Strategic Analyisis On Capital Market (NIMS11)

WHY INVEST ?
If you were to open a book on economics and look up the word “investing”, chances are
that you would find the following definition: “Investing is building up to meet future
consumption demands with the intention of making surpluses or profits, as they are
popularly known.”
And after reading it, the last trace of your eagerness to invest is likely to evaporate.
But investing is essential. Here is why…
While the life expectancy of the average human being has increased, we are productive
only between the ages of 30 and 60 years. Hence the short time span that we are able to
earn money needs to provide for our future when we may not be capable of earning.
Everything being the same, we could keep away a part of our earnings every year (save)
that will come in handy when we will not be able to earn. However inflation destroys the
value of what we save. A sum of Rs10,000 saved this year will not have the same
purchasing power ten years down the line. Hence we need to preserve the purchasing
power of what we save.
The only way to hedge inflation is to invest in shares, debentures, bonds, gold or real
estate, to earn returns from these assets that compensate for the decline in our purchasing
power.
SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 1

WHAT IS A SHARE ?
“Share” or “Equity” represents part of an ownership of a business. So as a shareholder

you own a piece of the action that happens in that business. Why would you want a piece
of the action? For the rewards of course. As a shareholder you have a right over the
profits generated by your business. Your company might pay out the profits generated
every year as dividends or it may retain the profits to further grow them.
There’s another way you as a shareholder can make money. If your company does well,
then its shares listed on the stock market become more valuable and the stock price
appreciates. On the other hand, the company might perform badly. Then not only do you
not get dividends but the stock price also declines. Hence investing in shares is a risky
proposition.
When you invest in shares, you can expect certain returns based on the fundamentals of a
business. However you have no control over it. What you have control over is managing
risks associated with it.

INDUSTRY OVERVIEW
INTRODUCTION
Stock exchanges to some extent play an important role as indicators, reflecting the
performance of the country’s economic state of health. Stock market is a place where
securities are bought and sold. It is exposed to a high degree of volatility, prices fluctuate
within minutes and are determined by the demand and supply of stocks at a given time.
Stock brokers are the ones who buys and sells securities on behalf of individuals and
institutions for some commission.
The Securities and Exchange Board of India (SEBI) is the authorized body, which
regulates the operations of stock exchanges, banks and other financial institutions. The
past performances in the capital markets especially the securities scam by Hasrshad
Mehta has led to tightening of the operations by SEBI. In addition the international
trading and investment exposure has made it imperative to better operational efficiency.
With the view to improve, discipline and bring greater transparency in this sector,
constant efforts are being made and to a certain extent improvements have been made.

HISTORY OF THE STOCK BROKING INDUSTRY
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took place
in Bombay. Though the trading list was broader in 1839, there were only half a dozen
brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed
a rapid development of commercial enterprise and brokerage business attracted many
men into the field and by 1860 the number of brokers increased into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a
disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850
could only be sold at Rs. 87). At the end of the American Civil War, the brokers who
thrived out of Civil War in 1874, found a place in a street (now appropriately called as
Dalal Street) where they would conveniently assemble and transact business.
In 1887, they formally established in Bombay, the "Native Share and Stock Brokers'
Association" (which is alternatively known as "The Stock Exchange"). In 1895, the Stock
Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the
Stock Exchange at Bombay was consolidated.
Thus in the same way, gradually with the passage of time number of exchanges were
increased and at currently it reached to the figure of 24 stock exchanges.

DEVELOPMENT
An important early event in the development of the stock market in India was the
formation of the Native Share and Stock Brokers’ Association at Bombay in 1875, the
precursor of the present-day Bombay Stock Exchange. This was followed by the
formation of associations /exchanges in Ahmedabad (1894), Calcutta (1908), and Madras
(1937). IN addition, a large number of ephemeral exchanges emerged mainly in buoyant
periods to recede into oblivion during depressing times subsequently.
In order to check such aberrations and promote a more orderly development of the stock
market, the central government introduced a legislation called the Securities Contracts
(Regulation) Act, 1956. Under this legislation, it is mandatory on the part of a stock
exchanges to seek government recognition. As of January 2002 there were 23 stock
exchanges recognized by the central Government. They are located at Ahemdabad,
Bangalore, Baroda, Bhubaneshwar, Calcutta, Chenni,(the Madras stock Exchanges ),
Cochin, Coimbatore, Delhi, Guwahati, Hyderbad, Indore, Jaipur, Kanpur, Ludhiana,
Mangalore, Mumbai(the National Stock Exchange or NSE), Mumbai (The Stock
Exchange), papularly called the Bombay Stock Exchange, Mumbai (OTC Exchange of
India), Mumbai (The Inter-connected Stock Exchange of India), Patna, Pune, and Rajkot.
Of course, the principle bourses are the National Stock Exchange and The Bombay Stock
Exchange , accounting for the bulk of the business done on the Indian stock market.
While the recognized stock exchanges have been accorded a privileged position, they are
subject to governmental supervision and control. The rules of a recognized stock
exchanges relating to the managerial powers of the governing body, admission,
suspension, expulsion, and re-admission of its members, appointment of authorized
representatives and clerks, so on and so forth have to be approved by the government.
These rules can be amended, varied or rescinded only with the prior approval of the
government. The Securities Contracts (Regulation) Act vests the government with the
power to make enquiries into the affairs of a recognized stock exchange and its business,
withdraw the recognition the task of regulating the stock exchange to the Securities
Exchanges Board of India.

BSE (THE STOCK EXCHANGE OF MUMBAI)
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as
"The Native Share and Stock Brokers Association". It is the oldest one in Asia, even
older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary
non-profit making Association of Persons (AOP) and is currently engaged in the process
of converting itself into demutualised and corporate entity. It has evolved over the years
into its present status as the premier Stock Exchange in the country. It is the first Stock
Exchange in the Country to have obtained permanent recognition in 1956 from the Govt.
of India under the Securities Contracts (Regulation) Act, 1956.
The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures redressal
of their grievances whether against the companies or its own member-brokers. It also
strives to educate and enlighten the investors by conducting investor education program
and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected
directors, who are from the broking community (one third of them retire ever year by
rotation), three SEBI nominees, six public representatives and an Executive Director &
Chief Executive Officer and a Chief Operating Officer.

NSE (NATIONAL STOCK EXCHANGE)
NSE was incorporated in 1992 and was given recognition as a stock exchange in April
1993. It started operations in June 1994, with trading on the Wholesale Debt Market
Segment. Subsequently it launched the Capital Market Segment in November 1994 as a
trading platform for equities and the Futures and Options Segment in June 2000 for
various derivative instruments.
NSE has been able to take the stock market to the doorsteps of the investors. The
technology has been harnessed to deliver the services to the investors across the country
at the cheapest possible cost. It provides a nation-wide, screen-based, automated trading
system, with a high degree of transparency and equal access to investors irrespective of
geographical location. The high level of information dissemination through on-line
system has helped in integrating retail investors on a nation-wide basis. The standards set
by the exchange in terms of market practices, Products , technology and service standards
have become industry benchmarks and are being replicated by other market participants.
Within a very short span of time, NSE has been able to achieve all the objectives for
which it was set up. It has been playing a leading role as a change agent in transforming
the Indian Capital Markets to its present form. The Indian Capital Markets are a far cry
from what they used to be a decade ago in terms of market practices, infrastructure,
technology, risk management, clearing and settlement and investor service.

HISTORICAL INDEX CHART
The chart shows the data related to NIFTY Ups and Downs from January 1994 to March
2006.

NCDEX (NATIONAL COMMODITIES AND DERIVATIVES
EXCHANGE)
NCDEX started working on 15th December, 2003. This exchange provides facilities to
their trading and clearing member at different 130 centers for contract.
In commodity market the main participants are speculators, hedgers and arbitrageurs.
Promoters of NCDEX are
 National Stock Exchange(NSE)
 ICICI bank
 Life Insurance Corporation(LIC)
 National Bank for Agricultural and Rural Development (NABARD)
 IFFICO
 Punjab National Bank (PNB)
 CRISIL
WHY NCDEX?
 NCDEX is nationalized screen based system which is providing transparent,

private and easy services.
 NCDEX is one of the traditional media which gives online information
 NCDEX is one of the Indian commodity exchange, constructed on the basis of the
current national institutes the exchange has been established with the coloration of
leading institutes like NABARD, LIC, NSI etc….
 In India NCDEX has maximum settlement guarantee fund.
 NCDEX has appointed two exports for checking quality at the time of delivery

FACILITIES PROVIDED BY NCDEX
 NCDEX has developed facility for checking of commodity and also provides a
wear house facility
 By collaborating with industrial partners, industrial companies, news agencies,
banks and developers of kiosk network NCDEX is able to provide current rates
and contracts rate.
 To prepare guidelines related to special products of securitization NCDEX works
with bank.
 To avail farmers from risk of fluctuation in prices NCDEX provides special
services for agricultural.
 NCDEX is working with tax officer to make clear different types of sales and
service taxes.
 NCDEX is providing attractive products like “weather derivatives”

MCX (MULTI COMMODITY EXCHANGE)
MULTI COMMODITY EXCHANGE of India limited is a new order exchange with a

mandate for setting up a nationwide, online multi-commodity marketplace, offering
unlimited growth opportunities to commodities market participants. As a true neutral
market, MCX has taken several initiatives for users
In a new generation commodities futures market in the process, become the country’s
premier exchange.
MCX, an independent and a de-mutualized exchange since inception, is all set up to

introduce a state of the art, online digital exchange for commodities futures trading in the
country and has accordingly initiated several steps to translate this vision into reality.
MARKET WATCH:
The market watch window is used to view the market details for a particular or group of
contracts and for a particular instrument type. This window displays the following
details: Symbol,Expiry,price quotation unit, buy qty, buy price, sell price, sell qty, last
traded price,D.P.R,volume (in 000’s), value (in lac),% change,
average trade price, high, low, open, close & open interest.

TRANSACTION CYCLE
Decision to
Decision to Placing
Placing
trade
trade Order
Order
Funds or
Funds or
Securitie
Securitie Trade
ss
Transaction Trade
Execution
Execution
Cycle
Settlement
Settlement
of trades
of trades Clearing
Clearing
of Trades
of Trades
A person holding assets (Securities/Funds), either to meet his liquidity needs or to

reshuffle his holdings in response to changes in his perception about risk and return of the
assets, decides to buy or sell the securities. He selects a broker and instructs him to place
buy/sell order on an exchange. The order is converted to a trade as soon as it finds a
matching sell/buy order. At the end of the trade cycle, the trades are netted to determine
the obligations of the trading member’s securities/funds as per settlement cycle.
Buyer/seller delivers funds/ securities and receives securities/funds and acquires
ownership of the securities.
A securities transaction cycle is presented above. Just because of this Transaction cycle,
the whole business of Securities and Stock Broking has emerged. And as an extension of
stock broking, the business of Online Stock broking/ Online Trading/ E-Broking has
emerged.

MAJOR PLAYERS
1. S S KANTILAL ISHWARLAL SECURITIES PVT LTD. (www.sharekhan.com)

2. ICICI WEB TRADE LTD. (www.icicidirect.com)
3. 5 PAISA.COM (www.5paisa.com)
4. KOTAK SECURITIES LTD. (www.kotakstreet.com)
5. INDIABULLS (www.indiabulls.com)
6. MOTILAL OSWAL SECURITIES LTD.
7. HDFC SECURITIES LTD. (www.hdfcsec.com)
8. UTI SECURITIES LTD.
9. IDBI CAPITAL MARKET SERIVICES LTD.
10. REFCO SIFY SECURITIES PVT LTD.
A/c Opening Fee Brokerage Interface

Parameters
Trading Square Banks Associated
Demat Delivery
A/c Off with
HDFC, UTI, OBC,
Sharekhan 750 NIL 0.50 0.10
IDBI & Citibank
ICICI Direct 750 NIL 0.75 0.18 ICICI Bank
Indiabulls 750 250 0.40 0.10 N.A.

Citibank, HDFC,
5 paisa 800 NIL 0.20 0.05 OBC, UTI & ICICI
Bank
Kotak Bank &
Kotak Street 500 N.A. 0.59 0.06
Citibank
HDFC & Other 4
HDFC Securities 700 NIL 0.50 0.15
Banks

S. S. KANTILAL ISHWARLAL SECURITIES PVT. LTD. (SHAREKHAN.COM):
Sharekhan, India’s leading stock broker is the retail arm of SSKI, and offers you
depository services and trade execution facilities for equities, derivatives and
commodities backed with investment advice tempered by decades of broking experience.
A research and analysis team is constantly working to track performance and trends.
That’s why Sharekhan has the trading products, which are having one of the highest
success rates in the industry. Sharekhan is having 240 share shops in 110 cities; the
largest chain of retail share shops in India is of Sharekhan.
In future, Sharekhan is planning to enter in Mutual funds, Insurance sector and banking
sector to expand beyond the market currently covered by it. And it has started MF
(Mutual Funds) on priority basis but wants to grow in it.
ICICI WEB TRADE LTD. (ICICIdirect.com):

ICICIdirect.com was the first entrant into e-broking. ICICdirect.com provides the 3-
in-1 to the users which ties in their saving bank account and their Demat account to their
brokerage account electronically. This integration ensures that money is transferred
to/from their bank account and the shares are transferred from/to their Demat account
automatically without writing any cheques or transfer instructions while carrying out
their trades in shares.
ICICIdirect.com has the option of trading in shares in cash, margin or spot segments. An
investor can also invest in 14 Mutual Funds (Prudential ICICI MF, Franklin Templeton
India MF, Alliance Capital MF, JM MF, Birla Sun Life MF, Sundaram MF, IL&FS MF,
Principal MF, HDFC MF, Standard Chartered MF, Reliance Capital MF, Kotak
Mahindra MF, TATA MF and DSP MERRILL LYNCH MF) through their trading
account.
ICICIdirect.com doesn’t provide the facility of trading in a traditional way.

5Paisa.com:
5paisa is the trade name of India Infoline Securities Private Limited (5paisa), member of
National Stock Exchange and The Stock Exchange, Mumbai. 5paisa is a wholly owned
subsidiary of India Infoline Ltd, India’s leading and most popular finance and investment
portal. 5paisa has emerged as one of leading players in e-broking space in India.
The company’s brokerage is one of the lowest in the industry. It also provides the
research on commodities. Investors can benefit from its analysis and advice available at
the click of the mouse. For those who prefer to trade the traditional way, India Infoline
investor points are available across the country.
India Infoline was founded by a group of professionals in 1995. Its institutional investors
include Intel Capital, one of the leading technology companies in the world promoted by
the UK government, ICICI, TDA and Reeshanar. The company offers a slew of products
such as stock and derivatives broking, commodities broking and mutual funds.
KOTAK SECURITIES LIMITED (kotakstreet.com):

Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank and
Goldman Sachs (holding 25% - one of the world’s leading investment banks and
brokerage firms) is India’s leading stock broking house with a market share of 5 - 6 %.
Kotak Securities Ltd. has been the largest in IPO distribution - It was ranked number One
in 2003-04 as Book Running Lead Managers in public equity offerings by PRIME
Database. It has also won the Best Equity House Award from Finance Asia - April 2004.
Kotak Securities Ltd is also a depository participant with National Securities Depository
Limited (NSDL) and Central Depository Services Limited (CDSL) providing dual benefit
services wherein the investors can use the brokerage services of the company for
executing the transactions and the depository services for settling them. The company has
42 branches servicing around 1, 00,000 customers. Kotakstreet.com the online division of
Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual
Fund Investments.

Kotak Securities Limited manages assets over 1700 crores under Portfolio Management
Services (PMS) which is mainly to the high end of the market. Kotak Securities Limited
has newly launched “Kotak Infinity” as a distinct discretionary Portfolio Management
Service which looks into the middle end of the market.
India Bulls:
Indiabulls is India's leading retail financial services company with 77 locations spread
across 64 cities. Its size and strong balance sheet allows providing varied products and
services at very attractive prices, our over 750 Client Relationship Managers are
dedicated to serving your unique needs.
Indiabulls is lead by a highly regarded management team that has invested crores of
rupees into a world class Infrastructure that provides real-time service & 24/7 access to
all information and products. The Indiabulls Professional Network offers real-time
prices, detailed data and news, intelligent analytics, and electronic trading capabilities,
right at your finger-tips. This powerful technology is complemented by our
knowledgeable and customer focused Relationship Managers.
Indiabulls offers a full range of financial services and products ranging from Equities,
Derivatives, Demat services and Insurance to enhance wealth and to achieve the financial
goals.
MOTILAL OSWAL SECURITIES LTD. (MOSt):

One of the top-3 stock-broking houses in India, with a dominant position in both
institutional and retail broking, MOSt is amongst the best-capitalized firms in the broking
industry in terms of net worth. MOSt was founded in 1987 as a small sub-broking unit,
with just two people running the show. Focus on customer-first-attitude, ethical and
transparent business practices, respect for professionalism, research-based value investing
and implementation of cutting-edge technology have enabled it to blossom into a
thousand-member team.

The institutional business unit has relationships with several leading foreign institutional
investors (FIIs) in the US, UK, Hong Kong and Singapore. In a recent media report
MOSt was rated as one of the top-10 brokers in terms of business transacted for
FIIs.
The retail business unit provides equity investment solutions to more than 50,000
investors through 270 outlets spanning 150 cities and 22 states. MOSt provides Advice-
Based Broking, Portfolio Management Services (PMS), E-Broking Services,
Depository Services, Commodities Trading, and IPO and Mutual Fund Investment
Advisory Services. Its Value PMS Scheme gave a 160% post-tax return for the year
ended March 2004.
In AsiaMoney Brokers Poll 2003 MOSt has been rated as the Best Domestic Research
House- Mega Funds ,while in 2000 and 2002 it has been rated as the Best Domestic
Equity Research House and Second best amongst Indian Brokerage firms
respectively.
HDFC SECURITIES LTD (HDFCsec):

HDFCsec is a brand brought to you by HDFC Securities Ltd, which has been promoted
by the HDFC Bank & HDFC with the objective of providing the diverse customer base of
the HDFC Group and other investors a capability to transact in the Stock Exchanges &
other financial market transactions. The services comprise online buying and selling of
equity shares on the National Stock Exchange (NSE). Buying and selling of select
corporate debt and government securities on the NSE would be introduced in a
subsequent phase. In a few months, they will also start offering the following online
trading services on the BSE and NSE:
1. Buying and selling of shares on the BSE
2. Arbitrage between NSE & BSE
3. Trading in Derivatives on the NSE
4. Margin trading products.
They are also planning to include buying and selling of Mutual Funds, IPO subscriptions,
Right issues, purchase of Insurance policies and asset financing.

