A PROJECT REPORT ON.pdf

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K.S. School of Business Management

A

project report on

investor perception toward

(equity &commodity market)

Under taken at:

SUBMITTED TO:

K.S. SCHOOL OF BUSSINESS MANAGEMENT

UNDER THE SUPERVISION OF

MR. MUNAF KADRI

SUBMITTED BY:

KOMAL PATEL

KOMAL PARMAR

YEAR: 2012-2013







PREFACEThe following project mainly covers the origin and development of stock Market inIndia in brief about Sharekhan Stock Broking LTD…the company in which I did mysummer internship and about the fundamental and technical analysis and the varioustools used in it.

The project is intended to give the reader a fair understanding of the various aspectsof the stock market and about the basis factors that investors would like to knowbefore plunging into the vast field of shares and stocks. To excel in any field practicaltraining is an internal part to involve theoretical studied to a practical approach. Itmakes the individuals to the actual practical condition, which could have beenimpossible to be thought in classroom. A trainee learnt dealing with the worker andmanagement- working environment along with today’s market, which is changing atincredible pace. In addition globalisation and technological changes, we arewitnessing power shift from manufacturer to services rapid growth and qualityconsciousness among consumers, a diminishing role for mass marketing andadverting and a disconcerting of brand loyalty, these changes are throwingcompanies in a state of confusion regarding strategy unfortunately the general publicand even many senior managers do not understand the market.

Management wants to know about the consumer perception about the newlylaunched product. I am thankful to the management that such type of challengingproject was assigned to me for Ahmadabad region.





ACKNOWLEDGEMENT

It is my great pleasure to present t hi s report. I thank all those people whohelped me to make this project, by providing necessary information.

I would like to express my gratitude towards Mr. MUNAF KANGARI of Share Khan Group who spent his most valuable time and provided withall the necessary details regarding the company.

I would also like to thank Mr. Pratik Brabhatt and Mr. Jay bhojavani,who shared their knowledge and expertise.

I would also like to thank Mr . Darshit Vyas for their guidance throughoutthe preparation of the project and for their valued suggestion.

At last I would like to thank all those people who helped me bring thisproject to fortuitism.

Date:

Place: Signature

KOMAL PATEL

KOMAL PARMAR





EXECUTIVE SUMMARY

The summer internship at “share khan Sto ck broking” un dertaken by us has given us

an exposure into the investment scenario in India. The project that we were involvedwith while working at share khan Stock broking” includes advisory services i.e.educating the existing and potential investors about stock market as an alternativesource to investment

Analysing the Sub- broker’s behaviour includes understanding the concerns a personhas towards Stock Market, his stages in life and wealth cycle, the effect of theinvestments made by the peer groups, effect of the profession he/she is in, educationqualification, importance of tax benefits, the most preferred saving tools etc. and thisall is analysed with the help of a schedule prepared. I got the chance to survey theprocess of B2B i.e...Business to Business. In my project I have surveyed the Sub-Brokers of other companies to know what they are offering to their sub-brokers.

The project has given me knowledge about the stock market and how it works. I gotin depth and insights knowledge of services offered by Share khan Stock Broking and





its competitors of in the stock market.. I met with different Sub-brokers of differentbroking house offering different services to their different clients.

TABLE OF CONTENT





Chapter:-1

Stock market





1.1 STOCK MARKETINTR0DUCTION

Security market has essentially three categories of participants, namelythe issuer of the securities, investors of the securities and the intermediaries;and two categories of product, namely the services of the intermediaries andthe securities including derivatives.

The security market has two interdependent and inseparable segments,the new issues (primary market) and the stock (secondary market). Theprimary market provides the channel for sale of new securities while thesecondary market deals in securities previously issued.

