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Project Report on
Comparative Analysis of various Financial Institutions in the Market
Arcadia Share & Stock Brokers Pvt. Ltd.Rajkot
By:
Shah AkashA – 43MBA I
Faculty guide:
Prof. Kunal Mankodi
Post Graduate Institute of ManagementAmrut Mody School of Management
July 2012
1
Project Report on
Comparative Analysis of various Financial Institutions in the Market
Arcadia Share & Stock Brokers Pvt. Ltd.Rajkot
July 2012
Report submitted in partial fulfillment of the requirements of the summer internship training
undertaken for the MBA program
2
Declaration
I hereby declare that my Summer Internship Report entitled “Comparative Analysis of various Financial Institutions in the Market under Arcadia Share & Stock Brokers Pvt. Ltd. Rajkot” submitted in partial fulfillment of the Summer Internship Program is
original and is not substantially the same as one which has already been submitted in part or in full for any such similar qualification to the University to the best of my knowledge.
Date:
Place: Shah Akash
The work mentioned above is carried out under my guidance.
Date:
Place: Prof. Kunal Mankodi
3
Acknowledgement
The research work requires co-operation of many people and this work is no
exception. It is difficult to thank individually all the persons who patronized this work. I
had asked for favors, borrowed ideas, expressions and facts from so many that it would
require one volume to give credit to all. So, the researcher wants to thank all the patrons
of this report
First and foremost I would like to express my sincere gratitude to Mr.Akhil Shah
(Branch Head - Arcadia Share & Stock Brokers Pvt. Ltd. Rajkot) whose supervision has
given a proper shape to this project. His attitude towards excellence, his helping nature
and his enthusiasm has been source of constant inspiration.
This internship would not be complete without the support of our Director Bhavesh
Patel, I also thank my faculty mentor Prof. Kunal Mankodi for his insightful
knowledge, patience and encouragement, which gave me the strength and power to
perform my best.
(Shah Akash)
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Table of Contents
Chapter 1 : Study Profile
1.1 About Project
1.2 Objectives of the Study
1.3 Scope of the Study
1.4 Limitations of the Study
Chapter 2 : Industry and Company Orientation
2.1 Introduction to the Indian
Market Securities
2.2 Introduction to the Company
Chapter 3 : Facts, Findings, Analysis and Interpretation
Chapter 4 : Recommendations
Chapter 5 : Conclusion
Chapter 6 : Suggestions
Chapter 7 : Bibliography
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Chapter 1: Study Profile
1.1 About project
The understanding of the customer requirement of various financial products is vital these
days. It is also important to understand the extent to which these services are provided by
the competitors but not provided by us.
Sometimes there is a gap between the need of the customer and the degree of satisfaction
provided by the competitor.
As a prudent marketer it is vital to identify such areas as these provide an opportunity to
exploit and move ahead of competitors. But this involves a comprehensive understanding
of the market which was facilitated by market survey.
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1.2 Objectives
The prime objective of the study was to understand the market and analysis of the
competitors.
The survey was used to understand the type of financial service desired by the
customer.
To find out the degree of awareness of Equity.
To study the consumer behavior.
To find out the market potential for online trading of equity shares in Rajkot.
To learn professionalism in market of financial product and services.
To find prospects for the institution.
To conduct the survey to know how many persons invest in equity and how many
do not.
To do the analysis of market share of Arcadia Share & Stock Brokers Pvt. Ltd.
and its competitors available in the market of Rajkot.
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1.3 Scope of the Study
I am undergoing the summer internship project in Arcadia Share & Stock Brokers Pvt.
Ltd. Rajkot. I had joined the company on 23rd May, 2012 and assigned task of doing the
market survey work for online trading account. I am doing my project on research on
market share of the company with their existing competitors like sharekhan.com,
icicidirect.com, etc. I also had to understand about other financial products of the
company. In this report I also had to present the details of other financial instruments in
which the customers invest their money like mutual funds, derivative market etc. It is
very interesting project and very learning experience for me.
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1.4 Limitations
Though I had completed my project on time but I still faced certain problems while doing
the market survey work and collecting information for my project report they are listed
below:
Searching for the prospective client for opening online account is very time
consuming.
Some clients have already taken the online account of our competitors and they
are not interested in giving information about it.
Limited data availability.
Lack of proper response from the respondents as they don’t want to invest in
equity, so they refuse or do not cooperate.
Online share trading is a very new field for me and I had consumed a lot of time
for understanding about it.
Irregular consumer behavior regarding investing in equity market.
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Chapter 2: Industry and Company Orientation
2.1 Introduction to the Indian Market Securities
Different types of financial products
Financial products are the need of the new era. As the income of the individual is
increasing day by day on the same track their saving is also increasing, because of it
people requires different financial instruments to invest in it according to their needs &
requirements. So there are different financial products available in the market and the
individual can invest in it by keeping in mind the risk factor involved in the investment.
