A Project Study REPORT ON Training Undertaken at

Bonanza Pvt.ltd Titled Awareness of DMAT & E-Broking of Bonanza Submitted in partial fulfillment for the Award of degree of Master of Business Administration

Jitendra
1

Virahy as
JVIRAHYAS@GMAIL.COM
2008-2010

AUTHORISATION

Jasoda Devi College, Jaipur (Affiliated to Rajasthan Technical University) Preface/Prelude

The MBA Curriculum has been designed to provide to the future Managers ample practical exposure to the business world. The training is necessary part for the fulfillment of the MBA degree course helps the students to gain knowledge about various aspect to the industry, emphasizing on the development of skills in analyzing and interpreting practical problem through application of concept & theory. Ones a project is selected, suitable financing arrangements have to be made. Flexibility, risk, income, control and taxes are the key business
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considerations that influence the capital structure decision and the choice of specific instruments of financing. Performance review should be done periodically to compare actual performance with projected performance. The researcher has undertaken her project in one such company Bonanza Pvt.ltd ,JAIPUR.

My project title is Awareness

of DMAT & E-Broking of Bonanza

It has

helped me to enhance my knowledge about the functions of the industry.

I tried my best to explore the truth in our project for understanding practical way of working.

ACKNOWLEDGEMENT

Continuous value addition is vitally important in todays dynamic corporate environment. The world is full of savvy, agile professionals who know knowledge & exposure make the difference. We are seeing a revolution in quality & coverage of educational curriculums and training & development needs of corporate for their employees throughout the world.
The feeling of enthusiasm continues with this Summer Training Report on the Awareness of DMAT & E-Broking of Bonanza, which is an integral part of the Programme, and it increased with being a part of the batch of MBA organized by the institute for the year 2008-2010.
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With a will and effort to show my gratitude towards all those who have helped me during this amazing learning process, I have contributed my best to draft this report and make it an enriched source of reference not only for management people but also for those who seek knowledge. At the outset I express my sincere gratitude to all the Faculty Members, for their help in each and every possible manner. I would also like to thank Miss ma and all the members of the Companys administration for their invaluable cooperation.

Executive Summary

TABLE OF CONTENTS
S. No. 1 2 2.1 2.2 2.3 2.4 3 3.1 ACKNOWLEDGEMENT CHAPTER-1 INTRODUCTION Abstract History of Stock Market in India Risk Involved in Stock Market Nuances in Marketing of DMAT a/c and Study of Consumer Behavior CHAPTER-2 COMPANY PROFILE About Bonanza CONTENT P. No. 2 3 4 5 9 15 19 20
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3.2 4 5 5.1 6 6.1 6.2 6.3 6.4 7 7.1 8 9

E-Broking CHAPTER-3 OBJECTIVE AND METHODOLOGY CHAPTER-4 REVIEW OF LITERATURE Existing Literature on DMAT a/c and Consumer Behavior CHAPTER-5 FINDINGS Comparison Table SWOT Analysis Exhaustive Sales Pitch Analysis of Consumer Behavior CHAPTER-6 CONCLUSION AND RECOMMENDATIONS Conclusion and Recommendations APPENDIX BIBILIOGRAPHY

31 37 39 40 42 43 42 46 50 62 63 65 67

CHAPTER 1 INTRODUCTION

ABSTRACT
The project is basically divided into two parts, the first part of the project deals with Nuances in Marketing of Dmat and Trading accounts, offered by Bonanza.Under this, I had to get new clients for the company, using our contacts, databases of prospective clients, existing clients, references, internet and last but not the least, by going on to the field and thus convince people and sell the Dmat accounts to them. I also called up and met inactive clients of Bonanza and try to make them active by solving their problems and convincing them to trade in the market, which will lead to increase in the revenue of the company. I have also performed a comparative analysis of different companies which are into marketing of Dmat and trading a/c and compared and contrast this with Bonanza. I also developed an exhaustive pitch to approach the clients by interacting with company official and faculty guide. This sales pitch is developed to show the logical sequence of how a client is approached by Bonanza. The second part of the project includes the study of Consumer Behavior while deciding to invest in Equities and Derivative market. This also includes analysis of certain factors which would increase investors confidence to invest in Equities market in future.

Under this study I have considered certain factors like brokers advice, analysts recommendation, personal analysis, share price and online services and then a factor analysis on these factors is being carried out. From the data analyzed I came out with a conclusion that investors appear to seek three major kinds of benefits from trading firms: Analysis (Brokers Advice and Personal Analysis), Market Condition (Analyst Recommendation and Market Price) and Online Facility.

History of stock market in India

The working of stock exchanges in India started in 1875. BSE is the oldest stock market in India. The history of Indian stock trading starts with 318 persons taking membership in Native Share and Stock Brokers Association, which we now know by the name Bombay Stock Exchange or BSE in short. In 1965, BSE got permanent recognition from the Government of India. National Stock Exchange comes second to BSE in terms of popularity. BSE and NSE represent themselves as synonyms of Indian stock market. The history of Indian stock market is almost the same as the history of BSE. The country's capital markets have passed through both good and bad periods. The journey in the 20th century has not been an easy one. Till the decade of eighties, there was no scale to measure the ups and downs in the Indian stock market. The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that
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subsequently

became

the

barometer

of

the

Indian

stock

market.

SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media. The Index was initially calculated based on the "Full Market Capitalization" methodology but was shifted to the free-float methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. Due to its wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time (From 1979 onwards). Small wonder, the SENSEX has over the years become one of the most prominent brands in the country.

SENSEX Calculation Methodology

SENSEX is calculated using "Free-float Market Capitalization" methodology. As per this methodology, the level of index at any point of time reflects the Free-float market value of 30 component stocks relative to a base period. The market capitalization of a company is determined by multiplying price of its stock by the number of shares issued by company. This market capitalization is further multiplied by the free-float factor to determine free-float market capitalization.

The base period of SENSEX is 1978-79 and the base value is 100 index points. This is often indicated by the notation 1978-79=100. The calculation of SENSEX involves dividing the Free-float market capitalization of 30 companies in the Index by a number called the Index Divisor. The Divisor is the only link to the original base
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period value of the SENSEX. It keeps the Index comparable over time and is the adjustment point for all Index adjustments arising out of corporate actions, replacement of scripts etc. During market hours, prices of the index scripts, at which latest trades are executed, are used by the trading system to calculate SENSEX every 15 seconds and disseminated in real time. The National Stock Exchange of India Limited (NSE) is a Mumbai-based stock exchange. It is the largest stock exchange in India in terms daily turnover and number of trades, for both equities and derivative trading. NSE is mutually-owned by a set of leading financial institutions, banks, insurance companies and other financial intermediaries in India but its ownership and management operate as separate entities. As of 2006, the NSE VSAT terminals, 2799 in total, cover more than 1500 cities across India. In October 2007, the equity market capitalization of the companies listed on the NSE was US$ 1.46 trillion, making it the second largest stock exchange in South Asia. NSE is the third largest Stock Exchange in the world in terms of the number of trades in equities. It is the second fastest growing stock exchange in the world with a recorded growth of 16.6%. The National Stock Exchange of India was promoted by leading financial institutions at the behest of the Government of India, and was incorporated in November 1992 as a tax-paying company. In April 1993, it was recognized as a stock exchange under the Securities Contracts (Regulation) Act, 1956. NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment of the NSE commenced operations in November 1994, while operations in the Derivatives segment commenced in June 2000.