UTI SECURITIES LTD.: (UTISEL)
UTI Securities Ltd was incorporated on June 24, 1994 by Unit Trust of India as a 100%
subsidiary and on the repealing of the UTI Act, the capital is now held by the
Administrator of the Specified Undertaking of Unit Trust of India (ASUUTI). UTI
Securities has been working as an independent professional entity for providing financial
intermediary and advisory services to its corporate and retail clientele.
The Company has presence in major cities with 20 branches and 50 franchisees to service
a wide range of clients. The company has also invested in the joint-venture company with
Standard Chartered Bank viz. Standard Chartered UTI Securities (P) Ltd. that is
engaged in primary dealership and Government securities. The company is very soon
going to start Commodity Trading through its subsidiary, USEc Commodities Ltd, which
provides facility of commodity trading on NCDEX and MCX.
IDBI Capital Market Services Ltd.
IDBI Capital is a leading Indian securities firm offering a complete suite of products and
services to individual, institutional and corporate clients.
IDBI Capital Market Services Ltd. (IDBI Capital), a wholly owned subsidiary of
Industrial Development Bank of India (IDBI), is a leading Indian securities firm, offering
a complete suite of products and services to individual, institutional and corporate clients.
The services include fixed income trading, equities brokerage, debt and equity
derivatives, research, private placements, depository services, portfolio management and
distribution of financial products. Over the last five years, we have emerged as a leading
player in each of these businesses.
 March 1995 - Commenced Equity Broking on NSE CM segment

 July 1995 - Built agent Distribution Network across the country
 October 1996 - Commenced Debt Broking on NSE WDM segment
 December 1996 - Started operations as a Depository Participant

 1996 - Started to act as Arranger to Privately Placed Bond issues
 April 1998 - Commenced operations as a Portfolio Manager
 February 1999 - Acquired membership of BSE, Mumbai
 November 1999 - Started operations as a Primary Dealer
 June 2000 - Acquired Derivatives memberships of BSE and NSE
 March 2002 - Achieved an outright secondary market turnover exceeding
Rs100,000 cr in G-Secs
 October 2002- Commenced trading in Interest Rate Swaps
Refco - Sify Securities India Pvt. Ltd

Refco-Sify Securities India Pvt. Ltd., headquartered in Mumbai, is a joint venture
between the Refco Group Holding Ltd., USA; and Satyam Infoway Limited (NASDAQ:
SIFY) to offer online and offline equity and derivatives trading for retail customers as
well as execution and clearing services for financial institutions.
Refco also provides clients with prime brokerage services, fixed income, equities, foreign
exchange, OTC derivatives and asset management.
Refco is a leader in providing clients with the latest technological advances in products
and services. Its proprietary systems and global infrastructure provide the flexibility to
meet all client requirements.

INDUSTRY ANALYSIS USING PORTER’S 5 FORCES MODEL
POTENTIAL
POTENTIAL ENTERANT
ENTERANT
Investmart
Investmart
Various
Various Banks
Banks
Geojit
Geojit
Cipher
Cipher
UTI
UTI Securities
Securities Ltd.
Ltd.
Refco
Refco Group
Group Ltd.
Ltd.
IDBI
IDBI Capital
Capital Mkt.
Mkt. Services
Services
Ltd.
Ltd.
BUYERS
BUYERS
SUPPLIERS
SUPPLIERS
Small
Small Investors
Investors
Web
Web maintainers
maintainers COMPETITORS
COMPETITORS Franchise/Business
Franchise/Business
NSCL
NSCL Partners
Partners
CSDL
CSDL ICICI
ICICI Web
Web Trade
Trade Ltd
Ltd HNI’s
HNI’s
NSE
NSE 5paisa.com
5paisa.com MF
MF Companies
Companies
BSE
BSE Kotak
Kotak Securities
Securities Ltd
Ltd HUF
HUF
MCX
MCX India
India Bulls
Bulls Institutional
Institutional
NCDEX
NCDEX Motilal
Motilal Oswal
Oswal Securities
Securities Ltd
Ltd Investors
Investors
HDFC
HDFC Securities
Securities Ltd
Ltd
Marwadi
Marwadi Finance
Finance Ltd
Ltd
SUBSTITUTES
SUBSTITUTES
Mutual
Mutual Funds
Funds
Insurance
Insurance
Bank
Bank FD
FD

1. SUPPLIERS
 NSDL & CSDL are the regulatory bodies for Depository Participants like SSKI,
SHCIL, ICICIdirect.com, etc. Also these regulatory bodies have got an upper
hand as the bargaining power stock broking houses like SSKI, etc. would be less.
 NSE & BSE are playgrounds where common an investor trade through stock
broking houses, for which they have to take permission from NSE/BSE.
 NSE & BSE are under the purview of SEBI, that’s why stock broking houses like
SSKI, have low bargaining power. But here there is one advantage that NSE/BSE
have i.e. they cannot go for forward integration.
 MCX & NCDEX are stock exchanges which trade in commodities and
derivatives. Here again stock broking houses have to follow rules and regulation
of the same.
 Web maintainers are companies which maintain web sites & technical aspects of
the same. Here stock broking houses like SSKI can have more bargaining power
due to stiff competition among web maintaining companies.
 Web maintainers are companies who make and maintain software’s for stock
broking houses. If say for example stock broking houses switches over to other
web maintainers then that company cannot understand the mechanisms of
software’s. So it is quite high switching cost.

2. BUYERS
 There are various types of investors who trade through stock broking houses like
SSKI, which includes investors like small investors, medium net worth investors,
business partners, institutional investors and mutual fund companies.
 Here the bargaining power of stock broking houses depends on how big the
investor is.
 So here we can say that bargaining power of stock broking houses is high in case
of small investors & HUF.
 While the bargaining power is moderate in case of HNI (High New Worth
Investors)/ MNI’s (Medium Net Worth Investors) and business partners.
 But the in case of mutual fund companies and institutional investors bargaining
power is less.
 There is competitive buzz in stock broking industry; competitors are offering low
brokerage and best services with added feature. So switching cost is pretty much
less. So the buyer can easily switch over to competitors product.
3. ENTRY BARRIERS
 Huge capital: - Capital is necessary not only for fixed facilities but also for
customer’s credit and absorbing start up losses. To start a stock broking house,
one needs huge capital for technology up gradation and skilled manpower.
 Technology: - Technology for stock broking houses is life saving device.

Stock broking requires huge capital to make their products user friendly,
which in turn requires capital to employ skilled manpower. Thus, technology
could be one of the entry barriers.

 Regulatory Constraints: - Obtaining a license is a tedious job for a stock
broking house. It should comply with the regulation of the governing bodies
like SEBI, NSDL, etc. For a stock broking houses to plunge into the stock
broking industry, it needs to have some kind of financial background and
expertise. Thus, regulators constraints could be an entry barrier.
 Experience curve: - The core competency in this industry is the services which
are provided to the end-users and the research based activities which includes
“TIPS”, fundamental as well as technical script analysis. Also the most
important thing which helps already established firms is-“TRUST” which
people would be having on firms like SSKI , Motilal Oswal, etc. this is very
difficult for new companies to imitate.
 Network: - The “Reach” to the customer is the key factor in the industry. The
network of the companies like Motilal Oswal, Sharekhan, and ICICI is very
efficient and spreaded all over India. It will take time for a new entrant to
establish such a huge network (e.g. Marwadi), which say that,”Network can
come up as most difficult entry barrier to overcome.”
 Expected Retaliation: - Whenever a new player comes in the industry, the old
companies have an option to reduce the prices of their product. This kind of
practice is called expected Retaliation which is also possible in this industry in
terms of less brokerage rates and reduced account opening charges. E.g.
before the entry of so many mew companies, Sharekhan was having two types
of accounts viz. speed trade speed trade plus, which were costing 1000 &
1500 account opening charges respectively. But due to competition, they have
come up with only one account i.e. speed trade plus with the account charges
of Rs.1000.

4. COMPETITORS
 The company is facing the competition from local as well as national level
players. The local players provide facility for off-line trading while the
national players like ICICIdirect.com and Kotakstreet.com, HDFC Security
provide online trading services.
 There are also other big names like Indiabulls, Motilal Oswal, 5paisa and
Marwadi encircles the company form both the sides by providing online and
off-line trading with competitive services.
5. POTENTIAL ENTRANTS
 The potential entrants in like Investmart, Jeojit and Cipher which are coming
in near future to Rajkot City.
 Nationalized banks are also thinking to enter in this field by tying up with
broking houses. E.g. Bank Of Baroda.
6. SUBSTITUTES
 Here substitutes are such instruments which can be used instead of
investing in shares.
 The instruments like Bank FD, insurance, mutual funds are the substitutes.
 If the use of this instruments increase this may be disadvantage for the
stock broking houses.
 The companies and banks which are having these instruments can plunge
into this industry.

COMPETITIVE ANALYSIS
FOLLOWER:
 The followers are those who just blindly follow the other player which are
leader and challenges.
 The players like 5 paisa, Motilal Oswal, HDFC Securities, Kotakstreet are the
followers.
LEADER:
 ICICIdirect.com is a leader in the online account which is having 1, 24,000
accounts in the country.
 While in offline account Sharekhan is leading with 64,000 offline accounts.
NICHER:
 ICICIdirect.com and Kotakstreet.com are the two stock broking houses which
are focusing only on online investors.
CHALLENGER:
 Sharekhan, Kotakstreet and Indiabulls come under this head.
 Sharekhan challenges competitors by providing quality services and research
based advice.
 Indiabulls is also challenging with low brokerage rates and class one services.

ABOUT THE SHAREKHAN COMPANY
HISTORY
Sharekhan, the retail arm of the SSKI (Shrepal Sewaklal Kantilal Ishwarlal) Group offers
world-class facilities for buying and selling shares on BSE and NSE, demat services,
derivatives (F&O) and most importantly investment advice tempered by 85 years of
research and broking experience. A research and analysis team is constantly working to
track performance and trends. That’s why Sharekhan has the trading products, which are
having one of the highest success rates in the industry. You can avail of all its services at
any of their 240 outlets in 110 cities, or through internet using their real time online
trading terminals.
A part from Sharekhan, the SSKI Group also comprises of Institutional Broking and
Corporate Finance. The Institutional Broking division caters to domestic and foreign
institutional investors, while the Corporate Finance Division focuses on niche areas such
as infrastructure, telecom and media. SSKI has been voted as the Top Domestic
Brokerage House in the research category, twice by Euromoney survey and four times by
Asiamoney survey. SSKI has been voted the best domestic brokerage in India by
Asiamoney Polls’ 2004.
Also SSKI is being rated as No. 1 Financial Researcher by Business Today, in the Survey
conducted on Lead Managers of all the Mutual Funds.
Basically, the company is a market leader in providing brokering services and has a high
turnover in it which makes it No.1 in the market. The main difference is the services that
they provide to the investors. The customer is managed with a friendly corporate culture
to give him a more benefited investment idea and motivate him whenever he needs. The
company is providing as many tips to the clients (pre-market, online and post-market) for
more and more trading ideas and the manager helps each client to concentrate on a few
scripts so that he can manage the profit/loss.

In future, Sharekhan is planning to enter in Mutual funds, Insurance sector and banking
sector to expand beyond the market currently covered by it. And it has started MF
(Mutual Funds) on priority basis but wants to grow in it.
To sum up, Sharekhan brings a user- friendly trading facility, coupled with a wealth of
content that will help customers stalk the right shares.

CURRENT POSITION
VISION
To empowr the investor with quality advice and superior serivce to help him take
better investment decisions. We believe that our growth depends on client
satisfaction.

MISSION STATEMENT
o To provide the best customer service and product innovation tuned to diverse
needs of clientele
o Continuous up-gradation with changing technology, while maintaining human
values
o Respond to progressive globalization and achieving international standard.
o Efficiency and effectiveness built on ethical practices.

CORE VALUE
 Customer satisfaction through

 Providing quality service effectively and efficiently
 “Smile, it enhances your face value ” is a service quality
stressed on
 Periodic customer service Audits
 Maximization of stakeholder value
 Success through Teamwork ,integrity and People

GENERAL INFORMATION
NAME : S. S. KANTILAL ISHWARLAL

SECURITEIS PVT. LTD.
HEAD OFFICE : SHAREKHAN LTD.

A – 206, PHOENIH HOUSE,
PHOENIH MILL COPUND,
SENAPATI, BAPTA MARG,
LOWER PAREL,
MUMBAI - 400013
PH NO : 1800 - 22 7500 , 3970 75 00
E-MAIL : shrinivasb@branch.sharekhan.com
WEB SITE : www.sharekhan.com
CHIEF EXECUTIVE OFFICER: TARUN SHAH
BRANCH OFFICES : 100 BRANCHES

CHANGING TREND
Remember the time when you left orders with your broker in the morning and received a
confirmation fax late in the evening?
You wondered whether you had acquired the shares at the best possible price for the day.
Today, the picture is different. Imagine a scenario where you log on to your account, get the
live quotes of scripts you are interested in, get advise from experts and research reports
on your investment choice and then just click the mouse to place your order, pay the
amount due (which automatically gets debited into your account with the on line
brokerage firm), get your account statement, and the delivery of your shares into your
Demat account. All this through just one click of a mouse. Seems like a dream? But with
online trading this has become a reality. A few seconds later, you get the confirmation on
your screen. And after the trade settlement, your bank and DP accounts will reflect the
changes accordingly.
The speed of transaction, confidentiality about the prices and ease of settlement in the
paperless mode should be good reasons for retail investors to jump on to the Net. All they
need is a PC, a modem, a subscription to an ISP, an account with a bank (which has a web
presence) and a depository account. And they can choose from a plethora of e-trading web
sites.
So, finally the changing trend is known as E-trading which really means Buying and selling
securities via the Internet or other electronic means such as wireless access, touch-tone
telephones, and other new technologies with online trading. In most cases customers access a
brokerage firm's Web Site through their regular Internet Service Provider. Once there,
customers may consult information provided on the Web Site and log into their accounts to
place orders and monitor account activity"

7 P’s OF SHAREKHAN
1. PRODUCT
• Product Variety
Share khan offers 3 types of online trading accounts for its customers
specially designed according to their volume in share trading. Those 3
varieties are:
 Classic- for retail investors
 Speed Trade: for high net worth investors with large and active
equity portfolio who need to monitor and action swiftly
 Speed trade Plus- for high net worth investors dealing in derivative
market.
• Quality
User Friendly, attractive & colorful Website.
.
• Design
The website of Share khan namely www.sharekhan.com has been specially
designed to facilitate its users to buy and sell shares in an instant at anytime
and from anywhere they like. The site is user friendly allowing even a
layman to easily operate without any hassles.

• Features:
Share khan’s product comes with the following features:
• Trade execution in a fraction of a second!

• Single Screen Trading Terminal
• Real time streaming quotes. Price watch on any number of scripts.
• Hot keys similar to Brokers Terminal.
• Customized Alerts based on Multiple Parameters.
• Back up Facility to place trades on Direct Phone Lines.
• Intra day charts, updated live, tick-by-tick.
• Instant Order\ Trade Confirmation in the same window
• Live margin, position, marked to market profit & loss report.
• Competitive Brokerage.
• Flexibility to customize screen layout and setting.
• Facility to customize any number of portfolios & watch lists.
• Facility to cancel all pending orders at one click.
• Facility to square off all transactions at one click.
• Top Gainers, Top Losers, and Most Active, updated live.
• Index information; index chart, index stock information live.
• Market depth, i.e. Best 5 bids and offers, updated live for all scripts
• Online access to both accounts and DP.
• Live updated Order and Trade Book.
• Details of pending, executed and rejected orders.
• Online access to Customer Service.
• 128 - bit super safe encryption.
• Facility to place after market orders
• Online fund transfer facility from leading Banks
• Online intra-day technical calls.
• Exhaustive database of over 2000 companies
• Historical charts and technical analysis tools.
• Last but not the least, ideas that help you to make money!!!

• Brand Name
 The company as a whole in its offline business has named itself as

SSKI Securities Pvt. Ltd -Sevaklal Sevantilal Kantilal and Ishwarlal
Securities Pvt. Ltd. The company has preferred to name themselves
under a Blanket Family Name.
 But in its online division started since 1997, the company preferred
to name itself as “SHARE KHAN”. The Brand Name “SHARE
KHAN” itself suggests the business in which the company is dealing so
that the consumer could easily identify the product or service category.
• Services
 Share khan offers its customers, depository services and trade

execution facilities for equities, derivatives and commodities backed
with investment advice tempered by decades of broking experience.
The teams of its dedicated analysts are constantly at work to track
performance and trends.
 Dial-n-trade is also an exclusive service available to all Sharekhan

customers for trading in shares via the telephone. On dialing the toll
free number 1600-22-7050 and on entering the customers TPIN
number, the customer will be directed to a telebroker who will buy or
sell shares for him.

2. PRICE
• List Price
CLASSIC SPEED TRADE SPEED TRADE
PLUS
One time 750 1000 1500
registration fee
Minimum brokerage Nil 1000 1500
Charges –Quarterly
• Brokerage
Share khan in its online business charges brokerage as follows:
- In equity Market:
On Trading: 0.1% On Delivery: 0.5%
- In Derivative Market
On Trading: 0.12% (Total brokerage) On Delivery: 0.2%
• Service Tax
-8% on Brokerage.
• Turnover tax + Stamp duty
-0.015% (Rs. 15 on every turnover of Rs. 100000)
• Custody Charge
Re. 1 per script held per month.
• Discounts
For investors with High Net worth, there are slabs in brokerage rates.
• Payment Period
The transaction settlement date in the securities market is T+ 2 days i.e.
the payment of the transaction taken place has to be made within two
days of its occurrence.
• Credit terms
Share khan allows its customers to trade up to 4 times i.e. by keeping
1/4th margin with them.
• Dematerialization charges
Re. 3 per certificate or Rs.15 per requests whichever is higher.

3. PROMOTION
Online share trading is totally a new concept in Indian Market. Generally

investor doesn’t like to come out from conventional way of share trading. Share
khan has introduced this product in. The concept and Product are still new in the
market. Therefore the company has undertaken extensive promotion campaign
to create awareness about the product. Share khan adopts the following tools for
promoting the product
o Advertising
Company advertises its product through TV media on channels like
CNBC, Print Media-in leading dailies and outdoors media. It advertises
itself as an innovative Brand with a cartoon of tiger-called SHERU.
Besides attractive and colorful brochures as well as posters are used giving
full details about the product.
Mails are sent to people logging on to sites like moneycontrol.com and
rediff.com.
Also, stalls are opened up now and then at places where prospective
customers can be approached.
o Sales Promotion
The Company offers Rs.500 instead of Rs.750 for corporate accounts
(more than 20 accounts).
Also, it provides online trading accounts for just Rs.300 for IIM students.
o Sales Force
The Company has an aggressive sales force, which is given incentives,
based on their sales. The sales force is given intensive training
continuously.

o Seminar
The Company also arranges seminar in corporate world for creating
awareness about the product. Recently, it had organized for a seminar in
ONGC, IIM.
o Direct Marketing
Company emphasizes more on direct marketing, as many people are still
not aware of this new way of smart trading. For this, the company recruits
and trains sales representatives so as to explain the product and solve
customer queries related to the product. This is the most effective way to
communicate the three-in-one concept which company offers.
o Telemarketing
This is another promotional tool company is using to boost up its sales.
For this, the company collects the database of the people belonging to
different professional segments.
4. PLACE
• Channels
Share khan uses various channel alternatives to reach to its customers
through
 Internet
 Tele Marketing
 Retail Share Shops
 Franchisee Owners
 Power Brokers
 Sales Force

• Coverage
Access to the website from any part of the globe.
• Locations
Share khan has the largest chain of retail share shops in India. It has 180
share shops located in 90 cities all over India like Pune, Thane, Chennai,
Kolkata, Banglore, Luckhnow, Darjleeng, Kanpur, Baroda, Midnapore,
Surat, Delhi, Gaziabad, Hydrabad, Allahbad, etc.
5. PEOPLE
• Employees
⇒ Selection: Employees are selected on the basis of their experience

and qualification as applicable to the job.
⇒ Training: Intensive training is provided to the employees till a week
once they join and even at times required after that.
⇒ Motivation: The employees are motivated through incentives they
are provided.
• Research Team
Share khan has a team of dedicated analysts who have years of working
experience in the industries that they track, and a proven track record in
using their knowledge of the investment science to deliver results.
• Customers, the heart of sharekhan are really treated loyally like the kings.
The customer care, which comprises of highly trained executives operating
from 9:30 to 8:00 p.m.