Different types of products available in the market are:
Equity shares
Fixed income products
Mutual funds
Derivatives
Unit linked insurance plans
Bonds
About Equity Share
Equity is a term whose meaning depends very much on the context. In general, you can
think of equity as ownership in any asset after all debts associated with that asset are paid
off. For example, a car or house with no outstanding debt is considered the owner's equity
since he or she can readily sell the items for cash. Stocks are equity because they
represent ownership of a company, whereas bonds are classified as debt because they
represent an obligation to pay and not ownership of assets.
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To support its investment, a firm must find means to finance them. Equity and debt
represent two broad sources of finance for a business firm.
What Does Equity Represent?
1. Stock or any other security representing an ownership interest.
2. On the BALANCE SHEET, the amount of the funds contributed by the owners (the
stockholders) plus the retained earnings (or losses). Also referred to as "shareholder's
equity"
3. In the context of MARGIN TRADING, the value of securities in a margin account
minus what has been borrowed from the brokerage.
4. In the context of real estate, the difference between the current market value of the
property and the amount the owner still owes on the mortgage. Thus, it is the amount, if
any; the owner would receive after selling a property and paying off the mortgage.
Shares are the Certificates representing ownership in a corporation. The person
who holds the shares of the company are called shareholders.
Equity shares are very risky mode of investment it involves a lot of risk involved in it.
The person can invest in equity shares through two ways:
Offline share trading
Online share trading
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Offline Share Trading
SUB BROKER
CUSTOMER
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SHARE
MAIN BROKER
MAIN BROKER
SUB BROKER SUB BROKER SUB BROKER SUB BROKER
CUSTOMER CUSTOMER CUSTOMER CUSTOMER
Under this type of trading the customer is registered with the sub broker, registered under
main broker in the share market. An individual customer willing to trade provides with
the money, for this purpose he gets a cheque issued from the authorized bank referred to
as a delivery instruction slip. The money gets transferred to the account of the sub broker.
He does the trading for the customer, whenever the market is profitable.
How it works:
Now in the share market there will be a willing buyer and a willing seller. The price
referred to as order is of two types,
Market Order
Limit Order
Now when the taking and giving price matches, the transaction takes place.
After the transaction takes place the money is transferred to the sub broker’s
account that in turn transfers the cheque to the customer. On the other hand the
shares bought are transferred to the customers account.
All this transaction takes T +2 Days.
WHY OFFLINE?
Fear in the mind of the traders.
Feeling of insecurity.
Lack of knowledge about the equity.
Happy with the existing brokers loyalty
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Online share trading:
In Online share trading there are three accounts involved,
Trading account
Savings account
Demat account
A customer doing online share trading must compulsorily hold all these three account.
The shares are stored in the demat account in the demat form. After the transaction the
goes into this account. Buying and selling is done through the trading account. The fund,
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Market
Trading account
SAVINGS ACCOUNT DEMAT ACCOUNT
which is invested for buying and selling, is served through the savings account, which is
held with any authorized bank. All these three account are interrelated.
WHY ONLINE?
Dependency on share broker goes defaulter.
Customer has direct access to the market.
More transparency in transaction.
There are no hassles.
Derivatives as a term conjure up visions of complex numeric calculations, speculative
dealings and comes across as an instrument which is the prerogative of a few ‘smart
finance professionals’ In reality it is not so. In fact, a derivative transaction helps cover
risk, which would arise on the trading of securities on which the derivative is based and a
small investor can benefit immensely.
A derivative security can be defined as a security whose value depends on the values of
other underlying variables. Very often, the variables underlying the derivative securities
are the prices of traded securities.
For example:
Ram buys a futures contract.
He will make a profit of Rs.1000 if the price of Infosys rises by Rs.1000.
If the price is unchanged Ram will receive nothing.
If the stock price of Infosys falls by Rs.800 he will lose Rs.800.
As we can see, the above contract depends upon the price of the Infosys script, which is
the underlying security. Similarly, future trading has already started in Sensex futures and
Nifty futures. The underlying security in this case is the BSE Sensex and NSE Nifty.
Derivatives and futures are basically of 3 types:
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Forwards and Futures
Options
Swaps
( i ) Forward contract
A forward contract is the simplest mode of a derivative transaction. It is an agreement to
buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No
cash is exchanged when the contract is entered into.
Illustration 1:
Shyam wants to buy a TV, which costs Rs.10,000 but he has no cash to buy it outright.
He can only buy it 3 months hence. He, however, fears that prices of televisions will rise
3 months from now. So in order to protect himself from the rise in prices Shyam enters
into a contract with the TV dealer that 3 months from now he will buy the TV for Rs
10,000. What Shyam is doing is that he is locking the current price of a TV for a forward
contract. The forward contract is settled at maturity. The dealer will deliver the asset to
Shyam at the end of three months and Shyam in turn will pay cash equivalent to the TV
price on delivery.
