“Investment Preference in Bonanza Portfolio Limited”

A PROJECT REPORT

ON

Under the guidance of

Ms. Meenu Singh & Jitendra Virahyas

SUBMITTED BY:
Ayush Maheshwari
M.B.A. 4th Sem.

In Partial Fulfillment of the requirement

for the award of the degree
Of
MASTER OF BUSINESS ADMINISTRATION
IN
FINANCE

March, 2014

Student Declaration
I, Ayush Maheshwari of M.B.A. IV Sem., SIKKIM MANIPAL UNIVERSITY (SMU),
hereby declare that all the information facts and figures produced in this report is based on
my own experience and study during my open research in analyzing the

I further declare that all the information and facts furnished in this project report are based on
my intensive research findings. They are first hand and original in nature.

Ayush Maheshwari
MBA IV Sem.
 CERTIFICATE

This is to certify that Ayush Maheshwari of M.B.A. IV Sem., SIKKIM MANIPAL

UNIVERSITY (SMU),, has project on “INVESTMENT PREFERENCE IN BONANZA
PORTFOLIO LIMITED” Bonanza, Jaipur, in the partial fulfillment of the degree of Master
of Business Administration.

I wish him continuous success in life.

Meenu Singh
 PREFACE

Master of Business Administration is conducted to provide knowledge to the students

regarding various type of management like financial management, marketing management
and production management etc.

MBA being a specific management course there is necessary of practical knowledge to

support other theoretical subject name “Project training”.

The practical training is also a very important of MBA course.

I have done my training in Bonanza Portfolio Limited. During this training period, I have
learned about Back office work, depository work, and security market and sector analysis.

I have come to know that how does security market function and how one can deal in stock
market and how to manage risk and portfolio. Thus, it was beneficial for me in terms of
knowledge and experience.
 ACKNOWLEDGMENT

I express my sincere thanks to my project guide, Mr. Jitendra Virahyas Manager (Regional
office, Jaipur) of Bonanza Securities Limited., for guiding me right from the inception until
the successful completion of the project. I sincerely acknowledge him extending their
valuable guidance, support for literature, critical reviews of project and the report and above
all the moral support he had provided to me with all stages of this project.

I would also like to thank the supporting staff Mr. Shivpal Singh, for their help and
cooperation throughout our project.

Ayush Maheshwari

M.B.A. IV Sem.
 BONAFIDE CERTIFICATE

This is to certify that Ayush Maheshwari student of MBA 4th sem. of SMU Distance

Learning, has project on “INVESTMENT PREFERENCE IN BONANJA

PORTFOLIO LIMITED”, Jaipur in the partial fulfillment of the degree of Master

of Business Administration (2013-2014).

Signature Signature

Head of the Department Faculty Incharge

 EXECUTIVE SUMMARY

The Indian stock market have seen various stages of economic cycles if we look at market
condition then we find that at the beginning of the year 2013 the market was on cloud nine
(all time high on 10 January 2013) Sensex was 21207.83. However, after reaching its all time
high, it has started to show strong resistance to carry on. The result of the resistance and sharp
slump in the world economy, the bull suddenly turned into bear and all expectations of
investors that market will reach 25000 just turned into dream and according to current
situation that is for away from reality. Investors just shocked due to slump in the market
condition, they have rethink about investment alternatives risk and returns. Capital
appreciation and time value of money.

Since investment become a basic need of everyone so each person wants to secure his
investment and willing to get good returns and capital appreciation upon the investment fund.
This study really gives an overview about how and when we invest in various sectors. That
how can invest money for future safety in various markets such as primary market, secondary
market, Govt. security market etc.

Thus, the study is providing knowledge about investment scenario and guiding the investors
for safe investment with the help of economic analysis, fundamental analysis, and financial
analysis. One can analysis the market, understands the nature and movement of market for
safe investment, and can become wiser investor that is most challenging thing in current
scenario.
 TABLE OF CONTENTS

S.NO CONTENTS PAGE NO.

1. INTRODUCTION TO INDUSTRY

2. INTRODUCTION TO THE ORGANISATION

3. RESEARCH METHEDOLOGY:-

3.1) Title of the study

3.2) Duration Of the Project

3.3) Objective of the Study

3.4) Type of Research

3.5) Sample Size and method of selecting sample

3.6) Scope of Study

3.7) Limitation of Study

4. FACTS AND FINDINGS

5. ANALYSIS AND INTERPRETATION

6. SWOT ANALYSIS

7. CONCLUSION

8. RECOMMENDATION AND SUGESSIONS

9. APPENDIX

10. BIBLIOGRAPHY

INTRODUCTION TO THE INDUSTRY

Broking industry is growing for last ten year with leaps & bounces to Indian
economy and stock market. Brokerage houses are known as intermediaries
between market and investor and play a key role in execute the functions to
carry on the stock market. All the brokerage houses having different sort of
charges and fee according to their facilities and efficiency provided to investors.
They manage the portfolio, risk management and providing guidance to investor
for dealing in security market the major players of Indian broking industry are
as follows:-

1. Bonanza Portfolio Limited

2. Share khan Limited

3. Religare Limited

4. Hem Securities Limited

5. Angle Broking Limited

6. India bulls Securities Limited

7. Anand Rathi Securities Limited

Analysis of players in the industry

Unicon

Unicon has been founded with the aim of providing world class investing
experience to hitherto underserved investor community. The technology today
has made it possible to reach out to the last person in the financial market and
give him the same level of service that was available to only the selected few.

Unicon give personalized premium service with reasonable commissions on the

NSE, BSE & Derivative market through our Equity broking arm Unicon
Securities Pvt. Ltd. With our sophisticated technology, you can trade through
your computer and if you want human touch, you can deal through our
Relationship Managers out of our more than 100 branches spread across the
nation.

Religare securities

Trading in Equities with Religare truly empowers you for your investment
needs. We ensure you have a superlative trading experience through -

• A highly process driven, diligent approach

• Powerful Research & Analytics and

• One of the “best-in-class” dealing rooms

Further, Religare also has one of the largest retail networks, with its presence in
more than 1800* locations across more than 490* cities and towns. This means,
you can walk into any of these branches and connect to our highly skilled and
dedicated relationship managers to get the best services.

The Religare Edge:-

• Pan India footprint

• Powerful research and analytics supported by a pool of highly skilled
research analysts

• Ethical business practices

• Offline/Online delivery models

• Single window for all investment needs through your unique CRN

Anand Rathi
Anand Rathi (AR) is a leading full service securities firm providing the entire
gamut of financial services. The firm, founded in 1994 by Mr. Anand Rathi,
today has a pan India presence as well as an international presence through
offices in Dubai and Bangkok. AR provides a breadth of financial and advisory
services including wealth management, investment banking, corporate advisory,
brokerage & distribution of equities, commodities, mutual funds and insurance,
structured products – all of which are supported by powerful research teams.

How Bonanza differ from other in the industry

Bonanza Portfolio Ltd is an emerging leader in the high growth retail financial
services sector in India.

India set to emerge as one of the world’s largest retail financial services
markets. India’s GDP growth has averaged 6.5% since 1994 and expected to
continue to grow at 8+%.

• Increasing sophistication of financial markets

• Indian consumer’s affinity for equity

• Emergence of large domestic retail brokerage houses

• India has nearly 10,000 brokers; most of them are small family businesses

• The last 5-7 years has witnessed the emergence of large institutional
players driving consolidation of the retail financial services market

• Global players are starting to make strategic inroads into the retail
financial services market

• Foreign broking houses dominate FII based institutional broking

• Some global majors like Citigroup are making inroads into retail by
leveraging their network

• E-trade has announced majority ownership of IL&FS Investment

Bonanza Portfolio Limited

Bonanza, a leading financial services &brokerage house working diligently

since 1994 can be describe in a single word as a “financial powerhouse”. With
acknowledged industry leadership in execution and clearing services on
exchange traded derivatives and cash market products, bonanza has spread its
trustworthy tentacles all over the country with more than 1632 outlets spread
across 535 cities.

It provides an extensive range of services in equity, commodities, currency

derivatives, wealth management, distribution of third party product, etc.

Competition within the industry:

Competition within this industry is very high , there are lots of new company’s
coming in this business , although Bonanza Portfolio Limited has good
reputation but competition is so high and due to recession all the brokerage firm
are badly affected and Bonanza Portfolio Limited is also affected . This market
is centre of attraction to new entrepreneur because it is already fast growing
market and it is for sure that it will go further, and there are many opportunities
lying ahead in the way .but although it is successful industry competition affect
the major players. In addition, bonanza is one of the successful players in this
industry. It is working very efficiently to fight back with competition and
challenging its competitor by satisfying its customer at most level of their
satisfaction.

It has many competitors, which are providing different type of services .the brief
introduction of its competitor is as follows

5paisa.com:

5paisa is the trade name of India info line securities private limited (5paisa),
member of NSE and BSE. 5paisa is the wholly owned subsidiary of India info
line limited, India’s leading and most popular finance and investment portal.
5paisa has emerged as one of leading player in e-broking space in India .their
key products are investor’s terminal and trade terminal .its special feature is that
it is not charging any kind of AMC, which provides comfortable tariff card to its
client. It provides the facility of margin for intraday and delivery as well as.

ICICI Direct.com:

ICICI Direct.com is the most comprehensive website, which allows its client the
opportunity to invest in share, mutual fund, derivative (future and option) and
other financial products .they offer their clients a product for every investment
need.

This provide the facility of cash trading, margin trading, margin plus trading,
spot trading and BTST facility to its client. It also provides the facility of
margin and funding for facilitating its client to trade with more money.

Share khan:

Share khan is also one of the close competitors of bonanza. It facilitate its client
in many ways .although it is not as big as India info line and icici direct.com,
etc, but it is still going forward speedily by winning the trust of its customers.
Its product range includes classic trade, speed trade, and speed trade plus.
Which facilitate its client during trading? It has also the producer for providing
the market and funding the trade.

Anand Rathi:

Anand Rathi (AR) is a leading full service securities firm providing the entire
range of financial services. AR provides a breadth of financial and advisory
services including wealth management, investment banking, corporate advisory,
brokerage and distribution of equities, commodities, mutual funds and insurance
–all of which are supported by powerful research team. Its product includes
demate and trading account. It only provides margin for intraday to its clients, it
does not provide funding for delivery.

Religare:

Religare is driven ethical and dynamic process for wealth creation. based on this
, the company stared its Endeavour in the financial market .a company promoted
, controlled and managed by the promoters of ranbaxy , religare , was founded
with the vision of providing integrated financial care driven by the relationship
of trust .

Kotak security:

Kotak Mahindra is one of India’s leading financial institutions, offering

complete financial solution that encompasses every sphere of life. From
commercial banking, to stock broking, to mutual fund, to life insurance, to
investment banking, the group caters to the financial needs of individual and
corporate.

Kotak institutional equities has full financial service capability , which includes
derivative , facilitating market access through affiliated and the distinctive
offering of corporate access to investors. The division services over 250 client
including files, pension and mutual fund. The division has sales desk in
Mumbai, London and New York, with India desk also servicing clients in Hong
Kong, Singapore, Japan and Australia.
 INTRODUCTION TO THE ORGANIZATION

Corporate office(Mumbai)
Head office(Delhi)
Bonanza House, plot no.M-2,Cama
22/2-A, 1ST Floor, Laxmi
Industrial Estate Walbhat road, Behind
insurance Building, Asaf Ali
‘the hub’,Goregaon(east) Mumbai-
Road, New Delhi -110002
400063

Registered office (Delhi) Regional office Raj(Jaipur) 410-413,4th

4353/4C,Madan Mohan floor, Silver Square, Near Raj Mandir
Street,Ansari Road, Cinema, Bhagwandas Road, Jaipur-01
Daryaganj,New Delhi-110002

COMPANY PROFILE

Bonanza is a leading Financial Services & Brokerage House with

acknowledged industry Leadership in execution and clearing services on
Exchange Traded Derivatives and cash market products.

