A SUMMER TRAINING PROJECT REPORT

ON

“Perception of people towards

investment and various investment
avenues”

Submitted in Partial fulfillment of the requirement for the Award of

the diploma of

Post graduate diploma in applied management

Submitted To     Submitted By

Neha kashyap

ACKNOWLEDGEMENT
For the successful and timely completion of the project report, I convey my
sincere feeling of gratitude towards all those who have been with me throughout.

I express my sincere gratitude to my industry guide Mr. Vishnu vishnawat

Search Manager, Religare Securities limited for his able guidance, continuous
support and cooperation throughout my project, without which the present work
would not have been possible. I would also like to thank the entire team of
Religare Securities limited, for the constant support and help in the successful
completion of my project.

Signature

Neha kashyap

(Student)

PREFACE
 Knowledge attains maturity and perfection through application in the
particular field. Application of management principles in all branches whether
production, personnel, finance or marketing etc., all result in more efficient
and effective utilization of the available resources. This report has been
compiled firstly in the partial fulfilment of the requirement for the MBA
course, secondly to share the practical experience gained because of
continued association with the company’s Finance department. The details
mentioned in this report are based strictly on the real situation.

Table of contents

S. Particulars Pages
No.

1. EXECUTIVE SUMMARY 4
 2. OBJECTIVE OF THE REPORT 6

3. RESEARCH METHODOLOGY 20

4. INDUSTRY PROFILE 22

5. Primary market and Secondary Market 38

6. 39

7. 51

8. 52

9. 54

10. 57

11. 59

12. 60

EXECUTIVE SUMMARY

The Indian Brokerage Industry consists of companies that primarily act as agents
for the buying and selling of securities (e.g. stocks, shares, and similar financial
instruments) on a commission or transaction fee basis. In actuality the brokerage
industry continues to develop rapidly. Many of the traditional restrictions against
banking activities within the brokerage industry are being eliminated and the
barriers are disappearing. Due to this, some commercial banks have as
subsidiaries, brokerage houses that offer discounts and some of them have
available accounts that offer all of the services that are offered by a checking
account.

The summer training done in Religare securities limited was done with the
objective to study the working of capital market in India , How actually trade
takes place once if order is being entered in the system, Signals are transferred
from broker to NSE’s mainframe office through VSAT lines. If order finds a match
order is being executed else it goes into a pending option and it gets executed
once it finds a perfect match. Then in my project work how order management
takes place how orders are entered modified and cancelled and then
understanding about clearing and settlement procedure is explained. how share
trading is done and how trading is carried out, done online as well as offline. If we
look from India’s point of view although online share trading is growing at a very
fast pace but still maximum investor goes for offline trading because of lack of
internet facility and also because of various disadvantages attached to online
share trading.

Other objective of doing my project was to understand the working of a

brokerage industry. The basic function of a brokerage firm is to execute buy and
sell orders for clients. Traditionally these firms have offered the investigation of
the quality and the possibilities of investing in a variety of investment products. It
is still accustomed for brokerage firms to offer information about possible
investments free of charge. This activity of bringing free of charge stock
investment reports is one of the main tools that are utilized by brokerage houses
to compete against other firms and to investors it continues to be an important
service.

OBJECTIVE OF PROJECT:
(A) PRIMARY OBJECTIVE:

1 .The primary objective of doing this project work is to have a

basic understanding of a capital market.

2. The other objective of doing this project is to understand the

working and dynamics of equity market.

(B) SECONDARY OBJECTIVE:

1 .Understanding the various clearing and settlement procedure

of a trade.

2. Comparing online share trading with offline share trading.

About Religare

Religare is a diversified financial services group of India offering a multitude of

investment options. The diverse bouquet of financial services, which Religare
offers, can be broadly clubbed across three key verticals - Retail, Institutional and
Wealth spectrums.
Religare Enterprises Limited (A Ranbaxy Promoter
Group Company) through Religare Securities Limited, Religare Finvest Limited,
Religare Commodities Limited and Religare Insurance Advisory Services Limited
provides integrated financial solutions to its corporate, retail and wealth
management clients.
Today, we provide various financial services, which
include Investment Banking, Corporate Finance, Portfolio Management Services,
Equity & Commodity Broking, Insurance and Mutual Funds. Plus, there’s a lot
more to come your way. Religare is proud of being a truly professional financial
service provider managed by a highly skilled team, who have proven track record
in their respective domains. Religare operations are managed by more than 2000
highly skilled professionals who subscribe to Religare philosophy and are spread
across its country wide branches.

Unlike a traditional broking firm, Religare group works

on the philosophy of partnering for wealth creation. We not only execute trades
for our clients but also provide them critical and timely investment advice. The
growing list of financial institutions with which Religare is empanelled as an
approved broker is a reflection of the high level service standard maintained by
the company.
Religare has also ventured into the alternative
investments sphere through its holistic arts initiative and Film fund. With a view
to expand, diversify and introduce offerings benchmarked against global best
practices, Religare operates in the life insurance space under 'Aegon Religare Life
Insurance Company Limited’ and wealth management under the brand name
'Religare Macquarie Private Wealth'.

Religare has a pan India presence, 1837 locations

across 498 cities and towns. It also currently operates from nine international
locations following its acquisition of London's brokerage & investment firm,
Hichens, Harrison & Co. plc. (Now Religare Hichens, Harrison Plc).