Illustration 2:
Ram is an importer who has to make a payment for his consignment in six months time.
In order to meet his payment obligation he has to buy dollars six months from today.
However, he is not sure what the Rs/$ rate will be then. In order to be sure of his
expenditure he will enter into a contract with a bank to buy dollars six months from now
at a decided rate. As he is entering into a contract on a future date it is a forward contract
and the underlying security is the foreign currency.
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The difference between a share and derivative is that shares/securities is an asset while
derivative instrument is a contract
What is an Index?
To understand the use and functioning of the index derivatives markets, it is necessary to
understand the underlying index. A stock index represents the change in value of a set of
stocks, which constitute the index. A market index is very important for the market
players as it acts as a barometer for market behavior and as an underlying in derivative
instruments such as index futures.
The Sensex and Nifty
In India the most popular indices have been the BSE Sensex and S&P CNX Nifty. The
BSE Sensex has 30 stocks comprising the index which are selected based on market
capitalization, industry representation, trading frequency etc. It represents 30 large well-
established and financially sound companies. The Sensex represents a broad spectrum of
companies in a variety of industries. It represents 14 major industry groups. Then there is
a BSE national index and BSE 200. However, trading in index futures has only
commenced on the BSE Sensex.
While the BSE Sensex was the first stock market index in the country, Nifty was
launched by the National Stock Exchange in April 1996 taking the base of November 3,
1995. The Nifty index consists of shares of 50 companies with each having a market
capitalization of more than Rs 500 crore.
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Futures and stock indices
For understanding of stock index futures a thorough knowledge of the composition of
indexes is essential. Choosing the right index is important in choosing the right contract
for speculation or hedging. Since for speculation, the volatility of the index is important
whereas for hedging the choice of index depends upon the relationship between the
stocks being hedged and the characteristics of the index.
Choosing and understanding the right index is important as the movement of stock index
futures is quite similar to that of the underlying stock index. Volatility of the futures
indexes is generally greater than spot stock indexes.
Every time an investor takes a long or short position on a stock, he also has a hidden
exposure to the Nifty or Sensex. As most often stock values fall in tune with the entire
market sentiment and rise when the market as a whole is rising.
Retail investors will find the index derivatives useful due to the high correlation of the
index with their portfolio/stock and low cost associated with using index futures for
hedging.
Understanding index futures
A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price. Index futures are all future contracts where the
underlying is the stock index (Nifty or Sensex) and helps a trader to take a view on the
market as a whole.
Index futures permits speculation and if a trader anticipates a major rally in the market he
can simply buy a future contract and hope for a price rise on the future contract when the
rally occurs. We shall learn in subsequent lessons how one can leverage ones position by
taking position in the futures market.
In India we have index futures contracts based on S&P CNX Nifty and the BSE Sensex
and near 3 months duration contracts are available at all times. Each contract expires on
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the last Thursday of the expiry month and simultaneously a new contract is introduced for
trading after expiry of a contract.
Example:
Futures contracts in Nifty in July 2012
Contract month Expiry/settlement
July 2012 July 26
August 2012 August 30
September 2012 September 27
On July 27
Contract month Expiry/settlement
August 2012 August 30
September 2012 September 27
October 2012 October 25
The permitted lot size is 200 or multiples thereof for the Nifty. That is you buy one Nifty
contract the total deal value will be 200*1100 (Nifty value) = Rs. 2,20,000
In the case of BSE Sensex the market lot is 50. That is you buy one Sensex futures the
total value will be 50*4000 (Sensex value) = Rs. 2,00,000
The index futures symbols are represented as follows:
BSE NSE
BSXJUN2012 (June contract) FUTDXNIFTY28-JUN2012
BSXJUL2012 (July contract) FUTDXNIFTY28-JUL2012
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BSXAUG2012 (Aug contract) FUTDXNIFTY28-AUG2012
( ii ) Options
Stock markets by their very nature are fickle. While fortunes can be made in a jiffy more
often than not the scenario is the reverse. Investing in stocks has two sides to it – a)
Unlimited profit potential from any upside (remember Infosys, HFCL etc) or b) a
downside which could make you a pauper.
Derivative products are structured precisely for this reason -- to curtail the risk exposure
of an investor. Index futures and stock options are instruments that enable you to hedge
your portfolio or open positions in the market. Option contracts allow you to run your
profits while restricting your downside risk.
Apart from risk containment, options can be used for speculation and investors can create
a wide range of potential profit scenarios.
We have seen in the Derivatives School how index futures can be used to protect oneself
from volatility or market risk. Here we will try and understand some basic concepts of
options.
What are options?
Some people remain puzzled by options. The truth is that most people have been using
options for some time, because options are built into everything from mortgages to
insurance.
An option is a contract, which gives the buyer the right, but not the obligation to buy or
sell shares of the underlying security at a specific price on or before a specific date.