Key elements that place Bonanza amongst the leading Brokerage Houses and
makes it the preferred service provider for value based financial services are:

• A Client-driven foundation and strategy committed to client-specific

investment needs and objectives.
• Integrated and innovative use of Technology enabling clients to trade
offline, online and Strategic tie-ups with latest technology partners to
facilitate trading access and direct processing across more than 900
Branches spread over 310 cities.
 • Client-focused philosophy backed by memberships of all principal
Indian Stock and Commodity Exchanges makes Bonanza a preferred
service provider in the Industry for value based services.

• Bonanza confidently steers you through a challenging Financial and

Trade Market every moment, whether you are present or not.

The Management

• Mr. Shiv Kumar Goel is a Promoter / Director, CA by profession and

a qualified Company Secretary. He has more than 25 yrs of experience
in financial service and brokerage. Prior to venturing into business he
was Chief Executive Officer (CEO) of SRF Finance Ltd., New Delhi.
He has been a pioneer in innovating technological advancements and its
implementation methodologies.
• Mr. S. P. Goel is a Promoter/Director, qualified CA operating from the
country's financial capital Mumbai, is credited of having represented on
the Board of directors of OTCEIL. Mr. Goel has represented various
prestigious committees oF SEBI including that of JR Verma
Committee, NSEIL (Executive Committee, Committee on Settlement of
issues), NSCCL. He has also represented as a member of the
Disinvestment and Privatisation Committee of the Indian Merchants
Chamber (IMC).

• Mr. S. K. Goel is a Promoter/Director, a qualified Chartered

Accountant by profession and experience of more than 25 years, has in
past worked with leading Indian industrial groups like Modi's &
Oswals's.

• Mr. Vishnu Kumar Agarwal is a Promoter/Director, is a Bullion

Dealer, real estate developers & consultant. He has been credited with
 setting up various trading & investment channels in the field of
commodity futures trading for Indian residents & investors.

• Mr. Anand Prakash Goel is a Promoter/Director and a practicing

Chartered Accountant with over 23 years of experience.

The management team of Bonanza comprises of Chartered Accountants,

MBAs, IT Professionals and Engineers, in addition to senior professionals
in the financial field.

Bonanza Affiliation and Distribution Network :-

Proven and accredited leaders in the Financial Services business,

Bonanza provides you the unique opportunity to trade offline and online while
cutting across all geographic barriers.

• Strategic Tie-ups that provide latest technology for access and

processing.
• Trading over 900 locations across 310 cities in India

• 24 hour access to Account Information via the Net or Electronic File

Transfer (FTP) facilities.

• Membership of all Principal Indian Stock and Commodity Exchanges

• National Stock Exchange of India Ltd (NSEIL)

• Bombay Stock Exchange (BSE)

• Futures & Option Segment of NSEIL & BSE

• Dubai Gold Commodities Exchange (DGCX)

• National Commodity & Derivatives Exchange Ltd. (NCDEX)

• Multi Commodity Exchange (MCX)

 • National Multi Commodity Exchange (NMCE)

• OTC Exchange of India Ltd (OTCEIL) Depository Participant with

NSDL & CDSL

• Corporate Agents for Life & Non-Life Insurance (both foreign / private
and state owned insurance companies)

• One of the largest distributors of leading Mutual Funds in India

• Depository Participant with NSDL & CDSL

Group Representation

• Bonanza Portfolio Ltd.

• Bonanza Global DMCC, Dubai

• Bonanza Commodity Brokers Pvt. Ltd.

• Bonanza Insurance Brokers Pvt. Ltd.

• Bonanza Online.com Ltd.

Bonanza Research Desk

Our Research Desk Philosophy :-

“Investing means laying out money today to receive money in real

terms after taking inflation into account, tomorrow” That’s because we’re
realistic, experienced, backed by research and study and most importantly,
client-driven.

Empowering the Investor:

The Bonanza Research Desk has one key objective – to empower you
completely with Market Knowledge, Analysis and Advisory Services to help
you prosper. Our team provides expert and timely analysis on equity and
commodity to help you maximize your trading decisions. We offer value
perspectives, suggest strategy, focus on opportunities for investment and
growth, and endeavors to reduce risk potential. Trading Ideas

• Daily Market Strategies

• Monthly Updates

• Investment Ideas

• Trading Calls

• Commodity Views

Bonanza Future Innovations: -

In an ever-evolving Market, we constantly seek value for our clients.

Some of our plans include: Value-based proactive Portfolio Management
Services (PMS) to Resident & Non-Resident Indians (NRI).

• Significant market-share in Commodities Futures Trading Segment in

India.
• Value based Global Portfolio & Asset Allocation access to Resident
Indians.

• Clearing, execution & custodian services for Non-Resident Indians,

Foreign Institutional Investors & Overseas Corporate Bodies.

BONANZA PORTFOLIO MANAGEMENT SERVICES (PMS)

This is probably the most professional and customized Portfolio Management

Service you will discover. Our key objective is your key objective –
Significant Wealth Creation for you.
A PMS offers all the benefits of a Mutual Fund Plus other advantages that
include the Flexibility to buy stocks in a phased manner and in a conducive
market. Our PMS Managers are highly experienced professionals who
respond swiftly to changes, rallies, patterns and move your stocks around to
capitalize on Market situations.

Value Plus! PMS levies charges only on actual performance. No profit – No

fee.

Highlights of the Bonanza PMS

Bonanza provides a highly professional fund management services that

is yet flexible to deliver maximum returns to our clients. Here are some
highlights of our process:

• Professional research brings out the brightest stock and sector ideas for
your portfolio.
• Proactive management means monitoring the operational and stock
market performance of all companies in your portfolio regularly.

• Prudent risk management practices mean the better downside protection

for your portfolio and also help convert paper gains into real profits.

• Greater flexibility to hold cash and allocate investments across sectors

and adjust for market trends.

Professional Fund Management

It is important to realize that an investment in bonanza PMS does not

automatically become an equity investment. The flexibility of the PMS allows
us to convert cash to equity over period of time- this process can be speeded
up or slowed down to adjust for market trends.
Recent Past Performance

Returns % (From Aug 13, 2007 to Nov 30, 2010)

Absolute Annualised

Bonanza PMS 327.28 % 99.22 %

Sensex 277.68 % 84.18 %

Nifty 260.58 % 79.00 %

Other benefits

Dedicated portfolio manager contact Expert initial and ongoing advice

Continual fund monitoring In-depth reporting on portfolio performance,
including graphs & charts.

Features & fee structure:

Minimum portfolio size: Rs.10 lakhs. You can also open a PMS account by
transferring your existing portfolio of stocks or mutual funds.

PMS Fees: 15% of profits plus government taxes. Charged quarterly -due
only if the portfolio has made profits in that quarter.

Brokerage: 0.50% plus all applicable regulatory charges and government

taxes.Bonanza portfolio Ltd. And Bonanza Stock Broker Ltd. will be
appointed as brokers Ltd. Will be appointed as brokers to the scheme.

Other charges: Depository and other charges, expenses and taxes will be on
actuals.

Exit: No lock-in period. No exit charges. Exit any time with a notice of
minimum 3 working days.
BROKERAGE SERVICES

Equity

Being a member of the National Stock Exchange (NSE), Bombay Stock

Exchange (BSE) and dealer with Over The Counter Exchange of India (OTCEI)
we handle your trading needs, through a network of experienced dealers across
the country, and through our comprehensive website.

Commodities

Investors looking for a fast paced dynamic market with excellent liquidity can
now trade in the Commodity Futures Market. Bonanza is a registered trading
and clearing member of NCDEX, MCX and DGCX (DUBAI). You can
participate by easily opening an account with us and we shall suggest and advise
you on the strategy you could employ in your investments. We will also provide
you with research on your investments, and you will receive regular portfolio
valuation reports to enable you to monitor performance and view the progress
towards the investment objective.

Derivatives

We are clearing-cum-trading members in Future & Options segment in NSE as

well as BSE and we provide this facility to our clients.

SERVICES AS DEPOSITORY PARTICIPANT

We are please to introduce you Bonanza as a Depository Participant for NSDL

and CDSL and offer the whole range of depository services to its investor like:-

• Account Opening :- Individual/Corporate/CM/in Equity/Commodity.

• Dematerialization/Rematerilisation :- Conversion of physical shares
into Electronic from and vice versa.
 • Facilitation Repurchase/Redemption of Units of Mutual Funds.

• Electronic settlement of tracks in stock Exchanges.

• Pledging of dematerialized securities against loan

• Nomination facility

• Electronic credit of securities allotted in Public Issues, right issue.

• 24x7 Web access form viewing of transaction for our clients through
Speed-e (nsdl.co.in) and Easiest (cdslindia.com)

• Internet based services like Speed-e and Easiest

• Providing better services at competitive rates.

Charge Structure
Sr Particulars New Charge Structure w.e.f. 1st
. Aug. 2012
1 Demat Account Opening Nil
Documentation Charges,
Including stamp agreement Rs. 100/-
Power of Attorney (POA) Rs. 100/-
FAX indemnity Rs. 200/-
2 Annual Maintenance : Individual Rs. 250/-
CM/Corporates/Others Rs. 800/-
3 Account Closing Charges Nil
4 Rematerialization Per certificate Rs. 15/-
5 Debit Transaction :
Market Off market/Inter Rs. 15/-
Depository
6 Pledge : Creation Rs. 35/-
7 Demeb Rs. 31/- per certificate
E-BROKING

You can easily in Equities, commodities and derivatives by signing up into

www.bonanzaonline.com at Bonanza online, you can choose between two
products.

Bonanza Value

All beginners start somewhere and it’s easier with a guide. Your investments
may be small, but our experience, research base and guidance are vast. Register
on to the Bonanza Value module and you will find all information and processes
customized to beginners.

Bonanza Max
Bonanza Max is the ultimate module for dynamic traders and jobbers working
through the daily trading session. In order to clearly distinguish the two
products and to encourage the use of right product by the person with right
mindset, the characteristics and system requirements for the two products is
explained in detail in the chart below.

Bonanza Opportunity

Bonanza Opportunity is targeted towards aggressive investors who prefer more

active management of their equity portfolio. The scheme will aim to capitalize
on value opportunities thrown up by sudden price changes. It will also target
event-based opportunities. Though the scheme will position its portfolio with an
aggressive stance, this remains an investment product.

a) Portfolio Management Fee Nil

b) Brokerage @ 1% of the value of the transaction+ Regulatory Charges.

c) Other Costs on actuals (DP Charges/Bank Charges.)

There are two types of trading environment available for online trading
Component. Bonanza-Value Bonanza-Max
Account Opening 500/- 500/-
Charges
Minimum initial 2000/- (Adjustable 1000/- (Adjustable
against market exposure) against market exposure)
Margin Amount
Brokerage (%)

Delivery 0.40 0.30

Intraday 0.05 0.04

F&O segment 0.05 0.04

DP Charges – AMC First year Nil First year Nil

Rs. 300/- 2nd yr. Rs. 250/- 2nd yr.

Onwards Onwards
-
Transaction Sale Transaction 12/- Sale Transaction 10/-
Exposure 7X of Total Credit 10X of Total Credit

(Including shares) (Including shares)

Bank Tie-up for HDFC/UTI/ICICI HDFC/UTI/ICICI
payments
Minimum Monthly Nil 1000/- (compound on
quarterly basis)
Membership
commitment
SMS charges for Free Free
research on Mobile
Software Charges Nil Nil
Minimum Charge per Rs. 15/- Rs. 15/-
contract Note
1. Installable software based stock trading terminals: This
trading environment requires software to be installed on investor’s
computer. This software is provided by the stock broking firm. This
kind of trading terminal is used by high volume intraday equity traders.
Advantages

• Orders are directly sent to stock exchange rather than stock

broker which make order execution very fast.
• It provides much more information as compared to web based
version including stock market charts, price alerts, stock market
news etc.