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Stock Exchange organized market for buying and selling financial instruments known as securities, which include stocks, bonds, options, and futures. Most stock exchanges have specific locations where the trades are completed. For the stock of a company to be traded at these exchanges, it must be listed, and to be listed, the company must satisfy certain requirements. But not all stocks are bought and sold at a specific site. Such stocks are referred to as unlisted. Many of these stocks are traded over the counterthat is, by telephone or by computer.

IMPORTANCE OF STOCK EXCHANGE

Stock exchanges perform important roles in national economies. Most importantly, they encourage investment by providing places for buyers and sellers to trade securities. This investment, in turn, enables corporations to obtain funds to expand their businesses. Corporations issue new securities in what is known as the primary market, usually with the help of investment bankers. The investment bank acquires the initial issue of the new securities from the corporation at a negotiated price and then makes the securities available for its clients and other investors in an initial public offering (IPO). In this primary market, corporations receive the proceeds of security sales. After this initial offering the securities are bought and sold in the secondary market. The corporation is not usually involved in the trading of its stock in the secondary market.
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Stock exchanges essentially function as secondary markets. By providing investors the opportunity to trade financial instruments, the stock exchanges support the performance of the primary markets. This arrangement makes it easier for corporations to raise the funds that they need to build and expand their businesses.

STOCK TRADING

Stocks are shares of ownership in companies. People who buy a companys stock may receive dividends (a portion of any profits). Stockholders are entitled to any capital gains that arise through their trading activitythat is, to any gain obtained when the price at which the stock is sold is greater than the purchase price. But stockholders also face risks. One risk is that the firm may experience losses and not be able to continue the payment of dividends. Another risk involves capital losses when the stockholder sells shares at a price below the purchase price.

STOCK BROKERS

A stockbroker is an employee of a brokerage firm. The individual investor contacts his or her stockbroker and provides the stockbroker with the details of the transaction the investor wants to complete. Stockbrokers, however, are more than order takers or sales representatives for their firms; they frequently provide advice to the investor.
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They may have their own client list and call clients when they see transactions that will fit the clients investment objectives. Stockbrokers almost always have certification from, or registration with, a state government agency or an exchange or both. For this reason they are sometimes referred to as registered representatives.

Risk involved while investing in Stock Market

Risk is a complex, multidimensional concept that manifests itself in various ways. Risk is omnipresent and includes stock market crashes, corporate bankruptcies and currency devaluations, changes in sentiment, in inflation and interest rates, and even major changes in the tax code. Risk is generally defined as return volatility, or the degree of ups and downs of returns. But there's more to risk than volatility. Risk and long-term reward are generally related. Risk is the chance that your actual return will be less than you expected. People sometimes think that a good return can be achieved with little or no risk. Unfortunately, that's impossible. To achieve your objectives, you need to assume certain risks and avoid others. Thoughtful investment selections that meet your goals and risk profile keep individual stock and bond risks at an acceptable level.

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However, other risks are inherent to investing you have no control over. Most of these risks affect the market or the economy and require investors to adjust portfolios or ride out the storm.

Major types of such risks are:

Economic Risks One of the most obvious risks of investing is that the economy can go bad. Following the market bust in 2000 and the terrorists attacks in 2001, the economy settled into a sour spell. A combination of factors saw the market indexes lose significant percentages. It has taken years to return to levels close to pre-9/11 marks. For young investors, the best strategy is often to just hunker down and ride out these downturns. If you can increase your position in good solid companies, these troughs are often good times to do so. Foreign stocks can be a bright spot when the domestic market is in the dumps if you do your homework. Thanks to globalization, some U.S. companies earn a majority of their profits overseas. Older investors are in a tighter bind. If you are in or near retirement, a major downturn in stocks can be devastating if you havent shifted significant assets to bonds or fixed income securities. Inflation

Inflation is the tax on everyone. It destroys value and creates recessions. Although we believe inflation is under our control, the cure of higher interest rates may at some point be as bad as the problem. Investors historically have retreated to hard assets such as real estate and precious metals, especially gold, in times of inflation.

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Inflation hurts investors on fixed incomes the most, since it erodes the value of their income stream. Stocks are the best protection against inflation since companies have the ability to adjust prices to the rate of inflation. It is not a perfect solution, but that is why even retired investors should maintain some of their assets in stocks. Market Value Risk

Market value risk refers to what happens when the market turns against or ignores your investment. This happens when the market goes off chasing the next hot thing and leaves many good, but unexciting companies behind.Some investors find this a good thing and view it as an opportunity to load up on great stocks at a time when the market isnt bidding up the price. On the other hand, it doesnt advance your cause to watch your investment flat-line month after month while other parts of the market are going up. The lesson is dont get caught with all you investments in one sector of the economy. By spreading your investments across several sectors, you have a better chance of participating in growth of some of your stocks at any one time.

How to evaluate a company before Investing

For stock investors that favor companies with good fundamentals, a "strong" balance sheet is an important consideration for investing in a company's stock. The strength of a company's balance sheet can be evaluated by three broad categories of investment-quality measurements: working capital adequacy, asset performance and capital structure. A company's capitalization describes the composition of a company's permanent or long-term capital, which consists of a combination of debt and equity. A healthy proportion of equity capital, as opposed to debt capital, in a company's capital structure is an indication of financial fitness.

Optimal Debt-Equity Relationship

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In financial terms, debt is a good example of the proverbial two-edged sword. The use of leverage (debt) increases the amount of financial resources available to a company for growth and expansion. The assumption is that management can earn more on borrowed funds than it pays in interest expense and fees on these funds. However, as successful as this formula may seem, it does require that a company maintain a solid record of complying with its various borrowing commitments. A company considered too highly leveraged (too much debt versus equity) may find its freedom of action restricted by its creditors and/or may have its profitability hurt as a result of paying high interest costs. Of course, the worst-case scenario would be having trouble meeting operating and debt liabilities during periods of adverse economic conditions. Unfortunately, there is no magic proportion of debt that a company can take on. The debt-equity relationship varies according to industries involved, a company's line of business and its stage of development. However, because investors are better off putting their money into companies with strong balance sheets, common sense tells us that these companies should have, generally speaking, lower debt and higher equity levels.

Capital Ratios and Indicators

In general, analysts use three different ratios to assess the financial strength of a company's capitalization structure. The first two, the so-called debt and debt/equity ratios, are popular measurements; however, it's the capitalization ratio that delivers the key insights to evaluating a companys capital position. The debt ratio compares total liabilities to total assets. Obviously, more of the former means less equity and, therefore, indicates a more leveraged position. The problem with this measurement is that it is too broad in scope, which, as a consequence, gives equal weight to operational and debt liabilities. The same criticism can be applied to the debt/equity ratio, which compares total liabilities to total shareholders' equity. Current and non-current operational liabilities, particularly the latter, represent obligations that will be with the company forever. Also, unlike debt, there are no fixed payments of principal or interest attached to operational liabilities.
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The capitalization ratio (total debt/total capitalization) compares the debt component of a company's capital structure (the sum of obligations categorized as debt + total shareholders' equity) to the equity component. Expressed as a percentage, a low number is indicative of a healthy equity cushion, which is always more desirable than a high percentage of debt.

Balance Sheet Strength

For stock investors, the balance sheet is an important consideration for investing in a company's stock because it is a reflection of what the company owns and owes. The strength of a company's balance sheet can be evaluated by three broad categories of investment-quality measurements: working capital adequacy, asset performance and capitalization structure.