6. PHYSICAL EVIDENCE
• Locality of the office: In Ahmedabad, two franchise outlets are located in

posh areas like Navrangpura and Maninagar. A new franchise is going to
open up in Vastrapur.
• Office Environment: The ambience within the office is what can make the
customer feel comfortable in trading. The cordial and friendly atmosphere at
office is like a full time motivation for the employees.
• Interiors and Infrastructure: The office is well furnished and has 24

computer terminals on which tick-by-tick price movements of the securities
are displayed.
7. PROCESS
• In this service organization, the ways in which the customers receive

delivery of the service constitutes the process. Here, the process involves
adding ‘value’ or ‘utility’ so that the customers get full satisfaction for the
money spent by them.
• Here the process begins from the step when customer wants to open e-invest
account and ends when his account is actually activated.
• All Indian residents and NRI are eligible to avail this service.
• Customers can open a sharekhan e-invest account by filling a single

application form.

This form includes 12 agreements like
1. Main form with customer details

2. Agreement between sharekhan and client in respect of the ONLINE-
INVESTMENT SUPPORT service offered.
3. Agreement between the Depository Participant and the client for
providing the transaction statement through Internet.
4. Irrevocable power of attorney
5. Agreement between the DP and the person seeking to open an
account with the DP.
6. Maintenance of client’s account on a running account bases by
SSKI.
7. Agreement giving the right of lien on the credit balance of client in
NSE trading.
8. Agreement giving the right of lien on the credit balance of client in
BSE trading.
9. Risk disclosure document (cash segment)
10. Power of attorney
11. Member and client agreement.
12. Web-online agreement between member-broker and client.

SEVEN (7) - S MODEL
Structu
re
Syste
Strate
gy ms
Super-
ordina
te
Goals
goals Styl
Skill
e
s
Staf
f
STRUCTURE:
Share khan is flexible in terms of making temporary structural changes to cope up with
specific strategic tasks without any hassles. If need arises, the top management can assign
the role to any of its employees which it considers capable and skillful.
STRATEGY:
Share khan believes not only in developing the strategies but also in its successful
execution.

SYSTEMS:
This constitutes of all the training and development systems, estimating budgets and the
accounting system of Share khan.
STYLE:
Style refers to all the symbolic actions undertaken by top managers of Share khan and its
influence on the subordinates.
STAFF:
Share khan values its employees as its assets and therefore carefully trains and motivates
them by giving them incentives at regular intervals. Talented employees are assigned as
mentors and given real responsibility and moved into higher positions.
SKILLS:
The term skills refer to those activities organizations do best and for which they are
known. Share khan is known for its timely advice (suggestions/tips), which it caters to its
customers and it boasts of 70-90% strike rates in booking recommendations.
SUPERORDINATE GOALS:
This refers to guiding concepts, values and aspirations that unite an organization in some
common purpose. It provides the customers the best service as it believes in customer
satisfaction and retention.

CORPORATE STRUCTURE
SSKI Group - Corporate Structure
Owns 56%
of Owns 50.5% of
SSKI Securities Pvt. Ltd.
Morakhia Family & Associates
SSKI Investor Services Pvt. Ltd.
SSKI Corporate Finance Pvt. Ltd.

Retail broking arm of the group
Shareholding pattern
Investment Banking arm of the group
56% Morakhia family (promoters)
Shareholding pattern
18.5% HSBC Private Equity
50.5% SSKI Securities Pvt. Ltd.
Management, Mauritius
49.5 % Morakhia family
18.5% First Carlyle Ventures, Mauritius
7% Intel Pacific Inc.
Integrated Equity Solutions Provider
• Among the top 3 branded retail service providers
(Rs. 200+crs average daily Vol- FY 03-04)
• Multi-channel access to clients
• Tailor made research and products
• Depository Services
• Derivatives
• Innovative products for enhanced performance

PRODUCTS OF THE SHAREKHAN COMPANY
ShareKhan’s
product
offline online Other Services
Speed Trade
Classic A/C
A/C
OFFLINE
The Off-Line account is trading account through which one can buy and sell through
his/her telephone or by personal visit at sharekhan shop. This a/c is for those who are not
comfortable with computer and want to trade.
o Offline A/c is the A/c for the investors who are not familiar with the use of
computer.
o The A/C opening charges Rs.500(One time)
o For 1st Year Demat A/C is Free, on 2nd Year AMC charge is applicable.

ONLINE
 A/C Opening Charges Rs.750(onetime Charge).

 For 1st Year Demat A/C is Free,On 2nd Year AMC charge is
applicable.
 Type with 7 banks through which one can transfer or withdraw his
fund online.Which are as follows
1. HDFC Bank
2. IDBI Bank
3. UTI Bank
4. OBC Bank
5. CITY Bank
6. Indusind Bank
7. Union Bank of India
Any one who have A/C either of above banks they can use
this facility.Otherwise one has to make fund transfer or withdraw
by cheque.
This account enables you to buy and sell shares through our website. You
get features like
a) Streaming quotes (using the applet based system)

b) Mutltiple watchlists
c) Integrated Banking, demat and digital contracts
d) Instant credit and transfer
e) Real-time portfolio tracking with price alert and, of course, the

assurance of secure transactions.
HOW TO USE:
By entering the Login ID and Browsing Password you can login into your
CLASSIC A/C.

FEATURES OF CLASSIC ACCOUNT / FAST TRADE ACCOUNT
that enables you to invest effortlessly
Online trading account for investing in Equities and Derivatives via

sharekhan.com
Integration of: Online trading + Bank + Demat account
Instant cash transfer facility against purchase & sale of shares
Make IPO booking
You get Instant order and trade confirmations by e-mail
Streaming Quotes
Personalised Market Scan with your own customized stock ticker!
Single screen interface for cash and derivatives
Your very own Portfolio Tracker!

FAST TRADE TERMINAL
SYSTEM REQUIREMENTS
you’ll need access to a computer which has at least the following
configuration:
Pentium 3 PC, Minimum 128 MB RAM
Windows 2000/XP
Internet Connection
Internet Explorer 6.0
Java enabled in IE

SPEEDTRADE PLUS
 A/C Opening Charges Rs.1000/-(onetime Charge).

 Monthly charges Rs.500/-(But if Client give Brokerage of Rs.1500/-in
a Quarter, then Rs.1500/-that was charged of a Quarter will be
Reimbursed).
 For 1st Year Demat A/C is Free, On 2nd Year AMC charge is
applicable.
 Type with 7 banks through which one can transfer or withdraw his
fund online. which are as follows
1. HDFC Bank
2. IDBI Bank
3. UTI Bank
4. OBC Bank
5. CITY Bank
6. Indusind Bank
7. Union Bank of India
Any one who have A/C either of above banks they can use this
facility. Otherwise one has to make fund transfer or withdraw by
cheque.

FEATURES OF SPEEDTRADE PLUS ACCOUNT
that enable you to trade effortlessly
 Instant order Execution & Confirmation

 Single screen trading terminal
 Real-time streaming quotes, tic-by-tic charts
 Market summary (most traded scrip, highest value and lots of
 other relevant statistics)
 Hot keys similar to a brokers terminal
 Alerts and reminders
 Back-up facility to place trades on Direct Phone lines
 Single screen interface for cash and derivatives

SPEEDTRADE PLUS TERMINAL
⇒ SYSTEM REQUIREMENTS
You'll need access to a computer which has at least the following configuration:
 Pentium 3 PC
 Minimum 128 MB RAM
 Windows 2000/XP
 Dial-up Modem / Cable modem
 Internet Connection Account
 Internet Explorer 6.0
 Java enabled in IE

GRAPHICAL INFORMATION OF SCRIPTS ON SHAREKHAN
TERMINAL

SERVICES
STOCK IDEAS
Stock Ideas is aimed at Sharekhan's trading clients. It presents our best stock picks in
today's market. We categorize these companies into six clusters to help you identify the
stocks that fit your time horizons and return objectives the best. Each cluster represents a
certain profile in terms of business fundamentals as well as the kind of returns you can
expect of it over a certain time horizon.
STOCK CLUSTER
We categorize all the scrips that are under coverage into six clusters. Each cluster
represents a certain profile in terms of business fundamentals as well as the kind of
returns you can expect over a certain time horizons and return objectives best.
⇒ EVERGREEN
Dominant players with strong brands, robust management
credentials, supernormal shareholder returns. Will steadily
compound 18-20% per year for next five to ten years.
⇒ APPLEEGREN
Potentially steady compounders, but five to ten years graph bit
unclear. Could gallop at 25-30 per year over the next two to
three years.
⇒ EMERGING STAR
Young companies likely to rule chosen niches. Even better, the
niches could balloon into full-blow markets. Potentially ten-
baggers if you’re patient.

⇒ UGLY DUCKLING
Trading below fair value or at huge discount to peer group. But
somtehing’s cooking. Could double in two to three years time.
⇒ VULTURE’S PICK
Companies with valueable assets at throwaway prices.Buy &
await predators. Stratlingly high returns possible.
⇒ CANNONBALL
Season’s favourites. Typically fast gainers in rising
markets,could return 30-50% within six months. Get in, cash in,
get out.

DIAL AND TRADE
⇒ Trade in Equity by using your phone!
Free with your Sharekhan Classic Account, the Dial-n-Trade service

enables you to place orders for buying and selling shares through your
telephone.
All you have to do is dial any one of our two dedicated numbers (1-
800-22-7050 or 30307600), enter your TPIN number (which is
provided at the time of opening your account) and on authentication
you'll be directed to a telebroker who will buy and sell shares for
you.
⇒ Features of Dial-n-Trade
that enable you to trade effortlessly
 TWO dedicated numbers for placing your orders with your cellphone
or landline. Toll free number: 1-800-22-7050. For people with difficulty in
accessing the toll-free number, we also have a Reliance number 30307600
which is charged at Rs. 1.50 per minute for STD calls.

 Automtic funds tranfer with phone banking (for Citibank and HDFC
bank customers)
 Simple and Secure Interactive Voice Response based system for

authentication
 No waiting time. Enter your TPIN to be transferred to our telebrokers
 You also get the trusted, professional advice of our telebrokers
 After hours order placement facility between 8.00 am and 9.30 am

(timings to be extended soon)
 Reliable service, wherever you are
⇒ Requirements
All you need is access to a phone - either a landline or a cellphone:

(the type of phone doesn't matter)
 If calling from a cellphone, please dial 022-1-800-22-7050
 Currently for Citibank and HDFC customers. More banks to be
added soon
 After hour order timings: 8.00 am to 9.30 am

 It takes approximately 10 minutes of your time to place an
order.

PMS (PORTFOLIO MANAGEMENT SERVICE)
I. Better Performance & Linear Returns with Hedging
Better performance
Superior performance is possible from superior market timing; our
critical edge
Superior performance is possible from picking stocks before inflection points in their trading
cycles
Linear Returns with moderated & hedged risks
Linear returns are possible from having hedged/sell market positions in
downtrends
Linear returns are possible by using options market to change the
portfolio beta
II. Convergence of time frames

 The best of both worlds can be achieved by having positions in cash and options
 The best of both worlds are achieved by using swing/momentum based index trading
systems with stop and reverse trend following.
 Delivery positions enable profit maximisation while options positions offer high beta
short term profile in the same portfolio
III. Two Product offering

Trading on Nifty: Nifty futures will be bought and sold on the basis of an
automated trading system generated calls to go long/short. The exposure will
never exceed the value of the portfolio i.e. no leveraging; but will allow us to be
short/hedged in Nifty in falling markets therefore allowing the client to earn
irrespective of the market direction.
Trading Portfolio:

Stocks in long term technical up trends will be identified to trade in at various
inflection points in their trading cycles. 80% of the portfolio will trade in delivery
of such stocks. 20% will be used in creating an options book i.e. buying calls/puts
of the index/stocks to increase the beta of the portfolio and to hedge against
pitfalls. The use of timing for delivery and options for a higher beta will attempt
to offer a superior rate of return by taking a risk with only 20% of the capital.
Here too money management rules will be in place to see that the capital is not
eroded. Portfolio rebalancing may be conducted between the Cash and options
segments based on the profitability of each segment.
IV. How to Invest?

 Minimum investment Rs.5 Lakh
 Lock in for 3 months
 Fortnightly reporting of Portfolio Net Worth
 Monthly reporting of Portfolio Holdings/Transactions
 20% profit sharing fees on booked profits quarterly basis.
 5% discount on profit sharing fees [to 15%] for investment of 1 crore OR lock in of 1
year.
 0% AMC fees
 Brokerage 0.05% for derivatives and 0.30% for delivery

ONLINE IPO
Online IPO (Initial Public Offering) is a new service started by Sharekhan for providing
the application form of any company’s issues of shares just like the TCS issue can be
subscribed by filling an online form to reduce the paper work and the fund transfer
facility is also provided to the clients for transferring the funds online. It is given on its
web-site for helping the clients who are not able to collect the forms manually and the
speed of filling and reducing the risk of misplacing of forms, not reaching in time, etc.

Sharekhan gives you the facility to fill up the IPO without giving any physical
documents and signatory.

RESEARCH BASED SERVICES
Every investor’s needs and goals are different. To meet these needs, Sharekhan provides
a comprehensive set of research reports, so that one can take the right investment
decisions regardless of their investing preferences! The Research and Development at
Sharekhan is done at its Head office Mumbai.
The R&D department Head Mr. Hemang Jani forwards all the details regarding all stocks
and scripts to all the branches through Internet. At the end of each trading day there is a
Teleconference, through which the R&D department Head MR. Hemang Jani talks with
each Branch heads and discusses about each day’s closing position and shows their
predictions about next day’s opening position. The quarries regarding stock positions and
other relevant matter of the branch heads of each branch is being solved through
teleconference.
Institutional Research - Each individual company is analyzed and its results are placed
on our site. Here Rating is given on relative basis, in the form of underperformer, neutral
and outperformer.
Outperformer: This stock will outperform the market by giving a relatively

higher return than a market-based index.
Neutral: This stock is expected to more or less give you the index rate of return
or a return not significantly higher or lower than the market index.
Underperformer: This stock is expected to lose value on a relative basis when

compared to a market-based index.
Sector Watch – Here each sector is analyzed thoroughly. For eg. Pharma sector,
Automotive sector, and various other sectors.

An example of Sharekhan’s Research Based Service :

SHAREKHAN DEPOSITORY SERVICES
Dematerialization and trading in the demat mode is the safer and faster alternative to the
physical existence of securities. Demat as a parallel solution offers freedom from delays,
thefts, forgeries, settlement risks and paper work. This system works through depository
participants (DPs) who offer demat services and the securities are held in the electronic
form for the investor directly by the Depository.
Sharekhan Depository Services offers dematerialization services to individual and

corporate investors. Sharekhan is a registered Depository Participant (DP) with National
Securities Depository Ltd. (NSDL). It has a team of professionals and the latest
technological expertise dedicated exclusively to our demat department, apart from a
national network of franchisee, making our services quick, convenient and efficient. At
Sharekhan, the commitment is to provide a complete demat solution which is simple,
safe and secure.

BENEFITS OF TRADING WITH SHAREKHAN
• Only Sharekhan offers the facility to trade at two major commodity exchanges of
the country:
1. Multi Commodity Exchange of India Ltd, Mumbai (MCX) and
2. National Commodity and Derivative Exchange, Mumbai (NCDEX).
• Sharekhan also equips you with world-class research, based on technical and
fundamental study of all major commodities.
• What’s more Sharekhan is in the process of launching several trading products

and strategies to help you trade in the commodity futures segment.
Sharekhan is a registered Stock Broker with the Bombay Stock Exchange and
National Stock Exchange to trade on behalf of clients. The screen-based trading is
done on BOLT- BSE Online Trading and NEAT- National Exchange Automated
Trading, terminals. There are two types of transactions executed on these terminals
viz. intra-day and delivery based transactions. Intraday transactions are those, in
which the squaring up of deal is done on the same day, while in delivery based
transaction the squaring up is not done on the same day, but the stock is to be traded
on the basis of rolling settlement i.e. T+2. The Brokerage of Intraday transaction is
0.10% single side, while brokerage on delivery based transactions is 0.50% on both
side, i.e. while purchasing as well as selling.

SMS SERVICES
Your Classic account now comes with the exclusive Sharekhan SMS Alert service. Get
quality trading calls and profitable investment ideas on your mobile phones.
In our continuous efforts to make investing easier, we have launched the Sharekhan
SMS Alert service. As part of this service our Chart Buster Calls and Stock Ideas shall
be disseminated to our on-line trading customers via mobile phones in the form of short
messages.
Our SMS service comes at a nominal fee of Rs100, which The Sharekhan SMS
shall be charged on a monthly basis. * Alert service can be
accessed from:
In order to avail of this facility all you need to do is to fill in  Hutch
the form below and submit the details  BSNL
 TouchTel
Customer ID  Reliance
 First Name
 Airtel
 Last Name
 Spice Mobile
 Mobile
 and several others!
number
Submit
 City

MARKET COVERAGE
Ground Network –
Largest in India
122 Franchisees and 28 branches

Covers 82 cities in 17 states across
India
Trade execution facility on BSE and
NSE for Cash as well as
Derivatives
Depository/Demat account services
Personalized Sharekhan research
advice
Uniform service standards
Sharekhan is having the 478 BRANCHES in 178 Cities all over India.

SWOT ANALYSIS
During this training at Sharekhan, we had come to know the Strengths – Weaknesses –
Opportunities – Threats for the company and it is very useful for a company to analyze
them. Therefore, the SWOT analysis is presented here and the suggestions for
maintaining strengths and removing weaknesses are explained.
STRENGTHS:
 Well-maintained infrastructure.
 Dedicated, Intelligent and Loyal staff.
 On-line Trading products.
 Lowest brokerage and other charges w.r.t. Competitors.
 The best investment advice correct up to 70-90 % through dedicated
 research and reports.
 Wide product range to enable the clients to choose the best alternative.
 One of the best DPs in India.
 A positive image in the existing clients.
WEAKNESSES:
 Less awareness in the market.