Disadvantages

• You cannot trade if you are not on the same computer where
you have installed the software.

2. Web (Internet) based trading application: This does not

require any special software installation. This is just like any other
website which can be opened from anywhere around the world for
trading purpose.

Advantage

• Real time stock trading is possible without calling or visiting

broker’s office.
• It displays real time market watch, graphs, historical data etc.

• Trading history, Demat a/c balance and saving a/c balance can
be checked at any time

• Also provides valuable analysis to investors on various stocks.

• Secured transactions through unique ID’s

• Customer service through Email and chat

Disadvantages
 • Some people don’t have much proficiency of internet and
computers.
• Websites are not that user friendly as compared to personalized
service of broker’s

Nevertheless, with all the convenience of online trading there are still investors
who prefer the old fashion way of offline trading. Offline trading has lost some
popularity but it is still the main form of investing. Offline trading offers many
benefits as well.

Pro’s of offline trading

• The most important point which investors appreciates is that they are not
alone while taking any decisions so they can take the advice of their
Relationship Manager when investing in a particular script.
• They are not faced with the challenge of making these vital investment
decisions; especially, if they do not have the experience necessary to
make the appropriate investments.

• The advantage of trading offline is higher exposure limit. Investors get

higher Exposure while trading Offline as compared to Online.

With the ever booming share prices and the market scaling new heights more
and more people are getting attracted towards this sector but as per the SEBI
norms one must have a Demat a/c.

To sell Demat a/c to a client it is required to collect all the information

regarding Demat a/c in general and demat a/c offered by Bonanza.

I visited some of the main companies as a client and enquired about their
offerings and compared these offerings with those of Bonanza.

Some of the main companies I visited were-

 • India Infoline
• Reliance Money

• ICICI Direct

• India Bulls

Bonanza Product and Service

Bonanza’s service encompasses the spectrum of wealth creation,

management and preservation. Bonanza offers a wide range of product and
services to help client reach their financial goal.

Bonanza
Products
Services

Brokerage Wealth Demat Distribution

Services Management

Equity
PMS NSDL
Insurance

Commodity

Advisory CDSL Mutual

Funds
Currency

IPOs

Derivatives
Prime Brokerage Services:

Equity and equity derivatives

 • Trading Platform offers online Equity & Equity Derivatives trading
facilities for investors. This high-end, efficiently integrated
application makes trading convenient, quick and hassle free.
• Added advantages - Having access to resources like research
charts, advice, live quotes online assistance - to take well-versed
decisions. Trading through our branch network or phone available,
by simply registering with us.

Commodity Derivatives

We are clearing-cum-trading members in Future & Options segment in NSE as

well as BSE and we provide this facility to our clients. You can trade in future
and options through www.bonanzaonline.com you can trade in index Options,
Index Future, Stock Option, Derivatives, CNXIT and BANKEX

• We offer access to future trading via multiple exchanges in wide-ranging

commodities agricultural commodities, base metals, energy and precious
metals.
• We also provide investment opportunities in gulf commodities futures
and currency market.

Currency Derivatives

• Known as being predecessors in contributing to unique financial

products, we have now added to our stable - currency Derivative.
• This service, we provide both offline and online.

Asset Management:

Portfolio Management Services (PMS)

 • Our team of portfolio managers design portfolios to suit every customer’s
needs. Constantly scrutinizing the developments in market and moving
stocks, we aim for maximum capitalization.
• We suggest the most appropriate product to customers, based on factors
like their investment spheres, return expectation and risk tolerance. Our
experience, expertise and research helps us give our customer’s
investments the best upshots.

Advisory

• Bonanza guides and supports its clients to re-structure and streamline

their portfolios based on changing market conditions and client
objectives.

Depository Services:

Bonanza in association with the NSDL & CDSL offers you the whole range of
DEPOSITORY SERVICES to make your share transaction faster, cheaper and
easier for equity as well commodity. An organization that hold your shares in
electronic form the same way as a bank holds your money is termed as a
depository.

Bonanza as a depository participant for NSDL and CSDL, offer the whole
range of depository services to its investor like

• Account Opening: - individual/corporate/CM/in

Equity/commodity.
• Dematerialization/Rematerilisation: - Conversion of physical
shares in to Electronic form and vice versa.

• Repurchase/Redemption: - Facilitation repurchase/redemption

of units of Mutual Funds
 • Electronic settlement of tracks in stock exchanges.

• Pledging of dematerialized securities against loan

• Nomination facility

• Electronic credit of securities allotted in public issues, right

issues.

• Providing better services at competitive rates

• Bonanza is a depository participant with NSDL and CDSL.

• We provide an array of Depository Services to make share

transactions quicker, easier and cheaper for both Equity and
Commodity.

Distribution:

Insurance

• Bonanza offers insurance products in Life and General Insurance.

• Our IRDA certified advisors offer prudent advice on policy selection and
assists through the claim redressal process.

• Our advisory team matches the insurance products to financial profiles of

customers to offer the best solution options, maintaining transparency and
professionalism.

Mutual Funds

• Bonanza is one of the largest distributors of mutual fund in India.

• With the help of our in-depth research across categories covering 20
parameters and our expertise, we guide our clients to take appropriate
investment decisions.
 • Keeping in mind customers' budgets, needs and securities, our AMFI
certified investment advisors offer the best deals.

Initial Public Offer (IPO)

• We offer our customers online investment access for Public offerings.

• In-depth research advice for the forthcoming IPO’s.

Bonanza’s Strengths

• Bonanza has over 1632 outlets in more than 535 cities in India.
• Bonanza has more than 2 lakh clients comprising of Corporate Financial
Institution Investors, Mutual Funds, High Net-worth Individuals and
Retail Investors.

• Bonanza has a young dynamic team of 1900 professionals.

• Strong infrastructure supporting over 3000 trading terminal supporting

more than 350 VSAT's to support geographic reach and servicing
capabilities.

• 24x7 service and support via our federal support system.

Bonanza Values

Customer centric approach At Bonanza, customers comes first.

And their satisfaction is not just our top priority but also the driving
force for us, every single day

Transparency Honesty is our forte. We believe in dealing on

thoroughly ethical grounds, being fair and transparent with our
customers
 Meritocracy We recognize and appreciate efforts put in by our
employees. And we, as a matter of fact, reward and distinguish
each one of them, ceaselessly.

Solidarity we believe in sharing a forthright and respectful

relationship with our business partners and employees. We
consider them both as our team associates, who work together.
Succeed together

Bonanza’s Technology

• Single VSAT Connectivity for NSE/BSE/F&O/NCDEX

/MCX/MCX-SX through Virtual Private Network (VPN) Other
connectivity links to branches through Leased Lines, ISDN,
Radio Frequency and Broadband.
• High Speed and Streaming live quote access via Internet for
NCDEX/MCX/MCX-SX for branches and retail clients.

• Internet based Depository access (Speed-e/Easiest) to offer DP

services to Retail investors.

• 24x7 online access to a centralized support structure for all

products offerings.

Bonanza’s Achievement

• Top Equity Broking House in terms of branch expansion for 2010

• 3rd in terms of Number of Trading Accounts for 2011

• 6th in terms of Trading terminals in for two consecutive years 2010- 2013

• 9th in terms of Sub Brokers for 2012

 Awarded by BSE 'Major Volume Driver 04-05, 06-07, 07-
08.Nominated among the Top 3 for the "Best Financial Advisor Awards '08" in
the category of National Distributors – Retail instituted by CNBC-TV18 and
Opti Mix

Capital issues (Control) Act, 1947

The Act had its origin during the Second World War in 1943 when the
objective of the Government was to per-empts resources to support the
war efforts. Companies were required to take the Government approval
for tapping household savings. Companies retained the act with some
modifications as a means of controlling the raising of capital. In addition,
to ensure that national resources were channeled into proper lines.

Companies act, 1956

Companies act, 1956 is a comprehensive legislation covering all aspects

of company form of business entity from formation to wining-up. The
legislation deals with issue, allotment and transfer of securities and
various aspects relating to company management. It provides for
standards of disclosure in public issues of capital, particularly in the fields
of company managements and projects, information about other listed
companies under the same managements and management perception of
risk factors.

Securities contracts act, 1956

The preciously self-regulated stock exchanges were brought under

statutory regulation through the passage of the SC, which provides for
direct and indirect control of virtually all aspects of securities trading and
the running of stock exchange, through a process of recognition and
continued supervision.
3.1 Share Market

Securities and Exchange Board of India

SEBI is the Regulator for the Securities Market in India. Originally

set up by the Government of India in 1988, it acquired statutory form in
1992 with SEBI Act 1992 being passed by the Indian Parliament. Chaired
by C B Bhave, SEBI is headquartered in the popular business district of
Bandra-Kurla complex in Mumbai, and has Northern, Eastern, Southern
and Western regional offices in New Delhi, Kolkata, Chennai and
Ahmedabad SEBI has to be responsive to the needs of three groups,
which constitute the market:

• The issuers of securities

• The investors

• The market intermediaries

SEBI has three functions rolled into one body quasi-legislative, quasi-judicial
and quasi-executive. It drafts regulations in its legislative capacity, it conducts
investigation and enforcement action in its executive function and it passes
rulings and orders in its judicial capacity. However, this makes it very powerful;
there is an appeals process to create accountability. There is a Securities
Appellate Tribunal, which is a three-member tribunal and is presently headed by
a former Chief Justice of a High court - Mr. Justice NK Sodhi. A second appeal
lies directly to the Supreme Court.

SEBI has enjoyed success as a regulator by pushing systemic reforms

aggressively and successively (e.g. the quick movement towards making the
markets electronic and paperless rolling settlement on T+2 basis). SEBI has
been active in setting up the regulations as required under law.
With the objective of improving market efficiency, enhancing transparency,
checking unfair trade practices and bringing the Indian market up to
international standards, a package of reforms consisting of measures to
liberalize, regulate and develop the securities market was introduced during the
1990s. This has changed corporate securities market beyond recognition in this
decade.

National Stock Exchange

The National Stock Exchange commenced its operations in 1947 as a first step
in reforming the securities market the exchange.

Before the NSE was set up, trading on the stock exchange in India used to take
place through open outcry without use of information technology for immediate
matching or recording of trades. This was time consuming and inefficient. The
practice of physical trading imposed limits on trading volumes as well as, the
speed with which new information was incorporated in to prices. To obviate
this, the NSE introduced screen-based trading system where a member can
punch into the computer the quantities of shares and the prices at which he
wants to transact. The transaction is executed as soon as the quote punched by a
trading member finds a matching sale or buys quote from counterparty. This
increases the informational efficiency of market. With SBTS, it becomes
possible for market participants to see the full market, which helps to make the
market mare transparent, leading to increased investor confidence. The NSE
started nation-wide SBTS, which have provided a completely transparent
trading mechanism. Regional exchange lost a lot of business to NSE, forcing
them to introduce SBTS. Today India boasts that almost 100% trading takes
place through electronic order matching.
Bombay Stock Exchange:

BSC Sensex or Bombay Stock Exchange Sensitive index is a value-weighted

index composed of 30 stocks started in 01 of Jan 1986. it consist of the 30
largest and most actively traded stock , representative of various sectors, on the
Bombay stock exchange .these companies account for around one-fifth of
market capitalization of the BSE. The base value of the Sensex is 100 on April
1, 1979, and the base year of BSE-SENSEX is 1978-79.

At irregular intervals, the Bombay stock exchange (BSE) authorities review and
modify its composition to make sure it reflect current market conditions.

The index is calculated based on free float capitalization method a variation of

the market cap method. Instead of using a company’s outstanding share it uses
its float, or share that are readily available for trading. The free float method,
therefore, dose not includes restricted stocks, such as those held by company
insiders.

The index has increased by over ten times from June 1990 to the present. Using
information from April 1979 onward, the long run rate of return on the BSE
Sensex works out to be 18.6% per annum, which translates to roughly 9% per
annum after compensating for inflation.