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‘Option’, as the word suggests, is a choice given to the investor to either honor the
contract; or if he chooses not to walk away from the contract.
To begin, there are two kinds of options: Call Options and Put Options.
A Call Option is an option to buy a stock at a specific price on or before a certain date.
In this way, Call options are like security deposits. If, for example, you wanted to rent a
certain property, and left a security deposit for it, the money would be used to insure that
you could, in fact, rent that property at the price agreed upon when you returned. If you
never returned, you would give up your security deposit, but you would have no other
liability. Call options usually increase in value as the value of the underlying instrument
rises.
When you buy a Call option, the price you pay for it, called the option premium, secures
your right to buy that certain stock at a specified price called the strike price. If you
decide not to use the option to buy the stock, and you are not obligated to, your only cost
is the option premium.
Put Options are options to sell a stock at a specific price on or before a certain date. In
this way, Put options are like insurance policies
If you buy a new car, and then buy auto insurance on the car, you pay a premium and are,
hence, protected if the asset is damaged in an accident. If this happens, you can use your
policy to regain the insured value of the car. In this way, the put option gains in value as
the value of the underlying instrument decreases. If all goes well and the insurance is not
needed, the insurance company keeps your premium in return for taking on the risk.
With a Put Option, you can "insure" a stock by fixing a selling price. If something
happens which causes the stock price to fall, and thus, "damages" your asset, you can
21
exercise your option and sell it at its "insured" price level. If the price of your stock goes
up, and there is no "damage," then you do not need to use the insurance, and, once again,
your only cost is the premium. This is the primary function of listed options, to allow
investors ways to manage risk.
Technically, an option is a contract between two parties. The buyer receives a privilege
for which he pays a premium. The seller accepts an obligation for which he receives a
fee.
Call options
Call options give the taker the right, but not the obligation, to buy the underlying shares
at a predetermined price, on or before a predetermined date.
Illustration 1:
Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call --Premium 8
This contract allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any time
between the current date and the end of next August. For this privilege, Raj pays a fee of
Rs 800 (Rs eight a share for 100 shares).
The buyer of a call has purchased the right to buy and for that he pays a premium.
Now let us see how one can profit from buying an option.
Sam purchases a December call option at Rs 40 for a premium of Rs 15. That is he has
purchased the right to buy that share for Rs 40 in December. If the stock rises above Rs
55 (40+15) he will break even and he will start making a profit. Suppose the stock does
not rise and instead falls he will choose not to exercise the option and forego the premium
of Rs 15 and thus limiting his loss to Rs 15.
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Let us take another example of a call option on the Nifty to understand the concept better.
Nifty is at 1310. The following are Nifty options traded at following quotes.
Option contract Strike price Call premium
Dec Nifty 1325 Rs 6,000
1345 Rs 2,000
Jan Nifty 1325 Rs 4,500
1345 Rs 5000
A trader is of the view that the index will go up to 1400 in Jan 2013 but does not want to
take the risk of prices going down. Therefore, he buys 10 options of Jan contracts at
1345. He pays a premium for buying calls (the right to buy the contract) for 500*10= Rs
5,000/-.
In Jan 2013 the Nifty index goes up to 1365. He sells the options or exercises the option
and takes the difference in spot index price which is (1365-1345) * 200 (market lot) =
4000 per contract. Total profit = 40,000/- (4,000*10).
He had paid Rs 5,000/- premium for buying the call option. So he earns by buying call
option is Rs 35,000/- (40,000-5000).
If the index falls below 1345 the trader will not exercise his right and will opt to
forego his premium of Rs 5,000. So, in the event the index falls further his loss is
limited to the premium he paid upfront, but the profit potential is unlimited.
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Call Options-Long & Short Positions
When you expect prices to rise, then you take a long position by buying calls. You are
bullish.
When you expect prices to fall, then you take a short position by selling calls. You are
bearish.
Put Options
A Put Option gives the holder of the right to sell a specific number of shares of an
agreed security at a fixed price for a period of time.
eg: Sam purchases 1 INFTEC (Infosys Technologies) AUG 3500 Put --Premium 200
This contract allows Sam to sell 100 shares INFTEC at Rs 3500 per share at any time
between the current date and the end of August. To have this privilege, Sam pays a
premium of Rs 20,000 (Rs 200 a share for 100 shares).
The buyer of a put has purchased a right to sell. The owner of a put option has the right to
sell.
Illustration 2:
Raj is of the view that the a stock is overpriced and will fall in future, but he does not
want to take the risk in the event of price rising so purchases a put option at Rs 70 on ‘X’.
By purchasing the put option Raj has the right to sell the stock at Rs 70 but he has to pay
a fee of Rs 15 (premium). So he will breakeven only after the stock falls below Rs 55
(70-15) and will start making profit if the stock falls below Rs 55.
Put Options-Long & Short Positions
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When you expect prices to fall, then you take a long position by buying Puts. You are
bearish.