 Time consuming process for account opening, resolving the problems of the
customers, etc.
 Service quality is not maintained accordingly how they are promoted.

OPPORTUNITIES:
 Slope of stock market towards delivery based transaction.

 Large potential market for delivery and intra-day transactions.
 Open interest of the people to enter in stock market for investing.
 Attract the customers who are dissatisfied with other broker & DPs.
 An indirect opportunity generated by the market from its bullishness.
 Large untapped market in the saurashtra region of Gujrat.
THREATS:
 Decreasing rates of brokerage in the market.

 Increasing competition against other brokers & DPs
 Poor marketing activities for making the company known among the
customers.
 A threat of loosing clients for any kind of weakness of the company.
 Loosing the untapped market with the entry of the
 competitors.

SENSEX UPS AND DOWNS
As all we know that SENSEX either rise or may fall down due to
information available in the market related to corporate bodies and
government policy and budget play a very vital role in this.
The Budget Report Card can give rise some of the industry bullish period
and for some it give bearish period also.
For Example:
THE REPORT CARD dated on February 28th 2006.
THE GOOD NEWS

• Economic growth projected at 8.1% in 2005-06.
• Agriculture growth at 2.3 %.
• Inflation rate projected at 5% in current fiscal.
• Industrial growth at 7.8 % (April 06 – December 06)
BUT LOT NEEDS TO BE DONE

• Bold policy reforms in oil sector required.
• Policy required for infrastructure development.
• Industry needs to be unburdened from high taxes
• Rs 1,72,000 cr investment required for national highways.
• Rs 40,000 cr required for airports.
• Rs. 50,000 cr investment needed for ports.
• Power sector remains main impediment to growth.

BUDGET HIGHLIGHTS FROM 2002 TO 2006

FOREIGN INSTITUTIONAL INVESTMENT (FII)
The finance minister (FM) presented the union budget for the fiscal year 2006-07 today. We believe
that in the budget 2006-07, the FM has managed the expectations of most, by doing little. Corporate
India is delighted that there has been no tampering of the current tax structure and no additional
levy of taxes. There has also been no change in the personal taxes, as the moderate and stable
personal income tax regime has resulted in buoyant tax collections. The indirect taxes have taken the
much-anticipated course.
The two key themes of the Union Budget 2006-07 are:
a. fiscal consolidation: as the fiscal deficit for FY2006 has given a positive surprise and
the targets for 2006-07 stage a come back to the Fiscal Responsibility and Budget
Management Act (FRBM Act); and
b. the story for the growth in investment spending continued with the plan outlay on
infrastructure spending upped by approximately 22%.
First let us take a look at FY2006 numbers. The revised estimates suggest that the tax
revenues are likely to grow at 21% for FY2006. Although the growth in the corporation
tax and the excise duty was lower than what was envisaged in the budget for the year, it
was more than made up by higher collections on account of the personal income tax and
customs duty. The fiscal deficit as a percentage of the gross domestic product (GDP) for
the year is now estimated at 4.1% as compared with 4.3% envisaged at the time of the
budget. The revenue deficit has also shown a marked improvement and is expected to be
2.6% of the GDP as compared with 2.7% anticipated at the time of the budget.
For FY2007 the FM has been able to keep a tight check on the fiscal deficit despite
making an Rs11,500 crore allocation for the much spoken National Rural Employment
Guarantee Scheme (NREGS). The fiscal balance has been maintained on the back of a
strong growth of 19.5% in the tax revenues and a check on the revenue expenditure. The
fiscal deficit is likely to be 3.8% of the GDP, which is lower by 0.3% over the revised
estimates for FY2006 and is on coarse to meet the objectives of the FRBM Act.

EFFECT OF BUDGET 2006 – 07 ON INDUSTRIES
Gainers of budget 2006-07

Sector Companies
Automobiles: Maruti Udyog, Tata Motors, M&M
Banking: State Bank of India, Punjab National Bank,

Canara Bank
Capital goods: BHEL
Cement: Shree Cement, Gujarat Ambuja
FMCG: ITC, HLL
IT: NIIT, Educomp
Defence Bharat Electronics, Nelco

Equipment:
Metals: Monnet Ispat, Raipur Alloys, Tata Sponge
Textiles: Banswara Syntex, Rajasthan Spinning, Alok

Industries
Losers of budget 2006-07
Sector Companies
Financial services: IDFC
IT: Spanco Tele, Mphasis
Inorganic DCM Shriram Cons, Chemplast Sanmar,

chemicals: Gujarat Alkalies
Oil and gas: ONGC
IT: Spanco Tele, Mphasis
Telecom: Bharti Tele-Ventures
Textiles: Lakshmi Machine Works

INVESTMENT AVENUES
NON-MARKETABLE FINANCIAL ASSETS
A good portion of financial assets is represented by non-marketable financial
assets. These can be classified into the following broad.
• Bank deposits
• Post office deposits
• Company deposits
• Provident fund deposits
EQUITY SHARES
Equity shares represent ownership capital. As an equity shareholder, you
have an ownership stake in the company. This essentially means that you
have a residual interest in income and wealth. Perhaps, the most romantic
among various investment avenues, equity shares are classified into the
following broad categories by stock market analysts:
• Blue chip shares

• Growth shares
• Income shares
• Cyclical shares
• Speculative shares

BONDS
Bonds or debentures represent long-term debt instruments. The issuer of a
bond promises to pay a stipulated stream of cash flows. Bonds may be
classified into the following categories:
• Government securities
• Government of India relief bonds
• Government agency securities
• PSU bonds
• Debentures of private sector companies
• Preference shares
MONEY MARKET INSTRUMENTS

Debt instruments which have a maturity of less than one year at the time of
issue are called money market instruments. The important money market
instruments are;
• Treasury bills
• Commercial paper
• Certificates of deposit

MUTUAL FUNDS
Instead of directly buying equity shares and/or fixed income instruments,
you can participate in various schemes floated by mutual funds which, in
turn invest in equity shares and fixed income securities. There are three
broad types of mutual fund schemes:
• Equity schemes
• Debt schemes
• Balanced schemes
LIFE INSURANCE
In a broad sense, life insurance may be viewed as an investment. Insurance
premiums represent the sacrifice and the assured sum the benefit. The
important types of insurance policies in India are:
• Endowment assurance policy

• Money back policy
• Whole life policy
• Term assurance policy
REAL ESTATE
For the bulk of the investors the most important asset in their portfolio is a
residential house. In addition to a residential house, the more affluent
investors are likely to be interested in the following types of real estate:
• Agricultural land
• Semi-urban land

• Timeshare in a holiday resort
PRECIOUS OBJECTS
Precious objects are items that are generally small in size but highly valuable
in monetary terms. Some important precious objects are:
• Gold and Silver
• Precious stones
• Art objects
FINANCIAL DERIVATIVES
A financial derivative is an instrument whose value is derived from the value
of an underlying asset. It may be viewed as a side bet on the asset. The most
important financial derivatives from the point of view of investors are;
• Options
• Futures

SUMMARY EVALUATION OF VARIOUS INVESTMENT AVENUES
RETURN
MARKETA
Capital CONVENI
Current RISK BILITY/LIQ TAX SHELTER
appreci ENCE
yield UIDITY
ation
Equity Section 80L
Low High High Fairly high High
shares benefit
Non-
Negligib
convertible High Low Average Nil High
le
Debentures
Equity Section 80L
Low High High High Very High
Schemes benefit
Debt No tax on
High Low Low High Very high
Schemes dividends
Bank Neglig Section 80L
Moderate Nil High Very high
Schemes ible benefit
Public
Provident Nil High Nil Average Section 88 benefit Very high
Fund
Life
Moderat
Insurance Nil Nil Average Section 88 benefit Very high
e
Policies
Residential Moderat Neglig
Moderate Low High Fair
House e ible
Gold and Moderat Avera
Nil Average Nil Average
Silver e ge

CLASSIFICATION OF FINANCIAL MARKET
Debt Market
Nature of
Claim
Equity Market
Money Market
Maturity of
Claim
Capital Market
Seasoning of Claim Primary Market
Secondary Market
Timing of Cash or Spot Market
Delivery
Forward or futures Market
Exchange traded Market

Organizational
structure Over The Counter Market

ABOUT THE EQUITY MARKET
PRIMARY EQUITY MARKET
There are four ways in which a company may raise equity capital in the primary market.
o PUBLIC ISSUE
o RIGHTS ISSUE
o PRIVATE PLACEMENT
o PREFERENTIAL ALLOTMENT
PUBLIC ISSUE
By far the most important mode of issuing securities, a public issue involves sale of
securities to the public at large. The company making a public issue has to go through a
fairly elaborate process which involves the following:
• Approval by the board

• Appointment of lead managers
• Appointment of other intermediaries like co-managers, advisors, underwriters,
bankers, brokers, and registrars
• Preparation of the prospectus
• Filing of the prospectus with the Registrar of Companies
• Printing and dispatch of prospectus and application form
• Filing of the initial listing application
• Promotion of the issue
• Statutory announcement
• Collection of applications
• Processing of applications
• determination of the liability of underwriters
• Allotments of securities

• Listing of the issue
STOCKINVEST SCHEME
When public issues get heavily over-subscribed, a large number of investors lose interest
on the subscription money locked with the company, while the issuing company enjoys
the benefits of float money. To prevent this, the Securities Exchange Board of India has
come out with the stockinvest scheme. This is an additional facility available to investors,
besides the existing instruments like cash, cheques, and drafts, to apply for public issues.
The stockinvest scheme works as follows:
• An investors who has a savings account or current account with a bank applies, in a
prescribed form, for issue of a certain number of stockinvests of requisite
denominations.
• The bank issues the stockinvests, which are properly dated, and marks a lien in the
account of the investor for the amount of stockinvests issued.
• The investors submits the application form for a public issue along with the requisite
stockinvests to the collecting banker.
• The collecting banker transmits the application form with stockinvests to the registrar
of the issue.
• After the allotment is finalized, the registrar fills up the right side of the stockinvest
form indicating the entitlement of the investor.
• The registrar presents the stockinvests to the controlling branch of the colleting bank
for the public issue, claiming whatever amounts are relevant according to the
allotments.
• The collecting bank gives credit to the company’s accounts as stockinvests are
guaranteed instruments.
• After the company’s account is credited, the registrar proceeds with formal allotment.
In case of full and partial allotment, the registrar intimates the successful applicants
through allotment advice. In case of unsuccessful applicants, the registrar returns the
applications form along with cancelled stockinvests to the controlling bank, which in
turn advise the issuing bank.
• The issuing bank intimates the applicant about the release of lien on the account as
sequel to non-allotment.

BOOK BUILDING
A company can use the process of book building to fine tune its price determination.
When a company employs the book building mechanism, it does not predetermine the
issue price or interest rate and invite subscription to the issue. Instead it starts with an
indicative price band which is determined through a consultative process with its
merchant bankers and asks its merchant bankers to invite bids from prospective investors
at different prices. Those who bid are requires to pay the full amount.
Based on the response received from investors the final price is selected. Investors who
have bid a price equal to or more than the final price selected are given allotment at the
final price selected. Those who have bid for a lower price will get refund.
RIGHT ISSUE
A right s issue involves selling securities in the primary market by issuing rights to the
existing shareholders. When a company issues additional equity capital it has to be
offered in the first instance to the existing shareholders on pro rata basis. This is required
under section 81 of the Companies act 1956. The shareholders, however, may be a
special resolution forfeit this right, partially or fully, to enable a company to issue
additional capital to the public.
PRIVATE PLACEMENT
Private placement and preferential allotment involve sale of securities to a limited
number of sophisticated investors such as financial institutions, mutual funds, venture
capital funds, banks, and so on. What there does not seem to be a very clear-cut
distinction between the two in the Indian context we find that broadly (i) Private
Placement refers to sale of equity or equity related instruments of an unlisted company or
sale of debentures of a listed or unlisted company, and (ii) preferential allotment refers to
sale of equity or equity related instruments of a listed company. Private placement in

India is mostly of equity or equity-related instruments of unlisted companies and debt
instruments of listed companies.

PREFERENTIAL ALLOTMENT
An issue of equity by a listed company to selected investors at a price which may or may
not be related to the prevailing market price is referred to as preferential allotment in the
Indian capital market. A preferential allotment is not related to a public issue and certain
categories of investors in a public issue. Preferential allotment in India is given mainly to
promoters or friendly investors to ward off the threat of takeover. This is now a very
popular means of raising fresh equity capital because: (1) The cost and uncertainty
associated with the public issue is high (2) Sophisticated investors like mutual funds and
private equity investors are likely to pay a higher price.
The price at which a preferential allotment of share is made should not be lower than the
higher of the average of the weekly high and low of the closing prices of the shares
quoted on the stock exchange during the six months period before the relevant date or
during the two week period before the relevant date.

SECONDARY EQUITY MARKET
For buying and selling any security in the market there must be a some medium to make
transaction. This medium is called secondary market. In secondary market one can buy
and sell the security which would listed in stock exchange.
The secondary market which represented an institutional mechanism that was inadequate,
non-transparent, hardly regulated and rarely geared to investor protection till the early
nineties, has also witness notable developments. Among them are the prescriptions of
norms by SEBI for intermediaries like brokers/sub-brokers/dealers in trading/settlement,
broad based governing boards of stock exchanges, capital adequacy norms for the
intermediaries, corporate membership, transparency in trading and settlement practices,
development of cash market, regulation of badla trading, introduction of future/options
trading. The setting up of the Over-The Counter Exchange of India (OTCEI) and the
National Stock Exchange (NSE) represents a landmark in the direction of developing
vibrant, strong, matured, and equitable secondary market as an integral constituent of the
emerging securities market in India. An equally significant development has been the
coming into being of the National Securities Depositories Ltd (NSDL) and the system of
dematerialized trading. The commencement of derivative trading has certainly added to
the sophistication of the market greatly and integrates it with international markets. The
corporatisation and demutualization of the stock exchanges, separating trading,
ownership and management is yet another crucial factor in the same direction.
TRADING
Each stock exchange has certain listed securities and permitted securities which are
traded on it. Members of the exchange alone are entitled to the trading privileges.
Investors interested in buying or selling securities should place their orders with the
members of the exchange.
There are two ways of organizing the trading activity the open outcry system and the
screen-based system.

OPEN OUTCRY SYSTEM
As the nomenclature suggests, under the open outcry system, traders shout and resort to
signals on the trading floor of the exchange which consist of several ‘notional’ trading
posts for different securities. A member wishing to buy or sell a certain security reaches
the trading post where the security is traded. Here, he comes in contact with others
interested in transacting in that security. Buyers make their bids and sellers make their
offers and bargains are closed at mutually agreed-upon prices. In stocks where jobbing is
done, the jobber plays an important role. He stands ready to buy or sell on his account.
He quotes his bid (buying) and ask (selling) prices. He provides some stability and
continuity to the market.
SCREEN-BASED SYSTEM
In the screen-based system the trading ring is replaced by the computer screen and distant
participants can trade with each other through the computer network. A large number of
participants, geographically separated, can trade simultaneously at high speeds. The
screen-based trading system (a) enhances the information efficiency of the market as
more participants trade at a faster speed. (b) permits the markets participants to get a full
view of the market, which increases their confidence in the market, and (c) establishes
transparent audit trails While computerized trading is more efficient, it decidedly lacks
the vibrancy and vitality of the traditional floor trading. Technology seems to have its
own way of pushing colourful traditions and practices into oblivion.
Till 1994, trading on the stock market in India was based on the open outcry system with
the establishment of the National Stock Exchange in 1994, India entered the era of
screen-based trading. Within a short span of time, screen-based trading has supplanted
the open outcry system on all the stock exchanges in the country, thanks to SEBI’s
initiative in this respect.

o Buyers and sellers places their orders on the computer. They can be limit
orders or best market price orders.
o The computer constantly tries to match mutually compatible orders on price
and time priority.
o The limit order book, i.e the list of unmatched limit orders is displayed on the
screen. Put differently , it is open for inspection to all traders.
SETTLEMENT
Traditionally, trades in India were settled b physical delivery. This means that the
securities had to physically move from the seller to the seller’s broker, from the seller’s
broker to the buyer’s broker and from the buyer’s broker to the buyer. Further, the buyer
had to lodge the securities with the transfer agents of the company and the created bed
paper risk.
To enable the creation of depositories to facilities dematerialized trading in India, the

central government passed the Depositories Act, 1996. The highlights of this Act are as
follows.
• Every depository will be required to be registered with the Securities and

Exchanges Board of India.
• Investors will have the choice of continuing with the existing share
certificates or opt for the depository mode.
• Investors opting to join the depository mode are required to register with the
agents for the depositories. These will be custodial agencies like banks,
financial institutions, and large brokerage firms.
• Shares in the depository mode will be fungible. This means that they will
cease to have distinctive numbers.
• Any loss caused to the beneficial owners due to the negligence of the
depository or the participant will be indemnified by the depository.

The National Securities Depository Limited (NSDL), India’s first depository, was set up
in 1996, it was followed by the Central Securities Depositories Limited (CSDL), Both the
depositories, the NSDL in particular, have recorded a significant growth in their
operations.
SHIFT TO ROLLING SETTLEMENT
Till recently share transactions in India were settled on the basis of a weekly account
period. (On the Bombay Stock Exchange the account period was Monday to Friday and
on the National Stock Exchange the settlement account period was Wednesday to
Tuesday.) This meant that purchase and sales during an account period could be squared
up and at the end of the account period, transactions could be settled on a net basis.
The weekly settlement system along with the badla system of carrying forward
transaction from one account period to the next, according to many informed observers of
the Indian Stock market, led to unbridled speculative activity and periodic market crisis.
So, SEBI decided to introduced rolling settlement in important scripts with effect from
1st January 2002. Under a rolling system each day constitutes an account period and its
trades are settled after a few days. For example, under the T+5 rolling settlement which
was introduced initially, the trades were settled after 5days. With effect from April 1,
2002, the T+3 settlement system has been introduced.
ONLINE BSE AND NSE TRADING WITH SHAREKHAN

Sharekhan is a registered Stock Broker with the Bombay Stock Exchange and National
Stock Exchange to trade on behalf of clients. The screen-based trading is done on BOLT-
BSE Online Trading and NEAT- National Exchange Automated Trading, terminals.
There are two types of transactions executed on these terminals viz. intra-day and
delivery based transactions. Intraday transactions are those, in which the squaring up of
deal is done on the same day, while in delivery based transaction the squaring up is not
done on the same day, but the stock is to be traded on the basis of rolling settlement i.e.
T+2. The Brokerage of Intraday transaction is 0.10% single side, while brokerage on
delivery based transactions is 0.50% on both side, i.e. while purchasing as well as selling.