Equities: -

What is Equity: - Funds brought in to a business by shareholders is called

equity. It is a measure of a stake of a person or group of persons starting a
business.

What does investing in equity mean? When you buy a company’s equity, you
are in effect financing it, and being compensated with a stake in the business.
You become part owner of the company, entitled to dividends and other benefits
that the company may announce, but without any guarantee of a return on your
investments.

Fundamental analysis: - The analysis of information like financial figures,

balance sheet, and other information publicly available is known as
fundamental analysis. This information is used to derive a fair price of the
share of the share of the company. The faithful fundamentalists believe that the
market incorporates all facts relating to the financial performance of the
company. However, a systematic analysis will ensure a more accurate valuation
of the price. Fundamental analysis use tools such as ratio analysis (P/E,
M/V/BV) and discounted cash flow analysis in order to arrive at the fair value
of a company and hence its share.

Technical Analysis: - Technical analysis is the study of historic price

movements of securities and trading volumes.

Technical analysis believes that largely forces of demand and supply determine
prices of the securities. Share prices move in patterns, which are easily
identifiable. Crucial insights in to these patterns can be obtained by keeping
track of price charts, leading to predictions that a stock price may move up to
down. The belief is that by knowing the past, future prices can predict.

Settlement cycle: - The accounting period for the securities traded on the
Exchange. On the NSE, the cycle beings on Wednesday and ends on the
following Tuesday, and on the BSE the cycle commences on Monday and ends
on Friday.

At the end of this period, the obligations of each broker are calculated and the
brokers settle their respective obligations of each broker are calculated and the
brokers settle their respective obligations as per the rules, byelaws and
regulations of the clearing corporation.
If a transaction is entered on the first day of the settlement, the same will be
settled in the eighth working day excluding the day of transaction. However, if
the same is done on the last day of the settlement, it will be settled on the fourth
working day excluding the day of transaction.

Rolling settlement: - The rolling settlement ensures that each day’s trade is
settled by keeping a fixed gap of a specified number of working days between a
trade and its settlement, at present, this gap is five working days after the
trading day. The waiting period is uniform for all trades.

Deliver the shares and pay the money to broker: - As a seller, in order to
ensures smooth settlement you should deliver the shares to your broker
immediately after getting the contract note for sale but in any case before the
pay-in day. Similarly, as a buyer, one should pay immediately on the receipt of
the contract note for purchase but in any case before the pay-in day.

Short selling: short selling is a legitimate trading strategy. It is a sale of a

security that the seller does not own, or any sale that is completed by the
delivery of a security borrowed by the seller. The sellers take the risk that they
will be able to buy the stock at a more favorable price than the price at which
they “sold short”

Auction: - An auction is conducted for those securities that members fail to

deliver/short deliver during pay-in. three factors primarily give rise to an
auction, short deliveries, un-rectified bad delivering up-rectified company
objection.

The buy/sell auction for a capital market security is managed through the
auction market. As opposed to the normal market where trade matching is an
on-going process, the trade matching process for auction starts after the
auction period is over.
If the shares are not bought at the auction, if the shares are not offered for sale,
the exchange squares up the transaction as per SEBI guidelines, the transaction
is squared up at the highest price from the relevant trading period until the
auction day or at 20 percent above the last available closing price whichever is
higher.

The pay in and pay out of funds for auction square up is held along with the
payout for the relevant auction.

Hawala Rate: - Hawala rate is a making-up price at which buyers and sellers
settle their speculative transaction at the end of the settlement. It is the basis for
buy and sells for the investor opting for carry forward during the next
settlement. This price is fixed by taking the weighted average of trades in the
last half-an-hour of trading on the settlement day for securities in the carry
forward list, also known as the “A” group or specified group.

This price is significant because for a speculative buyer or a seller, the Hawala
rate is the standard rate for settling his trade and for carrying forward business
to the next settlement. For example, an investor buys the stock of x company at
Rs.100 on Monday. By Friday (BSE settlement day), if Rs 90 is the weighted
average price in the last half-an-hour, the buyer would have to carry forward
his trade at this price of Rs. 90. He then settles at Rs. 90 and enters in to a
contract at Rs. 90 plus BLESS charges for the next settlement.

Normally, Stock Exchange does not interfere with the Hawala rates. However,
there are instances, when rates have been changed to ensure safety of the
markets. This is so because in case the market witnesses a sharp fall during a
settlement, the chances of a broker default are extremely high. This is when the
exchange administration steps in and raises the Hawala rate to avert any
possible default.
Book-closure and record date: - When shares of a joint stock company
invariably change hands during market trades, identifying the owner of some
shares becomes difficult. So it is difficult to pass on certain benefits (like share
bonus issue, splits and dividend payments) to shareholders.

Therefore, when a joint stock company declares dividends or bonus issues, there
has to be a cut-off date for such benefits to be transferred to the shareholders.
This date is termed as "Book Closure" date or "Record Date". The company will
not handle any transfer of shares requests until the benefits are transferred after
the date. Only shareholders marked in the company's register at the Book
Closure Date or the Record Date would be entitled to receive these benefits. If a
company announces book closure as 1 January, shareholders who as on that day
own the stock will be entitled to the dividend/bonus/split benefit. E.g., If Mr. Y
buys this stock from Mr. X on 2 January, the benefit of bonus issue or splits or
the company will still transfer dividend to Mr. X by.

A company generally announces such a date along with the announcement of

the bonus issue or splits or dividend announcement, as the case may be.

In an efficient market as per the efficient-market hypothesis (EMH) the effect of

the price change due to bonus issue or splits or dividend as on the Book
Closure date gets adjusted in the price of the stock in the market effective with
the opening of the trade floor on the book closure date

Commodity Market

India has a long history of futures trading extending over 125 year , while gold
and silver were widely trade commodities in the 19 century , other Agro product
like Chana , Urad , sugar wheat etc.; were only added recently in most market.

The bull run in commodity markets coupled with the setting up of national level
commodity exchanges in India and has led to a large scale improvement in
transportation , warehousing and financing etc.; placing India internationally in
commodities markets.

Commodity future perform an important role of price discovery and risk

management, which is beneficial for all the section of society i.e. producer,
trader etc.

Globally volumes on commodity future market are about five times of equity
market. Some of major commodities exchange is Chicago Board of Trade
(CBOT), New York Mercantile Exchange (NYMEX), London Metal Exchange
(LME), Tokyo Commodity Exchange (TOCOM), and Bursa Malaysia (KLSE).

What are future markets?

Future markets are efficient price discovery platform, comprising of farmers,

trader, producers, exporters, importers and industries associated with
commodities. The future market is used for hedging the price risk, trading and
arbitrage.

What is a future contract?

A future contract is standardized contract, trade on a future exchange, to buy or

sell a certain underlying instrument at a certain date in the future, at a pre-set
price. The future date is called the delivery date or financial settlement date. The
pre-set price is called the future prices.

What is a Margin?

A margin is the cash or collateral that a holder of a position in exchange traded

future contract is required to pay to cover potential adverse movements in the
value of the position. Generally, the margin varies from 6% to 15% of total lot
value.
What is open interest?

Open interest is the total number of contracts outstanding.

MCX:

Multi Commodity Exchange (MCX) is an independent commodity exchange

based in India. It was established in 2003 and is based in Mumbai. The turnover
of the exchange for the period Apr-Dec 2008 was INR 32 Trillion. MCX offers
futures trading in Agricultural Commodities, Bullion, Ferrous & Non-ferrous
metals, Pulses, Oils & Oilseeds, Energy, Plantations, Spices and other soft
commodities.

MCX has also setup in joint venture the National Spot Exchange a purely
agricultural commodity exchange and National Bulk Handling Corporation
(NBHC), which provides bulk storage, and handling of agricultural products.

It is now regulated by forward market commission.

• MCX is India's No. 1 commodity exchange with 84% Market share in

2008($0.84 trillion)
• The exchange's competitor is National Commodity & Derivatives
Exchange Ltd

• Globally, MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in crude
oil and gold in futures trading

• The crude volume touched 23.49 Million barrels on January 3, 2009

• The highest traded item is gold with an average monthly turnover of Rs

1.42 Trillion ($29 Billion).

• MCX has 10 strategic alliances with leading commodity exchange across

the globe
 • The average daily turnover of MCX is about US$ 2.4 billion

• MCX now reaches out to about 500 cities in India with the help of about
10,000 trading terminals

• MCX COMDEX is India's first and only composite commodity futures

price index

NCDEX:

NCDEX is the only commodity exchange in the country promoted by national

level institutions. This unique parentage enables it to offer a bouquet of benefits,
which are currently in short supply in the commodity markets. The institutional
promoters and shareholders of NCDEX are prominent players in their respective
fields and bring with them institutional building experience, trust, nationwide
reach, technology and risk management skills.

NCDEX is a public limited company incorporated on April 23, 2003 under the
Companies Act, 1956. It obtained its Certificate for Commencement of Business
on May 9, 2003. It commenced its operations on December 15, 2003.

NCDEX is a nation-level, technology driven de-mutualised on-line commodity

exchange with an independent Board of Directors and professional management
- both not having any vested interest in commodity markets. It is committed to
provide a world-class commodity exchange platform for market participants to
trade in a wide spectrum of commodity derivatives driven by best global
practices, professionalism and transparency.

Forward Markets Commission regulates NCDEX. NCDEX is subjected to

various laws of the land like the Forward Contracts (Regulation) Act,
Companies Act, Stamp Act, Contract Act and various other legislations.

NCDEX is located in Mumbai and offers facilities to its members about 550
centers throughout India. The reach will gradually be expanded to more centers.
NCDEX currently facilitates trading of 57 commodities –

Agriculture-

Barley, Cashew, Castor Seed, Chana, Chili, Coffee - Arabica, Coffee -

Robusta, Crude Palm Oil, Cotton Seed Oilcake, Expeller Mustard Oil,
Groundnut (in shell), Groundnut Expeller Oil, Guar gum, Guar Seeds,
Gur, Jeera, Jute sacking bags, Indian Parboiled Rice, Indian Pusa Basmati
Rice, Indian Traditional Basmati Rice, Indian Raw Rice, Indian 28.5 mm
Cotton, Indian 31 mm Cotton, Masoor Grain Bold, Medium Staple
Cotton, Mentha Oil, Mulberry Green Cocoons, Mulberry Raw Silk,
Mustard Seed, Pepper, Potato, Raw Jute, Rapeseed-Mustard Seed
Oilcake, RBD Palmolein, Refined Soy Oil, Rubber, Sesame Seeds,
Soybeans, Sugar, Yellow Soybean Meal, Tur, Turmeric, Urad, V-797
Kapas, Wheat, Yellow Peas, Yellow Red Maize

Metals-

Aluminum, Ingot, Electrolytic Copper Cathode, Gold, Mild Steel Ingots,

Nickel Cathode, Silver, Sponge Iron, Zinc Ingot.

Energy-

Brent Crude Oil, Furnace Oil.

At subsequent phases, trading in more commodities would be facilitated.

Currency Market

The foreign exchange market (currency, FOREX, or FX) is where currency

trading takes place. It is where banks and other official institutions facilitate the
buying and selling of foreign currencies. FX transactions typically involve one
party purchasing a quantity of one currency in exchange for paying a quantity of
another. The foreign exchange market that we see today started evolving during
the 1970s when world over countries gradually switched to floating exchange
rate from their erstwhile exchange rate regime, which remained fixed as per the
Bretton Woods system until 1971.

Presently, the FX market is one of the largest and most liquid financial markets
in the world, and includes trading between large banks, central banks, currency
speculators, corporations, governments, and other financial institutions. The
average daily volume in the global foreign exchange and related markets is
continuously growing. Traditional daily turnover was reported to be over
US$3.2 trillion in April 2007 by the Settlements. Since then, the market has
continued to grow. According to Euro money’s annual FX Poll, volumes grew a
further 41% between 2007 and 2008.