INTRODUCTION TO STOCK EXCHANGEThe emergence of stock market can be traced back to 1830. In Bombay,business passed in the shares of banks like the commercial bank, thechartered mercantile bank, the chartered bank, the oriental bank and the oldbank of Bombay and shares of cotton presses. In Calcutta, Englishmanreported the quotations of 4%, 5% and 6% loans of East India Company as wellas the shares of the bank of Bengal in 1836.This list was a further broadenedin 1839 when the Caicutta newspaper priented the quotations of banks likeunion bank and Agra bank. It also quoted the prices of business ventures likethe Bengal bonded warehouse, the Docking Company and the storm tugcompany.

Between 1840 and 1850, only half a dozen brokers existed for the limitedbusiness. But during the share mania of 1860-65, the number of brokersincreased considerably. By 1860, the number of brokers was about 60 and

during the exciting period of the American Civil war, their number increased





to about 200 to 250. The end of American Civil war brought disillusionmentand many Failures and the brokers decreased in number and prosperity. Itwas in those trouble sometimes between 1868 and 1875 that brokersorganized an informal association and finally as recited in the Indentureconstituting the Articles of Association of the Exchange.

Organization structure of stock exchange are organized as public limitedcompanies, 6 as companies limited by guarantee and 3 are non-profitvoluntary organization. Of the total of 23, only 9 stock exchanges have beenpermanent recognition. Others have to seek recognition on annual basis.These exchange do not work of its own, rather, these are run by some personsand with the help of some persons and institution. All these are down asfunctionaries on stock exchange. These are:

i. Stock brokersii. Sub-brokeriii. Market makers

iv. Portfolio consultants etc.

Present scenario of Indian stock market

Realizing there is untapped market of investors who want to be able toexecute their own traders when it suits them, brokers have taken their trading roomsto the internet. Known as online brokers, they allow you to buy and sell shares viaInternet.

Online Trading is a service offered on the Internet for purchase and sale of shares. In thereal world, you place orders on your stockbroker either verbally (personally ortelephonically) or in a written form (fax). In Online Trading, you will access astockbroker’s website through your internet -enabled PC and place orders through thebroker’s internet -based trading engine. These orders are routed to the Stock Exchange

without manual intervention and executed thereon in a matter of a few seconds.





There are 2 types of online trading service:

1. Discount brokers:

Discount online brokers allow you to trade via Internet at reducedrates. Some provided quality research, other don’t.

2. Full service online broker:Full services online brokerage is linked to existing brokerages. These brokersallow their clients to places online orders with the option of talking/chattingto brokers if advice is needed. Brokerage rates here are higher.Indianinfoline.com, ICICIDirect.com, IndiaBulls.coM, AngelBroking.com,Angel broking.com, HDFCSecurities.com is some of the online broking sitesin India.





Equity Market





Indian Equity Market

The Indian Equity Market is more popularly known as the Indian Stock Market.The Indian equity market has become the third biggest after China and HongKong in the Asian region. According to the latest report by ADB, It has amarket capitalisation of nearly $600 billion. As of March 2009, the marketcapitalisation was around $598.3 billion (Rs 30.13 lakh crore) which is one-tenth of the combined valuation of the Asia region. The market was slow sinceearly 2007 and continued till the first quarter of 2009.

A stock exchange has been defined by the Securities Contract ( Regulation)Act, 1956 as an organisation, association or body of individuals established forregulating, and controlling of securities.

The Indian equity market depends on three factors:-





Funding into equity from all over the world Corporate houses performance Monsoons

The stock market in India does business with two types of fund namelyprivate equity fund and venture capital fund. It also deals in transactionswhich are based on the two major indices- Bombay Stock Exchange (BSE) andNational Stock Exchange of India Ltd. (NSE). The market also includes the debtmarket which is controlled by wholesale dealers, primary dealers and banks.The equity indexes are allied to countries beyond the border as commoncalamities affect markets. E.g. Indian and Bangladesh stock markets areaffected by monsoons.