The vision is to build Religare as a globally trusted

brand in the financial services domain and present it as the 'Investment Gateway
of India'. All employees of the group guided by an experienced and professional
management team are committed to providing financial care, backed by the core
values of diligence, innovation, ambition and passion.
RELIGARE GROUP:
 Religare
Finvest Ltd

Religare
Religare Wealth
Securities Ltd management
service ltd

Religare
Religare Religare
Commodities
Ltd
Enterprise Capital
Market Ltd
Limited

Religare
Religare
Insurance
Finance Ltd
broking Ltd

Religare
Realty Ltd

RELIGARE SECURITIES LIMITED

1. Member of National Stock Exchange of India and Bombay Stock Exchange of
India.
2. Depository Participant with National Securities Depository Limited (NSDL) and
Central Depository Services Limited (CDSL). A SEBI approved Portfolio Manager.
RSL provides platform to all segments of the investor to leverage the immense
opportunity offered by equity investing in India either on their own or through
managed funds in Portfolio Management.

Religare Commodities Limited

Religare is a member of NCDEX and MCX and provides platform for trading in
commodities, which is an online facility also.

RCL provides platform to both agro and non-agro

commodity traders to derive the actual price of the commodity and also to trade
and hedge actively in the growing commodity trading market in India.

With this realisation, Religare Commodities is

coming up with its branches at 42 mandi locations. It is a flagship effort from our
team which would be helpful in facilitating trade and speculating price of
commodities in future.

Religare Finvest

Religare Finvest Limited (RFL), a Non Banking Finance Company (NBFC) is

aggressively making a name in the financial services arena in India. In a fast paced,
constantly changing dynamic business environment, RFL has delivered the most
competitive products and services.
 RFL is primarily engaged in the business
of providing finance against securities in the secondary market. It also provides
finance for application in Initial Public Offers to non-retail
clients in the primary market.
RFL is also planning to initiate personal loan
portfolio as fund based activity and mutual fund distribution as fee based
activities. Along with this, the company also undertakes non-fund based advisory
operations in the field of Corporate Financing in the nature of Credit Syndication
which includes inter alia, bills discounting, inter corporate deposit, working capital
loan syndication, placement of private equity and other structured products.

Religare Insurance Advisory Ltd.

Religare has been taking care of financial services for long but there was a missing
link. Financial planning is incomplete without protective measure i.e. structured
products to take care of event of things that may go wrong.
Consequently, Religare is soon coming up with
Religare Insurance Advisory Services Limited. As composite insurance broker, we
would deal in both insurance and reinsurance, providing our clients risk transfer
solutions on life and non-life sides.
This service will take benefit of Religare’s vast business
empire spread throughout the country -- providing our valued clients insurance
services across India. We aim to have a wide reach with our services – literally!
That’s why we are catering the insurance requirements of both retail and
corporate segments with products of all the insurance companies on life and non-
life side. Still, there is more in store. We also cater individuals with a complete
suite of insurance solutions, both life and general to mitigate risks to life and
assets through our existing network of over 150 branches – expected to reach 250
by the end of this year!
For corporate clients, we will be offering value based
customised solutions to cover all risks which their business is exposed to. Our
clients will be supported by an operations team equipped with the best of
technology support.
Religare Insurance Advisory aims to provide neutral,
transparent and professional risk transfer advice to become the first choice of
India.
 Vision
Providing integrated financial care driven by the relationship of trust and
confidence.

Mission
To be India's first Multinational providing complete financial services solution
across the globe.

Management profile
Religare team is led by a very eminent Board of Directors who provide policy
guidance and work under the active leadership of its CEO & Managing Director
and support of its Central Guidance Team.

Board Of Directors
Following is the list of Directors of Religare Securities Limited

Chairman Mr. Harpal Singh

Managing Director Mr. Sunil Godhwani

Director Mr. Vinay Kumar Kaul

Director Mr. Malvinder Mohan Singh

Director Mr. Shivinder Mohan Singh

PRODUCT PROFILE

Basis of difference RACE BASIC RACE LITE RACE PRO

1) Version Browser based Browser based Application based

2) Nse Cash,   
NSE, F&O,
BSE and
Commodities
3) Real time X  

Quotes

4) Alerts X  

5) Hot-key X  
function
6) Online fund   

transfer
through

7) Technical X x 

charting

8) Derivative X x 

chains

9) Futures and   

options
calculator

10) Interest   

to clients

11) Call n   

trades service

12) Access   

your ledger
balance and
account
information
 over internet
and phone

13) Accoun Rs 299 Rs 499 Rs 999

t activation
charge

14) Margin 5000 5000 5000

required

15) Market 4 market watch of 4 market watch of Multiple watch list

20 scrips each
watch 15 scrips each

Why customer trade with Religare?

Personal Assistance
· Dedicated dealers for facilitating trading and post trade needs.
· Dedicated Relationship Managers for assisting multiple investments
needs.