The purpose of FX market is to facilitate trade and investment. The need for a
foreign exchange market arises because of the presence of multifarious
international currencies such as US Dollars, Euros, Japanese yen, Pounds
Sterling, etc., and the need for trading in such currencies.

What is Foreign Exchange/FOREX/FX?

Foreign exchange is the simultaneous purchase of one currency and sale of

another – currencies are always traded in pairs. International currencies are
traded on floating exchange rates. There is a daily average turnover of about
US$1.5 trillion in the foreign exchange markets. The foreign exchange market is
known as the "FOREX," or "FX" market. It is the largest financial market in the
world.

Is there a central location for the FOREX Market?

FOREX trading is not managed through an exchange. Since transactions are

conducted between two counterparts, the FX market is an “inter-bank,” or over
the counter (OTC) market.
Who participates in the FX market?

Central, commercial and investment banks have traditionally dominated the

FOREX market. Other market participation is rapidly increasing, and now
includes international money managers and brokers, multinational
corporations, registered dealers, options and futures traders, and private
investors.

When is the FX market open for trading?

FOREX is a true global 24-hour marketplace. The trading day begins in Sydney,
and moves around the globe as each financial center comes to life. Tokyo
follows, then London, and finally New York. Investors can respond in real time
to any fluctuations caused by current economic, social and political events.

What are the most common currencies in the FOREX markets?

The“liquid” currencies in the FOREX market are those of countries with low
inflation, stable governments, and respected central banks. Nearly 85% of daily
transactions involve the major currencies, including the U.S. Dollar, Japanese
Yen, the European Union Euro, British Pound, Swiss Franc, and the Canadian
and Australian Dollars.

Is capital intensive to trade FOREX?

FOREX Capital Management requires a minimum deposit of $300 to open a

Mini Account and $2000 for a regular account. Your relationship with FOREX
Capital Management enables you to conduct highly leveraged trades (as much
as a 200 to 1 leverage ration in the Mini Account.) You set the degree of
leverage that you wish to deploy.
 Unless otherwise specified, your leverage level is set at the most lenient
level required by your account size. Please remember that while this degree of
leverage enables you to maximize your profit potential, there is an equally great
potential for loss.

Derivatives

The emergence of the market for derivative products, most notably forwards,
futures and options, can be traced back to the willingness of risk adverse
economic agent to guard themselves against uncertainties arising of fluctuations
in assets prices. By their very nature, the financial markets are marked by a very
high degree of volatility. Using derivative product it is possible to partially or
fully transfer price risks by locking in assets price .as instruments of risk
management; these generally do not influence the fluctuation in the underlying
asset prices. However, by locking in asset prices, derivative products minimize
the impact of fluctuation in asset prices on the profitability and cash flow
situation of risk adverse investors.

Derivative Products:

Derivative contracts have several variants. The most common variants are
forwards, futures, options, and swaps. Take a brief look at various derivative
contracts that have come to be used.

Forward: A forward contact is a customized contract between two entities,

where settlement takes place on a specific date in the future at today’s pre-
agreed price.

Future: A future contract is an agreement between two parties to buy or sell an

asset at a certain time in the future at a certain price. Future contracts are
special type of forward contracting the sense that the former are standardized
exchange traded contracts.
Option: Option is two types – calls and puts. Calls given the buyer the right but
not the obligation to buy a given quantity of the underlying asset, at a given
price on or before a given future date .puts give the buyer the right, but not the
obligation to sell a given quantity of the underlying asset at a given price on or
before a given date.

Warrants: Option generally have lives of up to one year. Majority of the option
traded on options exchanges having a maximum maturity of nine months.
Longer-dated options are called warrants and are generally traded over the
counter.

Leaps: The acronym leaps means long-term equity anticipation securities .these
are options having a maturity of up to three years.

Baskets: Baskets option is option on portfolio of underlying assets. The

underlying asset is usually a moving average of a basket of asset .equity index
options are a form of basket option.

Swaps: Swaps are private agreement between two parties to exchange cash
flows in the future according to pre-arranged formula. They can be regarded as
portfolios of forward contracts. The two commodity use swaps are:

Swaptions: Swaptions are option to buy or sell a swap that will become
operative at the expiry of the option .thus a swaption is an option on a forward
swap. Rather than have calls and puts, the swaption market has receiver
swaptions and payer swaption. A receiver swaption is an option to receive fixed
and pay floating. A payer swaption is an option to pay fixed and receive
floating.
The Depository system

The principal function of a depository is to dematerialize securities and

enable their transaction in book-entry form. The securities are transferred by
debiting the transferor’s depository account and crediting the transferee’s
depository account.

Functions of Depository

Dematerialization: one of the primary functions of depository is to eliminate or

minimize the movement of physical securities in the market. This is achieved
through dematerialization of securities. Dematerialization is the process of
converting securities held in physical form into holdings in book entry form.

Account transfer: the depository gives effects to all transfers resulting from
the settlement of trades and other transactions between various beneficial
owners by recording entries in the accounts of such beneficial owners.

Transfer and Registration: A transfer is the legal change of ownership of a

security in the records of the issuer. For affecting a transfer, certain legal steps
have to be taken like endorsement, execution of a transfer instrument and
payment of stamp duty. The depository accelerates the transfer process by
registering the ownership of shares in the name of the depository. Under a
depository system, transfer of security occurs merely by passing book entries in
the records of the depositories, on the persons entitled to receive corporate
benefits. In the other case, depository itself takes the responsibility of
distribution of corporate benefits.
Core Services of Demat Account

3-IN-1 ACCOUNT

Accounting Opening: Any investor who wishes to avail depository services

must first open an account with a depository participant of NSDL. The process
of opening a demat account is very similar to a bank account. The investor can
open an account with any depository participant of NSDL. An investor may
open an account with several DPs or he may open several accounts with a
single DP is free to fix its own fee structure. Investors have the freedom to
choose a DP based on criteria like convenience, comfort, service levels, safety,
reputation and charges. After exercising this choice, the investor has to enter
into an agreement with the DP the form and contents of this agreement are
specified by the Business Rules of NSDL. In this chapter, we deal with the
procedure for account opening under the NSDL system.

Types of Accounts: Type of depository account depends on the operations to

be performed. There are three types of demat accounts which can be opened
with a depository participant viz. (a) Beneficiary Account (b) Clearing Member
Account and (c) Intermediary Account.

Beneficiary Accounts

This is an account opened by investors to hold their securities in dematerialized

form with a depository and to carry out the transaction of sale and purchase of
such securities in book-entry form through the depository system. A beneficiary
account holder is legally entitled for all rights and liabilities attached to the
securities (i.e. equity shares, debentures, government securities, etc.) held in that
accounts. Therefore, the account is called “beneficial owner account”. A
beneficiary account can be in the name of an individual, corporate, Hindu
Undivided Family (HUF), minor, bank, financial institution, trust etc. or the
broker himself for the purpose of his personal investments in demat form. The
accounts are opened with DP.

Documents for Verification

Non-body Corporate Investors: For the purpose of verification, all mom-body

corporate investors have to submit the following documents, as prescribed by
SEBI, along with the stipulated account opening form.

A beneficiary account must be opened only after obtaining a proof of identity

and address of the applicant. An authorized official of the participant should
verify the photocopies of any of following documents submitted with their
corresponding originals and put his/her signature on them with remarks
“verified with original” proceeding to open the account.

Proof of Identity (POI)

I. Passport
II. Voter ID Card
III. PAN card with photograph
IV. MAPIN card
V. Identity card/document with applicant’s Photo, issued by
(1). Central/State Government and its Departments
(2). Statutory/Regulatory Authorities
(3). Public Sector Undertakings,
(4). Scheduled Commercial Banks,
(5). Public Financial Institutions,
(6). College affiliated to Universities (this can be treated as
valid only till the time applicant is a student’s),
(7). Professional Bodies such as ICAI, ICWAI, Bar Council
etc. to their Members
(8). Credit cards/Debit cards issued by Banks.
 b. Proof of address (POA)
I. Ration card
II. Passport
III. Voter ID card
IV. Driving License
V Bank Passbook
VI Verified Copies of
1) Electricity Bills (not more than two month old)
2) Telephone Bills (not more than two month old)
3) Leave and License Agreement / Agreement for sale.
VII. Self –declaration by High court & Supreme Court Judges,
giving the new address in respect of their own accounts.

For Corporate Investor: For the purpose of verification, all corporate investors
have to submit the following documents as prescribes by SEBI along with the
stipulated account opening form.

• Memorandum & Articles of Association (MOA & AOA) Board resolution

for opening demat account and the list of authorized signatories along
with their specimen signatures and photographs
• Introduction by an existing account holder of by the applicant’s bank.

• Proof of address of the corporate, evidenced by the document registered

with Registrar of companies or acknowledged copy of income tax return
or Bank Statement or Leave and License Agreement/Agreement for sale.

An authorized official of the participant shall verify the proof of address with
the original documents and affix his/her signature on the documents submitted
by the Client, while exercising such due diligence.
Common Information

The processes of opening an account with a depository, nature of such an

account, and various factors to be considered for opening a depository account
are explained below. Some details are common to all types of account. These
are:

1. Name of the holder

2. Date of Birth (for individual account)

3. Occupation

4. Address & phone number

5. Bank details like name of bank, type of account (current/savings)

account number, branch address, MICR etc.

6. PAN number

7. Details of nomination (for individual account )

8. Specimen signatures

9. MAPIN UIN (s)

10.E-mail address

11.Mobile number

12.Address for communication

Beneficiary Account- Procedure for Opening Account

Investors have the choice of selecting a DP based on their convenience, comfort,

service levels, safety, reputation, charges etc. they have the flexibility to have
more than one account with the same DP or any other DPs. No minimum
balance required for opening a depository account. Investors also have the
freedom to close an account with one DP and open another one with any other
DP.

The type of the account opening form to be filled by an investor and the list of
documents required depend on the type of beneficiary account to be opened –
whether it is for NRIs or corporate or individual. Further, the individual account
can be in a single name or joint names. Clearing members a broker have to open
a beneficiary account if they have to deal with their own holdings.

There are several client types in the depository system and different codes are
allotted to them. These are below:

1. Resident
• Ordinary

• Hindu Undivided Family (HUF)

2. Financial Institutions (FI)
• Government-sponsored

• State Financial Corporation

• Others

3. Foreign Institutional Investors

• Mauritius-based

• Others

4. Non-resident Indian (NRI)

• Repatriable

• Non-Repatriable

• Depository Receipt
5. Body Corporate
• Domestic Company
• Overseas Corporate Body
• Government Company
• Central Government
 • State Government
• Broker

• Foreign Bodies
• Group Companies

• Depository

7. Clearing Member
8. Foreign National – Foreign National / Depository Receipt

9. Mutual Fund

10. Trust

11. Bank
• Foreign Bank
• Co-operative Bank
• National Bank

Check List for Account Opening

• Proof of Identity: An authorized official of the Participant should verify

the photocopies of the any of the prescribed documents submitted with
their corresponding originals.
• Proof of address (POS): An authorized official of the Participant should
verify the photocopies of the any of the prescribed documents submitted
with their corresponding originals

• Ensure that all compulsory fields in the account opening form are filled
(except nomination, which is optional.)

• In case of corporate, ensure a copy of Board resolution of authorized

signatories. Ensure proper authorization in case of power of attorney
holder.
 • DP should give a copy of agreement to the client, including the charge.

• Inform clients regarding standing instruction facility.

• Branches of DP to co-ordinate & follow up with Head Office for account

opening.

• Ensure account is activated before forwarding Client ID to client.