When you expect prices to rise, then you take a short position by selling Puts. You are
bullish.
CALL OPTIONS PUT OPTIONS
If you expect a fall in price(Bearish) Short Long
If you expect a rise in price (Bullish) Long Short
SUMMARY:
CALL OPTION BUYER CALL OPTION WRITER (Seller)
Pays premium
Right to exercise and buy the shares
Profits from rising prices
Limited losses, Potentially unlimited
gain
Receives premium
Obligation to sell shares if exercised
Profits from falling prices or remaining
neutral
Potentially unlimited losses, limited gain
PUT OPTION BUYER PUT OPTION WRITER (Seller)
Pays premium
Right to exercise and sell shares
Profits from falling prices
Limited losses, Potentially unlimited
gain
Receives premium
Obligation to buy shares if exercised
Profits from rising prices or remaining
neutral
Potentially unlimited losses, limited gain
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Hedging
We have seen how one can take a view on the market with the help of index futures. The
other benefit of trading in index futures is to hedge your portfolio against the risk of
trading. In order to understand how one can protect his portfolio from value erosion let us
take an example.
Illustration:
Ram enters into a contract with Shyam that six months from now he will sell to Shyam
10 dresses for Rs 4000. The cost of manufacturing for Ram is only Rs 1000 and he will
make a profit of Rs 3000 if the sale is completed.
Cost (Rs) Selling price Profit
1000 4000 3000
However, Ram fears that Shyam may not honor his contract six months from now. So he
inserts a new clause in the contract that if Shyam fails to honor the contract he will have
to pay a penalty of Rs 1000. And if Shyam honors the contract Ram will offer a discount
of Rs 1000 as incentive.
Shyam defaults Shyam honors
1000 (Initial Investment) 3000 (Initial profit)
1000 (penalty from Shyam) (-1000) discount given to Shyam
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- (No gain/loss) 2000 (Net gain)
As we see above if Shyam defaults Ram will get a penalty of Rs 1000 but he will recover
his initial investment. If Shyam honors the contract, Ram will still make a profit of Rs
2000. Thus, Ram has hedged his risk against default and protected his initial investment.
The above example explains the concept of hedging. Let us try understanding how one
can use hedging in a real life scenario.
Stocks carry two types of risk – company specific and market risk. While company risk
can be minimized by diversifying your portfolio, market risk cannot be diversified but
has to be hedged. So how does one measure the market risk? Market risk can be known
from Beta.
Beta measures the relationship between movements of the index to the movement of the
stock. The beta measures the percentage impact on the stock prices for 1% change in the
index. Therefore, for a portfolio whose value goes down by 11% when the index goes
down by 10%, the beta would be 1.1. When the index increases by 10%, the value of the
portfolio increases 11%. The idea is to make beta of your portfolio zero to nullify your
losses.
Hedging involves protecting an existing asset position from future adverse price
movements. In order to hedge a position, a market player needs to take an equal
and opposite position in the futures market to the one held in the cash market. Every
portfolio has a hidden exposure to the index, which is denoted by the beta. Assuming you
have a portfolio of Rs 1 million, which has a beta of 1.2, you can factor a complete hedge
by selling Rs 1.2 mn of S&P CNX Nifty futures.
27
Steps:
1. Determine the beta of the portfolio. If the beta of any stock is not known, it is safe
to assume that it is 1.
2. Short sell the index in such a quantum that the gain on a unit decrease in the index
would offset the losses on the rest of his portfolio. This is achieved by multiplying
the relative volatility of the portfolio by the market value of his holdings.
3. Therefore in the above scenario we have to short sell 1.2 * 1 million = 1.2 million
worth of Nifty. Now let us study the impact on the overall gain/loss that accrues:
Index up 10% Index down 10%
Gain/(Loss) in Portfolio Rs 120,000 (Rs 120,000)
Gain/(Loss) in Futures (Rs 120,000) Rs 120,000
Net Effect Nil Nil
As we see, that portfolio is completely insulated from any losses arising out of a fall in
market sentiment. But as a cost, one has to forego any gains that arise out of
improvement in the overall sentiment. Then why does one invest in equities if all the
gains will be offset by losses in futures market. The idea is that everyone expects his
portfolio to outperform the market. Irrespective of whether the market goes up or not, his
portfolio value would increase.
The same methodology can be applied to a single stock by deriving the beta of the scrip
and taking a reverse position in the futures market.
Thus, we have seen how one can use hedging in the futures market to offset losses in the
cash market
28
Speculation
Speculators are those who do not have any position on which they enter in futures and
options market. They only have a particular view on the market, stock, commodity etc. In
short, speculators put their money at risk in the hope of profiting from an anticipated
price change. They consider various factors such as demand supply, market positions,
open interests, economic fundamentals and other data to take their positions.
Illustration:
Ram is a trader but has no time to track and analyze stocks. However, he fancies his
chances in predicting the market trend. So instead of buying different stocks he buys
Sensex Futures.