Research & Advisory

· Regular news and updates on market
· Research service over SMS to keep one
· Daily and weekly technical reports
· A complete information report on results and performance
individual companies. Complete reports on various economic sectors and their
performance along with analysis of few major companies in that sector
· Trading calls in Futures & Options
· Daily capsule of Market indices and index movement, national and
international corporate news, and their performance along with forth coming IPO
tracker.
 PRODUCT & SERVICES

 Equity & Derivatives

 Commodity
 Depository
 Portfolio Management Services
 International Equity & Commodity
 NRI Services
 Investment Banking
 Corporate Advisory Group

Competitor of Religare Securities limited

a. INDIA INFOLOINE SECURITY PVT. LTD.

b. HDFC SECURITIES
c. INDIA BULLS
d. KOTAK SECURITIES
e. RELIANCE MONEY
f. SHARE KHAN SECURITIES
g. MOTILAL OSWAL
h. ANAND RATHI SECURITIES
i. HEM SECURITIES
j. ICICI DIRECT

Market position of the above companies

 SWOT Analysis Of Religare

Strengths
1. It is a Ranbaxy promoter Group Company.
2. provides multi-channel access to all its customers through a strong online
presence with www.religare.in, 580 branches in 130 cities and a call-center
based Dial-n-Trade facility has dedicated research teams for fundamental
and technical research, Which constantly track the pulse of the market
and provide timely investment advice free of cost.

Weakness

1. Localized presence due to insufficient investments for countrywide

expansion.
 2. Lack of awareness among customers because of non- aggressive
promotional strategies (print media, newspapers, etc).
3. Lesser emphasis on customer retention.
4. Focuses more on HNIs than retail investors which results in meager
market-share as compared to close competitors.

Opportunities

1. Can easily tap the retail investors with small saving through promotional
channels like print media, electronic media, etc.
2. more and more small investors are entering into stock market.
3. Increasing usage of Internet through broadband connectivity.

Threats
1. Aggressive promotional strategies by close competitors may hamper
Religare’s acceptance by new clients.
2. Lack of sufficient branch-offices for speedy delivery of services.
3. More and more players are venturing into this domain.
4. current market condition is very bad, so its not easy to convince
clients to trade in share market.

INVESTMENTS

The dictionary meaning of investment is to commit money in order to earn

financial return or to make use of the money for future benefits or advantages.
People commit money to investments with an expectation to increase their future
wealth by investing money to spend in future years.
 For example, if you invest Rs. 1000 today and
earn 10 %over the next year, you will have Rs.1100 one year from today. An
investment can be described as perfect if it satisfies all the needs of all investors.
So, the starting point in searching for the perfect investment would be to examine
investor needs. If all those needs are met by the investment, then that investment
can be termed the perfect investment.

Most investors and advisors spend a great deal of time

understanding the merits of the thousands of investments available in India. Little
time, however, is spent understanding the needs of the investor and ensuring
that the most appropriate investments are selected for him. The Investment
Needs of an Investor By and large, most investors have eight common needs from
theirinvestments:

1. Security of Original Capital;

2. Wealth Accumulation;
3. Comfort Factor;
4. Tax Efficiency;
5. Life Cover;
6. Income;
7. Simplicity;
8. Ease of Withdrawal;
9. Communication.

1)Security of original capital:

The chance of losing some capital has been a
primary need. This is perhaps the strongest need among investors in India, who
have suffered regularly due to failures of the financial system.

2)Wealth accumulation:
 This is largely a factor of investment performance,
including both short-term performance of an investment and long-term
performance of a portfolio. Wealth accumulation is the ultimate measure of the
success of an investment decision.

3)Comfort factor:
This refers to the peace of mind associated with an
investment. Avoiding discomfort is probably a greater need than receiving
comfort. Reputation plays an important part in delivering the comfort factor.

4)Tax efficiency:
Legitimate reduction in the amount of tax payable is an
important part of the Indian psyche. Every rupee saved in taxes goes towards
wealth accumulation.

5)Life Cover:
Many investors look for investments that offer good return with
adequate life cover to manage the situations in case of any eventualities.

6)Income:
This refers to money distributed at intervals by an investment,
which are usually used by the investor for meeting regular expenses. Income
needs tend to be fairly constant because they are related to lifestyle and are well
understood by investors.
7)Simplicity:
Investment instruments are complex, but investors need to
understand what is being done with their money. A planner should also
deliver simplicity to investors.

8)Ease of withdrawal:
This refers to the ability to invest long term but withdraw
funds when desired. This is strongly linked to a sense of ownership. It is normally
triggered by a need to spend capital, change investments or cater to changes in
other needs. Access to a long-term investment at short notice can only be had at
a substantial cost.

9)Communication:
This refers to informing and educating investors about the
purpose and progress of their investments. The need to communicate increases
when investments are threatened.

Choosing the Right Investment Options

After understanding the concept of investment, the investors would like to know
how to go about the task of investment, how much to invest at any moment and
when to buy or sell the securities, This depends on investment process as
investment policy, investment analysis, valuation of securities, portfolio
construction and portfolio evaluation and revision. Every investor tries to derive
maximum economic advantage from his investment activity.

For evaluating an investment avenues are based upon

the rate of return, risk and uncertainty, capital appreciation, marketability, tax
advantage and convenience of investment. The following Table should give the
clearpicture relating to the investors’ investment decisions in various financial
market instruments. The choice of the best investment options will depend on
personal circumstances as well as general market conditions. For example, a good
investment for a long-term retirement plan may not be a good investment for
higher education expenses. In most cases, the right investment is a balance of
three things: Liquidity, Safety and Return.

Investment Options in India

 RESEARCH METHODOLOGY:

The primary objective of my project is to study the working of capital market in

India .The other objective is to understand the working and dynamics of equity
market and to understand how share trading is done.