ABOUT THE DERIVATIVES
INTRODUCTION
Keeping in view the experience of even strong and developed economies the world over,
it is no denying the fact that financial market is extremely volatile by nature. Indian
financial market is not an exception to this phenomenon. The attendant risk arising out of
the volatility and complexity of the financial market is an important concern for financial
analysts. As a result, the logical need is for those financial instruments which allow fund
managers to better manage or reduce these risks.
Out of various risks, Credit Risk and Interest Rate risk are the two core risks, which are
commonly acknowledged by various categories of Financial Institutions particularly
banks. Effective management of these core risks is a critical factor in comprehensive risk
management and is essential for the long-term financial health of business organizations,
especially banks.
With gradual liberalization of Indian financial system and the growing integration among
markets, the risks associated with operations of banks and All India Financial Institutions
have become increasingly complex, requiring strategic management. In keeping with
spirit of the guidelines on Asset-Liability Management (ALM) systems and on integrated
risk management systems, it is very much required to design risk management
architecture, taking into consideration the size, complexity of business, risk philosophy,
market perception and the level of capital. In addition, fine-tuning the risk management
system to deal with credit and market risk is also the need of the hour. For enabling the
banks and the financial institutions, among others, to manage their risk effectively, the
concept of derivatives comes into picture.
The emergence of the market for derivative products, most notably forwards, futures and
options, can be traced back to the willingness of risk-averse economic agents to guard
themselves against uncertainties arising out of fluctuations in asset prices. By their very
nature, the financial markets are marked by a very high degree of volatility. Through the
use of derivative products, it is possible to partially or fully transfer price risks by

locking–in asset prices. As instruments of risk management, these generally do not
influence the fluctuations in the underlying asset prices. However, by locking-in asset
prices, derivative products minimize the impact of fluctuations in asset prices on the
profitability and cash flow situation of risk-averse investors.
MEANING
A derivative is a financial instrument, which derives its value from some other financial
price. This “other financial price” is called the underlying. The underlying asset can be
equity, FOREX, commodity or any other asset.
A wheat farmer may wish to contract to sell his harvest at a future date to eliminate the
risk of a change in prices by that date. The price for such a contract would obviously
depend upon the current spot price of wheat. Such a transaction could take place on a
wheat forward market. Here, the wheat forward is the “derivative” and wheat on the spot
market is “the underlying”. The terms “derivative contract”, “derivative product”, or
“derivative” are used interchangeably. The most important derivatives are futures and
options.
Example: -
A very simple example of derivatives is curd, which is derivative of milk. The price of
curd depends upon the price of milk, which in turn depends upon the demand, and supply
of milk.
See it this way. American depository receipts/ global depository receipts of ICICI,
Satyam and Infosys traded on stock exchanges in the USA and England have their own
values? No. They draw their price from the underlying shares traded in India.
Consider how the value of mutual fund units changes on a day-to-day basis. Don’t mutual
fund units draw their value from the value of the portfolio of securities under the
schemes? Aren’t these examples of derivatives? Yes, these are. And you know what,
these examples prove that derivatives are not so new to us. Nifty options and futures,
Reliance futures and options, Satyam futures and options etc are all examples of
derivatives. Futures and options are the most common and popular form of
derivatives.

HISTORY
The derivatives markets has existed for centuries as a result of the need for both
users and producers of natural resources to hedge against price fluctuations in the
underlying commodities. India has been trading derivatives contracts in silver, gold,
spices, coffee, cotton and oil etc for decades in the gray market. Trading derivatives
contracts in organized market was legal before Morarji Desai’s government banned
forward contracts. Derivatives on stocks were traded in the form of “Teji” and
“Mandi” in unorganized markets. Recently futures contract in various commodities
was allowed to trade on exchanges. In June 2000, NSE and BSE started trading in
futures on Sensex and Nifty. Options trading on Sensex and Nifty commenced in
June 2001. Very soon thereafter trading began on options and futures in 31
prominent stocks in the month of July and November respectively. The market lots
keeps on changing from time to time. The minimum quantity you can trade in is one
market lot.
DERIVATIVES: AN INDIAN CONTEXT:
In Indian context, the intensity of derivatives usage by institutional investors (viz. Banks,
Financial Institution; Mutual Funds, Foreign Institutional Investors, Life and General
Insurers) depend on their ability and willingness to use derivatives for one or more of the
following purposes:
 Risk containment: using derivatives for hedging and risk containment purposes
 Risk Trading/Market Making: Running derivatives trading book for profits and
arbitrage; and/or
 Covered Intermediation: On-balance-sheet derivatives intermediation for client
transaction, without retaining any net-risk on the balance sheet (except credit
risks).

TYPES OF DERIVATIVES
Derivative as a term conjures up visions of complex numeric calculations, speculative
dealings and comes across as an instrument which is the prerogative of a few ‘smart
finance professionals’. In reality it is not so. In fact, a derivative transaction helps cover
risk, which would arise on the trading of securities on which the derivative is based and a
small investor can benefit immensely. “A derivative security can be defined as a
security whose value depends on the values of other underlying variables.” Very
often, the variables underlying the derivative securities are the prices of traded
securities.
Derivatives and futures are basically of 3 types:

 Forwards and Futures
 Options
 Swaps
DERIVATIVES
DERIVATIVES
Options
Options Futures
Futures Swaps
Swaps Forwards
Forwards
Put
Put Call
Call Interest
Interest Currency
Currency
Rate
Rate
Commod
Commod Security
Security
ity
ity

FORWARDS:
A forward contract is the simplest mode of a derivative transaction. It is an
agreement to buy or sell an asset (of a specified quantity) at a certain future time for
a certain price. No cash is exchanged when the contract is entered into.
Illustration: - Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to
buy it outright. He can only buy it 3 months hence. He, however, fears that prices of
televisions will rise 3 months from now. So in order to protect himself from the rise in
prices Shyam enters into a contract with the TV dealer that 3 months from now he will
buy the TV for Rs 10,000. What Shyam is doing is that he is locking the current price of
a TV for a forward contract. The forward contract is settled at maturity. The dealer will
deliver the asset to Shyam at the end of three months and Shyam in turn will pay cash
equivalent to the TV price on delivery.
FUTURES:
It is an agreement between two parties to buy or sell an asset at a certain time in the
future at a certain price through exchange traded contracts.
A Future represents the right to buy or sell a standard quantity and quality of an asset or
security at a specified date and price. Futures are similar to Forward Contracts, but are
standardized and traded on an exchange, and are valued, or "Marked to Market” daily.
The Marking to Market provides both parties with a daily accounting of their financial
obligations under the terms of the Future. Unlike Forward Contracts, the counterparty to
a Futures contract is the clearing corporation on the appropriate exchange. Futures often
are settled in cash or cash equivalents, rather than requiring physical delivery of the
underlying asset. Parties to a Futures contract may buy or write Options on Futures.

OPTIONS:
An option is a contract, which gives the buyer the right, but not the obligation to
buy or sell shares of the underlying security at a specific price on or before a specific
date.
‘Option’, as the word suggests, is a choice given to the investor to either honor the
contract; or if he chooses not to walk away from the contract. There are two kinds of
options: Call Options and Put Options.
A Call Option is an option to buy a stock at a specific price on or before a certain date.
When you buy a Call option, the price you pay for it, called the option premium, secures
your right to buy that certain stock at a specified price called the strike price. If you
decide not to use the option to buy the stock, and you are not obligated to, your only cost
is the option premium.
Put Options are options to sell a stock at a specific price on or before a certain date. In
this way, Put options are like insurance policies. With a Put Option, you can "insure" a
stock by fixing a selling price. If something happens which causes the stock price to fall,
and thus, "damages" your asset, you can exercise your option and sell it at its "insured"
price level. If the price of your stock goes up, and there is no "damage," then you do not
need to use the insurance, and, once again, your only cost is the premium.
Technically, an option is a contract between two parties. The buyer receives a privilege
for which he pays a premium. The seller accepts an obligation for which he receives a
fee.

CALL OPTIONS
Call options give the taker the right, but not the obligation, to buy the underlying shares
at a predetermined price, on or before a predetermined date.
Illustration: - Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call -Premium 8
This contract allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any time
between the current date and the end of next August. For this privilege, Raj pays a fee of
Rs 800 (Rs eight a share for 100 shares).
The buyer of a call has purchased the right to buy and for that he pays a premium.
Now let us see how one can profit from buying an option; Sam purchases a December
call option at Rs 40 for a premium of Rs 15. That is he has purchased the right to buy that
share for Rs 40 in December. If the stock rises above Rs 55 (40+15) he will break even
and he will start making a profit. Suppose the stock does not rise and instead falls he will
choose not to exercise the option and forego the premium of Rs 15 and thus limiting his
loss to Rs 15.
Call Options-Long & Short Positions

When you expect prices to rise, then you take a long position by buying calls.
You are bullish.
When you expect prices to fall, then you take a short position by selling calls.
You are bearish.

PUT OPTIONS
A Put Option gives the holder of the right to sell a specific number of shares of an
agreed security at a fixed price for a period of time.
Illustration:- Raj is of the view that the a stock is overpriced and will fall in future, but
he does not want to take the risk in the event of price rising so purchases a put option at
Rs 70 on ‘X’. By purchasing the put option Raj has the right to sell the stock at Rs 70 but
he has to pay a fee of Rs 15 (premium).
So he will breakeven only after the stock falls below Rs 55 (70-15) and will start making
profit if the stock falls below Rs 55.
Put Options-Long & Short Positions

When you expect prices to fall, then you take a long position by buying Puts. You
are bearish.
When you expect prices to rise, then you take a short position by selling Puts.
You are bullish.
CALL OPTIONS PUT OPTIONS

If you expect a fall in price(Bearish) Short Long
If you expect a rise in price (Bullish) Long Short

IMPORTANT FACTORS IN DERIVATIVES
HEDGING
We have seen how one can take a view on the market with the help of index futures. The
other benefit of trading in index futures is to hedge your portfolio against the risk of
trading. In order to understand how one can protect his portfolio from value erosion let us
take an example.
Illustration: Ram enters into a contract with Shyam that six months from now he will
sell to Shyam 10 dresses for Rs 4000. The cost of manufacturing for Ram is only Rs 1000
and he will make a profit of Rs 3000 if the sale is completed.
Cost (Rs) Selling price Profit

1000 4000 3000
However, Ram fears that Shyam may not honor his contract 6 months from now. So he
inserts a new clause in the contract that if Shyam fails to honor the contract he will have
to pay a penalty of Rs 1000. And if Shyam honors the contract Ram will offer a discount
of Rs 1000 as incentive.
Shyam defaults Shyam honors

1000 (Initial Investment) 3000 (Initial profit)
1000 (penalty from Shyam) (-1000) discount given to Shyam
- (No gain/loss) 2000 (Net gain)
As we see above if Shyam defaults Ram will get a penalty of Rs 1000 but he will recover
his initial investment. If Shyam honors the contract, Ram will still make a profit of Rs
2000. Thus, Ram has hedged his risk against default and protected his initial investment.
The above example explains the concept of hedging.

SPECULATION
Speculators are those who do not have any position on which they enter in futures and
options market. They only have a particular view on the market, stock, commodity etc. In
short, speculators put their money at risk in the hope of profiting from an anticipated
price change. They consider various factors such as demand supply, market positions,
open interests, economic fundamentals and other data to take their positions.
Illustration: Ram is a trader but has no time to track and analyze stocks. However, he
fancies his chances in predicting the market trend. So instead of buying different stocks
he buys Sensex Futures.
On May 1, 2001, he buys 100 Sensex futures @ 3600 on expectations that the index will
rise in future. On June 1, 2001, the Sensex rises to 4000 and at that time he sells an equal
number of contracts to close out his position.
Selling Price : 4000*100 = Rs 4,00,000
Less: Purchase Cost: 3600*100 = Rs 3,60,000
Net gain Rs 40,000
Ram has made a profit of Rs 40,000 by taking a call on the future value of the Sensex.
However, if the Sensex had fallen he would have made a loss. Similarly, if would have
been bearish he could have sold Sensex futures and made a profit from a falling profit. In
index futures players can have a long-term view of the market up to atleast 3 months.

ARBITRAGE
An arbitrageur is basically risk averse. He enters into those contracts were he can earn
riskless profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives risk less profit. Arbitrageurs are always in the look out for
such imperfections.
In the futures market one can take advantages of arbitrage opportunities by buying from
lower priced market and selling at the higher priced market. In index futures arbitrage is
possible between the spot market and the futures market.
 Assume that Nifty is at 1200 and 3 month’s Nifty futures is at 1300.

 The futures price of Nifty futures can be worked out by taking the interest cost
of 3 months into account.
 If there is a difference then arbitrage opportunity exists.
Let us take the example of single stock to understand the concept better. If Wipro is
quoted at Rs 1000 per share and the 3 months futures of Wipro is Rs 1070 then one can
purchase ITC at Rs 1000 in spot by borrowing @ 12% annum for 3 months and sell
Wipro futures for 3 months at Rs 1070.
Sale = 1070
Cost= 1000+30 = 1030
Arbitrage profit = 40
These kinds of imperfections continue to exist in the markets but one has to be alert to the
opportunities as they tend to get exhausted very fast.

MARGINS
The margining system is based on the JR Verma Committee recommendations. The

actual margining happens on a daily basis while online position monitoring is done on an
intra-day basis.
Daily margining is of two types:
1. Initial margins
2. Mark-to-market profit/loss
The computation of initial margin on the futures market is done using the concept of
Value-at-Risk (VaR). The initial margin amount is large enough to cover a one-day loss
that can be encountered on 99% of the days. VaR methodology seeks to measure the
amount of value that a portfolio may stand to lose within a certain horizon time period
(one day for the clearing corporation) due to potential changes in the underlying asset
market price. Initial margin amount computed using VaR is collected up-front.
The daily settlement process called "mark-to-market" provides for collection of losses
that have already occurred (historic losses) whereas initial margin seeks to safeguard
against potential losses on outstanding positions. The mark-to-market settlement is done
in cash.
Let us take a hypothetical trading activity of a client of a NSE futures division to

demonstrate the margins payments that would occur.
 A client purchases 200 units of FUTIDX NIFTY 29JUN2001 at Rs 1500.

 The initial margin payable as calculated by VaR is 15%.
Total long position = Rs 3,00,000 (200 x 1500)

Initial margin (15%) = Rs 45,000
Assuming that the contract will close on Day + 3 the mark-to-market position will look as
follows:

POSITION ON DAY 1
Close Price Loss Margin released Net cash outflow

1400 x 200 = 20,000 (3,00,000 - 17,000 (20,000 -
3,000 (45,000 - 42,000)
2,80,000 2,80,000) 3000)
Payment to be made (17,000)
NEW POSITION ON DAY 2

Value of new position = 1,400*200= 2,80,000
Margin = 42,000
Close Price Gain Addn Margin Net cash inflow

1510 x 200 = 22,000 3,300 18,700
3,02,000 (3,02,000 - 2,80,000) (45,300 - 42,000) (22,000 - 3300)
Payment to be recd 18,700
POSITION ON DAY 3
Value of new position = 1510*200 = Rs 3, 02,000
Margin = Rs 3,300
Close Price Gain Net cash inflow

1600*200 =3,20,000 18,000 (3,20,000-3,02,000) 18,000 + 45,300* = 63,300
Payment to be recd 63,300

Margin account*
Initial margin = Rs 45,000

Margin released (Day 1) = (-) Rs 3,000
Position on Day 2 Rs 42,000
Addn margin = (+) Rs 3,300
Total margin in a/c Rs 45,300*
Net gain/loss
Day 1 (loss) = (Rs 17,000)

Day 2 Gain = Rs 18,700
Day 3 Gain = Rs 18,000
Total Gain = Rs 19,700
The client has made a profit of Rs 19,700 at the end of Day 3 and the total cash inflow at
the close of trade is Rs 63,300.

ABOUT THE COMMODITY
COMMODITIES MARKET IN INDIA
Organized futures market evolved in India by the setting up of "Bombay Cotton Trade
Association Ltd." in 1875. In 1893, following widespread discontent amongst leading
cotton mill owners and merchants over the functioning of the Bombay Cotton Trade
Association, a separate association by the name "Bombay Cotton Exchange Ltd." was
constituted. Futures trading in oilseeds was organized in India for the first time with the
setting up of Gujarati Vyapari Mandali in 1900, which carried on futures trading in
groundnut , castor seed and cotton. Before the Second World War broke out in 1939
several futures markets in oilseeds were functioning in Gujarat and Punjab.
There were booming activities in this market and at one time as many as 110 exchanges
were conducting forward trade in various commodities in the country. The securities
market was a poor cousin of this market as there were not many papers to be traded at
that time.
The era of widespread shortages in many essential commodities resulting in inflationary

pressures and the tilt towards socialist policy, in which the role of market forces for
resource allocation got diminished, saw the decline of this market since the mid-1960s.
This coupled with the regulatory constraints in 1960s, resulted in virtual dismantling of
the commodities future markets. It is only in the last decade that commodity future
exchanges have been actively encouraged. However, the markets have been thin with
poor liquidity and have not grown to any significant level.
A three-pronged approach has been adopted to revive and revitalize the market. Firstly,
on policy front many legal and administrative hurdles in the functioning of the market
have been removed. Forward trading was permitted in cotton and jute goods in 1998,
followed by some oilseeds and their derivatives, such as groundnut, mustard seed,
sesame, cottonseed etc. in 1999. A statement in the first ever National Agriculture Policy,
issued in July, 2000 by the government that futures trading will be encouraged in
increasing number of agricultural commodities was indicative of welcome change in the
government policy towards forward trading.

Secondly, strengthening of infrastructure and institutional capabilities of the regulator
and the existing exchanges received priority. Thirdly, as the existing exchanges are slow
to adopt reforms due to legacy or lack of resources, new promoters with resources and
professional approach were being attracted with a clear mandate to set up demutualized,
technology driven exchanges with nationwide reach and adopting best international
practices.
The year 2003 marked the real turning point in the policy framework for commodity
market when the government issued notifications for withdrawing all prohibitions and
opening up forward trading in all the commodities. This period also witnessed other
reforms, such as, amendments to the Essential Commodities Act, Securities (Contract)
Rules, which have reduced bottlenecks in the development and growth of commodity
markets. Of the country's total GDP, commodities related (and dependent) industries
constitute about roughly 50-60 %, which itself cannot be ignored.
Most of the existing Indian commodity exchanges are single commodity platforms; are
regional in nature, run mainly by entities which trade on them resulting in substantial
conflict of interests, opaque in their functioning and have not used technology to scale up
their operations and reach to bring down their costs. But with the strong emergence of:
National Multi-commodity Exchange Ltd., Ahmedabad (NMCE), Multi Commodity
Exchange Ltd., Mumbai (MCX), National Commodities and Derivatives Exchange,
Mumbai (NCDEX), and National Board of Trade, Indore (NBOT), all these shortcomings
will be addressed rapidly. These exchanges are expected to be role model to other
exchanges and are likely to compete for trade not only among themselves but also with
the existing exchanges.
The current mindset of the people in India is that the Commodity exchanges are
speculative (due to non delivery) and are not meant for actual users. One major reason
being that the awareness is lacking amongst actual users. In India, Interest rate risks,
exchange rate risks are actively managed, but the same does not hold true for the
commodity risks. Some additional impediments are centered around the safety,
transparency and taxation issues.

