from his investment in this companys share will be prepared to pay only Rs 62.50 for the share , since the company earns a stream of only Rs 15 pre share . Thus if a share holder who desire a return of 24% on his investment subscribes to share at Rs 100 unit a company which earns a return of mere 15% on the investment , he will find the value of share droppings to about Rs 62.50 so that he would have suffered a major loss on his investment.

Clearly then, in above situation, no matter at what price the public issue is made, the cost of capital , that is the return the company is oblized to earn on its investments remains 24%. It is just that when an issue is made below the

market price of a share, there is transfer of wealth from the existing of shareholder to new shareholder. But there is no change in the cost of capital. It is in the interest of the companies not to price their issues too high and thereby risk erosion of investors confidence should the price of the share fall steeply later. After all a company is a going conern which needs to some back to the capital market again and again. Irrespective of how a company prices its issue, an investor must be develop the ability to assess the reasonableness of the price for himself. More of this question 57 onwards.

Q5-What are the other kinds of shares? AnsThere are two types of shares,namely preference shares and saving shares. Prference share: the most characteristic features of a preference share is that both in the payment of dividends during the life of the business, and in sharing the residual on its termination, a preference shareholder gets a preference over the ordinary shareholder. Unless the preference over the ordinary

shareholder. Unless the preference

shareholder has received his piece of the pie, the ordinary

shareholdercannot hope to rceive his own piece. On account of this preference over the ordinary shareholder , the preference shareholder assumes lower risk than the former. It is , therefore,reasonable, that in the long run, the preference shareholder should normally expect to earn less than the ordinary shareholder. Usually, the rate of dividend for the preference shares is fixed at the time of issue. Alternatively, the preference shareholder may be guaranteed a minimum fixed dividend on the share with an additional variable component depending upon the extent of profits made in a given year. Also , preference shares may be cumulative or non-cumulative. In the case of a cumulative preference share, if the dividend in a particular year is skipped on account of paucity of profits, it is cumulatively made good in the following year or years, thereby providing such preference shareholders extra assurance on their dividend earnings. In the case of a non-cumulative preference share, on the other hand, there is no such provision. Thus, the former is less risky than the latter. Again , a preferenceshare may or may not have voting rigjts. Further, a preferance share may be irredeemable or redeemable . these means respectively that the preference share capital may either be permanent like the ordinary shares,or such shares may be repurchase by the companyby paying back the capital. However, in India, preference shares are not very popular and they are largely on their way out. Occasationally, an investor may also encounter such shares as convertible prefenence shares. These are preference shares which are converted into ordinary shares at some time in future at terms and conditions specified in advanced. Recently, many companies have issued cumulative convertible prefenence shares, often known as CCps. As the name implies, these are cumulative preference shares which are converted into ordinary shares at a suitable conversion price in due course. Savings Share A saving share is an ordinary share without voting rights. They are also known as nonvoting shares. In many countries, such shares co-exist with ordinary shares, and usually earn higher dividends than the latter as compensation for the loss of voting right. Similarly, there are other kninds of saving shares which may have much more than one right each. Golden share is an example. In Sweden, for example, there are shares with 1000 voting rights each, which enable the promoters to wield control over

their companies with relatively smaller financial stakes. We do not have savings shares in India at present, and nor is there a likelihood of their being introduced in the foreseeable future.

Q.6 What are partly paid-up shares? Ans -One may occasionally encounter partly paid up shares, so that such a share quotes differently from a fully paid up share. An ivestor should learn to distinguish a fully paid up share from a partly paid up shares. Often, a company issues a share against which the investor is not required to pay up the entire capital at the time of application, so that the shares remains a partly paid shares. A part, save 50%, may be paid up at the time of application while the remaining 50% may be called by the company in due course in one or more installment. When a company makes a call on partly paid up shares, its specifies the date by which the call must be responded to. Depending upon this date, the stock exchange authorities specify the date out of which the shares not having paid up the call money will be deemed bad delivery. Thus, after this date all transactions in that share takes place only if the shares are paid up to the extent of the latest call.