Fixed Asset Turnover Ratio

Property, plant and equipment (PP&E), or fixed assets, is another of the "big" numbers in a company's balance sheet. In fact, it often represents the single largest component of a company's total assets A company's investment in fixed assets is dependent, to a large degree, on its line of business. Some businesses are more capital intensive than others. Natural resource and large capital equipment producers require a large amount of fixed-asset investment. Service companies and computer software producers need a relatively small amount of fixed assets. Mainstream manufacturers generally have around 3040% of their assets in PP&E. Accordingly, fixed asset turnover ratios will vary among different industries. The fixed asset turnover ratio is calculated as:

This fixed asset turnover ratio indicator, looked at over time and compared to that of competitors, gives the investor an idea of how effectively a company's management is using this large and important asset. It is a rough measure of the productivity of a
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company's fixed assets with respect to generating sales. The higher the number of times PP&E turns over, the better. Obviously, investors should look for consistency or increasing fixed asset turnover rates as positive balance sheet investment qualities.

Return on Assets Ratio

Return on assets (ROA) is considered to be a profitability ratio - it shows how much a company is earning on its total assets. Nevertheless, it is worthwhile to view the ROA ratio as an indicator of asset performance. The ROA ratio (percentage) is calculated as:

The ROA ratio is expressed as a percentage return by comparing net income, the bottom line of the statement of income, to average total assets. A high percentage return implies well-managed assets. Here again, the ROA ratio is best employed as a comparative analysis of a companys own historical performance and with companies in a similar line of business.

Bullish and Bearish Market

Origin of the term

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One common myth is that the terms "bull market" and "bear market" are derived from the way those animals attack a foe, because bears attack by swiping their paws downward and bulls toss their horns upward. This is a useful mnemonic, but is not the true origin of the terms. Long ago, "bear skin jobbers" were known for selling bear skins that they did not own; i.e., the bears had not yet been caught. This was the original source of the term "bear." This term eventually was used to describe short sellers, speculators who sold shares that they did not own, bought after a price drop, and then delivered the shares. Because bull and bear baiting were once popular sports, "bulls" was understood as the opposite of "bears." I.e., the bulls were those people who bought in the expectation that a stock price would rise, not fall.

A stock market bull is someone who has a very optimistic view of the market; they may be stock-holders or maybe investors who aggressively buy and sell stocks quickly. A bear investor, on the other hand, is pessimistic about the market and may make more conservative stock choices. Sometimes, the terms are used to refer to specific funds or stocks. What Drives Bear and Bull Markets? The stock market is affected by many economic factors. High employment levels, strong economy, and stable social and economic conditions generally build investor confidence and encourage investors to put their money in the stock market. Often,
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this can bolster bull markets. Also, new technologies and companies that encourage investors to put their money in stocks can create bull markets. For example, in the 1990s, the dot com craze encouraged many investors to put their money in stocks that they felt would keep increasing. In some cases, a bullish market is simply selfperpetuating. Since the market is doing well, it only encourages investors to invest more money or to start investing. On the other hand, discouraging economic or social political changes in a society can push the market down. Sudden instability or unemployment -- or even fears of unemployment caused by wars and other problems -- can start to make investors more conservative and therefore lead to bear markets. Of course, again this becomes a self-perpetuating trend. As the economy slows down, companies begin downsizing. Increased unemployment makes people far less willing to gamble on the stock market. Sometimes, a panic caused by dire predictions about the market can also create bearish conditions. Investing During Bear and Bull Markets New investors often assume that they need to avoid investing during bear markets, and invest heavily during bull markets. This is not the case. Experienced investors know that you need to be able to invest in any sort of market condition, provided that you do so wisely. Each investor has a different strategy for dealing with a bull market or bearish markets. Many investors try to take advantage of bull markets by buying stocks as soon as the market gets bullish, and then starting to sell when prices seem to have reached their peak. The difficulty, of course, is that it is almost impossible to tell when the trend is beginning and when it will peak. In general, investors can take more chances with the market during a bullish phase. Since overall prices will rise, the chances of making a profit are good. In bearish market conditions, prices are falling and the possibility of loss is pretty good. What is worse, it is not always possible to tell when bearish conditions will end. Therefore, if you invest during such market conditions, you may have to suffer some losses before bullish times return and you're able to realize a profit. For this reason, many investors decide on short selling or fixed income securities and other more conservative types of investment. Defensive stocks are another good option
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that remains stable during bearish conditions. On the other hand, some investors see bearish market conditions as an ideal time to invest in more stocks. Since many people are selling off their stocks -- including valuable blue-chip stocks -- at low prices, it is possible to set up long-term investments that will prove valuable during bullish times.

Now during the time of our Summer Internship Program the market trend was Bearish and the investors were not trading actively during this time. Our objective in Bonanza was to approach clients and educate them that this is the best time for them to invest in stock market. This is the time when they should do long term investments that will prove them valuable during the Bullish phase. This in turn helped Bonanza to generate more business from inactive clients.

NUANCES IN MARKETING OF DEMAT AND TRADING A/C

Dmat is short form of dematerialization. In a Demat account, securities like shares, corporate bonds etc are kept in electronic format. The idea of a dematerialized account is to avoid the need to hold anything in physical form. Investors have to open a Demat account with depository through a depository participant (DP). A depository is similar to a bank which holds securities in an account, transfers securities between accounts on the instruction of the account holder, facilitates transfer of ownership without having to handle securities and ensures safe-keeping of securities. Currently, there are two depositories National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) which are registered with the Securities and Exchange Board of India (SEBI). These depositories operate through a number of DPs, who are agents of these depositories.

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Though SEBI has allowed for transactions of less than 500 shares in physical format, not many people accept physical shares these days as it is difficult to sell them. Keeping Demat securities is also far more advantageous. It does away the need for paperwork, making transactions faster and more efficient. It saves investors from destruction or loss of securities in transit, name transfer, stamp duties etc. Our job in Bonanza was to get such clients for the company, who not only wish to open a Demat account but also willing to trade regularly. As the company earns through brokerage charged per transactions (i.e. when a client buys or sells shares) and to earn this brokerage, they need such clients, who trade on regular basis. This is been done by various methods like Cold Calls Here I collect the details of people from corporate databases,

yellow pages, internet and references and try to fix an appointment with these people by calling them.

Personal Network I also tried to make some clients based on my personal

network. I tried to contact my friends and family to give me prospective leads of people who all are interested in share market.

Going on the field I also tried to get some clients by directly approaching to

big offices, multiplexes and some complexes. Apart from this our job in Bonanza was to also look at such clients who were not been trading in recent times. We tried and fixed an appointment with such clients and tried to help them out if could be done with the help of company so that these clients can trade with ease in future.

Important things one needs to keep in mind while opening a Demat account

Zero balance: Unlike a normal bank account, one doesnt need to deposit

any shares or cash for opening a Demat account. Even after opening the account, there is no need to hold any securities in that account. If and when you buy any share, this share will be shown in your account electronically. The account will be

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adjusted to the extent of any sale/purchase of any securities as and when the transaction takes place.

One ID: The DP will open the account in the system and give an account

number, which is also called BOID (Beneficiary Owner Identification number). This account is enough to hold all kinds of securities like shares, debentures and other debt instruments like bonds and G-secs. However, there is no restriction on the number of Demat accounts that can be held by a person. One can open any number of Demat accounts with different DPs. Even post office instruments like Kisan Vikas Patra and National Savings Certificates can be held in Demat form. However, at present, the facility is available only in 35 nominated post offices in Mumbai.

Two documents: PAN has been made compulsory for all Demat accounts

with effect from April 2006. Anyone opening a Demat account needs to produce his PAN card at the time of opening it. The PAN card also doubles as a proof of identity document, which is mandatory. The other important document is proof of address. Passport, driving license, voters ID card, bank statement and electricity bills are among the various documents accepted as identity proofs.