RESEARCH DESIGN:

This work is no based on primary data; secondary data is being used for my
project work Apart from this, information gathered was by tele calling, personal
interactions with clients for the purpose of analyzing the awareness of Religare as
a brand and also for analysis of other graphs, Interaction with RM as well as my
personal experience was used to gain understanding about capital market and
also a help was taken from NCFM module.
 SCOPE OF THE STUDY:

I was faced with problem about what can be defined as a work on capital markets.
A variety of work in economics, accounting and finance has some linkages with
capital markets. For my project therefore, I considered functioning of the stock
markets.

LIMITATION:

Limitation of my study is that it is based on secondary data as well on my

interaction with the RM to gain the understanding about topic, so it may not give
the exact understanding of capital market.

PRIMARY MARKET:

The primary is that part of the capital markets that deals with the issuance of new
securities. Companies, governments or public sector institutions can obtain
funding through the sale of a new stock or bond issue. This is typically done
through a syndicate of securities dealers. The process of selling new issues to
investors is called underwriting. In the case of a new stock issue, this sale is an
initial public offering (IPO). Dealers earn a commission that is built into the price
of the security offering, though it can be found in the prospectus.

In primary market certain companies issue their shares directly to the public,
collect applications and after sorting out the good issues, they put in their
applications. The share brokers get their brokerage on the transactions made.

SECONDARY MARKET:

The secondary market is that market in which trading is done of securities that
have already been issued in an initial private or public offering. The secondary
market comprises of brokerage that a broker earns in the buying and selling of
companies that are listed in the stock exchange. These stock broker are in charge
of the conformation and carrying out of transactions. Orders are taken and
executed on behalf of the clients. The fluctuation of rates in the share market
makes the activity in a trade market a dynamic process. It is necessary for a
broker to have adequate knowledge about the economic and political factors as
they affect the share market.
 Indian Capital Market

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. The East India Company was the dominant institution in those days and
business in its loan securities used to be transacted towards the close of the
eighteenth century.

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.

The working of stock exchanges in India started in 1875. BSE is the oldest stock
market in India. The history of Indian stock trading starts with 318 persons taking
membership Native Share and Stock Brokers Association, which we now know by
the name Bombay Stock Exchange or BSE in short. In 1965, BSE got permanent
recognition from the Government of India. National Stock Exchange comes
second to BSE in terms of popularity. BSE and NSE represent themselves as
synonyms of Indian stock market. The history of Indian stock market is almost the
same as the history of BSE.

The 30 stock sensitive index or Sensex was first compiled in 1986. The Sensex is
compiled based on the performance of the stocks of 30 financially sound
benchmark companies. In 1990 the BSE crossed the 1000 mark for the first time.
It crossed 2000, 3000 and 4000 figures in 1992. The reason for such huge surge in
the stock market was the liberal financial policies announced by the then financial
minister Dr. Man Mohan Singh.

The up-beat mood of the market was suddenly lost with Harshad Mehta scam. It
came to public knowledge that Mr. Mehta, also known as the big-bull of Indian
stock market diverted huge funds from banks through fraudulent means. He
played with 270 million shares of about 90 companies. Millions of small-scale
investors became victims to the fraud as the Sensex fell flat shedding 570 points.

To prevent such frauds, the Government formed The Securities and Exchange
Board of India, through an Act in 1992. SEBI is the statutory body that controls
and regulates the functioning of stock exchanges, brokers, sub-brokers, portfolio
managers investment advisors etc. SEBI oblige several rigid measures to protect
the interest of investors. Now with the inception of online trading and daily
settlements the chances for a fraud is nil, says top officials of SEBI.

The stock market is booming in spite of the low agriculture output. The Monsoon
is good in an overall sense but still the question remains about who will take the
credit for it. The answer is the karma of the people. I would like to appreciate the
Indian politicians and the industrialists who are pawns of destiny for doing many
things positive and productive. India as a country is running a very good period
and the very position of the planets in transit are giving wonderful result.
 1.Only less than 1 per cent of the population own stocks and less than
1,000 individuals control the market, the majority being the FIIS, the promoters of
the company. The credit should go to the media for making stock markets the
headlines.

 First of all, Indian bourses in the future will be one of the best
investments in the world. There will be a time when it can even reach
3000 points in the Nifty. India will begin one of the best dasa of sun
which will work in its favour. So before 2009 Indian bourses should go
from high to high from time to time.
 Now this Bull Run will continue.
 There can be some correction in the BSE Sensex at the 7500 points
level.
 The market will hover between the 6000-7000 till mid-August.
 There will be huge fluctuations. Better for many investors and new
entrants for the market to cool down a bit and let it come well below
7000.
 In any case, if you are long-term players, then step in and buy now and
forget for another 10 years. You will make a killing in the Indian
markets.
 Most of the tech companies and the main index will do well but
slightly on the lower side of expectations.

ONE BASIC CONCEPTS

What is a stock market?

The stock market is a central market place for raising funds by Governments and
various corporations to expand their businesses and shareholding base. This is
usually done by issuing shares in a company which can then be bought and sold.
What is a stock exchange?

The fundamental role of a stock exchange is to provide a fair and internationally

competitive market place for the trading of financial securities for the benefit of
all participants (Listed Companies, Institutions and small investors). All countries
who have a local stock exchange aim to provide a market place whereby:

Companies and Governments can raise funds, and Investors can invest

surplus funds in anticipation of receiving dividends and capital gain from
their share investments.