On May 1, 2012, he buys 100 Sensex futures @ 3600 on expectations that the index will
rise in future. On June 1, 2012, the Sensex rises to 4000 and at that time he sells an equal
number of contracts to close out his position.
Selling Price : 4000*100 = Rs 4,00,000
Less: Purchase Cost: 3600*100 = Rs 3,60,000
Net gain Rs 40,000
Ram has made a profit of Rs 40,000 by taking a call on the future value of the Sensex.
However, if the Sensex had fallen he would have made a loss. Similarly, if would have
been bearish he could have sold Sensex futures and made a profit from a falling profit. In
index futures players can have a long-term view of the market up to atleast 3 months.
29
Arbitrage
An arbitrager is basically risk averse. He enters into those contracts were he can earn risk
less profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives risk less profit. Arbitragers are always in the look out for
such imperfections.
In the futures market one can take advantages of arbitrage opportunities by buying from
lower priced market and selling at the higher priced market. In index futures arbitrage is
possible between the spot market and the futures market. NSE has provided special
software for buying all 50 Nifty stocks in the spot market.
Take the case of the NSE Nifty.
Assume that Nifty is at 1200 and 3 month’s Nifty futures is at 1300.
The futures price of Nifty futures can be worked out by taking the interest cost of 3
months into account.
If there is a difference then arbitrage opportunity exists.
Let us take the example of single stock to understand the concept better. If Wipro is
quoted at Rs 1000 per share and the 3 months futures of Wipro is Rs 1070 then one can
purchase Wipro at Rs 1000 in spot by borrowing @ 12% annum for 3 months and sell
Wipro futures for 3 months at Rs 1070.
Sale = 1070
Cost= 1000+30 = 1030
Arbitrage profit = 40
These kinds of imperfections continue to exist in the markets but one has to be alert to the
opportunities as they tend to get exhausted very fast.
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2.2 Introduction to the Company
Arcadia came to life in 1995, right on the wave of a post-liberalization market economy.
As financial services became a major contributor to economic growth, it has steadily
shaped into a leading financial service provider.
Arcadia Share & Stock Brokers Pvt. Ltd. is the member of NSE, BSE, MCX, NCDEX
and CDSL DP. It is one of the leading and most popular finance and investment portals
in India. It has emerged as one of leading players in e-broking space in India.
Main products:
Investor Terminal
• Investor Terminal is recommended for infrequent investors, who fall into the
"Buy and Hold" school of investing.
• It’s a trading interface which works behind proxy and firewalls as they access the
Internet and the stock markets from their work place, where a direct connection is
difficult because of corporate IT security policies.
Trader Terminal
• Trader Terminal is for the dedicated day traders, who churn their portfolio on
minor movements in the market, sometimes several times a day.
• The Trader Terminal offers…..
– lightning fast order execution
– Monitoring of market to market positions on a minute-to-minute basis
– Intra-day charts, market gossip, price and volume information and much
more
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The Diet ODIN
• The Diet ODIN terminal provides the facility to trade not only in cash as well as
derivatives but also in the commodities segment in the Multi-Commodity
Exchange (MCX) and the National Commodity & Derivatives Exchange
(NCDEX);
• Though it doesn’t provide charting features, it provides a cleaner interface for
faster order execution, a facet well-appreciated by the true-blue trader of today.
On all the terminals, investors get the facility to buy and sell stocks in NSE, BSE and
Futures and Options through NSE.
Customer category
• Investor
• Trader
The category of the customer does not depend on the terminal.
Brokerage Investor
One-time registration fees 555
Minimum Initial Margin Rs.5000/-
Trading Brokerage (Cash) 0.10%
Delivery Brokerage 0.50%
F&O Brokerage 0.10%
Minimum Per Share(Trading) 5 Paisa
Minimum Per Share(Delivery) 5 Paisa
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Registration of Investor
• Registration charge of Rs.555 is once payable and non refundable. This charge
cannot be waived off under any circumstances.
• Account cannot be opened without the minimum initial margin of Rs. 5000 and
any point of time the ledger balance of the client should be minimum Rs. 5000.
• If the client has a debit balance then stock value minus debit has to be worth a
minimum Rs. 5000.
• Client can withdraw funds from the account but has to maintain a minimum
ledger balance of Rs. 5000
• If the minimum balance is not maintained then the account will be frozen and
client cannot operate both trading and demat account. The account can be re-
activated by payment of Rs. 50 p.m.
Brokerage-Trader
Quarterly Annual
Registration fees Rs. 3000/- Rs. 8000/-
Minimum Initial Margin Rs. 5000/- Rs. 5000/-
Trading Brokerage (Cash) 0.05% 0.05%
Delivery Brokerage 0.25% 0.25%
F&O Brokerage 0.05% 0.05%
Minimum Per Share
(Trading)
1paisa 1paisa
Minimum Per Share
(Delivery)
5paisa 5paisa
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Registration of Trader
• A client registering as a Trader will not pay Rs.555
• A Trader has an option of paying a registration fee of Rs. 8000 every year or Rs.