The equity market is also affected through trade integration policy. The countryhas advanced both in foreign institutional investment (FII) and tradeintegration since 1995. This is a very attractive field for making profit formedium and long term investors, short term swing and position traders andvery intra day traders. The Indian market has 22 stock exchanges. The largercompanies are enlisted with BSE and NSE. The smaller and medium companies

are listed with OTCEL (over The counter Exchange of India). The functions of the Equity Market in India are supervised by SEBI (Securities Exchange Board of India).

History of India Equity Market The history of the Indian equity market goes backto the 18 th century when securities of the East India Company were traded. Tillthe end of the 19 th century, the trading of securities was unorganized and themain trading centres were Calcutta (now Kolkata) and Bombay (now Mumbai).

Trade activities prospered with an increase in share price in India with Bombaybecoming the main source of cotton supply during the American Civil War(1860-61). In 1865, there was drop in share prices. The stockbroker associationestablished the Native Shares and Stock Brokers Association in 875 to organizetheir activities. In 1927, the BSE recognized this association, under the BombaySecurities Contracts Control Act, 1925. The Indian Equity Market was not wellorganized or developed before independence. After independence, new issues





were supervised. The timing, floatation costs, pricing, interest rates werestrictly controlled by the Controller of Capital Issue (CII). For four and half decades, companies were demoralized and not motivated from going publicdue to the rigid rules o f the Government. In the 70’s, the trading of ‘badla’resumed in a different form of ‘hand delivery contract’. But the Government of India passed the Dividend Restriction Ordinance on 6 th July, 1974. According tothe ordinance, the dividend was fixed value or 1/3 rd of the profit undersection 369 of The Companies Act, 1956 whichever is lower.

This resulted in a drop by 20% in market capitalisation at BSE (Bombay Stock

Exchange) overnight. The stock market was closed for nearly fortnight.Numerous multinational companies were pulled out if India public under FERA,1973. THE 80’s saw a growth in the Indian Equity Market. With liberalisedpolicies of the government, it became lucrative for investors. The market sawan increase of stock exchanges, there stock exchanges, there was a surge inmarket capitalization rate and the paid up capital of the listed companies.

The 90s was the most capital in the stock market’s history. Indians became aware

of ‘liberalization and ‘globalization’. In May 1992, the cap ital issues (control)Act,1947 was abolished. SEBI which was the Indian Capital Market’s regulatorwas given the power and overlook new trading policies, entry of private sectormutual funds and private sector banks, free prices, new stock exchanges,foreign institutional investors, and market boom and bust.

In 1990, there was a major capital market scam where bankers and brokers wereinvolved. With this, many investors left the market. Later there was a securitiesscam in 1991-92 which revealed the inefficiencies and inadequacies of theIndian financial system and called for reforms in the Indian Equity Market. Twonew stock exchanges, NSE (National Stock Exchange of India) established in1994 and OTCEL (Over the Counter Exchange of India) established in 1992 gaveBSE a nationwide competition. In 1995-96, an amendment was made to theSecurities Contracts (Regulation) Act, 1956 for introducing options trading. InApril 1995, The National Securities Clearing Corporation (NSCC) and inNovember 1996, the National Securities Depository Limited (NSDL) were set up

for demutualised trading, clearing and settlement. Information Technology





scrip’s were the major players in the late 90s with companies like Wipro,Satyam, and Infosys.

In the 21 st century, there was the Ketan Parekh Scam. From 1 st July 2001, ‘Badla’was discontinued and there was introduction of rolling settlement in all scrip’s .In February 2000, permission was given for internet trading and from 2000,futures trading started.

THE BOMBAY STOCK EXCHANGE (BSE)

The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai,popularly called The Bombay Stock Exchange, or BSE) is the oldest stock exchange inAsia. It is located at Dalai Street, Mumbai, India.

Bombay stock exchange was established in 1875.There is around 3,500 Indiancompanies listed with the stock exchange, and has a significant trading volume. As of October 2006, the market capitalization of the BSE was about Rs. 33.4 trillion (US $730 billion). The BSE SENSEX (Sensitive index), also called the BSE 30, is a widely usedmarket index in India and Asia. As of 2005, it is among the 5 biggest stock exchangesin the world in terms of transactions volume.