Three accounts: A Demat account will be fully operational only if its

accompanied by two other accounts trading account and bank account. While the former is optional, the latter is a pre-requisite as it is needed for crediting any dividend warrants. Trading account is necessary to buy/ sell securities in the market and can be opened with a broker. If one does not intend to trade but only to convert existing physical instruments into Demat form, the trading account is not necessary. Since many banks these days have broking and DP arms, you can open all three accounts at one place itself.

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Four types of charges: There are four fees usually levied on a Demat

account: conversion fee, annual maintenance fee, custodian fee and transaction fee. All the charges vary from DP to DP.

Conversion fees: The DP charges a fee for converting shares from the

physical to the electronic form or vice-versa. This fee varies for both Demat and Remat requests. For Demat, some DPs charge a flat fee per request in addition to the variable fee per certificate, while others charge only the variable fee.

Annual maintenance fees: This is generally charged in advance. Custodian fee: This is charged monthly and depends on the number of

securities held in the account. Each security is identified by a unique international securities identification number (ISIN). Custodian fee is linked to this numbers and ranges between Rs 0.5 to Rs 1 per ISIN per month. DPs will not charge custodian fee for ISIN on which the firms have paid one-time custody charges to the depository.

Transaction fee: Transaction fee is charged for crediting/debiting securities

to and from the account on a monthly basis. While some DPs charge a flat fee per transaction, others peg the fee to the transaction value, subject to a minimum amount. For example, while SBI charges Rs 3 per transaction, ICICI Bank does not charge buy trades, but charges 0.04% of the transaction value in case of sell trades, subject to a minimum of Rs 10. The fee also differs on the kind of transaction (buying or selling). Some DPs charge only for debiting the securities while others charge for both. The DPs also charge if your instruction to buy/sell fails or is rejected. In addition, service tax is also charged by the DPs. SEBI has removed account opening charges, transaction charges for credit of securities, and custody charges vide circular dated January 28, 2005.

Consumer

Behavior

while

taking

decisions

related

to

his

Investment in Equities and Derivative Market

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This study is based on various factors which affect consumer while taking decisions related to his investment in Equities and Derivative Market. The study is based on the questionnaire survey. Amongst the various factors outlined by experts taking up studies related to consumer behavior certain factors like current market price, confidence in brokers advice, analyst recommendation, inclination towards online trading, personal analysis etc are found to be most important and are analyzed. Though trading in equities and derivatives is no longer a novel concept to the Indian investor yet the predominant sentiment among investors is that of apprehension while investing in capital markets. The main objective here is to study the Indian investor behavior that was undertaken through the analysis of primary and secondary data. The primary data collected from investors belonging to different age group and having different professional background were analyzed through SPSS to arrive at those factors that actually influenced investor behavior. The analysis of the secondary data involved research papers and articles involving study of investor behavior published by both Indian and Foreign researchers. Through the comprehensive use of SPSS, an attempt has been made to establish a correlation among various factors influencing consumer behavior. From the analysis conducted we can see that investors appear to seek three major kinds of benefits from trading firms: Analysis (Brokers Advice and Personal Analysis), Market Condition (Analyst Recommendation and Market Price) and Online Facility The study also includes the analysis of factors which would increase investors confidence in Equities and Derivative Market.

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CHAPTER-2 COMPANY PROFILE

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Delhi Registered Office: 4353/4, Madan Mohan Street, Ansari Road, Darya Ganj, New Delhi 110 002. Tel.:011-23242022-26

Delhi Head Office: 2/2A Lakshmi Insurance Building, 1st Floor, Asaf Ali Road, New Delhi 110 002 Tel.: 011-301412600 / 30112900

Mumbai Corporate Office: Plot No. M-2, Walbhat Road, Cama Industrial Estate, Goregoan (E), Mumbai 400 063. Tel.: 6760 5500 / 6760 5600

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:

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A Client-driven foundation and strategy committed to client-specific investment Integrated and innovative use of Technology enabling clients to trade offline, online

needs and objectives. 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.

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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 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

Transfer (FTP) facilities.

NSDL & CDSL

Corporate Agents for Life & Non-Life Insurance (both foreign / private and
31

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, tommorrow Thats because were 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

32

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:

33

Professional research brings out the brightest stock and sector ideas for Proactive management means monitoring the operational and stock market Prudent risk management practices mean the better downside protection for Greater flexibility to hold cash and allocate investments across sectors and

your portfolio.

performance of all companies in your portfolio regularly.

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

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, 2004 to Nov 30, 2007) Absolute Bonanza PMS Sensex Nifty 327.28 % 277.68 % 260.58 % Annualised 99.22 % 84.18 % 79.00 %

34

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. 35

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.

36

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

37

Sr.

Particulars

New Charge Structure w.e.f. 1st Aug. 2007

Demat Account Opening Documentation Charges, Including stamp agreement Power of Attorney (POA) FAX indemnity

Nil

Rs. 100/Rs. 100/Rs. 200/Rs. 250/Rs. 800/Nil Rs. 15/-

Annual Maintenance : Individual CM/Corporates/Others

3 4 5

Account Closing Charges Rematerialization Per certificate Debit Transaction : Market Off market/Inter Depository

Rs. 15/Rs. 35/Rs. 31/- per certificate

6 7

Pledge : Creation Demeb

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.

38

Bonanza Value
All beginners start somewhere and its 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.)

39

Component. Account Opening Charges Minimum initial Margin Amount Brokerage (%) Delivery Intraday F&O segment DP Charges AMC

Bonanza-Value 500/2000/- (Adjustable against market exposure)

Bonanza-Max 500/1000/- (Adjustable against market exposure)

0.40 0.05 0.05 First year Nil Rs. 300/- 2nd yr. Onwards - Transaction Sale Transaction 12/7X of Total Credit (Including shares)

0.30 0.04 0.04 First year Nil Rs. 250/- 2nd yr. Onwards Sale Transaction 10/10X of Total Credit (Including shares) HDFC/UTI/ICICI 1000/- (compound on quarterly basis)

Exposure

Bank Tie-up for payments Minimum Monthly Membership commitment SMS charges for research on Mobile Software Charges Minimum Charge per contract Note

HDFC/UTI/ICICI Nil

Free

Free

Nil Rs. 15/-

Nil Rs. 15/-

40

There are two types of trading environment available for online trading
1. Installable software based stock trading terminals: This trading

environment requires software to be installed on investors 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.
41

Advantages Disadvantages Some people dont have much proficiency of internet and computers. Websites are not that user friendly as compared to personalized service of brokers Real time stock trading is possible without calling or visiting brokers 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 IDs Customer service through Email and chat

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. Pros 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.

42

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 also studied and compared the features of Demat a/c offered by various other companies in the industry to get fully prepared in order to sort the queries a client could ask about the product. 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 IndiaBulls

43

CHAPTER-3 OBJECTIVE AND METHODOLOGY

44

Objectives
To increase the client base of the company by targeting new clients for To help the organization provide better service to customer by analyzing the

Bonanza. problems faced by the customer and their satisfaction level with the service of Bonanza. a/c. To study the factors affecting consumer behavior while taking decision before investing in Equities and Derivative market. To understand the marketing strategies of Dmat a/c of Competitor companies To suggest strategies to Bonanza regarding marketing of Dmat and trading and to compare and contrast with Bonanza.