WHY STRUCTURED COMMODITY MARKET?
Today the business is not limited to our area only. Where the production is less but,
demand is comparatively high prices of the product will go up. On the contrary where the
production is high but demand is comparatively low the prices will go down.
 If sellers and buyers come together at a place then it will create a market. Here
against one seller there will be more then one buyer. In this market buyers will
come across the country for transactions.
 In this market not only producer and seller are included but arbitrageur,
speculator, and hedger can tread. In this way the total area of market will become
broad.
 In our country agricultural products form 25% of GDP. Total turnover of

commodity of market is nearly Rs.1, 10,000 corer. In which 60,000 corer comes
from agriculture and left is coming from coal, crude, etc…
 Today in our country most of the trade is done in unorganized market. In the
market current and future contracts are done. Promissory contracts have been
started science 1875. But due to some restriction it was not properly worked.
Presently nearly in 122 commodities tread is being done

TRANSACTION IN THE ORGANIZED MARKET:
Organized markets have structured forms of transactions. The commodity

exchanges are regulated as per rules and regulations define in The Forward
Contracts (Regulation) Act, 1952 for regulating forward\future contracts. In
December 2003, the National Commodity and Derivative Exchange Ltd
(NCDEX) launched futures trading in nine major commodities.
MCX To begin with contacts in gold, silver, cotton, soyabean, soya oil, mustered
seed, rapeseed oil, crude palm oil and RBD Palmolive are being offered. Now
more then 40 commodity items are included. Day by day number of commodity
items is incising. The various commodities that tread on the NCDEX and look at
some commodity specific issues. In this commodity market classified as
agriculture products, precious metal, other metal and energy which we discuss
above.

CHARACTERISTICS OF FUTURES TRADING
A "Futures Contract" is a highly standardized contract with certain distinct features.

Some of the important features are as under:
a. Futures’ trading is necessarily organized under the auspices of a market

association so that such trading is confined to or conducted through members of
the association in accordance with the procedure laid down in the Rules & Bye-
laws of the association.
b. It is invariably entered into for a standard variety known as the "basis variety"
with permission to deliver other identified varieties known as "tender able
varieties".
c. The units of price quotation and trading are fixed in these contracts, parties to the
contracts not being capable of altering these units.
d. The delivery periods are specified.
e. The seller in a futures market has the choice to decide whether to deliver goods
against outstanding sale contracts. In case he decides to deliver goods, he can do
so not only at the location of the Association through which trading is organized
but also at a number of other pre-specified delivery centers.
f. In futures market actual delivery of goods takes place only in a very few cases.
Transactions are mostly squared up before the due date of the contract and
contracts are settled by payment of differences without any physical delivery of
goods taking place.

ECONOMIC BENEFITS OF THE FUTURES TRADING
Futures contracts perform two important functions of price discovery and price risk
management with reference to the given commodity. It is useful to all segments of
economy. It is useful to producer because he can get an idea of the price likely to prevail
at a future point of time and therefore can decide between various competing
commodities, the best that suits him. It enables the consumer get an idea of the price at
which the commodity would be available at a future point of time. He can do proper
costing and also cover his purchases by making forward contracts.
The futures trading is very useful to the exporters as it provides an advance indication of
the price likely to prevail and thereby help the exporter in quoting a realistic price and
thereby secure export contract in a competitive market. Having entered into an export
contract, it enables him to hedge his risk by operating in futures market. Other benefits of
futures trading are:
 Price stabilization-in times of violent price fluctuations - this mechanism

dampens the peaks and lifts up the valleys i.e. the amplititude of price
variation is reduced.
 Leads to integrated price structure throughout the country.
 Facilitates lengthy and complex, production and manufacturing activities.
 Helps balance in supply and demand position throughout the year.
 Encourages competition and acts as a price barometer to farmers and other
trade functionaries.

COMMODITIES ARE SUITABLE FOR FUTURE TRADING
The following are some of the key factors, which decide the suitability of the
commodities for future trading: -
 The commodity should be competitive, i.e., there should be large demand for and
supply of the commodity - no individual or group of persons acting in concert
should be in a position to influence the demand or supply, and consequently the
price substantially.
 There should be fluctuations in price.
 The market for the commodity should be free from substantial government control.
 The commodity should have long shelf life and be capable of standardization and
gradation.
VARIOUS COMMODITEIS TRADED IN THE MULTI COMMODITY

EXCHANGE
Bullion: Gold, Gold M, Gold HNI, Silver, Silver M, Silver HNI
Oil & Oil Seeds : Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soymeal,
RBD Palmolein, Crude Palm Oil, Groundnut Oil, Mustard Seed, Mustard Seed Oil,
Cottonseed Oilcake, Cottonseed
Spices: Pepper, Red Chilli, Jeera, Turmeric
Metal: Steel Long, Steel Flat, Copper, Nickel, Tin
Fibre: Kapas, Long Staple Cotton, Medium Staple Cotton
Pulses: Chana, Urad, Yellow Peas, Tur
Cereals: Rice, Basmati Rice, Wheat, Maize, Sarbati Rice
Energy: Crude Oil
Others: Rubber, Guar Seed, Gur, Guargum Bandhani, Guargum, Cashew Kernel,
Guarseed Bandhani

NEED FOR FUTURES TRADING IN COMMODITIES
Commodity Futures, which forms an essential component of Commodity Exchange, can

be broadly classified into precious metals, agriculture, energy and other metals. Current
futures volumes are miniscule compared to underlying spot market volumes and thus
have a tremendous potential in the near future.
Futures trading in commodities results in transparent and fair price discovery on account
of large-scale participations of entities associated with different value chains. It reflects
views and expectations of a wider section of people related to a particular commodity. It
also provides effective platform for price risk management for all segments of players
ranging from producers, traders and processors to exporters/importers and end-users of a
commodity.
It also helps in improving the cropping pattern for the farmers, thus minimizing the losses
to the farmers. It acts as a smart investment choice by providing hedging, trading and
arbitrage opportunities to market players. Historically, pricing in commodities futures has
been less volatile compared with equity and bonds, thus providing an efficient portfolio
diversification option.
Raw materials form the most key element of most of the industries. The significance of
raw materials can further be strengthened by the fact that the "increase in raw material
cost means reduction in share prices". In other words "Share prices mimic the commodity
price movements".
Industry in India today runs the raw material price risk; hence going forward the industry
can hedge this risk by trading in the commodities market.

HEDGING
Hedging is a sophisticated mechanism, which provides the necessary immunity to the
above interests in the marketing of commodities from the risk of adverse price
fluctuations.
A Hedge is a countervailing contract transacted in a futures market through which those

who have bought in the ready market will sell in the futures market and those who have
sold in the ready market would buy in the futures market. In each of these two cases, a
purchase in the ready market is off-set by an opposite sale in the futures market and a sale
in the ready market is off-set by purchase in the futures market.
When the purchase or sale commitment in the ready market is fulfilled, the sale or
purchase hedge contract is closed out by an offsetting reverse purchase or sale contract in
the futures market.
The practice of hedging is based on the assumption that the ready and futures prices of
the commodity move more or less parallel to each other. The ready and futures prices of a
commodity ordinarily do move together in sympathy with each other because both ready
and futures prices are basically determined by the demand and supply factors of that
particular commodity.
When the price of a commodity has declined in the ready market, its price in the futures
market would normally have also declined so that the loss incurred in the ready market
would be recovered by the profit made in the futures market.
Similarly, if the price rises in the ready market after the hedge sale had been entered into
the futures market, there would be a loss in the futures market, which would, however, be
made up with the profit made in the ready market. But, in certain circumstance, the ready
and futures prices may not move together or the spread between the two may increase or
decrease sharply. To the extent that they do not move together by the same extent,
hedging itself may be a source of minor gains or losses. But a dealer, manufacturer or
exporter is not, per se, interested in such speculative losses or gains. His only interest is
to ensure that he gets the necessary insurance against unforeseen fluctuation in prices. By
and large, hedging in a futures market does afford such a protection to the various
functionaries.

Hedging on futures markets cannot be practiced unless there are operators willing to
assume the risk of adverse price fluctuations which the hedgers desire to transfer. These
operators are called speculators. They, thus provide the much needed breadth and
liquidity to the futures markets which in their absence would remain narrow and unstable.
A speculator operating in a futures market is the one who buys or sells futures contracts
without any countervailing commitments or transactions in the actual commodity with a
view to making profit from the fluctuations in the prices.
The basic distinction between a hedge and speculative transaction on a futures market is
that while in the case of a hedge transaction there is a corresponding opposite transaction
in the ready market, in the case of a speculative transaction, there is no corresponding
transaction in the ready market.
While the motives of the speculator in entering into futures trans actions are different
from a hedger, the form or nature of transactions entered into by both in the futures
market is similar. When a transaction takes place in a futures market, the transaction may
well be between two hedgers or two speculators or between a hedger and a speculator.
While it is possible for the individual parties to enter into futures contracts, such contracts
are generally entered under the auspices of commercial bodies known as commodity
exchanges or associations.
The need for organizing futures trading under the auspices of such commodity exchanges
or associations arises mainly in order to ensure that payment of differences arising from
settlement of purchase and sale contracts entered into by the members of such exchanges
or aassociations take place in a smooth and orderly manner and thus defaults on account
of non-payment of such differences are avoided. Futures trading in these commodity
exchanges/associations are confined to or conducted through its members in accordance
with the procedure laid down in its rules members in accordance with the procedure laid
down in its rules and bye-laws.

Further, these exchanges/associations also help in evolving standard terms of contracts in
which the quantity and quality of the goods traded, period of delivery and all other terms
are pre-determined, the only variable being the price at which the contracts helps the
members of associations in entering into uniform types of contracts in which the quantity
and quality of goods, period of delivery etc. are pre-determined so that they can be
entered into primarily for the purpose of exchange of money differences.
REGULATORY BODY
The Forward Markets Commission (FMC) is the regulatory body for commodity
futures/forward trade in India. The commission was set up under the Forward Contracts
(Regulation) Act of 1952. It is responsible for regulating and promoting futures/forward
trade in commodities. The FMC is headquartered in Mumbai while its regional office is
located in Kolkata. Curbing the illegal activities of the diehard traders who continued to
trade illegally is the major role of the Forward Markets Commission.
WHY COMMODITIES MARKET?
India has very large agriculture production in number of agri-commodities, which needs
use of futures and derivatives as price-risk management system.
Fundamentally price you pay for goods and services depend greatly on how well business
handle risk. By using effectively futures and derivatives, businesses can minimize risks,
thus lowering cost of doing business.
Commodity players use it as a hedge mechanism as well as a means of making money.

For e.g. in the bullion markets, players hedge their risks by using futures Euro-Dollar
fluctuations and the international prices affecting it.
For an agricultural country like India, with plethora of mandis, trading in over 100 crops,
the issues in price dissemination, standards, certification and warehousing are bound to
occur. Commodity Market will serve as a suitable alternative to tackle all these problems
efficiently.

PROBLEMS FACED BY COMMODITIES MARKETS IN INDIA
Institutional issues have resulted in very few deliveries so far. Currently, there are a lot of
hassles such as octroi duty, logistics. If there is a broker in Mumbai and a broker in
Kolkata, transportation costs, octroi duty, logistical problems prevent trading to take
place. Exchanges are used only to hedge price risk on spot transactions carried out in the
local markets. Also multiple restrictions exist on inter-state movement and warehousing
of commodities.
RISKS ASSOCIATED WITH COMMODITIES MARKETS
No risk can be eliminated, but the same can be transferred to someone who can handle it
better or to someone who has the appetite for risk. Commodity enterprises primarily face
the following classes of risks, namely: the price risk, the quantity risk, the yield/output
risk and the political risk. Talking about the nationwide commodity exchanges, the risk of
the counter party (trading member, client, vendors etc) not fulfilling his obligations on
due date or at any time thereafter is the most common risk.
This risk is mitigated by collection of the following margins: -
• Initial Margins
• Exposure margins
• Market to market of positions on a daily basis
• Position Limits and Intra day price limits
• Surveillance
Commodity price risks include: -
• Increase in purchase cost vis-à-vis commitment on sales price

• Change in value of inventory
• Counter party risk translating into commodity price risk

KEY FACTORS FOR SUCCESS OF COMMODITIES MARKET
The following are some of the key factors for the success of the commodities markets: -
• How one can make the business grow?

• How many products are covered?
• How many people participate on the platform?
KEY FACTORS FOR SUCCESS OF COMMODITIES EXCHANGES
The following are some of the key factors for the success of the commodities exchanges:
Strategy, method of execution, background of promoters, credibility of the institution,

transparency of platforms, scaleable technology, robustness of settlement structures,
wider participation of Hedgers, Speculators and Arbitrageurs, acceptable clearing
mechanism, financial soundness and capability, covering a wide range of commodities,
size of the trade guarantee fund, reach of the organization and adding value on the
ground. In addition to this, if the Indian Commodity Exchange needs to be competitive in
the Global Market, then it should be backed with proper "Capital Account
Convertibility".
The interests of Indian consumers, households and producers are most important, as these
are the people who are exposed to risk and price fluctuations.

KEY EXPECTATIONS OF COMMODITIES EXCHANGES
The following are some of the key expectations of the investor's w.r.t. any commodity
exchange: -
• To get in place the right regulatory structure to even out the differences that may
exist in various fields.
• Proper Product Conceptualization and Design.
• Fair and Transparent Price Discovery & Dissemination.
• Robust Trading & Settlement systems.
• Effective Management of Counter party Credit Risk.
• Self-Regulation to ensure: Overview of Trading and Surveillance, Audit and
review of Members, Enforcement of Exchange rules.
FUTURE PROSPECTS
With the gradual withdrawal of the government from various sectors in the post-
liberalization era, the need has been felt that various operators in the commodities market
be provided with a mechanism to hedge and transfer their risks. India's obligation under
WTO to open agriculture sector to world trade would require futures trade in a wide
variety of primary commodities and their products to enable diverse market functionaries
to cope with the price volatility prevailing in the world markets. Government subsidy
may go down as a result of WTO. The MSP programme will not be sustainable in such a
scenario. The farmer will have to look at ways of being in a position to trade on
commodity exchanges in future. Also, corporates will feel the pressure to hedge their
price risk once the frontiers open up for free trade.
Indian markets have recently thrown open a new avenue for retail investors and traders to
participate: commodity derivatives. For those who want to diversify their portfolios
beyond shares, bonds and real estate, commodities are the best option.
Following are some of the applications, which can utilize the power of the commodity
markets and create a win-win situation for all the involved parties: -

REGULATORY APPROVAL / PERMISSION TO FII'S FOR
TRADING IN THE COMMODITY MARKETS
FII's are currently not allowed nor disallowed under any law. As, they have added depth
to the equity markets; they will add depth to the commodities markets, since they
globally know the commodities.
ACTIVE INVOLVEMENT OF MUTUAL FUND INDUSTRY IN

INDIA
Currently Mutual Funds are prohibited from not using derivatives apart from hedging.
Mutual Funds as investors can invest in gold and get returns as they get from debt
instruments, equity markets. AMFI & SEBI need to collectively work towards the same.
Launch of the "Commodity Funds", by the Mutual Funds in India, can serve as a newer
investment avenue for investors.

ONLINE COMMODITY TRADING
Online commodity trading offers a way for an open, many-to-many system, where every
user has equal access to price quotes and trading functionality. It provides a level playing
field for all, without favoritism or control by a chosen few, where any user can view all
quotes posted by other users in real time, act or trade on quotes posted by others, post
their own prices and quantities for others to trade
The Online commodity trading site usually lists a large number of unique products
covering a variety of commodities, structures, and settlement terms ranging from Oil,
Natural Gas, Electric Power, Precious Metals, Emissions and Weather. It provides for
various media ranging from Physical Delivery and Financial Cash Settlement. There are
further derivative options available ranging from Forwards, Swaps, Options, Spreads,
Differentials, Complex Derivatives.
Liquidity, or trade activity, is perhaps the best measure of success of an online trading
commodity trading system. With most online commodity trading systems, traders can be
sure of finding an interesting market development or trading opportunity almost every
time they log on.
All quotes posted by users on any online commodity trading systems are live and firm.
They can be acted on with full assurance of a completed transaction. The greatest
advantage of an online system for trading is that just a click can be used to hit a bid or lift
an offer.
The Online trading system operates almost continuously around the clock, 24 hours a
day, seven days a week. This allows any user to extend the trading day, and easily pass
the trading objectives to others in companies in different times zones.
The online commodity trading system in India is only an emerging segment yet. This is
because the Internet boom in Indian is on the rise only now. The Internet charges are
becoming minimal and the Internet is soon becoming a way of life in India. It is in this
scenario that online trading is becoming more the way of trading in India.

SHAREKHAN COMMODITY ADVANTAGE
KEY BENEFITS OF COMMODITIES@ SHAREKHAN:
You are getting 20time exposer in MCX &10 time in NCDEX depends on commodity to open an
account
We have sms facility where u getting market information as well as buy/sell call
You are also getting yahoo chat,Where our dealer/RM are always help for market information as
well as buy/sell call

ABOUTH THE MUTUAL FUNDS
INTRODUCTION
Mutual fund is the ideal investment vehicle for today’s complex and modern financial
scenario. The sources of revenue like fix income instruments, real estate, derivatives etc...
But due to less information available it can not be understood easily.
A mutual fund is the answer to above all the situations. Nowadays a mutual fund is a
strong tool to pull a large amount from the market. There are several schemes to invest
money and get more revenue. With the help of Mutual fund an investor can invest their
money indirectly in share market.
Mutual fund industry was started in India with establishment of UTI (1963), which is
only player in the market of mutual fund up to 1987. During that time mutual fund
market refers the unit link schemes like Master Share and Master Gain.
Mutual fund provides varieties of schemes for different kind of customers to suit their
goals. Mutual fund have open-ended and close-ended schemes, children’s plan,
diversified equity fund, balanced fund, liquid fund, income fund, short term fund, sector
fund, ELSS (equity linked savings schemes) and pension plan.

PROCESS OF MUTUAL FUND
STRUCTURE OF MUTUAL FUND

WHY ONE SHOULD INVEST IN MUTUAL FUND ?
• PROFESSIONAL INVESTMENT MANAGEMENT
• DIVERSIFACATION
• LOW COST
• CONVENIENCE AND FLEXIBILITY
• LIQUIDITY
• TRANSPARENCY
• VARIETY
HOW TO CHOOSE A MUTUAL FUND ?
• PAST PERFORMANCE
• KNOW THE FUND MANAGER
• DOES IT SUIT YOUR RISK PROFILE?
• READ THE PROSPECTUS
• HOW THE FUND WILL AFFECT THE DIVERSIFICATION OF YOUR

PORTFOLIO?
• WHAT DOES IT COST TO THE INVESTOR?