An informal group of 22 stockbrokers began trading under a banyan treeopposite the Town Hall of Bombay from the mid-1850s, each investing a (then)princely amount of rupee 1. This banyan tree still stands in the Horniman Circle Park,Mumbai.

Mumbai, July 1 (Reuters) – Indian shares ended higher for the second week in a row,but fell 0.44 percent on Friday as losses in Reliance Industries and Bharti Airtel andsome profit-taking after six days of gains pulled down the main index. Shares inenergy major Reliance fell 4.3 percent over worries of lower reserve estimates at itskey gas block off India’s east coast, and after television reports that a former up





steam regulator’s house was searched. Top mobile operator Bharti fell 2.9 percentafter brokerage CLSA downgraded the stock.

Traders and analysts said despite the odd hiccup, the positive momentum fromthe week is likely to continue, helped bya revival in interest from foreign institutionalinvestors (FIIS).”There is some profit taking, but positive FII inflows again is a moodchanger, “said K.K.Mital, chief executive for portfolio management services at GlobalCapital Market. “Some more flows are expected in India; give the global scenario, sowe should see some momentum.” Foreign institutional investors net bought sharesworth $1.1 billion in the last five sessions till June 30, although they have been in

2010. Greece’s approval of austerity measures this week has boosted risk appetite,while an unexpected jump in business activity in the U.S Midwest helped quell fearsabout an economic slowdown.

Investors have to transact via jobber/broker. The jobber/broker feed his buy/sellquotes in his terminal, which is linked to the main server at the BSE. Since both jobbers and brokers feed their orders , the NSE has adopted a ‘quote -driven systemand order driven’ system.

HOW BSE WORKS?

The scripts traded on BSE have been classified into the following;





A - Large capitalization, profitable, reliable, high-liquid companies

B1 – Mid-capitalization, reliable, high-liquid companies

B2 – Mid-capitalization, moderate liquid companies

T – Trade to trade companies (compulsory delivery of trade within a day), low liquidcompanies

S – Not reliable, low liquid companies

Z – Blacklist companies

BSE SENSEX

The BSE SENSEX also known as the BSE 30 is a value-weighted index composed of 30 scripts. The base year of SENSEX is 1978-79 and the base value is 100.

SENSEX is not only scientifically designed but also globally accepted construction andreview methodology. First compiled in 1986, SENSEX is a basket of 30 constituentstocks representing a sample of large, liquid and representative companies. The set of companies which make up the index has been changed only a few times in the last 20years. These companies account for around on-fifth of the market capitalization of the BSE. The index is widely reported in both domestics and international marketthrough 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 fromSeptember 1, 2003. The “free float market capitalization” methodology of index

construction is regarded as ad industry best practice globally. Due to its wide





acceptance amongst the Indian investors, SENSEX is regarded to be the pulse of theIndian stock market.

NATIONAL STOCK EXCHANGE OF INDIA LIMITED (NSE)

National stock exchange (NSE), established in the mid 1990s as a demutualisedelectronic exchange by leading Indian financial institutions offers trading, clearing andsettlement services in a range of products covering equity, debt and equityderivatives. It is India’s largest exchange and ranks third globally by number of tradersin the equities market. NSE provides a modern, fully automated screen-based tradingtrading system, named NEAT (National Exchange Automated Trading System) withnearly 40,000 trading terminals giving it extensive reach. Its NIFTY 50 is usedextensively by investors in India and around the world to take exposure to the Indianequities market.

In the fast growing Indian financial market, there are 23 stock exchange trading

securities. The National Stock Exchange of India (NSE) is the largest and mostadvanced exchange with 1016 companies listed and 726 trading members.