Methodology
The methodology of the project includes a combination of both primary as well as secondary data collection. Collected Database of the prospective clients from the company officials and making calls to them to explain about the offering. We used our Personal Database and tried to create market for Demat and Trading a/c. Fixed an appointment with the Client and explained them thoroughly about the Demat a/c of Bonanza and tried to convince them to open a/c with Bonanza. Completed the Registration Formalities with the Clients who were interested in opening an account with Bonanza. Developing an Effective Sales Pitch Based on Primary Research data collected from the Interviews with company Factors affecting Consumer Behavior
45

officials and Faculty Members.

This study is based on the questionnaire survey. Various factors such as current market price, confidence in brokers advice, analyst recommendation, inclination towards online trading etc are studied and analyzed.

The study also includes factors that would improve investors confidence in capital markets.

COMPILIATION OF DATA:
To perform Competitive Analysis of different Companies which are into Marketing of Demat a/c Perform an Exhaustive Strength Weakness Opportunity Threat (SWOT) analysis report of Bonanza Portfolio Ltd. Developing an exhaustive pitch to approach the clients by interacting with company official and faculty guide, which would help new recruits of Bonanza in increasing client base for the company.

46

CHAPTER-4 REVIEW OF LITERATURE

47

Existing literature on Consumer Behavior Globally, there are increased evidences to suggest that investor confidence has assumed an important role in the economic development of a country. Though research relating to importance of investor behavior in the Indian capital markets are yet to be undertaken there has been ample instances wherein behavioral patterns of the investor has be considered essential. The Economist (1998) indicated that a lot of issues need to be addressed to make capital markets safer. Transparency, strengthening financial system and managing crises are the issues, which cannot be quickly fixed. But they add up to a stronger system. David Bullard (1998) in Business Times has indicated that the private investors are the big losers on South African listings scam. Companies with no earning record and with inexperienced directors got listed on stock exchanges. Their only objective was profit making out of inflated market price. The net result is private investors lost confidence in the market. Lee Hsien Loong (2000) while addressing Financial Institutions in Bangkok stressed the importance of rebuilding investor confidence for prosperity of ASEAN countries. He indicated that for investor confidence, rebuilding of sound fundamentals, dealing with capital account risks, economic co-operation among ASEAN, corporate restructuring, banking sector reforms and improvement of political and social conditions is important. Joseph.J.Oliver (2002) in his presentation to the senate standing committee on banking, trade and commerce, suggested that close to half of all Canadians have investments in equities and their confidence is essential to healthy and dynamic capital market. Deep bear market, corporate scandals, insider trading, high levels of executive compensation and in accuracy of published financial statements are cited as reasons for lack of investor confidence in Canadian capital markets. He indicated that regulators, the accounting professionals, analysts, brokerage firms, public companies, shareholders and Government must contribute to ensure good corporate governance and reduce corporate failures. McCall (2002) in his testimony before the committee on financial services United States house representatives, observed that integrity of the financial markets and economic well being of the country depend on corporate accountability and investor confidence.
48

The Hindu (2002), online edition of Indian national newspaper has indicated that the spate of scandals in United States were being addressed by stricter laws and strong actions against culprits to prevent any recurrence of these events and to restore investor confidence.

The subject related to consumer behavior of investors participating in the capital markets have been undertaken by many prominent researchers in the last decade. Dale W. Jorgensen, (1966) Dept. of Economics, Harvard University in his paper on capital theory and investment behavior had cited tax policy as a determinant of investment expenditures through rental price of capital service. Stiglitz and Weiss (1984) have indicated that any bunch of new entrants into the equity market contains a number of frauds. Common investors know this, but they cannot identify the frauds. Heath and Tversky (1991) found that peoples willingness to act on their judgment is dependent on their subjective competence. They cited that people are willing to bet on their own judgment when they feel they are knowledgeable and skilful. Bumgarner and Pime (2000) have studied the capital flows to and from Hong Kong in the years prior to its reversion to Chinese sovereignty and during the transition. They have indicated that Government policies have an impact on investor confidence and capital mobility. Fieldstein and Yitzhaki (2000) have presented evidence to suggest that the corporate stock owned by high-income investors appreciate substantially faster than stock owned by investors with lower incomes. They have indicated that high-income individuals have larger portfolios and can therefore denote more time or resources to their investments, thus resulting in higher returns. Dechow, Hutton and Sloan (2001) found that analysts growth forecasts are routinely over optimistic around new equity offerings, but the most over optimistic are those analysts employed by the lead underwriters of the offerings. Bloomfield, Libby and Nelson (2002) have indicated that less informed investors are over confidant in investments. Providing more information to professional investors only could harm the welfare of less informed investors if less informed investors are not aware of the extent of their informational disadvantage. Statman (2002) in his research compared the investors a century ago with investors today. He concluded that todays investors are more rapidly informed than their predecessors, but they are neither better informed nor better behaved. Hall (2002) has conducted research on brokers recommendations. He found that investors, who invested in the Johannesburg Securities Exchange (JSE) based on their brokers advice, were able to get risk
49

adjusted returns superior or equal to the market. Stout (2002) has indicated that investors have adaptive and not rational expectations. Adaptive expectations result in both trust and mistrust in securities market based on past actions. Graham and Harvey (2006) in their paper had cited that the competence effect influenced frequency trading and home bias (tendency to overweight domestic equities and underweight foreign equities). They had also cited in their findings that male investors and investors with larger portfolios or more education are likely to perceive themselves as more competent than female investors and investors with smaller portfolios and lesser education.
In the Indian context, Gupta (1996) has indicated that from the angle of investor protection, the regulation of the primary market is important for several reasons. The number of small investors in primary market is massive. Most of new investors make their first entry into equity investments via the new issue market. So retaining common investor confidence in primary markets is important. Madhusoodan (1997) has indicated that in the Indian stock market, higher risk is not commensurately well priced, hence investment in higher risk instruments may be of no use. Gokaran (2000) has studied the financing patterns of the corporate growth in the country. The study indicated that equity markets suffer serious inadequacies as a mechanism for raising capital. Murali (2002) has indicated that New issues market (NIM) focuses on decreasing information asymmetry, easy accessibility of capital by large sections of medium and small enterprises, national level participation in promoting efficient investments, and increasing a culture of investments in productive sector. In order that these goals are achieved, a substantial level of improvement in the regulatory standards in India at the voluntary and enforcement levels is warranted. The most crucial

steps to achieve these goals would be to develop measures to strengthen the new issues market.

50

CHAPTER 5 FINDINGS

51

COMPARISON TABLE REGARDING THE OFFERING FROM DIFFERENT COMPANIES

Name of Charge the s for Company opening Demat and Trading a/c Indiabull Rs 900 s for both Exposure Brokerag e for Intraday Brokerag e for Delivery (cash) Annual Maintenanc e Charge Minimum Balance Required

India Infoline

Reliance Money ICICI Direct

Rs 5555 in which Rs 5000 would be used for Trading Rs 750 for both Rs 750 for all three types of a/c Rs.200 are for Trading a/c and Rs. 400 are for Demat a/c

Up to 8 times in General Trading and Up to 2 times in Marginal Trading Up to 8 times

0.03 to 0.05%

0.3 to 0.5 %

Nil

Nil

0.05%

0.25%

Yes

Rs 2000

Up to 5 times

Prepaid Brokerage Card * Margin in which 0.05% exposure is 5 times and u can convert to delivery Margin Plus- in which exposure is 20 times but no conversion 5 to 7 times

Prepaid Brokerage Card * 0.75%

Yes

Nil

Yes

Nil

Bonanza Portfolio Limited

0.03%

0.3%

No

Nil

* Prepaid Brokerage Card is been given to clients in which there brokerage charge gets automatically charged e.g. brokerage charge of Rs. 500 on Trading of Rs. 1crore gets charged

52

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 HNIs.