Q 7. What exactly are debentures? How do debenture holders differ from shareholders? Ans -A debentures represents the smallest unit of public lending to a company. Like shares, they are also represented in the form of a certificate. The common face value for debenture in India is Rs 100, and they are always issued at par. unlike ordinary shareholders, a debenture holder assumes very little risk on his investment. Unlike the uncertain stream of dividends, which a shareholder receives, a debenture holder receives a fixed stream of interest. Payment of such interest is a legal obligation on the part of the company. Further, in general, a debenture is required to be secured against the assets of the part of the company. Thus, a debenture is also a form of a secured loan. Secured debenture impulses that should a company default in its obligations towards debentures holders in the repayment of their interest and principal, in law, the charged assets can be sold off for meeting such obligations. Thus, debenture holders are investors who assume relatively little risk on their investment and accordingly the returns they can expect to earn are lower

than that of ordinary shareholders. Debenture holders, since they are lenders of capital and not owners, do not have voting rights, except under exceptional circumstances. Unlike dividend, interest on debentures is deductible from the corporate profits. This means that interest payments are made from the pretax operating profits of a company.

Q8. What are the different kinds of debentures in the corporate sector? Ans - Debentures are essentially of three kinds, fully convertible (FCD), partly convertible (PCD) and nonconvertible (NCD). Fully Convertible debentures (FCD). A fully convertible debenture is a debenture which, at a specified time after the issue, is fully converted to equity at the option of the holder. Partly Convertible Debenture (PCD) As the name suggests, a partly convertible debenture is a debenture only a part of which is convertible into an ordinary share. For example, a debenture priced at rs 100 may have two components, namely, a convertible component (A) and a non-convertible component (B) priced at RS 30 and RS 70 respectively. Here only component A priced at RS 30 is convertible into an ordinary share, while the non-convertibles component B priced at RS 70 is allowed to remain intact. Non-convertible Debentures (NCDs) These debentures cannot be converted into ordinary shares. Frequently, these debentures may be redeemable with a small premium (usually 5% of the principal). They may also be irredeemable or perpetual. In India, the interest rate on non-convertible debentures paid by the companies is usually 2 to 2.5% higher than that for convertible debentures. Under the SEBI guidelines, conversion must take place at or after 18 months at the option of the debenture holder. The guidelines also require that all debentures with conversion or maturity over 18 months be credit rated and that the premium amount at the time of conversion, the period of conversion, the redemption amount, period of maturity and yield on redemption be indicated in the prospectus. Ordinarily, a convertible debenture is converted into the shares of the company issuing the debenture. However, in principle, there is no reason why the debentures of a company cannot be converted into the

shares of another company. In many countries, such a practice does exist. Such innovations are bound to enter our own market before long.

Q9. What is a bonus issue? Ans - When we invest the share capital in a business, we do so with the expectation of getting back not only our invested capital, but also a proportionate share of the surplus generated from operations, after all the other stakeholders have been paid their dues. Thus, collectively the business owes its shareholders, their invested capital as well as the surplus generated from operations. But in reality, while the business may pay us annual dividends, seldom is this surplus fully distributed away as dividends. Thus, the surplus, which is retained in the business, is still owed to us. This retained surplus is also reflected as retained earnings or reserves in the balance sheet of a company. Together, share capital and reserves are known as equity or the net worth of a company. Over a period of time, the retained earnings of a firm can become quite large; often several times the original share capital. And when this happens, the management of the firm may decide to transfer some amount from the reserves account to the share capital account by a mere book entry. This has the effect of decreasing or debiting the reserves in the balance sheet of the firm and increasing or crediting the share capital (and hence the number of shares outstanding). In such a case, the firm is said to have made a bonus issue.

Q10. What is the benefit of a bonus issue to a shareholder?

Ans - in order to answer this, let us assume that a company makes a 1:2 bonus issue. In other words, for every two shares held, the shareholder receives one additional share. For eg. , if this companys original share capital was Rs 10 crore (with 1 crore shares of a par value Rs 10 outstanding), the bonus issue has the effect of increasing the share capital to Rs 15 crore (implying 1.5 crore shares of Rs 10 each) , so that reserves go down accordingly by Rs 5 crore.

Thus, the shareholder of the firm who previously held two shares is now in possession of three shares, i.e. one extra share. Henceforth, the shareholders would begin to receive dividends on three shares, for every two shares held by them earlier. The company could have achieved the same effect by increasing its dividend payments by 50% on the earlier two shares, without making the bonus issue.