NSE is mutually-owned by a set of leading financial institutions, banks, insurancecompanies and other financial intermediaries in India but its ownership andmanagement operates as separate entities. The National Stock Exchange of India Ltd.provides its clients with a single, fully electronic trading platform that is operatedthrough a SAT network. Unlike most world exchanges, the NSE uses the satellite

communication system that connects traders from 345 Indian cities. The advanced





technologies enable up to 6 million traders to be operated daily on the NSE tradingplatform.

In 1998, the National Stock Exchange of India launched its we-site and was the firstexchange in India that started trading stock on the Internet in 2000. The NSE has alsoproved its leadership in the Indian financial market by gaining many awards such as‘Best IT us age Award’ by computer society in India (in 1996 and 1997) and CHIP WebAward by CHIP magazine (1990).

How NSE Works?

The NSE has opted for an order-driven system. When an order is placed by atrading member, an order confirmation slip is generated.

When a trade takes place, a trading confirmation slip is printed at the tradingmember’s workstation. It gives details like quantity, price, code number of counterparty, and so on.

The identity of the trading member is not revealed to other when he places anorder or when his pending orders are displayed. Hence, large orders can beplaced on the NSE.

On the eighty day of trading, each member gets a statement showing his netposition, the amount which he has to transfer to the clearing bank, and thesecurity he has to deliver to the clearing house.

Members are required to deliver securities and cash by the thirteen andfourteen day respectively. The fifteenth day is the payout day.

All traders on NSE are guaranteed by the National Securities ClearingCorporation (NSCC).This means that when A buys from B, NSCC becomes thecounterparty to both eliminates counterparty risk.





Types of Trading Delivery Intraday Short Selling

Futures Futures vs. Forwards Standardization Margin settlement Option Arbitrage

DELIVERY

Delivery trading is when you want the shares that you purchased to come intoyour demat accounts, i.e., you when to take the delivery of shares that you havepurchased. T + 2 are settlement where all the trades are settled on T+ 2basis where T is the trade day. For example, a trade executed on Monday ismandatory settled by Wednesday (considering two working days from the tradeday). The funds and securities pay-in and pay-out are carried out on T+ 2 days.





INTRADAY

Day trading refers to the practices f buying and selling financial instrument

within the same trading day such that all position will usually (not necessarilyalways) be closed before the market close of the trading day. This is the oppositeof After-hours trading. Traders that participate in day trading are called daytraders.

Some of the more commonly day-traded financial instruments arestocks. Stock options, currencies, and a host of futures contracts such as equityindex futures, interest rate futures, and commodity futures. Day trading used tobe the financial firms and professional investors and speculators. Many day

traders are bank or investment firm employees working as specialists in equityinvestment and fund management. However, day trading has become and thepopularity of the Interest.

Although collectively called day trading. There are many sub trading styleswithin day trading. A day trader is not necessarily very active. Depending onone’s trading strategy, the number of trades made in a day may very from one todozens or more.

SHORT SELLING

Short selling is the sale of shares that the seller does not own at the time of trading. Despite being a long-standing market practice worldwide, short-saleshave been the subject of considerable debate and divergent views in mostsecurities markets. The votaries of short-selling views the practices as a desirableand essential feature of a securities market.

They argue that in a weak market, short-covering of positions taken at thebeginning of a downturn, would arrest the declining trend. Critics of short-selling,on the other hand, are convinced that short-selling poses potential risks and caneasily destabilise the market directly or indirectly.

FUTURES





In finance, a future contract is a standardised contract, traded on a futuresexchange, to buy or sell a certain underlying instrument at a certain date in thefuture, at a specified price. The futures date is called the delivery date or finalsettlement date. The pre-set price is called the futures prices. The price of theunderlying asset on the delivery date is called the settlement price.

A futures contract gives the holder the obligation to buy or sell, which differsfrom an option contract, which gives the holder the right, but not the obligation.In other words, the owner of an options contract may exercise on the settlementdate. The seller delivers the commodity to the buyer, or, if it is a cash-settledfuture, then cash is transferred from the futures trader who sustained a loss tothe one who made a profit. To exit the commitment prior to the settlement date

,the holder of a future position has to offset his/her position by either selling along position or buying back a short position,effectivel closing out the futuresposition and its contract obligations.