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 RMs (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 doesnt 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

53

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 documentation has to be send 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 SEBIs new norms which allow FDI to enter in stock broking can post a threat to Bonanza.

54

EXHAUSTIVE SALES PITCH FLOW CHART

Start

Other References

Company Personnel

Personal Contacts

Perspective Log

Making calls

Respon se Positive Negative

Fixing an Appointment

Ending the Conversation

Respon se Negative Positive Telling him about the Company Products

Saving the data for future

Stop

55

Completing the Formalities and closing the deal

EXHAUSTIVE SALES PITCH

1. Acquiring Contacts The first and the foremost thing in sales is to acquire

the contacts. The contacts can be acquired from the following sources

Company Personnel The contacts given by company personnel can be of extreme help. The leads provided by Sr. Relationship Manager are very useful because they have very good experience in the industry and their contacts with people from other industry are also good. E.g. A Sr. Relationship Manager having contacts with a bank official can help to provide some good leads.

Personal Network The contacts can also be gathered from personal network. Contacts from families, friends and known sources are much easy to contact and convince as compare to contacts from any other sources.

Other Sources - Contacts can also be gathered from various other sources. Contacts can be gathered from internet, yellow pages etc.

2. Preparing Perspective Clients Log The next step is to give preferences to

contacts gathered. Contacts should be properly sorted out for calling purpose. E.g if we are approaching the weekend then it is better to sort out those clients first who are into service because they are busy to fix an appointment during weekdays. It is also required to call a limited number of people at a particular time and fix an appointment accordingly because too many appointments can also result in inefficiency.
56

3. Making Calls The next and the main step is to call the database sorted out.

During this stage it is required to tell the client that we have been calling on behalf of Bonanza and this is in relation to Demat and Trading a/c. If the client says that he already has a Demat a/c then we need to ask that with which company he is having a Demat a/c and try to tell the advantages of opening a Demat a/c with Bonanza as compared to the Demat a/c he is having at present. If the client says that he is not having the Demat a/c then briefly telling about the offerings and try fixing an appointment with the client. If the client says that neither he is having any Demat a/c nor he wishes to have one now then ending the conversation and saving that contact in the database and trying to contact him again in future when market is good or is in bullish phase to see that if he is interested now to open the a/c or not.
4. Approaching the Client When the client agrees for an appointment then

we need to follow Customer Centric Approach. We need to do our homework before approaching the client. We need to collect all the basic information about the industry in which the client is. E.g. if the client is in steel sector then we need to collect the basic information related to steel sector so that we can talk to him related to his field. We also need to tell the client that how the customer can get good returns by investing in certain stocks and what is the current position of the stocks in which he is interested in. Then it is required to tell the offerings which Bonanza would be giving to him when he opens the Demat a/c. At this stage it is also required to tell the advantages of Bonanza in comparison to other players in the market.

Advantages of opening a Demat a/c with Bonanza

No Annual Maintenance Charges The biggest advantage of opening a

Demat a/c with Bonanza is that it does not charges anything to maintain Demat and trading a/c in comparison to its competitors.

57

Excellent service by Relationship Mangers The service provided to

clients is amongst the best when compared to competitors. The clients are not charged for making any number of calls to relationship managers in relation to managing their a/c or trading. The clients are also informed about the latest happenings of share prices through SMS and through online messengers.

Brokerage charges The brokerage charges charged to clients varies

according to the clients. Normally the prices which are charged to clients in all the companies are the same. 0.03% - Intraday 0.3% - Delivery (cash) But if the client is ready to invest more with Bonanza then brokerage charges are bought to as low as 0.01% - Intraday 0.1% - Delivery (cash)

User friendly software The software Bonanza Power provided by Bonanza is very easy to use. The advantage of such software is that it shows the price changes on regular basis there is no time lag. The software provided by its competitor are neither that friendly and do not show price changes immediately , there is always some difference which exist between the market price and price shown by their software.

Marginal trading Bonannza not only provides general trading to its clients but also provides marginal trading. In this, the client can take an exposure of up to 7 times the amount of money he is having in his Trading a/c.

If the response of the client after all this is still negative then asking him the reason and saving that contact in the database so that if we could solve his query or if suppose the reason because of which he is not entering the market does not exist then contacting again and approaching him.
58

If the response of the client is positive after knowing about the Demat a/c offered by Bonanza then completing the formalities and closing the deal.
5. Completing the Formalities and Closing the Deal In the end when the

client has agreed to open the a/c it is required to complete all the formalities. Requirements to open a Demat a/c are Photocopy of Pan Card Identity Proof 4 Passport size Photographs Cheque of Rs.900

After taking all these things we need to take signature of client on the kit of Bonanza and thank client for opening a/c with Bonanza.

STUDY OF CONSUMER BEHAVIOR Sources and Methods:

Collection of Data and Methodology This survey uses questionnaire (included in annexure A) as the medium to extract relevant responses that would enrich the study to be undertaken. A questionnaire is a research instrument consisting of a series of questions and other prompts for the purpose of gathering information from respondents. Although they are often designed for statistical analysis of the responses, this is not always the case. The questionnaire was invented by Sir Francis Galton. Questionnaires have advantages over some other types of surveys in that they are cheap, do not require as much effort from the questioner as verbal or telephone surveys, and often have standardized answers that make it simple to compile data. The questionnaire is basically a Likert scale model. A Likert scale is a type of psychometric response scale often used in questionnaires, and is the most widely
59

used scale in survey research. When responding to a Likert questionnaire item, respondents specify their level of agreement to a statement. The scale is named after Rensis Likert, who published a report describing its use. The responses were expected to be received from those investors who were willing to spend their time and wished contribute to research willingly only. So it constitutes a convenience sample which would be collected from people pursuing various occupations and belonging to different age group. Data collection would be carried out at major business centers of Indore. Depending upon the responses received, the investor preferences for the decisions in capital market issues would be graded using a favorable scale. In the first part the data collected from the questionnaires would be analyzed using factor analysis. The second part would consist of queries relating to measures that would improve investors confidence in capital markets. Factor Analysis Factor analysis was carried out to find out the significant factors affecting investor decisions. Using data, factor analysis applies an advanced form of correlation analysis to the responses to a number of statements. The purpose of this analysis is to determine if the responses to statements are highly correlated.

Brokers Advice: It can be seen that 58% of the sample had somewhat agreed that their investment decision depended on the advice of the brokers. Thus the brokerage firms need to concentrate on the credibility the investors attach to the brokers advice during investment.

60

Personal Analysis: It can be clearly seen that 45% of the sample were confident in their own personal analysis to arrive at a decision related to investment. This may be the result of the efforts undertaken by various organizations in improving the investors attitude towards the market.

Online Facility: From the survey it can be seen that there has been an increase in the degree of confidence an investor attaches towards online trading of shares as the majority of the sample comprised of people who professionals who are conversant with the internet. But the majority of the people from the business community depend on offline trading through their brokers.
61

Market Price: The chart shows that majority (68%) of the investors strongly agree that the current market price of the equities is the most dominant factor affecting their investment. This figure implies the relative immaturity of the majority of the sample as most technical analysts are of the opinion that historical data pertaining to the performance of the equities should influence investors decisions.

Analyst Recommendation: From the figure it can be seen that majority (55%) of the investors consults publicized articles related to investment before reaching a decision.

62

Factors to improve Investors Confidence in future: It is clearly seen from the survey that investors confidence in capital market would increase if there would be Lesser Scandals.