3000 every quarter.
• The registration fee is refunded against the brokerage charged i.e. we will refund
to the client the registration fee (8000 or 3000) or the actual brokerage charged for
that period whichever is lower.
• Trader has to maintain minimum margin of Rs. 5000 and at any time the ledger
balance or stock value has to be minimum Rs. 5000
Terminals offered
– An Investor and Trader can opt for any of the products we offer
• Investor Terminal
• Trader Terminal
• Diet ODIN
– An Investor that has opted for TT can be de-activated if the brokerage
earned is not sufficient. Our Audit team will keep a check on this and
produce a monthly list of such customers
– Under the Investor or Trader scheme a client can also choose offline
trading.
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Depository Charges
• Account opening charges- Nil
• Annual maintenance charges-Nil
• Custody / Holding charges-Nil
• Transaction Credit-Nil
• Transaction Debit- 0.05% of transaction value (Minimum Rs.15/-Maximum
Rs.100/-)
DP charges mentioned above are the same for Investor and Trader.
If the client opens only a demat account then the client will be charged annual
maintenance charge of Rs. 250
Regulatory charges
• Trading Cash (NSE & BSE) : 0.006% on turnover
• Delivery (NSE & BSE) : 0.014% on turnover
• F&O : 0.008% on turnover
Service tax & STT
Service Tax is 12.24% on brokerage
• Securities Transaction Tax
• For delivery transactions – 0.1%
(Charged to buyer and seller)
• For trading transactions in cash – 0.02%
(Charged to seller only)
• For trading transactions in ‘F n O’ - 0.0133 %
35
Competitors:
ICICI:
Products and Services
Icicidirect.com is the website, which allows you to invest in Shares, Mutual funds,
Derivatives (Futures and Options) and other financial products.
1. Trading in shares:
Cash Trading
Margin Trading : up to 3 to 4 times your available funds
MarginPLUS Trading : up to 25 times your available funds
Spot Trading : On selling shares through "cash on spot", money is credited to
your bank a/c the same evening & not on the exchange payout date.
BTST : Buy Today Sell Tomorrow (BTST) is a facility that allows you to sell
shares even on 1st and 2nd day after the buy order date, without you having to wait
for the receipt of shares into your demat account.
2. Trade In Derivatives:
Futures & Options: One can trade in index and stock futures on the NSE. In
futures trading, you take buy/sell positions in index or stock(s) contracts having a
longer contract period of up to 3 months.
36
HDFC Securities :
HDFC securities have been promoted by the HDFC Bank & HDFC with the objective of
providing the diverse customer base of the HDFC Group and other investors a capability
to transact in the Stock Exchanges & other financial market transactions.
Products and Services:
1. Buying and selling of shares on the BSE
2. Arbitrage between NSE & BSE
3. Trading in Derivatives on the NSE
4. Margin trading products
Later, their service range will be enhanced to include the following: Buying and selling
of select mutual funds units, subscription to initial public offerings, public issues and
rights issues, and purchase of insurance policies and facilitating asset financing (house
\and car loans for instance).
Also offers financial information, its analysis, investment guidance, news & views, and is
designed to meet the requirements of everyone from a learner to a savvy and well-
informed investor.
37
Indiabulls:
Indiabulls is India's leading retail financial services company with 135 locations spread
across 95 cities over 750 Client Relationship Managers.
Products and Services:
Equities & Derivatives
Comprehensive services for
independent investors, active traders
& Non-Resident Indians.
IndiabullsEquity
AnalysisTM
Premium research on 401+ companies
updated daily.
Depository ServicesValue added services for seamless
delivery.
InsuranceTake care of your life while you take
care of business.
38
Chapter 3: Facts, Findings, Analysis and Interpretation
The survey was conducted in the market of
Customers Zones:
Professionals – Elite class
Traders:
Rajkot citizens
Samples under study:
Equity traders were surveyed randomly.
Sample size:
100 individuals
I had done the survey work to find out that how many persons are interested in online
trading , how many invest in equity , how many want to know about equity , how many
invest with ARCADIA and how many are still satisfied with offline trading.
39
Following are the findings:
How many invest with equity ?
GRAPH NO. 1
Above graph is showing that how many persons do invest in equity share which is shown
with the percentage i.e. 38% who are interested and 26% are not interested.
% of persons interested in online trading:
not interested
62%
interested persons
38%1
2
40
How many persons want to understand about the equity market ?
persons interested in knowing about equity :
interested 83%
not interested 17%
1
2
GRAPH NO. 2
Above graph is showing that how many persons want to understand the term equity
market which is shown in % i.e.
17% are interested and 83% are not interested in knowing equity.