Since a bonus issue implies no real change in the fortunes of the business, the ex- bonus price (the market price after the bonus issue) of the three shares including the bonus share, will be equal to the cum-bonus price (the price before the bonus issue) of the original two shares. Hence, following this bonus issue, the market price per share must fall by 33.33%(assuming that everything else remains unchanged). In other words, now the market price of the ex-bonus share will be only two thirds of the price of the cum-bonus share.

The bonus issue enthusiasts may argue that this fall in market price is likely to be much less than 33.33%, so that the ex-bonus value of the three shares would be greater than the cum- bonus value of the two shares, implying an increase in the wealth position of the shareholders as a consequence of the bonus issue. If this were indeed so, it would imply creation of wealth through book entry, for a bonus issue is nothing but just that! In a logical world, there is no reason to believe that the shareholders would not have achieved the same increase in wealth if the company had decided to merely enhance the dividend by 50%, rather than issue a bonus of 1:2 (assuming that the company maintained its DPS following the bonus issue). Thus, strictly

speaking, bonus issue implies absolutely no change in the fortunes of either the issuing company or its shareholders.

Q 11.What is a right issue? Ans - Whenever an existing company makes a fresh issue of equity capital or convertible debenture holders have the first right to subscribe to the issue in proportion to their existing holdings. Only what is not subscribed to by the existing shareholders can be issued to the public. Thus, an issue offered to the existing shareholders or convertible debenture holders as their right is known as rights issue, as opposed to an issue open to the public at large, in which case we call it a public issue. An investor may exercise this right to subscribe to the offered issue, or he may sell the rights separately in the market. The rights have a market value only when the issue is made below the market value of the security. When this happens, as can be expected, the market price drops a little. The price of the security before the rights issue is known as the cum-rights price, and the price after the rights issue is known as the ex-rights price. The difference between the cum-rights and ex-rights price is a measure of the market value of a right, through increase in share prices.

Q12.Is the price at which the rights are issued important? Ans - The price at which at rights issue is made irrelevant. In order to understand this, consider the example of a company, which has 100000 ordinary shares outstanding with a market price of Rs 40 per share. This is the cum-rights price. The total market value of the shares at this stage is Rs 4000000(Rs 40*100000). Let us assume that this company needs to raise another Rs 500000 for sustaining its operations and so makes a rights issue of 25000 shares, i.e. at a ratio of 1:4 at Rs 20 each. Thus, after the rights issue is made, the number of shares outstanding increases to 125000. Assuming that the purpose for which the additional

capital is being raised is not likely to affect the overall profits of the company significantly, the ex-rights price of the share should drop to about Rs 36(Rs{4000000+500000}/125000). In this case, the value

of rights is Rs 4 and one requires four rights in order to procure one shares at Rs 20, and the ex-rights wealth of the shareholders works out to about Rs 4500000(Rs 36*125000). If on the other hand the company were to decide to raise the additional Rs 500,000 by issuing 12,500 shares at Rs 40 each, the ex-rights price of the share would remain unchanged at Rs 40 (4500,000/112,500). Also, one who buys for rights for Rs 16, and acquires one share at the issue price of Rs 20, eventually ends up paying Rs 36, which is the same as the exrights wealth of the shareholders is about Rs 4,500,000(Rs 40 * 112,500). Thus, it can be seen that no matter at what price the rights issue is made, the ex-rights wealth of the shareholders subscribing to the rights issue remains more or less the same. A public issue made below the market price, resulted in a transfer of wealth from the existing shareholders to the new shareholders. Needless to say no issue whether rights or public will be subscribed by the rational investor at a price higher then the prevailing market price, as the investor can always buy that share from the secondary market rather than subscribes to the issue.

Q14. How are securities traded in the stock exchanges? Ans - Securities are traded in three different ways in stock exchanges in India: on spot basis, cash basis and settlement basis. Only a few select frequently traded ordinary shares are eligible for being traded on the settlement basis. These are known as specified shares or share on specified list or category A shares. In December 1994, there were only about 90 securities on the specified list in the Bombay Stock Exchange. All the other ordinary shares, preference shares, debentures, and government securities have to be traded on cash basis. The ordinary shares, which cannot be traded on settlement basis, are known as non-specified shares or category B shares. Category B shares are also said to be on the cash list and are known as cash securities. If we look at a financial daily, we would see the prices of these two categories of shares listed separately. Occasionally, for reasons, which will be described later, shares may be moved from the specified

list to the cash list and vice versa within a stock exchange. Also, a security may be on specified list in one stock exchange and on cash list in another. However, all the securities may be traded on spot or cash basis as well.