What is a share and what is their use?

A share is a basic unit of ownership in a company. When you buy a share, you
become a part-owner of a company. Ownership of that company is divided into
millions of parts. These parts are called shares and each person who buys a share
is a shareholder.

 The directors of the company are employed to manage the business,

but the company is wholly owned by its shareholders.
 When a company is founded, it often progresses and develops and
often to expand, it requires financial help. The company can opt to
borrow funds from the bank and pay interest like a loan or they can opt
to raise funds by becoming a listed company on the share market.
There are many Rules and Regulations that a company must abide by
and comply with, if they wish to list and issue securities on the New
Zealand Stock Exchange. These Rules are administered and enforced
by an independent Market Surveillance Panel. Once a Company has
become a Listed Company on the NZX, it can raise funds by offering
shares in return for 'cash'. A share of ownership is what the investor
gets in exchange for their financial support.
 Once the shares are listed on the market, they can be bought and sold
among investors in what is called the secondary market. It is this
 secondary market which attracts the most attention and is where most
of the share transactions take place.
 When shares are purchased, the ownership of a share entitles the
share holder to vote on company matters in proportion to their share
holding and they are also entitled to a share of the profits distributed
by the issuer in the form of dividends.

SECURITIES AND EXCHANGE BOARD OF INDIA

Major part of the liberalization process was the repeal of the Capital
Issues (control) Act, 1947, in May 1992. With this, Government’s control over
issues of capital, pricing of the issues, fixing of premium and rates of interest on
debentures etc. ceased, and the office which administered the Act was abolished:
the market was allowed to allocate resources to competing uses. However, to
ensure effective regulation of the market, SEBI Act, 1992 was enacted to establish
SEBI with statutory powers for:-

 Protecting the interests of investors in securities.

 Promoting the development of the securities market, and
 Regulating the securities market
Its regulatory jurisdiction extends over corporate in the issuance of capital and
transfer of securities, in addition to all intermediaries and person associated with
securities market. SEBI can specify the matters to be discloser and the standards
of disclosure required for the protection of investors in respect of issues; can
issue directions to all intermediaries and other person associated with the
securities market in the interest of investors or of orderly development of
securities market and can conduct enquiries, audits and inspections of all concern
and adjudicate offences under the Act. In short, it has been given necessary
autonomy and authority to regulate and develop an orderly securities market. All
the intermediaries in the market, such as brokers and sub brokers, underwriters,
merchant bankers, bankers to the issue, share transfer agents and registrars to
the issue , are now required to register with SEBI and are governed by its
regulations. A code of conduct of each intermediary has been prescribed in the
regulations; capital adequacy and other norms have been specified; a system of
monitoring and inspecting their operations has been instituted to enforce
compliance; and disciplinary actions are being taken against the intermediaries
violating any regulation

FUNCTIONS OF SEBI

SEBI has been obligated to protect the interests of the investors n

securities and to promote and development of, and to regulate the securities
market by such measures as it thinks fit.

SEBI, in particular, has power for:-

(a) Regulating the business in stock exchanges and other securities markets
(b) Registering and regulating the working of stock brokers, sub brokers,
share transfer agents, bankers to an issue, trustees of trust deeds,
registrars to an issue, merchant bankers, underwriters, portfolio
 managers, investment advisers and such other intermediaries who may
be associated with securities markets in any manner;
(c) Registering and regulating the working of depositories, participants,
custodians of securities, foreign institutional investors, credit rating
agencies and such other intermediaries as SEBI may, by notification,
specify in this behalf;
(d) Registering and regulating the working of venture capital funds and
collective investment schemes including mutual funds;
(e) Promoting and regulating self regulatory organizations;
(f) Prohibiting fraudulent and unfair trade practices relating to securities
market;
(g) Promoting investor’s education and training of intermediaries of
securities markets;
(h) Prohibiting insider trading in securities;
(i) Regulating substantial acquisition of shares and take over of companies;
(j) Calling for information from, undertaking inspection, conducting inquiries
and audits of the stock exchanges, mutual funds and other persons
associated with the securities market and self regulatory organizations in
the securities market;
(k) Performing such functions and exercising according to securities contracts
(Regulation) Act, 1956, as may be delegated to it by the Central
Government;
(l) Levying fees or other charges for carrying out the purpose of this section;
(m) Conducting research for the above purpose.
 DEPOSITORY SYSTEM

Depository system is concerned with conversion of

securities from physical to electronic form, settlement of trades in electronic
segment, transfer of ownership and custody of securities.

In the depository system, the ownership and transfer of

securities place by means of electronic book entries. This Rids the Capital market
of the dangers and risks related to handling of paper. Its transaction costs are also
less as compared to that of physical transactions. While investors will continue to
exercise the option of holding securities in the physical form, those preferring
Rematerialisation of scripts are permitted to withdraw from the depository by
requesting the issue of physical certificate again. Share transaction costs in the
depository shall be lower than the cost of buying and selling physical shares.

Depository system is not mandatory as of now; it is

optional and is left on the investor to decide whether he wants the securities to
be dematerialized. Holding and handling of securities in electronic form
eliminates problems that are normally associated with physical certificates and it
facilitates faster settlement cycle.