• Inform settlement deadlines to clients

Intermediary Account:

As per SEBI Regulations on Stock Lending and Borrowing only an approved

intermediary can lend borrow stocks from clients. This intermediary borrows
from lenders and lends to borrowers. Intermediaries registered with SEBI as
approved intermediary account with a DP of its choice for executing stock
lending and borrowing transaction made through them. An intermediary account
may be opened only after obtaining registration from SEBI under an approved
Stock Lending Scheme and getting the approval of the depository for opening
the account.

Operation of demat accounts based of power of attorney

A demat account can be operated by a power of attorney holder. In this regard,

it may be noted that

i. A power of Attorney executed to the promulgation of the

Depositories Act is valid and enforceable.
ii. It is the responsibility of the Depository Participant to verify
whether the Power of Attorney is adequate and sufficiently
authorizing the holder of the Power of Attorney to operate the
account of the beneficial owner.
 iii. A sample clause is given hereunder which if it forms a part of the
Power of Attorney could suffice.

However it may be mentioned that a DP shall not obtain Power of Attorney

(POA) from its clients as a requirement for opening a demat account. Further,
the POA shall not contain the following clauses:

I. POA Holder Done has the sole authority to operate the account and
the account folder is/are restrained from operating the account.
II. Delivery Instruction Slip (DIS) books are denied to the account
holders who have executed a POA

III. DPs are authorized to mere the securities kept under various
accounts of the clients.

IV. DPs will have a lien on the securities of the clients.

DPs are therefore required to review the POA document and if the POA
contains any clause similar to what has been stated above the POA should be
modified suitably. DPs must inform all those clients who have executed POA
about such changes and obtain a written confirmation from the clients that they
have taken note of the changes in the POA.

It may also be mentioned that where a client has executed a POA such
depository accounts can be operated both by the clients as well as by the POA
holder. Therefore, DPs should ensure that the signatures of the accounts holders
and the POA holder are captured in the DPM system and DPs are required to
provide DIS books to the clients who have executed a POA and allow the clients
to operate their accounts as well.

Further DPs are required to maintain separate accounts of the clients in

conformity with regulation 42 of Security and Exchange Board of India
(Depositories and Participants) Regulations 1996. Lien on the securities can be
only as per Regulation 58 of SEBI Regulation and as per the procedure laid
down in the bye Laws and business Rules of NSDL.

Closure of Account

Closure on Client’s Request: - DP can close a depository account on receipt

of an application in the prescribed format. The application should be made by
the account holder or by the entire joint holder. An account can be closed only
when there is no balance in the account. In case there is any balance in the
account sought to be closed, the following steps are necessary.

a. Dematerialization of all securities to the credit of the account at the

time of making the application for closure
b. Transferring the balance to the credit of another account opened by
the same account holders either with the same participant or with a
different participant.

However, where demat request are pending for disposal for a long time in a
demat account and the client desires to close such an account the following
procedure maybe adopted by the client

• Write a letter in the prescribed format to the issuer, requesting for

rejection of the pending dematerialization requests and send fresh
physical security to the client directly
• Enclose a copy of the dematerialization request generated from DPM
system duly signed & stamped by the participant along with the aforesaid
letter to the issuer.

Before closing the account, the DP should ensure that all pending
transaction has been settled. The request for closure should be processed
only after ensuring that there is no balance lying in the account.
If a client makes a request for closure of account, DPs should provide the
Statement of Transaction (SOT) to the client for the period from the beginning
of the quarter in which the account is closed until the date of closure. Further,
the SOT should bear the words “Account Closed” and should be prominent.
For this purpose, DP can affix a rubber stamp or create a suitable system that
will clearly show on the SOT that the account has been closed.

Consolidation of Account

Some clients could have opened multiple accounts to dematerialize their shares
held in multiple combinations an sequence of names. However, they may not
need so many accounts after they have dematerialized their shares and may want
to bring all their share holdings into one of fewer accounts. This can be
achieved by using normal off market transfer instruction.

Closure by DP

The DP may also initiate closure of a client’s if the client has defaulted in
performing its obligations laid out in the client-participant agreement. The
participant should give sufficient notice to the client before initiating closure of
his account. The notice should clearly state the reasons of closure of account.
The process of closing account in such a case is the same that of client-initiated
closure.

Closure/Shifting of Clearing Account: - a clearing member may transfer its

clearing account from one DP to another DP. For this simultaneously
applications have to be made of closure of account to the earlier DP and for
opening of new clearing member account to the new DP forwards the
application to the depository for approval and allotment of a new CM-BP-ID.
Once the new CM-BP-ID is allotted, the new DP opens a new clearing account
and intimates the depository advises the old DP to close the account. The old
DP then closes the account and intimates the clearing member. All payout of
securities, subsequent to closure of old clearing account takes place in the new
account.

Freezing Accounts

Account freezing means suspending any further transaction from a depository

account until the account is unfrozen

1. If a written instruction is received from the client by the DP,

requesting freezing of account.
2. If a client makes an electronic request to his DP or to the
Depository in the form and manner as may be prescribed the
depository.

3. If orders are received by the DP depository from the Central of

State Government, SEBI or any order by court, tribunal, or
statutory authority.

4. If a request is received by the depository from a DP client.

5. If orders are passed by Disciplinary Action Committee (DAC) or if

DP becomes insolvent.

By freezing an account for debits only (preventing transfer of securities out of

the account) the client can receive securities in his account. An account can also
be frozen for debits as well as credits (preventing any movement of balances out
of the account). No transaction can take place in such an account until it is
reactivated.

A frozen account may be unfrozen or reactivated by taking the reverse steps.

1. On the valid written request of the account holder where he had

requested freezing.
 2. On directions of depository made in pursuance of the order of the
appropriate authority

3. Changes in Client Details

A client may change any of the following particulars in the depository system.
All he has to do is to submit the change in writing to the DP.

• Father’s/Husband’s Name (change from father’s name to

husband’s name may be necessary on account of marriage).
• Standing instruction facility, (an investor can
activate/deactivate it).

• Address (both local as well as correspondence), telephone

number, mobile number, clients have to provide proof of new
address while submitting application for change address.

• Occupation details

• Nominee details (the DP has to obtain the required form from

the client duly filled and effect the changes).

• Bank details (clients may revise the bank details given by him
before record date to ensure that the dividend/interest warrants
bear the correct bank details).

• PAN number details

• In case of NRIs, the Reserve Bank of India reference number

and approval date.

• E-mail addresses.

Change of address for individual clients

1. While processing requests for change of address receive from
client, DP should obtain the following documents.

a. A written application for change of address from the client.

b. Proof of identity

c. Latest transaction statement of the account received from the

participant.

d. Proof of new address along with the original documents of the

new address.

2. The client should personally visit the office of the DP where the
client maintains and operates his/her account and submit the
application for change of address. However, in case the client
expresses inability to personally visit the participant, the
application for change of address along with other documents can
be submitted though an authorized representative.

3. The client or its authorized representative should sign the

application once again in the presence of the officials of the DP.

4. The DP should verify the signature of the client on the application

and the identity documents with the documents maintained with the
DP. Further, the documents pertaining to new address should be
verified with the original. After due verification an authorized
official of the DP should put his/her signature on the application
with remarks “verified with original” and thereafter record the
change of address in the DPM system.

5. However in case DP could not verify the documents because the

records of the documents submitted by the client are kept at a
 different place, then the participant must verify the same within a
period of seven working days and only then effect the change.

Change of signature

1. The client should make a request in writing specifying reasons for

change in signature.
2. Client’s banker should duly attest new signature.

3. Client should visit DP’s office personally and produce valid proof
of identity as well as the latest transaction statement of its account.

4. In the presence of officials of DP client should affix his/her new

signature.

A holder of eligible securities in the depository system may get his physical
holdings converted into electronic form by making a request through the DP
with whom he has his beneficiary account.

Prerequisites for Dematerialization Request

1. The registered holder of the securities should make the request

2. Securities to be dematerialized must be recognized by NDDL as
eligible. In other word only those securities who is ISIN has been
activated by NSDL can be dematerialized in the NSDL system.

3. The company/issuer should have established connectivity with

NSDL. Only after such connectivity is established the securities of
that company are recognized to be “available for dematerialization”
in the NSDL system.

4. The holder of securities should have a beneficiary account in the

same name as it appears on the security certificates to be
dematerialized.
 5. The request should be made in the prescribed dematerialization
request form.

Dematerialization Process:

1. Client/investor submits the DRF (Demat Request Form) and

physical certificates to DP. DP checks whether the securities are
available for demat.
2. DP enters the demat request in his system to be sent to NSDL.

3. DP dispatches the physical certificates along with the DRF to the

R&T agent.

4. NSDL records the details of the electronic request the system and
forwards the request to the R&T agent.

5. R&T agent on receiving the physical document and the electronic

request verifies and checks them. Once the R&T agent is satisfied,
dematerialization of the concerned securities is electronically
confirmed to NSDL.

6. NSDL credits the dematerialized securities to the beneficiary

account of the investor and intimates the DP electronically. The DP
issues a statement of transaction to the client

Trading and Settlement

One of the basic services provided by NSDL is to facilitate transfer of securities

from one account to another at the instruction of the account holder. In NSDL
depository system both transferor and transferee have to give instruction to its
depository participants (DPs) for delivering (transferring out) and receiving of
securities.
 Transfer of securities from one account to another may be done for any of
the following purposes.

a. Transfer due to a transaction done on a person to person basis is

called “off-market” transaction
b. Transfer arising out of a transaction done on a stock exchange

c. Transfer arising out of transmission and account closure.

The ID for an off-market trade or for a market trade has to be clearly indicated
in the form by marking appropriately. The form should be complete in all
respects. All the holders of the account have to sign the form. If the debit has to
be effected on a particular date in future, account holder may mention such date
in the space provided for ‘execution date’ in the form.

Settlement of off-market Transactions:

Off-Market Trade

1. Seller gives delivery instructions to his DP to move securities from

his account to the buyer’s account.
2. Buyer automatically receives the credit of the securities in to his
account on the basis of standing instruction for credits.

3. Buyer receives credit of securities in to his account only if he gives

receipt instructions if standing instructions have not been given.

4. DP needs to be extra careful in verifying the signature of the client

if large quantities of securities are being debited to the account.

5. Funds move from buyer to seller outside the NSDL system.

Settlement of Market-Transaction

Market Settlement-Demat Share

A market trade is one that is settled though participation of a clearing
Corporation. In the depository environment, the securities move through
account transfer. Once the broker on the stock exchange executes it, the seller
gives delivery instruction to his DP to transfer securities to his broker’s account.

The broker then has to complete the pay-in before the deadline prescribed by the
stock exchange. The broker removes securities from his account to (Clearing
Corporation / Clearing House) CC/CH of the stock exchange concerned, before
the deadline given by exchange.

The CC/CH gives pay-out and securities are transferred to the buying broker’s
account. The broker then gives delivery instructions to his DP to transfer
securities to the buyer’s account.

1. Seller gives delivery instructions to his DP to move securities from

his account to his broker’s account.
2. Securities are transferred from broker’s account to CC on the basis
of a delivery out instruction.

3. On pay-out, securities are moved from CC to buying broker’s

account.

4. Buying broker gives instruction and securities move to the buyer’s

account.

Market type

Stock exchanges offer different market segments in which trades can be done.
The segmentation is done by the type of settlement or type of trade.

Each of the segments is denoted ad ‘Market Type’ in NSDL depository system.

The stock exchange which offers these market types, generally, recognize these
settlements with a two character code, the DI slip should contain the market
type for which securities are being transferred to the clearing member. The
contract note/trade confirmation slip given by the broker/sub-broker will
indicate the market type.

Settlement Number

Trading periods of each of the market segments is identified by a settlement

number. Every settlement number has a trade beginning day, trade-ending day,
settlement pay-in day and settlement pay-out day. Stock exchanges divide a
period of one year in to several settlement periods and allocate settlement
number for each settlement-period. All these days collectively are called
‘settlement calendar’. DPM system will give complete details of settlement
calendar for each stock exchange.