63

How do you prefer Trading: We can see from the following figure that 63% of the people prefer doing trading online. This shows the inclination of people towards online, they are more dependent on online analysis as compared to brokers advice. Some people also believe that in online trading transactions are carried out faster as compared to offline.

Why Online Trading: It can be clearly seen that out of 38 people who preferred Trading Online 37% preferred trading because of the faster transactions in Online as compared to Offline. They thought that their transactions are carried out much faster in Online and there is no hard cash engaged in it. Some people also preferred online just because of the convenience and online analysis.

64

Why Offline Trading: Out of 22 people who preferred Offline trading 36% of people preferred it because of the valuable suggestion of Broker. They carried out their transactions by consulting with their broker. Some people also preferred Offline Trading because of higher exposure limit in Offline Trading as compared to Online Trading.

Factor Analysis
Factor analysis was carried out to find out the significant factors affecting investor decisions. Using data, factor analysis applies an advanced form of correlation analysis to the responses to a number of statements. The purpose of this analysis is to determine if the responses to statements are highly correlated.
65

Correlation Matrix brokeradvice 1.000 -.186 -.038 .033 -.009 .078 .388 .400 .474 personal analysis -.186 1.000 -.028 -.025 .042 .078 .415 .424 .374 onlinefacility -.038 -.028 1.000 -.070 -.030 .388 .415 .299 .409 marketprice .033 -.025 -.070 1.000 -.086 .400 .424 .299 .256 analystre comm -.009 .042 -.030 -.086 1.000 .474 .374 .409 .256

Correlation

Sig. (1-tailed)

brokeradvice personalanalysis onlinefacility marketprice analystrecomm brokeradvice personalanalysis onlinefacility marketprice analystrecomm

A correlation matrix is a lower triangle matrix showing the simple correlations between all possible pairs of variables included in the analysis. For factor analysis to be appropriate, the variables must be correlated. From the above correlation matrix it could be derived that there exists a certain degree of correlation between the selected variables assumed to influence investor behavior related to equity trading. Personal Analysis is correlated with Brokers Advice and Market Price is correlated with Analyst Recommendation. Bartletts Test of Sphericity can be used to test the null hypothesis that the variables are uncorrelated in the population; in other words the population correlation matrix is an identity matrix.
KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square df Sig. .573 66.856 10 .000

In an identity matrix all the diagonal terms are 1 and all off diagonal terms are 0. The test statistics for sphericity is based on chi-square transformation of the determinant of the correlation matrix. A large value of the test will favor the rejection of the null hypothesis. The approximate chi square statistics is 66.865 with 10 degree of freedom which is significant at the 0.05 level. Moreover the Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy is an index used to examine the
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appropriateness of factor analysis.

This index compares the magnitudes of the

observed correlation coefficients to the magnitudes of the partial correlation coefficients. The value of the KMO statistics (0.573) is also large (> 0.5). Thus, factor analysis can be considered an appropriate technique for analyzing the correlation matrix. Communality is the amount of variance that a variable shares with all the other variables considered. This is also the proportion of variance explained by the common factors. Under communalities, Initial column, it can be seen that the communality for each variable from Broker Advice to Analyst Recommendation is 1.0 as unities are inserted in the diagonal of the correlation matrix.
Communalities brokeradvice personalanalysis onlinefacility marketprice analystrecomm Initial 1.000 1.000 1.000 1.000 1.000 Extraction .622 .616 .764 .617 .705

Extraction Method: Principal Component Analysis.

The second column under the communalities gives relevant information after the desired numbers of factors have been extracted. The communalities of the variables under Extraction are different than under Initial because all the variances associated with the variables are not explained unless all the factors are retained.
T o ta l Va rian ce Ex p la in e d In itia l Eig en valu es T o ta l % o f Va ria n ce C u m u la tive % 1.21 2 2 4 .2 36 24 .2 3 6 1.07 4 2 1 .4 78 45 .7 1 4 1.03 9 2 0 .7 77 66 .4 9 1 .8 74 1 7 .4 74 83 .9 6 5 .8 02 1 6 .0 35 1 0 0 .0 0 0 Extractio n Su m s o f Sq u are d L oa d in g s R o ta tio n Sum s of Sq u a re d Lo a d T otal % o f Va rian ce C u m u la tive % T o ta l % o f Va rian ce Cu m u la tiv 1 .2 1 2 2 4.23 6 2 4 .2 36 1 .1 86 23 .72 1 23 .7 1 .0 7 4 2 1.47 8 4 5 .7 14 1 .0 83 21 .65 2 45 .3 1 .0 3 9 2 0.77 7 6 6 .4 91 1 .0 56 21 .11 8 66 .4

C om p o n en t 1 2 3 4 5

Extra ctio n M e th od : Prin cip a l C o m p o ne n t An a lysis.

The eigenvalue represents the total variance explained by each factor. The table initial Eigenvalues gives the Eigenvalues. The Eigenvalues for the factors are, as expected, in decreasing order of magnitudes as we go from factor 1 to factor 5. The Eigenvalues for a factor indicates the total variance attributed to that factor. The total variance accounted for all the five variables is 5.00, which is equal to the number of
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variables. Factor 1 account for a variance of 1.212, which is (1.212/5) or 24.236 percent of the total variance. Likewise, the second factor accounts for (1.074/5) or 21.478 percent of the total variance, and the third variable accounted for (1.039/5) or 20.777 percent of the total variance therefore the first three variables accounted for 66.491 percent of the total variance. Extraction Sums of Squared Loadings give the variance associated with the factors that are retained. These are the same as under Initial Eigenvalues as the technique implemented would is principal component analysis. A Scree plot is a plot of Eigenvalues against the number of factors in order of extraction. The slope of the plot is used to determine the number of factors. Typically, the plot has a distinct break between the steep slope of factors, with large Eigenvalues and gradual trailing off associated with the rest of the factors. This gradual trailing off is referred to as a scree.

S re P t c e lo

1 .3

1 .2

Eigenvalue

1 .1

1 .0

0 .9

0 .8 1 2 3 4 5

C m o e tN m e o pnn u br

With reference to the above scree plot it can be observed that a distinct break occurs at three factors. Finally, from the cumulative percentage of variance accounted for, we see that the first three factors accounts for 66.491 percent of the variance, and
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that the gain achieved in going to four factors is marginal. Furthermore, the eigenvalue determination also indicates that an assumption of three factors is fairly reasonable. The component matrix contains the factor loadings of all the variables on all the factors extracted. The factor matrix contains the coefficients used to express the standardized variables in terms of factors. These coefficients, the factor loadings, represent the correlations between the factors and the variables. A coefficient with a large absolute value indicates that the factor and the variable are closely related. The coefficients of the factor matrix can be used to interpret the factors. But although the initial factor matrix indicates the relationship between the factors that can be interpreted, because the factors are correlated with many variables.
a Component Matrix

personalanalysis brokeradvice marketprice onlinefacility analystrecomm

1 .704 -.703 -.350 .103 .297

Component 2 -.343 .242 -.701 .510 .383

3 .044 .264 -.067 -.702 .685

Extraction Method: Principal Component Analysis. a. 3 components extracted.

In the case under consideration factor 1 is correlated to two of the variables and factor 3 is also correlated to two of the variables (absolute value of factor loading is > 0.5). Therefore it becomes difficult to correctly interpret the factors without rotation.

In rotating the factors, the percentage of variance accounted for by each factor does change. The variance explained by the individual factor is redistributed by rotation. In the present case we have adopted the varimax procedure that minimizes the number of variables with high loadings on a factor, thereby enhancing the interpretability of the factors.