Depository System – Business Partners :

NSDL carries out its activities through various functionaries called

business partners who include Depository Participants (DPs), Issuing companies
and their Registrars and Share Transfer Agents, Clearing corporations/ Clearing
Houses of Stock Exchanges.
NSDL is electronically linked to each of these business partners via a satellite link
through Very Small Aperture Terminals (VSATs) or through Leased land lines. The
entire integrated system (including the electronic links and the software at NSDL
and each business partner’s end) is called the “NEST” (National Electronic
Settlement & Transfer) system. Depository Participant (DP): The investor obtains
Depository Services trough a depository participant of NSDL. A DP can be a bank,
financial institution, a custodian, a broker, or any entity eligible as per SEBI
(Depositories and Participants) Regulations, 1996. The SEBI regulations and NSDL
bye laws also lay down the criteria for any of these categories to become a DP

Benefits of Depository System :

In the depository system, the ownership and transfer of securities takes place by
means of electronic book entries. At the outset, this system rids the capital
market of the dangers related to handling of paper. NSDL provides numerous
direct and indirect benefits, like:

 Elimination of bad deliveries – In the depository environment, once

holdings of an investor are dematerialized, the question of bad delivery
does not arise i.e. they cannot be held “under objection”. In the physical
environment, buyer was required to take the risk of transfer and face
uncertainty of the quality of assets purchased. In a depository environment
good money certainly begets good quality of assets.
  Elimination of all risks associated with physical certificates – Dealing in
physical securities have associated security risks of theft of stocks,
mutilation of certificates, loss of certificates during movements through
and from the registrars, thus exposing the investor to the cost of obtaining
duplicate certificates and advertisements. Etc. This problem does not arise
in the depository environment.

 No stamp duty for transfer of any kind of securities in the depository. This
waiver extends to equity shares, debt instruments and units of mutual
funds.

Immediate transfer and registration of securities – In the depository environment,

once the securities are credited to the investors account on pay out, he becomes
the legal owner of the securities. There is no further need to send it to the
company’s registrar for registration. Having purchased securities in the physical
environment, the investor has to send it to the company’s registrar so that the
change of ownership can be registered. This process usually takes around three to
four months and is rarely completed within the statutory framework of two
months thus exposing the investor to opportunity cost of delay in transfer and to
risk of loss in transit. To overcome this, the normally accepted practice is to hold
the securities in street names i.e. not to register the change of ownership.
However, if the investors miss a book closure the securities are not good for
delivery and the investor would also stand to loose his corporate entitlements

 Faster settlement cycle – The exclusive demat segments follow rolling

settlement cycle of T+2 i.e. the settlement of trades will be on the 2nd
working day fro the trade day. This will enable faster turnover of stock and
more liquidity with the investor.
 Faster disbursement of non cash corporate benefits like rights, bonus, etc. –
NSDL provides for direct credit of non cash corporate entitlements to an
investors accounts, thereby ensuring faster disbursement and avoiding risk
of loss of certificates in transit.

 Reduction in brokerage by many brokers for trading in dematerialized

securities – Brokers provide this benefit to investors as dealing in
dematerialized securities reduces their back office cost of handling paper
and also eliminates the risk of being the introducing broker.
 Reduction in handling of huge volumes of paper
 Periodic status reports to investors on their holding and transactions,
leading to better control.
 Elimination of problems related to change of address of investor,
transmission etc. – In case of change of address or transmission of demat
shares, investors are saved from undergoing the entire change procedure
with each company or registrar. Investors have to only inform their DP with
all relevant documents and the required changes are effected in the
database of all the companies, where the investor is a registered holder of
securities.
 Elimination of problems related to selling securities on behalf of a minor –
A natural guardian is not required to take court approval for selling demat
securities on behalf of a minor.
 CENTRAL DEPOSITORY SECURITIES LIMITED

(CDSL)

A Depository facilitates holding of securities in the electronic form and enables

securities transactions to be processed by book entry by a Depository Participant
(DP), who as an agent of the depository, offers depository services to investors.
According to SEBI guidelines, financial institutions, banks, custodians,
stockbrokers, etc. are eligible to act as DPs. The investor who is known as
beneficial owner (BO) has to open a demat account through any DP for
dematerialisation of his holdings and transferring securities.

The balances in the investors account recorded and

maintained with CDSL can be obtained through the DP. The DP is required to
provide the investor, at regular intervals, a statement of account which gives the
details of the securities holdings and transactions. The depository system has
effectively eliminated paper-based certificates which were prone to be fake,
forged, counterfeit resulting in bad deliveries. CDSL offers an efficient and
instantaneous transfer of securities.

CDSL was promoted by Bombay Stock Exchange

Limited (BSE) jointly with leading banks such as State Bank of India, Bank of India,
Bank of Baroda, HDFC Bank, Standard Chartered Bank, Union Bank of India and
Centurion Bank.
CDSL was set up with the objective of providing convenient, dependable and
secure depository services at affordable cost to all market participants. Some of
the important milestones of CDSL system are:

 CDSL received the certificate of commencement of business from SEBI in

February, 1999. Honourable Union Finance Minister, Shri Yashwant Sinha
flagged off the operations of CDSL on July 15, 1999.

 Settlement of trades in the demat mode through BOI Shareholding Limited,

the clearing house of BSE, started in July 1999.