Q15. What is a share price index? Ans - A share price index depicts the relative movement of the market prices as a whole over a period of time. For e.g. if the shares price index today is 2000, with the average share price in 1984 85 taken as 100, it means that on an average, share prices in the market have gone up about 24 times since 1984-85. The year for which the average price is assumed to be 100 (in this case, 1984-85) is known as the base year. One must be careful about the base year,

since it is usually changed every few years. When this happens, the indices before and after the introduction of the new base year cannot be compared directly.

Most well known financial dailies publish their own as well as the BSE Sensitive and National Share Price Index every day. Most of them include a large number of shares from a large number of stock exchanges and weigh them with the value of shares traded in arriving at the indices. The number of stock exchanges and weighs them with the value of shares traded in arriving at the indices. The number of shares entering the computation of the BSE Sensex and National indices are 30 and 100 shares respectively. Notwithstanding the difference in the number of securities entering the computation of the two indices, they move very close in relation to each other. This is because both the indices are quite well diversified and beyond 15 or 20 securities, the benefits of diversification are very marginal.

Q16. How does the market price the shares?Ans - It is difficult to say exactly what processes the market goes through in pricing the shares, especially as the market is really a compound entity comprising millions of investors.

However, there is a widely held belief in the realm of finance that the fundamental value of the share, that is, the price the investors are prepared to pay for the share of a firm is equal to the present value of the future benefits which they expect the share to yield in the form of dividends, at a rate which they expect on the

equity of the firm. If the prevailing price of a share is below its fundamental value, the shareholder considers it a good buy; if it is below the fundamental value, it is time to sell the share. The procedure dealing with the estimation of this fundamental value of a share is known as the fundamental analysis.

Q.18 What are financial options? Ans. - Financial options provide a right to buy or sell a specified numbers of shares at a specified price time in future. By locking in the future buying or selling price, options provide the investors an opportunity to insure the risk arising from price fluctuations for a premium. You buy an option that gives u a right to sell 5000 shares at Rs 100 each six months later. Naturally you pay a price for this option. Let us assume that the option costs you Rs 15000. Now, if six months later, the market price of the share is above of Rs 100, you will decide not to exercise the option of selling the 5000 shares at Rs 100 each, sine you can then sell these shares in the market for a higher price. If on the other hand six months later the price falls to, say, Rs 80, you exercise your option to sell the shares for Rs 100, thereby avoiding the possible loss of Rs 100,000, which you would have suffered if you had not, purchased the option. Thus, for a premium of Rs 15,000 you effectively insured yourself against all possible losses. In this case you had bought yourself a put option, which is an option to sell a certain security at the specific price on a specific date. Similarly, a call option is an option to buy a certain security at a specific price on specific date. Consider again the situation in the previous question involving the investment of 2000 shares at Rs 100 six moths later. Futures had enabled you to hedge yourself again the possibility of a price hike. However you were exposed to the risk of not being able to take advantage of fall in price. You could have done so by purchasing a call option, to say, buy 2000 shares at Rs 100 at a premium of say, Rs 5000. If the price of the shares six months later was higher than Rs 100, you could exercise the option .If however, it was lower than Rs 100, and you would not exercise the option and invest at the lower prevailing price. Thus you would have covered your risk in either direction.

An option is called a European option if it is to be exercise on a specific date and an American option if it can be exercised over a period of time. As of now, we do not have a formal options market in India. As we said earlier, a futures and options exchange is under active contemplation. However there has been a fairly active options market in the unorganized sector in stock exchanges which speculators have access to. In the local parlance the market in known as Teji-Mandi. For instance, that there is a thriving Insurance business in Bombay against ticket less traveling in the suburban trains? You pay a premium to these insurer and if the ticket examiner challenges you. You merely produce this challan before the insurers for a full refund! Incidentally, it can be seen that both convertible debentures as well as share warrants have a lot in common with call-options. This is because, in general, a convertible debenture is nothing but an option to purchase a given number of shares in exchange for the value of the debenture. Notice, however, that even though a convertible debenture has similarities to a call option, unlike an option, it has independent existence of its own and is useful in mobilizing funds in the primary market. Similarly, a share warrant also involves an option of purchasing or given number of equity shares by paying a predetermined exercise price. Thus, convertible debenture or warrant are also essentially derivatives scurrilities whos pricing depend upon their underline shares.