Delivery Deadline

Stock exchange set a deadline time by which clearing member are expected to
deliver securities. Clearing member can deliver securities within the deadline
time only if they have received securities from their clients. In order to ensure
that clients give securities in time to the clearing member, SEBI has prescribed
deadline time by which clients have to give securities to clearing members.
SEBI has advised DPs to instruct their clients to submit the settlement
instructions on T+1 (in physical form up to 4.00p.m. and 6 p.m. in case of
electronic instructions) for pay-in of securities viz.; instruction, CM Pool to CM
Pool account transfers and Delivery-out instruction, etc. For example, pay-in for
trades executed on ‘Monday’ will be on Wednesday. Hence, Client will have to
submit instructions to their Participants (up to 4 p.m. in case of physical and up
to 6 p.m. in case of electronic instructions) on Tuesday. The client must submit
the delivery instruction slip to its Depository Participant before the DPs
acceptance deadline,

Automatic Delivery-out
 1. Delivery-out instructions for moving securities from CM settlement
account to CM delivery account can be generated automatically by
the respective clearing corporations based on the net delivery
obligation of its clearing members. The clearing corporation can
generate auto Dos will be generated around the time of download
of the delivery obligations to the clearing members. Such clearing
members will not be required to give delivery –out instruction
forms to the participants for pay-in to the clearing corporation in
respect of the automatically generate Dos.

2. Auto DOs will not be generated in the following cases and the
clearing members will have to give delivery-out instruction forms
to their participants as usual:
a. Non pari-passu shares or multiple ISINs:
b. Irreversible delivery-out (IDO):
c. Shifting of CM settlement account from one participant to
another participant:

3. Clearing members will be required to give inter-settlement

instructions to the participants for securities lying in another
settlement as usual.

4. Participants can generate separate reports from the DPM both for
auto DOs and manual Dos.

5. All the existing features of DOs viz; remaining valid till the NSDL
deadline tine and partial delivery for insufficient balance will be
applicable for auto DOs also.

TRADING

Online share trading:

Realizing there is untapped market of investors who want to be able to execute
their own trades when its suits them, broker have taken their trading rooms to
the internet known as online broker, they allow you to buy and sell shares via
internet. Investors can have complete control of their stocks investing action,
now that they have the convenience of buying and selling share on the NSE
online and in real time. Each individual has access to the latest information and
tools to analysis any stock investment decision. Plus the power to execute the
sale or purchase right before them on their personal computer screen.

TRADING IN SECURITY MARKET:

1. Trading in shares:

Cash Trading: This is a delivery based trading system, which is generally

done with the intention of taking delivery of shares or monies.

Margin Trading: Customers can also do an intra-settlement trading up to

3 to 4 times, with available funds, wherein customers take long buy/ short
sell positions in stocks with the intention of squaring off the position
within the same day settlement cycle.

Margin PLUS Trading: Through Margin PLUS customers can do an

intra-settlement trading up to 25 times with available funds, wherein
customer take long buy/ short sell positions in stocks with the intention of
squaring off the position within the same day settlement cycle. Margin
PLUS will give a much higher leverage in the customer account against
their limits.

Spot Trading: This facility can be used only for selling demats stocks
which already exist in demat account. When customer are looking at an
immediate liquidity option, 'Cash on Spot' may work the best for them,
 On selling shares through "cash on spot", money is credited to customer
bank a/c the same evening & not on the exchange payout date. This
money can then be withdrawn from any of the ICICIBank ATMs.

BTST : Buy Today Sell Tomorrow (BTST) is a facility that allows

customers to sell shares even on 1st and 2nd day after the buy order date,
without this customer have to wait for the receipt of shares into customers
demat account.

Call Trade®: Call Trade® allows customer to call on a local number in

customer city & trade on the telephone through our Customer Service
Executives. This facility is currently available in over 11 major states
across India.

Trading on NSE/BSE: Through ICICIdirect.com, customer can trade on

NSE as well as BSE.

Market Order: Customer could trade by placing market orders during

market hours that allows you to trade at the best obtainable price in the
market at the time of execution of the order.

Limit Order: It Allows Customer to place a buy/sell order at a price

defined. The execution can happen at a price more favorable than the
price, which is defined by the Customer, limit orders can be placed by
Customer during holidays & non market hours too.

Trading in Derivatives

FUTURES

Through ICICIdirect.com, customer can now trade in index and stock

futures on the NSE. In futures trading, customer takes buy/sell positions
in index or stock(s) contracts having a longer contract period of up to 3
months.

Trading in FUTURES is simple! If, during the course of the contract life,
the price moves in Customer favor (i.e. rises in case Customer have a buy
position or falls in case Customer have a sell position), Customer make a
profit.

Presently only selected stocks, which meet the criteria on liquidity and
volume, have been enabled for futures trading.

Calculate Index and Know Customer Margin is tools to help in

calculating margin requirements and also the index & stock price
movements. The ICICIDIRECT UNIVERSITY on the HOME page is a
comprehensive guide on futures and options trading.

OPTIONS

An option is a contract, which gives the buyer the right to buy or sell
shares at a specific price, on or before a specific date. For this, the buyer
has to pay to the seller some money, which is called premium. There is no
obligation on the buyer to complete the transaction if the price is not
favorable to him.

To take the buy/sell position on index/stock options, Customer has to

place certain % of order value as margin. With options trading, Customer
can leverage on trading limit by taking buy/sell positions much more than
what Customer could have taken in cash segment.

The Buyer of a Call Option has the Right but not the Obligation to
Purchase the Underlying Asset at the specified strike price by paying a
premium whereas the Seller of the Call has the obligation of selling the
Underlying Asset at the specified Strike price.
 The Buyer of a Put Option has the Right but not the Obligation to Sell the
Underlying Asset at the specified strike price by paying a premium
whereas the Seller of the Put has the obligation of buying the Underlying
Asset at the specified Strike price. By paying lesser amount of premium,
Customer can create positions under OPTIONS and take advantage of
more trading opportunities.

Electronic trading

Electronic trading eliminates the need for physical trading floors. Brokers can
trade from their offices, using fully automated serene-based processes. Their
workstations are connected to a Stock Exchange’s central computer via satellite
using very small aperture terminus (VSATs).

The orders placed by brokers reach the Exchange’s central computer and are
matched electronically. The Stock Exchange, Mumbai (BSE) and the National
Stock Exchange (NSE) are the country’s two leading Exchange.

There is 20 other regional Exchange, connected via the Inter-Connected Stock

Exchange (ICSE). The BSE and NSE allow nationwide trading via their VSAT
system.
 RESEARCH METHODOLOGY

Before conducting any type of research and analysis and inference based on it,
the first and the foremost thing is to collected the date and after the proceeding
in a systematic manner to finally reach at result.

Research is a process of collecting, analysing, interpreting and summarizing in a

significant manner for the purpose of framing out necessary conclusion and
finding of data perceived and formulated for deriving out the meaningful
information. To carry our research necessary telephonic calls needed to be done,
suitable appointments were to be fixed and therefore to be market survey is to
be followed.

TITLE OF THE STUDY:

“Investment preference in Bonanja Portfolio Limited”

DURATION OF PROJECT:

Project duration undertake for 45 Days.

OBJECTIVE OF STUDY

The stock exchange of the country is the important part of the capital
market. It provides the investors a platform to invest in different securities.
 The well-regulated stock exchange is in the interest of both the company’s
as well as the investors.

In India the stock exchange provide a good leverage to the capital market,
but it is not very easy to get profit out of this market, for this knowledge is
must about the market. The knowledge can be obtained by knowing the
security market. Knowledge of security market is very important to a
management student.

• Analysing the market survey and thereby finding out the

investment pattern of the consumer.
• To impart knowledge about the general working of the stock
exchange

• Fundamental analysis of securities

• To gain in–depth knowledge about up gradation made due to

computer in stock exchange.

• Research Instrument used in this research was Questionnaire.

• A questionnaire is a formalized set of questions for eliciting

information. It is one of the most common instruments used for
primary data collection.

• The questionnaire was administered by a personal interview.

TYPE OF RESEARCH:
 The research that was done is descriptive in which datas were obtained by
different respondents.

a. Exploratory research

b. Descriptive research

c. Causal research

Exploratory research is a type of research conducted because a problem has

not been clearly defined. Exploratory research helps determine the best research
design, data collection method and selection of subjects. Given its fundamental
nature, exploratory research often concludes that a perceived problem does not
actually exist.

Descriptive research, also known as statistical research, describes data and

characteristics about the population or phenomenon being studied. Descriptive
research answers the questions who, what, where, when and how

SAMPLE SIZE AND METHOD OF SELECTING SAMPLE

Sample Size Method:

* Sampling Unit

The study was restricted to Jaipur only. Keeping in mind the objective
of the study we sampled dealers and retailers of each and every brand.
We try to explore out as many shops as could be possible.

*Sample Size
 The sample size taken for the purpose of study was around 150
respondents from the two distt.All the respondents were chosen
randomly.

*Sampling Procedure

We try to find out almost all of the cement dealers and retailers in the
market.

RESEARCH DESIGN

SAMPLING PLAN:

Sample unit: The sampling units are various areas of

Jaipur, which have been approached to collect data from different
people.

Sampling method: Sampling method used in this research is

simple random sampling that is also known as probability
sampling. Under this sampling design, every item of universe has
an equal chance of inclusion in sample. It is say to a lottery
method.

Sample size: The size of the sample was restricted to 100, as to

just get a quick analysis

TOOLS OF ANALYSIS

For the proper analysis of data, Quantitative Technique

such as percentage method was used. In addition, Microsoft
excel was also used for preparing charts for deducing inferences.

LITRATURE SURVEY
 THE CAPITAL MARKET
The capital market is the market for securities, where the companies and
government can raise long-term funds. In this money is lent for periods
longer than a year. The capital market includes the stock market and
bond market. The capital market consists of primary and secondary
markets.

Primary market:

The primary market deal with the issue of new instruments by the
corporate sector such as equity shares, preference shares and debt
instruments. Central and State Government, various public sector
industrial units, statutory and other authorities such as state electricity
boards and port trusts also issue bonds/debt instruments.

The primary market in which public issue of securities is made through a

prospectus is a retail market and there is no physical location. Offer for
subscription to securities is made to investing community.

Secondary Market:

The secondary market or stock exchange is a market for trading and

settlement of securities that have already been issued. The secondary
market consists of 22 stock exchanges. The secondary market provides a
trading place for the securities already issued to be bought and sold. It
also provides liquidity to the initial buyers in the primary market to re-
offer the securities to any interested buyers at any price, if mutually
accepted.

SCOPE OF STUDY
After conducting the research at bonanza Securities Limited at Jaipur on
equity research, many stages are undertaken as guidance towards appearing
at conclusion like interaction with staff ,questionnaire survey and percentage
analysis.

As the questionnaire are targeted to get filled by general public who keeps
interest in investment and have an idea about equity .so I got the opportunity
to know certain facts about this securities market .

Presently in India, securities market is not so much established and popular.

There is only a small portion of people, who are active part of this market,
as investors. Most of the people invest only 20% to 40% of their saving in
this market and their basic criteria to invest in this market is achieving
higher returns. Most of the investors want to enjoy higher returns by
investing in this market.

Most of the investors, who are investing in this securities market, are
choosing the securities on the basic of goodwill of the company. Although
they prefer and believe that technical analysis produces good and accurate
results, but still as these technical analyses is not so easy to understand, they
choose their securities based on the reputation of the company. If we look
upon those people who are using technical analysis then we will find that
most of the people who choose the securities by doing technical analysis are
using moving average as the most easy and suitable tool.
Some people are investing in securities market by using market calls and
tips as the base to choose the securities. However, they are not so much
about the result of these market calls and tips. They do not believe that these
calls and tips are so much fruitful but as they are not very much aware
regarding the technical tools, they have to use market calls and tips.