 All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi Stock Exchange, The Stock Exchange, Ahmedabad, etc have
established connectivity with CDSL.
 As at the end of Dec 2005, over 5000 issuers have admitted their securities
(equities, bonds, debentures, commercial papers), units of mutual funds,
certificate of deposits etc. into the CDSL system.
Although India had a vibrant capital market which is more than a century old, the
paper-based settlement of trades caused substantial problems like bad delivery
and delayed transfer of title till recently. The enactment of Depositories Act in
August 1996 paved the way for establishment of NSDL, the first depository in
India. This depository promoted by institutions of national stature responsible for
economic development of the country has since established a national
infrastructure of international standards that handles most of the securities held
and settled in dematerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to support the
investors and brokers in the capital market of the country. NSDL aims at ensuring
the safety and soundness of Indian marketplaces by developing settlement
solutions that increase efficiency, minimise risk and reduce costs. At NSDL, we
play a quiet but central role in developing products and services that will continue
to nurture the growing needs of the financial services industry.

In the depository system, securities are held in depository accounts, which is

more or less similar to holding funds in bank accounts. Transfer of ownership of
securities is done through simple account transfers. This method does away with
all the risks and hassles normally associated with paperwork. Consequently, the
cost of transacting in a depository environment is considerably lower as
compared to transacting in certificates.

Although India had a vibrant capital market which is more than a century old, the
paper-based settlement of trades caused substantial problems like bad delivery
and delayed transfer of title till recently. The enactment of Depositories Act in
August 1996 paved the way for establishment of NSDL, the first depository in
India. This depository promoted by institutions of national stature responsible for
economic development of the country has since established a national
infrastructure of international standards that handles most of the securities held
and settled in dematerialised form in the Indian capital market.

Using innovative and flexible technology systems, NSDL works to support the
investors and brokers in the capital market of the country. NSDL aims at ensuring
the safety and soundness of Indian marketplaces by developing settlement
solutions that increase efficiency, minimise risk and reduce costs. At NSDL, we
play a quiet but central role in developing products and services that will continue
to nurture the growing needs of the financial services industry.

In the depository system, securities are held in depository accounts, which is

more or less similar to holding funds in bank accounts. Transfer of ownership of
securities is done through simple account transfers. This method does away with
all the risks and hassles normally associated with paperwork. Consequently, the
cost of transacting in a depository environment is considerably lower as
compared to transacting in certificates.

BENEFITS

 Elimination of problems related to transmission of demat shares - In

case of dematerialised holdings, the process of transmission is more
convenient as the securities the surviving joint holder(s)/legal
heirs/nominee has to correspond independently with each company
in which shares are held.
 Elimination of problems related to selling securities on behalf of a
minor - A natural guardian is not required to take court approval for
selling demat securities transmission formalities for all securities held
in a demat account can be completed by submitting documents to
the DP whereas, in case of physical on behalf of a minor.
 Elimination of problems related to change of address of investor - In
case of change of address, investors are saved from undergoing the
entire change procedure with each company or registrar. Investors
have to only inform their DP with all relevant documents and the
required changes are effected in the database of all the companies,
where the investor is a registered holder of securities
 Elimination of bad deliveries In the depository environment, once
holdings of an investor are dematerialised, the question of bad
delivery does not arise i.e. they cannot be held "under objection". In
the physical environment, buyer was required to take the risk of
transfer and face uncertainty of the quality of assets purchased. In a
depository environment good money certainly begets good quality of
assets.
 MAJOR STOCK EXCHANGES IN INDIA:

BOMBAY STOCK EXCHANGE

As the first stock exchange in India, the Bombay Stock Exchange is considered to
have played a very important role in the development of the country's capital
markets. The Bombay Stock Exchange is the largest of 22 exchanges in India, with
over 6,000 listed companies. It is also the fifth largest exchange in the world, with
market capitalization of $466 billion.

The Bombay Stock Exchange uses the BSE Sensex, an index of 30 large, developed
BSE stocks. This index gives a measure of the overall performance of the Bombay
Stock Exchange, and is closely followed around the world. Based on the Sensex,
the BSE equity market has grown significantly since 1990.

In addition to individual stocks, the BSE also has a market in derivatives, which
was the first to be established in India. Listed derivatives on the exchange include
stock futures and options, index futures and options, and weekly options.

The Bombay Stock Exchange is also actively involved with the development of the
retail debt market. The debt market in India is considered extremely important, as
the country continues to develop and depends on this type of investment for
growth. Until recently, the debt market in India was limited to a wholesale
market, with banks and financial institutions as the only participants. The Bombay
Stock Exchange believes that a retail market will bring great opportunities to
individual investors through better diversification.
The National Stock Exchange is one the most advanced and largest stock markets
in the world. The NSE is the world’s third largest stock exchange in terms of
transactions and dealings. It is located in Mumbai, which is considered to be the
financial capital of India. It opened for trading in the year of 1994 and the
instruments traded are treasury bills, government securities and bonds issued by
public sector companies. The NSE group consists of:

1. India Index Services & Products Ltd. (IISL)

2. National Securities Clearing Corporation Ltd. (NSCCL) 
3. NSE.IT Ltd. 
4. National Securities Depository Ltd. (NSDL) 
5. DotEx International Limited

Dematerialization:

Dematerialization is the process by which a client can get physical certificates

converted into electronic balances maintained in his account with the DP.