Q20.Can you elaborate SEBIs overall role in the securities market? Ans. - Securities Exchange Board Of India (SEBI) is the national regulatory body for the securities market, set up under the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market and for matters connected therewith or incidental to. Well, thats a board canvas and SEBI has just about picked up the brush! But then, a beginning has been made. SEBI has its head office in Bombay and it is in the process of setting up regional offices in the metropolitan cities of Calcutta, Chennai, and Delhi. The Board of SEBI comprises a Chairman, two members from the

Central Government representing the Ministries of Finance and Law, one member from the Reserve Bank of India and two other members appointed by the Central Government. As per the SEBI ACT, 1992, the powers and functions of the Board encompass thr regulation of stock exchanges and other securities markets; registration and regulation of the working of stock brokers, sub brokers, bankers to an issue , trustees of trust deeds, registrars to an issue, merchant bankers, underwriters, portfolio managers, investment advisors and such other intermediaries who may be associated with a stock market in anyway; registration and regulation of mutual funds; promotion and regulation of self regulatory organizations; prohibiting fraudulent and unfair trade practices and insider trading in securities market; regulating substantial acquisition of shares and takeovers of the company; calling for information from, undertaking inspection, conducting inquiries and audits of stock exchanges, intermediaries and self regulatory organizations of the securities market; performing such functions and exercising such powers as contained in the provisions of the Capital Issue (control) Act, 1947 and the Securities Contract (regulation) Act, 1956, levying various fees and other charges, conducting necessary research for above purposes and performing such other functions as our be prescribed from time to time.

Findings :

By data collection and found that where the secuerty stand in stock market.

1. Research basis advice : - Sharekhan gives advice that which types of shave should buy or sell and this advice is base on research not any assumption. 2. Multi channel access :- Sharekhan is a stock agent where all types of product under one roof. 3. Higher Brokerage :- Sharekhan brokerage is higher than other competitors. (a) 0.4% For delivary Based Transaction (b) 0.03% For intra day transaction 4. Client Services :- There are average client service, because most of customers unaware about sharekhan and it, products and services so they go for any securities. 5. Consumer awareness :- Most of customer are unaware about sharekhan because in jodhpur its office is not attract the customer. There is not marketing of Employees. 6. Customer interactiong :- There is nothing interaction with new customer. Employees dose not understand the customer and they do not give support to customer.

SuggestionsFor ShareKhan :

1. Imprave client service :- Sharekhan should improve its client service and should give response to its customer. So that customer could satisfied their services. 2. Trained Employee :- Sharekhan have need some trained employee to improve its atmosphere. Trained employee also satisfied the customer and capable to telling them facalities and services. 3. Wide network :- Sharekhan should explore the network or office so that customers will aware about sharekhau. 4. Decrease the Brokerage :- Sharekhan should be decreases its brokerage. Because most of customers look at the brokerage and go to the ther securities. 5. Uses the marketing sources :- It is unknown for most of person that what is sharekhan. So marketing sources like advertisement, holding and sources are necessary for the share khan. Because today is time of marketing.

Conclusion

Sharekhan is the retail arm of SSKT with mote than 8 decades of trust and credibility in stock market.

Its research based advice is important for customer. This research based advice give the place in stock market to sharekhan.

Its multi channel access, effective online trading are attract to customers.

Its Brokerage is too high but customer attract with this stock broking agent. If in future it decreases its brokerage than the number of customers will increases.

Its client service is average if it will improve its client service than it will be no. WE stock broking agent in future.

BIBLOGRAPHY

Stock Exchanges and Investments V Raghunathan Tata Mcgraw-Hill Publishing Company Ltd. Financial Management Ravi M. Kishore Taxmanns Financial Management WE M Pandey Vikas Publishing House Websites : www.sharkhan.com www.bseindia.com www.nseindia.com www.sebi.gov.in www.nsdl.com www.cdsl.com