TYPES OF MUTUAL FUND
BY STRUCTURE
OPEN ENDED SCHEMES
These funds are sold at the NAV based prices, generally calculated on every business
day. These schemes have unlimited capitalization, open-ended schemes do not have a
fixed maturity - i.e. there is no cap on the amount you can buy from the fund and the unit
capital can keep growing. These funds are not generally listed on any exchange.
Open-ended funds are bringing in a revival of the mutual fund industry owing to
increased liquidity, transparency and performance in the new open-ended funds promoted
by the private sector and foreign players. Open-ended funds score over close-ended ones
on several counts. Some of these are listed below:
a) Any time exit option: The issuing company directly takes the responsibility of
providing an entry and an exit. This provides ready liquidity to the investors and avoids
reliance on transfer deeds, signature verifications and bad deliveries.
b) Tax advantage: Though Budget 2000 proposals envisage a tax rate of 20% on dividend
distribution made by the Debt funds, the funds continue to remain attractive investment
vehicles. In equity plans there is no distribution tax.
c) Any time entry option: An open-ended fund allows one to enter the fund at any time
and even to invest at regular intervals (a systematic investment plan).
The open ended funds offered by PruICICI are Liquid Plan, Income Plan, Gilt-Treasury,
Gilt-Investment, Balanced Fund, Growth Fund, Tax Plan , FMCG Fund, Technology
Fund, Monthly Income Plan , Fixed Maturity Plan, Child Care Plan, Power and Short
Term Plan

CLOSE ENDED SCHEMES
Schemes that have a stipulated maturity period, limited capitalization and the units are
listed on the stock exchange are called close-ended schemes.
These schemes have historically seen a lot of subscription. This popularity is estimated to
be on account of firstly, public sector MFs having floated a lot of close-ended income
schemes with guaranteed returns and secondly easy liquidity on account of listing on the
stock exchanges.
The closed-ended fund managed by PruICICI is ICICI Premier.
BY INVESTMENT OBJECTIVE
GROWTH SCHEMES
These funds seek to provide growth of capital with secondary emphasis on dividend.
They invest in shares with a potential for growth and capital appreciation. Because they
invest in well-established companies where the company itself and the industry in which
it operates are thought to have good long-term growth potential, growth funds provide
low current income. Growth funds generally incur higher risks than income funds in an
effort to secure more pronounced growth.
INCOME SCHEMES
Growth and income funds seek long-term growth of capital as well as current income.
The investment strategies used to reach these goals vary among funds. Some invest in a
dual portfolio consisting of growth stocks and income stocks, or a combination of growth
stocks, stocks paying high dividends, preferred stocks, convertible securities or fixed-
income securities such as corporate bonds and money market instruments. Others may
invest in growth stocks and earn current income by selling covered call options on their
portfolio stocks. Growth and income funds have low to moderate stability of principal
and moderate potential for current income and growth. They are suitable for investors
who can assume some risk to achieve growth of capital but who also want to maintain a
moderate level of current income.

BALANCED SCHEMES
The Balanced fund aims to provide both growth and income. These funds invest in both
shares and fixed income securities in the proportion indicated in their offer documents.
Ideal for investors who are looking for a combination of income and moderate growth.
MONEY MARKET SCHEMES
For the cautious investor, these funds provide a very high stability of principal while
seeking a moderate to high current income. They invest in highly liquid, virtually risk-
free, short-term debt securities of agencies of the Indian Government, banks and
corporations and Treasury Bills. Because of their short-term investments, money market
mutual funds are able to keep a virtually constant unit price; only the yield fluctuates.
Therefore, they are an attractive alternative to bank accounts. With yields that are
generally competitive with - and usually higher than -- yields on bank savings account,
they offer several advantages. Money can be withdrawn any time without penalty.
Although not insured, money market funds invest only in highly liquid, short-term, top-
rated money market instruments.
Money market funds are suitable for investors who want high stability of principal and
current income with immediate liquidity.

OTHER SCHEMES
These funds invest in securities of a specific industry or sector of the economy such as
health care, technology, leisure, utilities or precious metals. The funds enable investors to
diversify holdings among many companies within an industry, a more conservative
approach than investing directly in one particular company.
Sector funds offer the opportunity for sharp capital gains in cases where the fund's
industry is "in favor" but also entail the risk of capital losses when the industry is out of
favor. While sector funds restrict holdings to a particular industry, other specialty funds
such as index funds give investors a broadly diversified portfolio and attempt to mirror
the performance of various market averages.
Index funds generally buy shares in all the companies composing the BSE Sensex or NSE
Nifty or other broad stock market indices. They are not suitable for investors who must
conserve their principal or maximize current income.
A summary is presented in the table below of the various funds and their investment
objectives.
GROWTH OF THE MUTUAL FUND INDUSTRY

INVESTING IN MUTUAL FUNDS THROUGH SHAREKHAN
We're glad to announce that you will now be able to invest in Mutual Funds through us!
We've started this service for a few mutual funds, and in the near future will be
expanding our scope to include a whole lot more. Applying for a mutual fund through us
is open to everybody, regardless of whether you are a Sharekhan customer.
You have two choice through which you can invest in Mutual Fund.
A) On the main page of this micro-site and scheme snapshot page we have provided with
a link to PDF version of application form which you just need to download, print and fill
up relevant details. Submit the duly filled copy with payment either to Nearest Sharekhan
Branch Or Mutual Fund Company.
B) Alternatively you can call up our customer service 1600-22-7500 and give your
contact detail wherey we will arrange to mail you a hard copy of application of desired
schemes from the list offered by Sharekhan.

PROBLEMS OF THE INDUSTRY
 Problems of awareness about mutual fund industry are urban areas

only people of rural areas are not aware of MF and 70% people
belong to village areas and full of money.
 Lack of communication like day to day NAV and when the dividend
declared, How much percentage of dividend will come etc. messages
are not communicated by Asset Management Company to the Broker
or Intermediaries.
 Customers could not get the service properly like Statement of
Investment, Redemptions, which schemes and what percentage of
return they are getting?
 The industry is highly depending upon the Primary market and no one
can predict about market whether it will go up (Boom) or down.
Indian Market is highly volatile.
 Performance of the various schemes of MF is again depending on the
Fund Manager. If the Fund Manager performs well, investors will get
the handsome return of their investment otherwise investors lose its
amount, which is invested in MF.
 A wrong commitment by the broker like Broker is giving the sure
returns commitment and neglects the risks factor.
 Investors also want high return and less risk. Expectations of the
investor are high and risk avers.
 Fact sheet of the various schemes are not coming on time and in
quantity. It is necessary because investors want it for their study. As
well as the problem of necessary forms.

ABOUT LIFE INSURANCE
Life insurance is a contract of payment of sum of money assured to the person assured (or
falling him/her, to the person entitled to receive the same) on the happening of the event
insured against.
Usually the insurance contract provides for the payment an amount on the date of
maturity or at the specified dates at periodic intervals or at unfortunate death if it occurs
earlier. Obviously, there is a price to be paid for this benefit. Among other things, the
contract also provides for the payment of premiums by the assured. Life Insurance is
universally acknowledged as a tool to eliminate risk, substitute certainty and ensure
timely aid of the family in the unfortunate event of the death of the bread winner. In other
words, it is civilized world’s partial solution to the problems caused by the death.
In a nutshell, life insurance helps in two ways: premature death which leaves dependent
families to fend for itself and old age without visible means of support.
BENEFITS OF LIFE INSURANCE:
SUPERIOR TO ANY OTHER SAVING PLAN

Unlike any other saving plan, a life insurance policy affords full protection against risk of
death. In the event of death of a policy holder, the insurance company makes available
the full sum assured to the policy holders’ near and dear ones. In comparison, any other
saving plan would amount to the total savings accumulated till date. If the death occurs
prematurely, such savings can be much lesser than the sum assured. Evidently, the
potential financial loss to the family of the policyholder is sizable.

ENCOURAGES AND FORCES THRIFT
A saving deposit can easily be withdrawn. The payment of life insurance premiums,
however is considered sacrosanct and is viewed with the same seriousness as the payment
of interest on mortgage. Thus a life insurance policy in effect brings about compulsory
savings.
EASY SETTLEMENT AND PROTECTION AGAINST CREDITORS
A life insurance policy is the only financial instrument the proceeds of which can be
protected against the claims of a creditor of the assured by effecting a valid assignment of
the policy.
ADMINISTERING THE LEGACY FOR BENEFICIARIES
Speculative or unwise expenses can quickly causes the proceeds to be squandered.

Several policies have foreseen this possibility and provide for payments over period of
years or in a combination of installments and lump sum amounts.
READY MARKETABILITY AND SUITABILITY FOR QUICK BORROWING
A life insurance policy can, after a certain time period (generally three years), be
surrendered for a cash value. The policy is also acceptable as a security for a commercial
loan, for example a student loan. It is particularly advisable for housing loans when an
acceptable LIC policy may also cause the lending institution to give loan at lower interest
rates.

DISABILITY BENEFITS
Death is not only the hazard that is insured; many policies also include disability benefits.
Typically, these provide for waiver of future premiums and payments of monthly
installments spread over certain time period.
ACCIDENTAL DEATH BENEFITS
Many policies can also provide for an extra sum to be paid (typically equal to the sum
assured) if death occurs as a result of accident.
TAX RELIEF
Under the Indian Income Tax Act, the following tax relief is available
a) 20% of the premium paid can be deducted form your total income tax liability.
b) 100% of the premium paid is deductible from your total taxable income.
When these benefits are factored in it is found that most policies offer returns that are
comparable/ or even better than other saving modes as PPF, NSC etc. Moreover, the cost
of insurance is a very negligible.

RESEARCH METHODOLOGY
RELEVANCE OF THE STUDY
Any country of the world is measured by its economy. The economy indicates whether
the nation is strong or weak, developed or under – developed.
Financial market is one of the factor which affects the economy of any country. Stock
market affects Indian economy directly or indirectly.
In India stock market is fully developed but on the other side derivatives segment and
commodity segment are upcoming.
In the financial market, there are various instruments for investment or saving. The more
investment or saving in these instruments, the more development is possible.
The instrument like F.D., Equity, Debenture, Cash segment, Bond, Mutual Fund,
derivatives and commodities. There are other bullion market, Real Estate, Precious
Objects, Insurance etc… are available.
There are so many investors in India are not much familiar with their instruments but one
fact is that there is immense scope for these instruments.
Thus to know the awareness about the investment pattern in stock market particular in
rajkot city this study is undertaken.
As a sharekhan member this study is undertaken to know the investment pattern in stock
market and also find out the way to attract such investor who like to trade in stock
market.
At last this study helps me to gain the knowledge and the company to attract new
customers.

RESEARCH PROBLEM
In the rajkot city, many people invest in stock market and mutual fund but most of the
investor never invest in government securities and other securities segment are remain
inaccessible.
Very few people in the rajkot who are invest in current capital market having immense
opportunities for developing of investment segments.
Sharekhan as a stock broking company needs to focus on increasing interest in stock

market investment because if trading on these instruments increase sharekhan will be
benefited by earning revenue in terms of brokerage.
So that this study is undertaken.

OBJECTIVES
The main objective of the study is to know literacy and total awareness of current capital
market ratio of different investment avenues and their potential market among the people
of Rajkot City.
Some other secondary objectives are as under:
1. To know the awareness of Total Capital Market.
2. To know the scope for the Current Capital Market.

3. To know the investment habit of the people of Rajkot City.
4. To know the purpose of investing in Current Investment Avenues.
5. To know the influencing force behind the decision making while invest in
currently available investment options.
6. To find out the best pattern to educate about different investment avenues.
7. To find out the medium which is the best suitable for investing in different
investment avenues.

HYPOTHESIS
H0: “There is no significant difference in level of knowing the different

investment avenues in the current capital market among the people of
Rajkot City.”
H1: “There is significant difference in level of knowing the different

investment avenues in the current capital market among the people of
Rajkot City.”

SCOPE OF THE STUDY
The research that is being conducted by us will be useful in the following respect.
 This will help the company, how to make people aware about capital market
mostly stock market by imparting best education.
 This will help the company to know the taste of masses and turn it towards best
available investment avenue.
 This will help the company to frame effective Marketing Strategy.
 This will also help to select the right media for advertising to create brand
awareness as well as to give knowledge of the products.
 Mind share of Sharekhan can be known.
 This will also help to select right medium for investing into the different
investment tools.
 This will help the company to reduce the obstacles which come in the way for the
development of its related investment products segment.

DATA COLLECTION
SECONDARY DATA
When data are collected and compelled from the published nature or any other’s primary
data is called secondary data.
So far as our research is concerned, we have not collected any information from any
sources. So, we have not used secondary data for our research
PRIMARY DATA
The data which is collected directly from the respondent to the base of knowledge and
belief of such research are called primary data.
SAMPLING DESIGN
Sample design is definite plan for obtaining a sample from a given population. It refers to
the technique or procedure the researcher would adopt selecting items for the sample.
Sample design may as well as lay down the no. of item to be included in the sample i.e.
the size of sample.
Sample design is determined before the data are collected.

It is very true that it’s very difficult to do the research with the whole universe. As we
know that it is not feasible to go for population survey because of the numerous
customers and their scattered location. So for this purpose sample size has to be
determined well in advance and selection of sample also must be scientific so that it
represents the whole universe.
So far as our research is concerned, we have taken sample size of 300 respondents. We
have selected Income Earners with savings to invest in Rajkot city.
As we select the questionnaire as our INSTRUMENT for the research purpose.
MODE OF COLLECTION OF DATA

We have collected the data through questionnaire by personal meeting and tele – calling
with people.

LIMITATION OF THE STUDY
1. Personal Bias:
People may have personal bias towards particular investment option so they may
not give correct information and due to which conclusion may be derived.
2. Time Limit:
The time duration of the research is short that’s why the information is not
covered fully.
3. Area:
The area was limited to Rajkot city only, so we can not know the degree of the
literacy outside the city.
4. Sample Size:
The last limitation is Sample size, taken by us is of 300 only; due to which we
may not get the proper results.

DATA ANALYSIS
1. GENDER RATIO
MALE FEMALE
219 81
GENDER RATIO
81
MALE
FEMALE
219
2. AGE GROUP
NO OF
PARTICULARS PERSONS
BELOW 30 89
31-45 123
46-60 60
ABOVE 60 28
140
120
100
80
123
60
89
40 60
20 28
0
BELOW 30 31-45 46-60 ABOVE 60

3. EDUCATION
NO OF
PARTICULARS PERSONS
UNDER
GRADUATE 87
GRADUATE 135
POST GRADUATE 78
EDUCATION
78 87
UNDER GRADUATE
GRADUATE
POST GRADUATE
135
4. OCCUPATION
NO OF
PARTICULARS PERSONS
PROFESSIONAL 27
BUSINESSMAN 143
WORKING IN PVT
FIRM 67
GOVT. EMPLOYEES 63
27
63
PROFESSIONAL
BUSINESSMAN
WORKING IN PVT FIRM
67 GOVT. EMPLOYEES
143

5. OF THIS INVESTMENT OPTION WHERE DO YOU INVEST YOUR
SAVINGS ?
NO. OF % OF
AVENUES PERSONS PERSONS
STOCK MARKET 192 64
BANK Fixed Deposits 235 78.33333
POST OFFICE SAVINGS
SCHEME 210 70
INSURANCE 189 63
MUTUAL FUND 170 56.66667
COMMODITY 205 68.33333
REAL ESTATE 148 49.33333
NO. OF PERSONS
235
250 210
192 205
189
200 170
148
150
NO. OF PERSONS
100
50
0
ESTATE
MUTUAL
MARKET
SAVINGS
STOCK
OFFICE
FUND
REAL
POST
% OF PERSONS
49.33333333 64
1
2
68.33333333
3
78.33333333
4
5
56.66666667 6
70 7
63

6. IF YOU INVEST IN STOCK MARKET WHICH WOULD BE YOUR
PREFERENCE ROM BELOW
NO OF % OF
PARTICULARS PERSONS PERSONS
EQUITY 189 63
FUTURE &
OPTIONS 67 22.33333
COMMODITY 44 14.66667
NOOFPERSONS
200 189
150
100
67
50
44
COMMODITY
FUTURE &
EQUITY
OPTIONS
0 NOOF NOOFPERSONS
PERSONS
% OF PERSONS
14.666666
7
1
22.333333 2
3 63 3

7. WHICH FACTOR PLAYS A CRUCIAL ROLE WHEN YOU MAKE A
DECISION TO INVEST IN STOCK MARKET ?
NO OF
PARTICULARS PERSONS RANK
RISK REDUCTION 45 4
LEAVERAGE
BENEFIT 41 5
ARBITRAGE
BENEFIT 54 3
SPECULATIVE
MOTIVE 72 2
INVESTMENT
PURPOSE 88 1
100% 4 5 3 2 1
90%
80%
70%
60% RANK
50% 45 41 54 72 88
40% NO OF PERSONS
30%
20%
10%
0%
N
IT
VE
SE
T
IO
FI
EF
O
TI
CT
NE
RP
O
BE
DU
M
BE
PU
E
RE
E
E
V
AG
T
G
TI
EN
K
RA
LA
TR
S
M
RI
VE
U
BI
ST
EC
AR
A
VE
LE
SP
IN

8. HOW DO YOU TAKE DECISION IF YOU WANT TO INVEST IN STOCK
MARKET ?
FACTOR PERCENTAGE(%) RANK

INDEPENDENTLY 14.3 1
BROKER/AGENT'S ADVICE 11.6 5
NEWS CHANNEL 9.3 8
NEWS PAPER 8 9
INTERNET 11.3 6
ADVICE OF
FRIENDS/COLLEAGUS 12 2
ADVICE OF CA/TAX
CONSULTANTS 9.7 7
WELL KNOWN TOCK BROKING
HOUSES 12 2
BUSINESS MAGAZINES 11.8 4
100% 1
90% 2 2 4
80% 5 6 7
8 9
70%
60% RANK
50% 14.3
40% 12 12 11.8 PERCENTAGE(%)
30% 11.6 11.3
9.3 8 9.7
20%
ADVICE OF CA/TAX
10%
INDEPENDENTLY
NEWS CHANNEL
MAGAZINES
0%
INTERNET
CONSULTANTS
BUSINESS

9. WHICH STOCK EXCHANGE WOULD YOU PREFER TO CARRY OUT
YOUR TRANSACTION ?
NO OF
EXCHANGES PERSONS
BSE 133
NSE 81
NCDEX 45
MCX 41
NO OF PERSONS
140 133
120
100
81
80
NO OF PERSONS
60 45 41
40
20
0
BSE NSE NCDEX MCX
10. DO YOU CONSIDER INVESTMENT IN STOCK MARKET ARE SAFER

THAN OTHER INVESTMENT AVENUES ?
NO OF
PARTICULARS PERSONS
YES 137
NO 163

NO OF PERSONS
137 YES
163 NO
11. IF NO THAN WHICH CONSTRAINTS THAT HOLDING YOU BACK ?
NO OF
CONSTRAINTS PERSONS
LACK OF KNOWLEDGE 38
LACK OF GUIDENCE FROM
BROKER 16
LACK OF AVAILABILITY OF
FUND 42
LAKE OF RISK TAKING
ABILITY 67
NO OF PERSONS
100%
80%
60%
38 16 42 67
40%
20%
0%
LACK OF LACK OF LACK OF LAKE OF RISK
KNOWLEDGE GUIDENCE AVAILABILITY TAKING
FROM BROKER OF FUND ABILITY
NO OF PERSONS