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a Rotated Component Matrix

brokeradvice personalanalysis analystrecomm marketprice onlinefacility

1 .773 -.767 -.012 .029 .001

Component 2 .045 .078 .802 -.654 -.049

3 .152 .147 .247 .434 -.873

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. a. Rotation converged in 4 iterations.

In the rotated factor matrix Factor 1 has high coefficients with Broker Advice and Personal Analysis, Factor 2 has high coefficients Analyst Recommendation and Market Price. Therefore we can summarize the data by stating that investors appear to seek three major kinds of benefits from trading firms: Analysis (Brokers Advice and Personal Analysis), Market Condition (Analyst Recommendation and Market Price) and Online Facility

Component Transformation matrix generally gives us the correlation between the two factors.
Component Transformation Matrix Component 1 2 3 1 -.905 .396 .153 2 .401 .675 .619 3 -.142 -.622 .770

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

In this case the Factor 1 is minimally correlated with Factor 2 and negatively correlated with Factor 3 Factor 2 is minimally correlated with Factor 1 and negatively correlated with Factor 3. Factor 3 is minimally correlated with Factor1 and not so high with Factor 2.

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Factor scores are composite scores estimated for each respondent on the derived factors. These factor scores could be used instead of the original variables in subsequent analysis. The unique factors are correlated with each other and with the common factors. The common factors can themselves be expressed as linear combinations of the observed variables.
Component Score Coefficient Matrix Component 2 .077 .043 -.064 -.596 .748

brokeradvice personalanalysis onlinefacility marketprice analystrecomm

1 .653 -.646 .008 -.007 .021

3 .138 .148 -.828 .397 .251

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization. Component Scores.

Fi = Wi1X1+ Wi2X2++WikXk (Where Fi = estimate of ith factor, Wi = weight or fatroe score coefficients, k = number of variables) It is possible to select weighs or factor score coefficients so that the first factor explains the largest portion of the total variance. Then a second set of weighs can be selected, so that the second factor accounts for most of the residual variance, subject to being uncorrelated with the first factor. This same principle could be applied to selecting additional weights for the additional factors. Thus, the factors can be estimated so that their factor scores, unlike the values of the original variables, are not correlated. Furthermore, the first factor accounts for the highest variance in the data, the second factor the second highest, and so on.

LIMITATIONS In relation to Consumer Behavior

The study will be limited to INDORE only. Due to recency effect the response of a consumer can vary which can affect the survey.
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A limited sample size of sixty clients only was considered for the primary survey pertaining to study of investor behavior.

In relation to Marketing of Demat a/c

Past data on the customer information such as their telephone number and residential address sometimes inaccurate lead to immense wastage of time. One of the main problems was Language Problem I do not understand Telegu and sometimes I came across people who do not understand Hindi and are also not very verse in English.

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CHAPTER 6 CONCLUSION AND RECOMMENDATION S

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Conclusion
In this study, the decisions taken by small investors while investing in equity primary markets were studied. The decisions studied were investment in listed companies with good current market price, investment based on the advice from the broker, personal analysis of the offer document, confidence pertaining to electronic trading and using analysts recommendations in investment decisions. 68% of investors strongly agreed that current market price is important. 58% investors somewhat agree to the use of investment advice from the broker. 45% of the investors agree to a great extent that they do personal analysis of the offer document before investing. 35% indicated that they consider online trading to a great extent as reliable. 55% investors agreed to a great extent that they use analysts recommendations in the investment decisions. Securities and Exchange Board of India (SEBI) National Council for Applied Economic Research (NCAER) report (June 2006) indicates that despite the expansion of the securities market, a very small percentage (5 %) household savings is channeled into the securities market. Out of 12.1 million equity investors, 84% have invested in equity market through primary market. Thus primary markets play an important role in bringing investments into equity markets. Also the report indicates that 80% of equity investor households were first generation investors. So retaining their confidence is important. Report has also indicated that there is a decrease in preference for equity due to the losses made in investments by the investors in equity markets. These losses in primary market are due to lower market price after listing. The study conducted on investor confidence also indicated the importance of issue price and market price, which were given an overall first and third respectively. Another aspect identified by SEBI NCAER report is that inadequate diversification of portfolio is the main reason for lack of protection from volatility in the market. For
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proper diversification, information about investment avenues or financial assets, also macro and micro level changes affecting market prices and understanding about diversification is important. Thus information about the issue and how it is going to affect ones own portfolio is to be analyzed. The investor confidence survey also indicates that information availability is second important factor, next to issue price. It indicates that investors prefer personal analysis to brokers advice. For carrying out personal analysis also information is required. Thus information plays an important role in investment decisions and needs of the investors in this area also need to be addressed.

Society for Capital Market Research and Development (SCMRD) (June 2001) report indicates that the reforms made secondary market safer but primary market is still perceived riskier than before. Thus policy initiatives are required for reducing this perceived risk. Investors have suggested number of recommendations in this regard. As regards the various factors that would increase investor confidence in capital markets lesser scandals weighed the most with 52% of the investors opting for it, followed by better regulations that added up to 37% which is thereafter followed by government policies, intermediaries and market information. The last three scoring less may be considered as increase in investor confidence in the Government policies, intermediaries and market information sources (such as business newspapers, magazines etc.

Recommendations
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.

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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 brokers 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 smss 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.

Being a pioneer in Financial Sector Bonanza should foray into Mutual Funds and Insurance Sector.

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APPENDIX

Questionnaire based on awareness of DMAT and consumer behavior while taking decisions related to his investment in Equities and Derivative market Name: Date: Please mark in the appropriate brackets:
1. In which of the following age brackets do you fall: 18-30

Organization:

30- 45

45 - 60

60 and above

Others

2. Please select your respective occupation: Service

Profession

Business

3. Do you know what is DMAT ?

Yes

No

for Bank Account Cannt say

4. DMAT is used for :-

for trading in share market

5. How do you invest in share market ?

through share broker by yourself

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6. How much your decision to invest in securities depends on the advice from your broker? Least agree

Somewhat agree

Agree moderately

Agree to a great extent

Strongly agree

7. How much your decision to invest depends on your personal analysis/self evaluation of the securities/ derivatives? Least agree

somewhat agree

Agree moderately

Agree to a great extent 8.

Strongly agree

Please select your level of confidence on online trading of shares and derivatives:

Least confidence

Somewhat confident

Moderately confident

Confident to a great extent

Absolute confidence

9.

Do you invest in listed companies with good current market price?

Least agree

Somewhat agree

Agree moderately

Agree to a great extent

Strongly agree

10. How much your decision to invest depends on using analysts recommendations (privately circulated or published)? Least agree

Somewhat agree

Agree moderately

Agree to a great extent

Strongly agree

Government

11. Factors that would improve the current securities investment scenario: Better Regulations Market information

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Lesser scandals

Intermediaries

12. How do you prefer Trading? Online

Offline

13. Why do you prefer Trading Online? Faster Transactions

Online Analysis

Convenient

Lesser Charges

14. Why do you prefer Trading Offline?

Brokers Advice

Higher Exposure Limit

Secure Transactions

Not Comfortable with Online

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Bibliography
www.Bonanzaonline.com www.Reliancemoney.com www.bseindia.com www.indiabulls.com www.investopedia.com How to Invest in share Market. Stock Market Analysis For The Intelligent Investors. -N.J.YASASWY Statistical Methods

- V.K.Kapoor

Jitendra
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Virahy as
JVIRAHYAS@GMAIL.COM

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