Features:

(a) Holdings in only those securities that are admitted for dematerialization by
National Securities Depository Ltd (NSDL) can be dematerialized.
(b) Structure of holding in the securities should match with the account
structure of the depository account. Now shares in different order of names
can also be dematted.
(c) If the shares are in the name of X and Y, the same cannot be dematerialized
into the account of either X or Y alone. However if the shares are in the
name of X first and Y second, and the account is in the name of Y first and
X second, then these shares can be dematerialized in this account.
(d) Only those holdings that are registered in the name of the account holder
can be dematerialized. Physical shares which have not been transferred and
 are still there with a transfer deed cannot be dematted. Only a few
companies have been given the permission to offer Transfer-cum-Demat.
The list of these companies can be viewed here.

Rematerialization:

Rematerialization is the process by which a client can get his electronic holdings
converted into physical certificates. The client has to submit the dematerialization
request to the DP with whom he has an account along with a Remat request form.
The physical shares will be posted by the company directly to the clients.

Trades:
For all sales made by clients, the shares will have to be given to the broker, so that
the Pay In can be made by the broker to the stock exchange concerned. For that it's
essential that the shares be transferred to the account of the broker well before the
deadline date.
You must confirm with your broker the settlement date and
settlement number and then submit your instructions to your DP. Also it's
important to give the instructions to your DP as early as possible.
 DEMAT FORM V/S PHYSICAL FORM

A COMPARISON OF INVESTMENT IN SECURITIES IN PHYSICAL AND

DEPOSITORY MODES

IN PHYSICAL FORM IN DEMAT FORM

Space required for storage and safety No space required

Exclusive manpower to be allocated This function can be clubbed with
functions.No Exclusive manpower is
required
Insurance is required No insurance required
Laborious inventory verification Periodic statement of holding is
during internal stock taking and made available by the Dp’s Easy
audits verification of audits
Risk of theft /Forgery No risk of Theft/ Forgery
Pledging of shares is cumbersome Pledging is safe and easy
Receipt of Corporate benefits need Faster and hassle free receipt of
monitoring and risks of loss in transit corporate benefits
not ruled out
Inconvenience in portfolio shuffling Convenient portfolio shuffling and
and transactions within the group adjustment within the group since
since buy/sell adjustment need delivery is through a single
movement of paper instrument, registration,
instantaneous and cost less
 Book building
Book Building is essentially a process used by companies raising capital through
Public Offerings-both Initial Public Offers (IPOs) or Follow-on Public Offers
( FPOs) to aid price and demand discovery. It is a mechanism where, during the
period for which the book for the offer is open, the bids are collected from
investors at various prices, which are within the price band specified by the issuer.
The process is directed towards both the institutional as well as the retail investors.
The issue price is determined after the bid closure based on the demand generated
in the process

The Process: 

 The Issuer who is planning an offer nominates lead merchant banker(s) as

'book runners'.
 The Issuer specifies the number of securities to be issued and the price band
for the bids.
 The Issuer also appoints syndicate members with whom orders are to be
placed by the investors.
 The syndicate members input the orders into an 'electronic book'. This
process is called 'bidding' and is similar to open auction.
 The book normally remains open for a period of 5 days.
 Bids have to be entered within the specified price band.
 Bids can be revised by the bidders before the book closes.
 On the close of the book building period, the book runners evaluate the bids
on the basis of the demand at various price levels.
 The book runners and the Issuer decide the final price at which the securities
shall be issued.
 Generally, the number of shares are fixed, the issue size gets frozen based on
the final price per share.
 Allocation of securities is made to the successful bidders. The rest get refund
orders.
 What is the Trading Equity?
Trading equities involves more than stock trading. Equity trading in the public
markets can involve many different securities, requiring diverse strategies and
trading skills. Skilled traders will know the related trading strategies that
complement their objectives.
Trading equity refers to the universe of stocks, options
and preferred stock  in public markets. Equity trading specifically eliminates debt
trading.

Where Does Equity Trading Take Place?

Trading equities usually takes place in public markets, both domestic and overseas.
Equity trades can take place at almost any time of the day or night. Trading
securities not on a listed exchange involves cost inefficiencies due to lack of
liquidity. It is possible to trade equities through the futures markets.

The Electronic Market

Equity trading now involves the electronic matching of buy and sell orders. This is
true for almost all exchanges. Large orders on the New York Stock Exchange
(NYSE) are sometimes handled by specialists.

Bid and Offer Price

Equity markets provide a bid and offer price for every trade. The difference, or
spread, is earned by market makers that make trading profits from the
constant buying and selling  of stocks by the investing public.

The Many Forms of Equity

Common stock refers to the proportionate ownership of a company. Preferred
stock has both equity and debt-like components. Equity trading also refers to
options, warrants and convertible preferred stock.
 Market capitalization
The market value of a quoted company which is calculate by multiplying is
current share price by the number of shares in issue is called as market
capitalization.

Listing of securities
Listing means admission of securities of an issuer company to trading ,
dealing on a stock exchange through a formal agreement. The prime objective of
admission to dealing on the exchange is to provide liquidity and marketability to
security so that security can be bought and sold by various investor and as also to
provide a mechanism for effective control and supervision of trading.

Listing agreement
It does agreement with the stock exchange. The listing agreement specifies
the terms and condition of listing and the disclosers that shall be made by a
company on a continuous basis to the exchange.

Delisting of securities
Permanent removal of a listing security of a listing company on a stock
exchange.