It is the believe of investor that technical analysis is not very easy to

understand, but as the securities market is growing day by day so investors
are trying to understand these technical tools we can say now people are
being interested to learn about technical analysis. It is a good indication that
people are now interested and excited to know about technical analysis of
securities and they want to choose the securities on the basis of technical
analysis so all the companies related to securities market like Bonanza
should encourage and motivate their know investors and clients to use of
most easy technical tools to them.

LIMITATION OF STUDY

The various limitations that were found in market are as follows

• Lack of awareness of stock market: Since the area is not known

before, it takes lot of time in convincing people to start investing in
share primarily in IPO’s.
• Mostly people comfortable with traditional brokers: As people
are doing trading from their respective broker, they are quite
comfortable to trade via phone.

• Some respondents are unwilling to talk: Either some respondents

do not have time or willing does not respond, as they are quite
annoyed with the phone call.

• Lack of techno savvy people and poor internet penetration:

Since most of the people, are quite experienced and they are not
techno savvy. In addition, internet penetration is poor in India.

• Inaccurate leads: Sometimes leads that were provided had errors

in it, which varied from only 5-digit phone number to wrong phone
number.

• Misleading concepts: Some people think that shares are too risky
and just another name of gamble but they do not know it is not at
all that risky for long investors.

Facts and Findings

Fundamental Analysis helps us understand in which stock we should invest in
equity market there is continuous growth in number of contracts but fewer
understand on what basis they are investing.

The findings for the above research are as follows:-

• People are not aware of using the online trading facilities

• Bonanza has captured the market because of its brand name and the
brand awareness in the minds of the consumers.But people are yet to
know about its excellent service which would definitely help the
company to capture more and more new customer.

• Customer feel that the brokage charged by Bonanza are very high as
compared to other brokage house but they are not aware of the various
facilities(margin trading, recommendation etc) provided by India
Bonanza to its customer which make it unique .

• Many clients did not know about the change of RM. This leaves a bad
impression on the concerned client, damaging the reputation of the firm.

• Many time clients are not given confirmation after the trade
• Some time the database (including customer contact number and address)
maintained by the company is wrong that create a problem to the
company to have a regular touch with its customer.

ANALYSIS AND INTERPRETATION

Knowing the awareness and perception of the customers is very important

in any industry. This provides insight into the customer behavior and his
expectation from the industry players. A proper understanding of the
awareness and perception would definitely benefit the players.

This survey attempts to know the investor better. It examines some

interesting choices of the investor including the reasons behind investing
in stock market and the risk tolerance levels of the investors. The Jaipur
city survey was conducted to know the investor awareness and perception
about company. It is hoped that this survey in Jaipur city would go a long
way in benefiting for Bonanza securities Limited.

• Do you know about bonanza?

(a) 32% of the respondent is Have heard about them

(b) 56% of the respondent is Aware

(c) 12% of the respondent is Unaware

Have heard
about them ,
32, 32%
Aware
Completely Unaware
Aware, 56, 56%
Have heard about them

Completely
Unaware, 12,
12%
 • Where would you like to Invest?

(a) 36% of the respondent is share market

(b) 20% of the respondent is fixed deposits

(c) 12% of the respondent is property

(d) 14% of the respondent is jewellery

(e) 18% of the respondent is insurance

40
36
35

30
Fixed Deposits
25
Share Market
20
20 18 Property
14 Jewellery
15 12
Insurance
10

0
1
 • Which company of the share market are you aware of?

(a) 35% of the respondent is bonanza securities limited

(b) 20% of the respondent is indiabulls

(c) 24% of the respondent is anand rathi

(d) 11% of the respondent is angel

(e) 10% of the respondent is other

40
35
35
30
24
25
20
20
15 11 10
10
5
0
Bonanza Indiabulls Anand Rathi Angel Other
Companie's Name

Series1
• In which brokerage house you have your Demat account?

(a) 32% of the respondent is bonanza securities limited

(b) 18% of the respondent is indiabulls

(c) 22% of the respondent is anand rathi

(d) 16% of the respondent is angel

(e) 12% of the respondent is other

Other , 12, 12%

Bonanza , 32,
Angel , 16, 32%
16%

Anand Rathi , Indiabulls , 18,

22, 22% 18%

Bonanza Indiabulls Anand Rathi Angel Other

• How often do you trade ?

(a) 25% of the respondent is Daily

(b) 30% of the respondent is weekly

(c) 19% of the respondent is monthly

(d) 26% of the respondent is sometime

Weekly, 30
30
Daily , 25 Sometime , 26
25

20 Monthly, 19

15

10

0
Daily Weekly Monthly Sometime

Series1
• Which of these products apart from equity your company is
providing?

(a) 18% of the respondent is Mutual fund

(b) 15% of the respondent is Investment

(c) 10% of the respondent is Insurance

(d) 22% of the respondent is Trading

(e) 35% of the respondent is All of the

40 35
35
30
25 22
18
20 15
15 10
10
5
0
Mutual Fund Investment Insurance Trading All of the
advisory above
Financial Products

Series1
• Does your company provide online trading?

(a) 11% of the respondent is No

(b) 89% of the respondent is Yes

No, 6, 11%

Yes
No

Yes , 50, 89%

 SWOT ANALYSIS

STRENGTH

• Customized Brokerage Charges – The brokerage charge by Bonanza is

among the least as compared to other brokerage firms in the industry. The
brokerage for Intraday varies from 0.01 to 0.03% and for Delivery it is
0.1 to 0.3%. The brokerage varies on the basis of volumes of trading
expected from the client. Bonanza also charges brokerage of 0.01% and
0.1% from some HNI’s.
• No Annual Maintenance Charges – There is no Annual Maintenance
Charges (AMC) on Demat and Trading a/c which is there in almost every
other big brokerage firm.

• Value Added Services – There are no charges for calling RM’s

(Relationship Managers) in relation to their a/c or trading. A client can
call any number of times to his RM to enquire about his a/c status or to
place any order which is chargeable in other brokerage firm. e.g. ICICI
DIRECT charges Rs 12 for enquiring about the a/c and Rs. 20 for placing
any order.

• User Friendly Software - The software provided by Bonanza (Power

Bonanza) is very easy to use and reflects the price changes immediately
without any time lag. The client can easily place his order and see the
 movement of price change of his favorite scripts without any time delay
while other companies like ICICI DIRECT has a time lag of almost 20-25
seconds or more.

• Organized RMS (Risk Management System) – Bonanza has an

organized RMS and this is the reason why clients doesn’t suffer much
losses and his position is squared off automatically with the help of RMS.
This is the only reason why Bonanza suffered least losses as compared to
other big brokerage firm when market crashed.

WEAKNESS

• Trading of Z category stocks - Z (b1, b2, s, t) category stocks are not

allowed to buy because there is danger of liquidity in the stocks and
attracts higher speculation. These are the stocks, which are mainly traded
in BSE, and Bonanza encourages its clients to trade only in NSE.
• Time-consuming process – Every document has to be sent to HQ
(Gurgaon) because of which the processing of documentation takes time.
This centralization is costly also when it comes to sending each document
from different parts of the country to HQ.

OPPORTUNITY

• The way ahead - There is a lot of opportunity available in mutual funds

and insurance sector being a pioneer in financial sector in its own way
Bonanza should foray into mutual fund and insurance sector.
• Limited reach - Since Bonanza is not present in 2tier cities because of
which there is huge untapped market of rural and small urban sector.
 THREATS

• FDI in stock broking – As the competition in stock broking increasing

and SEBI’s new norms which allow FDI to enter in stock broking can
post a threat to Bonanza.

CONCLUSION

This securities market is about to grow in future very much with the growth of
equity research. There is very high competition in this market , there are many
companies which are providing different type of services to their clients and,
this market is centre of attraction to new entrepreneur because it is already
successful market and it is for sure that it will grow further, and there are many
opportunities lying ahead in the way.

Bonanza portfolio Limited is an active and well known participant of this

securities market, this is achieving great success by working very hard with
dedication. There is very good staff in this organization so it may facilitate its
clients in many ways, although there is competition but still it is doing its own
work and providing services to their clients up to the best extent.

Equity analysis is very important service of Bonanza Portfolio Ltd that it is

providing to its client .It provides the suggestion that which security is good for
the purpose of investment. For this project purpose, I have been gone through
with a research that has been conducted in Jaipur with a sample size of 160
investors. On the basis of this research I can conclude that most of the people
believe that technical analysis can provide more suitable and desirable results to
them .People are interested to now about this technical analysis part, for this we
just need to aware and encourage them.
• There should be more awareness made about the portfolio management
services by giving more advertisement.
• The bonanza PMS should go for tie-ups with the corporate to increase
business.

• Bonanza portfolio limited should organize some events to build its Brand
Image in the minds of the people towards PMS.

• As per customer’s point of view, they feel that bonanza portfolio limited
should open more number of branches for the convenience of people.

RECOMMENDATION & SUGGESTIONS

For Brokerage Firms and Investors based on the study

• Brokerage firms should consider educational institutes offering

professional and post graduate level courses as avenues of business.
Actively participating in seminars, putting up stalls could help them in
generating an interest towards capital markets.
• Domestic Brokerage firms should collaborate with foreign trading firms
to allow investors to invest in foreign markets that offer returns
commensurate with the risk involved.

• Brokerage Firms should be a source of reliable market information as

most investors consider personal analysis more important than broker’s
advice.

• The investors should be provided information pertaining to studies that

are undertaken by experts to forecast trends.

• They should provide tips on investment through messenger and sms’s but
this should be sent directly from the corporate offices rather than
individual relationship managers to increase the veracity of the tips.
 • The investors should be educated about online trading to avoid
misinterpretation information offered by the relationship managers.

For Bonanza

• Bonanza is not present in 2-tier cities which lead to less business

generation for the company. So they should enter in 2 tier cities so that
they can capture the untapped market.
• Bonanza does not deal in Z category shares which again lead to less
business generation. It should allow its investors to also trade in Z
category shares which would in turn lead to more business for the
company.

APPENDIX

QUESTIONNAIRE

Questionnaire based on awareness of company and consumer behaviour while

taking decisions related to his investment in Equities and Derivative market

Name:-………………….....

Age:-……………………….

Mobile no:-………………… Landline no:-……………….

Address:-……………….......

Occupation:-…………….....

Please select the appropriate option:

How much portion of yours saving do you invest/would invest in share

market?

(a) 20% (b) 20%-40% (c) 40%-60%

(d) Above 60%

You invest in stock market because :-

(a) high return ( b) faster return ( c ) easily liquidity

(d) depends on market

Taking the factors like security, rate of return and time in consideration
which among the Following you rate as per the best option?

(a) Bank FD’s (b) commodity market (c) Bonds

(d) Equity/ derivative (e) Mutual funds

What are the bases upon which people decide to invest in stock market?

(a) Technical analysis / fundamental analysis(b)Market call / tips

(c) Popularity of security (d) Goodwill of the company

Which one you prefer most?

(a) Technical analysis (b) Market tips / calls

How much you believe on technical analysis of stock or how much right
result can be acquired by doing the technical analysis of any scrip?

(a)40% ( b ) 40-50% ( c ) more than 50%

(d) Does not believe at all

Is the technical analysis easy to understand even by a simple investor?

(a) Yes (b) no

If your base to choose the scrip is market calls / market tips, and then what
are the sources you trust upon most?

(a) market tips by security based company on mobile .

(b) T.V channel like CNBC (c) stock brokers

Up to what percent market tips are correct according to you?

(a) 30% or less (b) 30%-50% (c) 50%-60%

(d) More than 60%

Do you think will securities market grows?

(a) Yes (b) no

BIBLIOGRAPHY

1. library of company and college

2. www.Bonanzaonline.com

3. www.Reliancemoney.com

4. www.bseindia.com

5. www.indiabulls.com

6. www.investopedia.com

7. N.J.YASASWY, “How to invest in share Market”, Stock Market

Analysis for the Intelligent Investors,

8. V.K.Kapoor, Statistical Methods