12. HOW MUCH TIME WILL YOU ABLE TO DEVOTE FOR LEARNING
STOCK MARKET ?
NO OF
TIME PERSONS
1 DAY 54
2 DAY 45
3 DAY 42
2 HR PER DAY OVER A
WEEK 47
CAN'T SAY 112
NO OF PERSONS
CAN'T SAY 112
2 HR PER DAY OVER A

WEEK 47
3 DAY 42 NO OF PERSONS
2 DAY 45
1 DAY 54

13. ACCORDING TO YOU WHICH MEDIUM IS THE MOST RELIABLE FOR
TRADING IN STOCK MARKET ?
NO OF
PARTICULARS PERSONS
STOCK
BROKING CO 113
FRANCHISES 56
BROKER 56
ONLINE 75
NO OF PERSONS
STOCK
ONLINE, 75
,BROKING CO
113
BROKER, 56
,FRANCHISES
56

14. GIVE THE RANK FOR RECOMMEDATION TO STOCK BROKING
COMPANIES.
COMPANY NO OF
NAME PERSONS RANK
ICICI
DIRECT.COM 89 1
KOTAK
STREET 56 3
SHAREKHAN 78 2
INDIA
INFOLINE 34 4
INDIABULLS 27 5
INDIABULLS
27
INDIA INFOLINE
34
SHAREKHAN
78
2
KOTAK STREET
56
ICICI DIRECT.COM
89
0 20 40 60 80 100
NO OF PERSONS RANK

1. GENDER RATIO
Male Female
186 114
GENDER
114
Male
Female
186
2. AGE
21 – 35 36 – 50 51 – 65 Above 66
Age
183 24 93 0
200 183
180
160
140
120
100 93
80
60
40 24
20
0
0
Age 21 – 35 36 – 50 51 – 65 Above 66

3. EDUCATIONAL QUALIFICATION
Post Graduate Graduate Under Graduate

Qualification
114 186 0
0
100%
80% 186
Under Graduate
60% Graduate
Post Graduate
40%
114
20%
0%
1
4. OCCUPATION
Employees working in Pvt.
Professionals Business Man Govt. Employees
Firm
114 45 69 72
Govt.
Employees,
72 Profession
als, 114
Employees
working in
Pvt. Firm, Business
69
Man, 45

5. INVESTMENT PATTERN OF THE PEOPLE
Securities Nos. Percentage

Bank FD 231 77
Mutual Fund 138 46
Shares/ Equity 186 62
Postal Scheme 207 69
Insurance 231 77
Real Estate 162 54
G-secs 114 38
Bonds/Debentures 138 46
Jewellery 231 77
231
Jewellery
138
Bonds/Debentures
114 G-secs
162 Real Estate
231 Insurance
207 Postal Scheme
186 Shares/ Equity
138 Mutual Fund
Bank FD
231
It can be seen from the graph that the respondents have given first preference for
investment to “Bank FD”. Insurance and Jewellary are at 77% while postal schemes,
shares/equities have almost equal share with second and third position. We can say that
the respondents are not in favor of taking risk. But by seeing the shares on second
preferences we can say that people are now turning towards capital market.

6. INSTRUMENTS IN WHICH PEOPLE ARE TRADING
Instruments Nos. Percentage (%)

Equity 207 69
Derivative 114 38
Commodities 45 15
250
207
200
150 Equity
114
Derivative
100
Commodities
45
50
0
Nos.
When asked to the respondents that out of the given three options in which they are
trading . Equity got the first preference by 69%. While derivatives i.e. F&O has got
second rank and commodities has been least preferred now a days.

7. INSTRUMENTS IN WHICH PEOPLE WANT TO BE TRADE IN.
Instruments Nos. Percentage (%)

Equity 93 31
Derivative 93 31
Commodities 114 38
120 114
100 93 93
80
Equity
60
Derivative
40 Commodities
20
0
Nos.
On asked about their preferences for trading in future, the respondents have shown equal
interest in equity and commodity with 38% followed by derivatives. From this we can
say that commodity segment has got a brighter future.

8. THE CONSTRAINTS THOSE ARE DECREASING THE USE OF
DERIVATIVES & COMMODITIES SEGMENT.
Obstacles Nos. Percentage (%)

Risk Taking Ability 69 23
Fund Facilities 69 23
Lack of Knowledge 45 15
Non Availability of Option
- -
with the Broker
Regulatory Constraints - -
Still in “wait & see” 24 08
Lack of Guidance 24 08
While questioned about the constraints which hold them back from trading in derivatives
and commodities, respondents have given the maximum votes to their “Risk awareness”
and “lack of funds” with 23% each. While the lack of knowledge about derivatives and
commodities is also one of the big constraints followed by lack of guidance.

9. FACTORS THAT ARE TO BE CONSIDERED BY PEOPLE WHILE JUMPING
IN TO DERIVATIVE & COMMODITY SEGMENT.
Factors Nos. Rank

Risk Reduction 28.4 1
To Increase Leverage 21.9 3
Investment 24.6 2
Arbitrage 11.4 5
Speculation 13.7 4
30 28.4
21.9 24.6
25
20 13.7
15 11.4
10
5
0
Nos.
Risk Reduction To Increase Leverage Investment
Arbitrage Speculation
While investigating the factors which have been given the maximum importance by
investors while trading in derivatives and commodities we have come up with “Risk
Reduction” as the first priority with 28.4%, while 24.6% people have considered it as an
investment option near to that almost 22% people are using derivatives and commodity as
a tool to increase the leverage. So, in future derivatives and commodities can be
highlighted as an investment option which given higher leverage.

10. FACTORS WHICH PEOPLE TAKES INTO CONSIDERATION WHILE
TAKING THE DECISION TO TRADE IN DERIVATIVES &
COMMODITIES.
Factor Percentage (%) Rank

Independently 14.3 1
Broker/Agent’s advice 11.6 5
News Channel 9.3 8
News Papers 8 9
Internet 11.3 6
Advice of Friends/Colleagues 12 2
Advice of CA/Tax consultants 9.7 7
Well-known Stock Broking Houses 12 2
Business Magazines 11.8 4
11.8 14.3
12
11.6
9.7 9.3
12 8
11.3
Independently Broker/Agent's advice
News channel News Papers
Internet Advice of Friends/Colleagues
Advice of CA/Tax consultants Well-known stock Broking Houses
Business Magazines

On asked to the respondents that while deciding to trade in derivative commodities,
whom do they consider the reliable source of information. We come up with the
conclusion that most of investors take their decision independently. While they
consider Business Magazines, Advice of friends/colleagues and services of well
known stock broking houses equally important. Also brokers have a good knowledge
on investment. So, stock broking houses like Sharekhan can plan out their strategy to
increase the trading on derivatives and commodities.
11. TOOLS PREFERRED BY THE PEOPLE WHILE LEARNING

DERIVATIVES & COMMODITIES.
Tools Nos. Percentage (%)

Classroom Teaching 114 38
Literature 114 38
Self-Experience 207 69
Internet 93 31
Documentaries - -
Seminars 69 23
80 69
60
38 38
40 31
23
20
0
Percentage (% )
Classroom Teaching Literature

Self-experience Internet
Documentaries Seminars
When the respondents were asked about the learning technique on derivatives and
commodities, the most of them preferred preference self experience that is they
wanted to learn through “trial n error”: after all “Experience is The Best Teacher”.

12. TIME WHICH PEOPLE CAN DEVOTE TO LEARN DERIVATIVES &
COMMODITIES.
Time Nos. Percentage (%)

1 day 45 15
2 days 93 31
3 days 24 8
2 hrs per day over 1 month 45 15
Can’t say 93 31
15
31
31
15
8
1 day 2 days
3 days 2 hrs a day over 1 month
can't say
When asked about the time which the respondents would like to devote for learning
about derivatives and commodities, 31% were not sure about the time limit. It means
it depends and varies on person to person.

13. MOST PREFERRED MEDIUM FOR TRADING IN DERIVATIVES &
COMMODITIES
Medium Percentage (%) Rank

Stock Broking Cos. (Branded) 33.1 1
Franchisees 15.3 3
Brokers 25.8 2
Online 25.8 2
25.8 33.1
15.3
25.8
Stock Broking Cos. (Branded)

Franchisees
Brokers
Online
While finding out the medium which people consider the most reliable while trading
derivatives and commodities, the respondents gave maximum vote to “Branded Stock
Broking Houses” like Sharekhan, ICICIdirect.com, Kotakstreet.com. While the
second choice was given to local brokers. So from the above we can say that if proper
attention is given on online trading and brokers the chances of development of
derivatives and commodities would be increasing.

14. MOST PREFERRED BROKING COMPANIES OF THE CITY
Broking Company Percentage (%) Rank
India Bulls 10.20 4
ICICIdirect 29.30 1
Kotak Street 14.10 3
Karvy 08.90 5
Sharekhan 25.00 2
5 Paisa 05.10 6
HDFC Securities 03.80 7
Motilal Oswal 01.20 9
Marwadi 02.40 8
1.2 2.4
3.8
10.2
5.1
25 29.3
8.9
14.1
IndiaBulls ICICIdirect Kotak Street

Karvy Sharekhan 5 Paisa
HDFC Securities Motilal Oswal Marwadi
This question was one of the most crucial for investigating the mind share of stock
broking houses. In this question we came up with the company which is one of the
leading in stock broking industry i.e. ICICIdirect.com the next close challenger was
Sharekhan.com followed by Kotakstreet.com.
15. INDIVIDUAL PERCEPTION AND KNOWLEDGE
True False Can’s Say

54.8 32.7 12.5

1 2 .5
5 4 .8
3 2 .7
T r u e F a ls e C a n ’s S a y
In this question we asked eight sub questions on derivatives and commodities segment.
Almost 55% questions were correctly answered by the respondents; while 32.7% were
false. So, we can say that the people have more or less knowledge about derivatives and
commodities.

CONCLUSION
• Most of the people in Rajkot City are investing in fixed return

Instruments.
• But there are investors who use Equity as an investment tool.
• Those people who want to invest in Derivatives & Commodities

are investing mainly for reducing risk and they consider them as
investment tool.
• People generally want to take trading decisions independently or

under the guidance of Friends or Well Known Stock Broking
Houses.
• Literature and Self Experience can be taken as the best method to

impart education about derivatives & commodities
• More than 40% of the respondents are interested to invest into

the stock market.

TESTING OF HYPOTHESIS
TESTING OF HYPOTHESIS USING Z TEST (TWO TAILED):
1) The Null Hypothesis (H0): “There is no significant difference in level of

knowing the different investment avenues in the current capital market
among the people of Rajkot City.”
Therefore, H0 : u = 50%
H1: u ≠ 50%
2) Level of Significance : σ
The Level of significance should be set at α = 0.05
3) The Statistical Test :

Z = X – u / σx
Where, Z = No. of standard deviations for the desired level of
confidence.
X = Mean of the sample
U = Mean of the population or hypothetical mean
σx = Estimate for the standard error or the mean

4) The Decision Rule
1.000 (1-0.025) = 0.975
1.9+ 0.6 = 1.96 & - 1.96 (the result will be between two)
σx = 5 / root of 300 - 1
= 15/17.29
= 0.8676
Z = 55 – 50 / 0.8676
= 5.763
5.) Draw a statistical conclusion
The absolute value of the computerized Z statistic (5.763) is larger
than 1.96, therefore null hypothesis is rejected.
So, Alternate Hypothesis is accepted.

H1: “ There is significant difference in level of knowing the different
investment avenues in the current capital market among the people of Rajkot
City.”

FINDING AND SUGGESTIONS
• Sharekhan needs to make its marketing team strong and also it
should increase marketing activities such as promotional
campaigns.
• Sharekhan should educate the investors about Derivatives &

Commodities by organizing classes, corporate presentations,
taking part in consumer fairs, organizing events.
• Company should show the benefits of trading on Derivatives &

Commodities
• Sharekhan should turn existing customers (who are trading in

Equity only) towards Derivatives & Commodities.
• Sharekhan can also use Newspapers and Local New Channels as a

medium of advertising.
• Sharekhan may also use its helpline number for giving education
on Derivatives & Commodities.
• Company may appoint special team for giving education &

attracting people towards trading on Derivatives & Commodities.

EXPERIENCE DURING THE TENNURE
• During the two month intercourse with sharekhan I had

the opportunity to explore the mechanisms of the stock
market. I had the chance not only to grab the knowledge
of this field but also the opportunity to become a member
of the alternate channel and thereby help the company
market its financial products in a more better and a
fruitful way.
• During my survey research I had learned about the

attitude of the people towards the investment avenues
available in the financial market.

QUESTIONNAIRE
INVESTMENT PATTERN IN STOCK MARKET
1. Gender: Male Female
2. Age: Below 30 31-45 46-60 Above 60
3. Education: Undergraduate Graduate Post graduate
4. Occupation: Professional Businessmen

Employees working Govt. Employee
in Pvt. Firms
5. Of this investment options, where do you invest your savings ?
Bank FD Postal Scheme Jewellary

Mutual Funds Insurance
Shares/Equity Real Estate
6. If you Invest in stock market which would be your preference from below :
Equity Derivatives (F&O) Commodity
7. Which factor plays crucial role when you make a decision to invest in stock
market :
Risk Reduction Speculative Motive

Leverage Benefit Investment
Arbitrage Benefit

8. How do you take decisions if you want to invest in stock Market (Give Rank)
Independently Advice of Friends/colleagues
Broker/Agent’s advice Advice from CA/Tax consultant
News channels Well-known Stock Broking Houses
Newspapers Business Magazines
Internet
9. Which Stock exchange would you prefer to carry out your transactions
BSE NCDEX
NSE MCX
10. Do you consider investment in stock market are safer than other investment
avenues ?
YES NO
11. If no than which constraints that are holding you back.

Lack of knowledge Lack of guidance from broker
Lack of fund availability Lack of Risk Taking ability
12. How much time will you be able to devote for learning Stock Market.
1 day 2 days 3 days
2 hrs per day over 1 week Can’t say
13. According to you, which medium is the most reliable for trading in Stock
Market ? (Give Rank)
Stock broking cos. (Branded) Brokers
Franchisees Online

14. Name any 6 stock-broking companies that you like to Recommend(Give
Rank).
Sharekhan Kotak Street(Online)

Indiabulls Motilal Oswal
5.Paisa.Com ICICI direct.com

QUESTIONNAIRE
THE DEGREE OF LITERACY ABOUT DERIVATIVES &
COMMODITIES IN THE PEOPLE OF RAJKOT CITY
1. Gender: Male Female

2. Age: 21-35 36-50 51-65 Above 66
3. Education: _________________________
4. Occupation: Professional Businessmen
Employees working Govt. Employee
in Pvt. Firms Others
5. Of this investment options, with which are you familiar and already invest in?
Bank FD Postal Scheme G-Secs

Mutual Funds Insurance Bonds/Debentures
Shares/Equity Real Estate Jewellary
6. Which of these are you already in today?

7. Which of these you would like to be in for trading?

8. If Questions 6& 7 are not applicable, then what are the constraints that are
holding you back?
Risk taking ability Regulatory constraints

Fund Facilities Still in ‘wait & see’
Lack of knowledge Lack of Guidance
Non-Availability of Options
with your broker

9. If you are trading in derivatives & commodities or you want to be in, which
factors will you give importance? (Give Rank)
Risk Reduction Speculation

Investment Arbitrage
To increase the leverage
10. How do you take decisions if you want to trade in Derivatives &
commodities? (Give Rank)
Independently Advice of Friends/colleagues
Broker/Agent’s advice Advice from CA/Tax consultant
News channels Well-known Stock Broking Houses
Newspapers Business Magazines
Internet
11. How do you want to learn about derivatives & commodities?

Classroom teaching Internet
Literature Documentaries
Self-Experience Seminars
12. How much time will you be able to devote for learning derivatives &
Commodities?
1 day 2 days 3 days
2 hrs per day over 1 month Can’t say
13. According to you, which medium is the most reliable for trading in
derivatives & Commodities? (Give Rank)
Stock broking cos. (Branded) Brokers
Franchisees Online
14. Name any 3 stock-broking companies that deal in derivatives &

commodities?
1. ________________ 2. ________________ 3.
________________

15. Individual perception & knowledge: True (√) ; False (X)
a.) Options are available for too many strikes
b.) Buying Calls and Puts means Teji
c.) If a fund gave a return of 16% in 2004, it will give at least 16% in 2005
d.) Derivatives and commodities are risk-reducing/ Hedging instruments
e.) One needs to pay margin for buying Calls & Puts
f.) Commodities are traded on NSE & BSE.
g.) The price of derivatives & future commodities are based on
current underlying
h.) Options are available in Commodities

BIBLIOGRAPHY
• Kothari C.R., Research Methodology, New Delhi, Vikas Publishing

House pvt.Ltd. 1978
• Pathak Bharti v.,Indian Financial System,Delhi,Person
Education(Singapore) pvt.Ltd.
WEBSITES:
1. www.Google.com
2. www.bseindia.com
3. www.nseindia.com
4. www.sharekhan.com
5. www.ncdex.com.
6. www.mcx.com
NEWSPAPERS:
• ECONOMIC TIMES
• TIMES OF INDIA
• FINANCIAL EXPRESS
• SHAREKHAN’S VALUE LINE MAGAZINE
 

Strategic Analyisis On Capital Market (NIMS11)

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WHY INVEST ?

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 1

“Share” or “Equity” represents part of an ownership of a business. So as a shareholder

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 2

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 3

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 4

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 5

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 6

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 8

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 9

 NCDEX is nationalized screen based system which is providing transparent,

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 10

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 11

MULTI COMMODITY EXCHANGE of India limited is a new order exchange with a

MCX, an independent and a de-mutualized exchange since inception, is all set up to

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 12

A person holding assets (Securities/Funds), either to meet his liquidity needs or to

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 13

1. S S KANTILAL ISHWARLAL SECURITIES PVT LTD. (www.sharekhan.com)

A/c Opening Fee Brokerage Interface

Indiabulls 750 250 0.40 0.10 N.A.

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 14

ICICI WEB TRADE LTD. (ICICIdirect.com):

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 15

KOTAK SECURITIES LIMITED (kotakstreet.com):

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 16

MOTILAL OSWAL SECURITIES LTD. (MOSt):

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 17

HDFC SECURITIES LTD (HDFCsec):

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 18

IDBI Capital Market Services Ltd.

 March 1995 - Commenced Equity Broking on NSE CM segment

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 19

Refco - Sify Securities India Pvt. Ltd

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 20

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 21

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 22

 Technology: - Technology for stock broking houses is life saving device.

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 23

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 24

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 25

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 26

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 28

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 29

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 30

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 31

 Customer satisfaction through

 Maximization of stakeholder value

 Success through Teamwork ,integrity and People

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 32

NAME : S. S. KANTILAL ISHWARLAL

HEAD OFFICE : SHAREKHAN LTD.

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 33

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 34

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 35

• Trade execution in a fraction of a second!

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 36

 The company as a whole in its offline business has named itself as

 Share khan offers its customers, depository services and trade

 Dial-n-trade is also an exclusive service available to all Sharekhan

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 37

SHREE H. N. SHUKLA COLLEGE OF MANAGEMENT STUDIES, RAJKOT 38