41
How many invest through online account ?
how many invest through online account :
not having 61%
having 39% 1
2
GRAPH NO. 3
42
Above graph is showing that how many persons are investing in equity through online
account i.e. through e-trade which is shown in % i.e. 31% are having online a/c and 61%
are not having online a/c with any other broker.
How many want to know about online trading ?
not interested
38%interested
62%
1
2
GRAPH NO.4
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Above graph is showing that how many persons are having interest in knowing about
online trading which is shown in % i.e. 38% are not interested in knowing about online
trading and 62% are interested in knowing about online trading of equity shares.
Market share of ARCADIA in online segment
GRAPH NO. 5
Above graph is showing percentage of market share of all the competitors of ARCADIA
SHARE & STOCK BROKERS PVT. LTD. who is having the market share in ‘others
category’ i.e. in 5% market share
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Comparison of ARCADIA SHARE & STOCK BROKERS PVT. LTD.
products with other competitor products
PARTICULARS LIVE
STREAMING
QUOTES
COMPANY SERVICE\
BRANCH
TOLL FREE
ARCADIA DL Broking house Many First 5 call free
& 20/-
ICICI No Bank No First 5 call free
& 20/-
HDFC No Bank No First 5 call free
KOTAK DL Broking house No First 5 call free, then
20/-
SHAREKHAN Yes \DL Broking house Many Free
INDIABULLS No Broking house Many No
BANK
LINKING
CHEQUE
ACCEPTANCE
DP LINKING MARGIN FUNDING
NSE\
BSE
ARCADIA 2Banks Yes No No Both
ICICI Self No Self No Both
HDFC Self No Self No NSE
KOTAK 2 Banks No No No NSE
SHAREKHAN 4 Banks Yes No No NSE
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INDIABULLS 2 Banks Yes No Yes NSE
LIMIT GIVEN FOR DP
BTST FACILITY BROKERAGE
T\D
ARCADIA No Yes 0.1\0.5
ICICI No No 0.15\0.85
HDFC No No 0.1\0.5
KOTAK No Yes 0.1\0.65
SHAREKHAN No Yes 0.1\0.5
INDIABULLS Yes Yes 0.1\0.5
46
Chapter 4: Recommendations
Following are some recommendations from my sides:
ARCADIA SHARE & STOCK BROKERS PVT. LTD. should try to reduce the
brokerage charges for both trading and delivery.
It should target retail customer.
They should increase their market penetration.
They should provide more and more attractive & innovative schemes for
promoting their new product like advertising.
They should have a tie up with more Banks.
Target & Task
Conducting survey to find out 100 potential customers.
Also finding out the prospective customers.
Selling the new online trading product of ARCADIA SHARE & STOCK
BROKERS PVT. LTD.
On the Job training
Understand the term “Online trading of equity shares”.
How to collect the database from the different sectors of corporate.
Strategies
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Target the professionals (Elite class).
Chapter 5: Conclusion
Business class investors more proportion of their income in shares and
securities as compared to service class investors.
Majority of investor’s trade according to except the daily traders.
Majority of investors take the decision on investment (where/what amount
to invest) on their own idea and some rely on expert’s opinion and
broker’s advice.
In cash segment, capital gain is the prior motive of the investors followed
by regular of the investors followed by regular income and tax income and
tax planning.
The satisfaction level regarding services by brokers of phone service &
professional advice is very low.
Professional advice available is not adequate regarding investment in
secondary market.
Most of the investors feel that online trading is more transparent than the
older form of trading (Ring trading).
Most of the people are aware of different charges charged by the brokers
(Demat charges, transaction charges, service charges etc.).
While selecting a broker, brokerage & frequent payments were considered
as main factors followed by personal relations.
Most of the investors are not satisfied with ‘phone services’ provided by
the brokers.
The major problem faced by the investors is of broker’s attitude towards
small investors is not same as with the big investors.
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Another major problems faced by the investors is to decide where/what
amount is invested.
Chapter 6: Suggestions
Professional advice should be made available in the city.
Brokers should transfer the deliveries/payments to the investors in time.
Brokers should deal all the investors in same respect.
ARCADIA SHARE & STOCK BROKERS PVT. LTD is fast emerging company
in financial sector but market share in comparison to its competitor is very low. It
needs to improve its share in financial market.
In today’s era, online trading becoming more popular, but most of the people
don’t know about it, and so they are trading offline.
So ARCADIA SHARE & STOCK BROKERS PVT. LTD. needs to popularize
online trading through its various financial products. For this they should
emphasize on effective and attractive advertisement campaigns in Print and E-
Media.
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Chapter 7 : Bibliography
www.arcadiastock.com
www.nse.com
Chandra Prasanna – Financial Management, Tata McGraw Hill Publishing Co.
Ltd., New Delhi, 1998
C.R. Kothari, Research Methodology
Philip Kotler, “Marketing Management”, 10th edition.
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