Futures contract, or simply futures, is exchange traded derivatives. Theexchange’s clearinghouse acts as counterparty on all contracts, sets marginrequirements, and crucially also provides a mechanism for settlement.

FUTURES vs. FORWARDS

While futures and forward contracts are both a contract to deliver a commodityon a future date at a prearranged price, they are different in several respects:

Forwards transact only when purchased and on the settlement date. Futures, onthe other hand, are rebalanced, or “marked to market,” everyday to the daily spotprice of a forward with the same agreed-upon delivery price and underlying asset.

The fact that forwards are not rebalanced daily means that, due tomovements in the price of the underlying asset, a largedifferential can build up between the forward’s delivery price andthe settlement price.

This means that one party will incur big loss at thetime of delivery (assuming they must transact at theunderling ’s spot price to facilitate receipt/delivery).





This in turn creates a credit risk. More generally, therisk of a forward contract is that the supplier will beunable to deliver the required commodity, or thatthe buyer will be unable to pay for it on the deliveryday.

The rebalancing of futures eliminates much of this credit risk by forcing theholders to update daily to the price of an equivalent forward purchased thatday. This means that three will usually be very little additional money due onthe final day to settle the futures contract.

In addition, the daily futures-settlement failure risk is borne by an exchange,rather than an individual party, limiting credit risk in futures.Consider a futures contract with a $100 prices: let’s say that on day 50 , aforward with a $100 delivery price (on the same underlying asset as thefuture) costs $88. On day 51, that forward costs $90. This means to mark-to-market would require the holder of one side of the future to pay$2 on day 51to track the change of the forward price. This money goes, via marginaccounts, to the holder of the other side of the future.

STANDARDIZATION

Futures contracts ensure their liquidity by being highly standardized, usually byspecifying;

The underlying asset or instrument. This could be anything from a barrel of crude oil to a short term interest rate.

The type of settlement, either cash settlement or physical settlement. The amount and units of the underlying asset per contract. This can be

national amount of bonds, a fixed number of barrels of oil, units of foreign

currency, the national amount of the deposit over which the short terminterest rate is traded, etc.

The currency in which the futures contract is quoted. The grade of the deliverable. In the case of bonds, this specifies which bonds

cab be delivered. In the case of physical commodities, this specifies not onlythe quality of the underlying goods but also the manner and the location of delivery. For example, the NYMEX Light Sweet Crude oil contract specifiesthe acceptable sulphur content and API specific gravity, as well as thelocation where delivery must be made.

The delivery month.





The last trading date. Other details such as the commodity tick, the minimum permissible price

fluctuation.

MARGIN

To minimize credit risk to the exchange, traders must post margin or aperformance bond, typically 5%- 15% of the contract’s value.

Margin requirements are waived or reduced in some cases for hedgerswho have physical ownership of the covered commodity or spreadtraders who have offsetting contracts balancing the position.

SETTLEMENT

Settlement is the act of consummating the contract, and can be done in oneof two ways, as specified per type of futures contract:

Physical delivery: - the amount specified of the underlying asset of thecontract is delivered by the seller of the contract to the exchange, and bythe exchange to the buyers of the contract. Physical delivery is commonwith commodities and bonds. In practice, it occurs only on a minority of contracts. Most are cancelled out by purchasing a covering position- thatis, buying a contract to cancel out an earlier sale (covering a short), orselling a contract to liquidate an earlier purchase (covering a long). TheNymex crude futures contract uses this method of settlement uponexpiration.

Cash settlement: - a cash payment is made based on the underlyingreference rate, such as a short term interest rate index such as Euribor, orthe closing value of a stock market index. A futures contract might alsoopt to settle against an index based on trade in a related spot market. IceBrent futures use this method.

OPTIONS:-

Options are financial instrument that convey the right, but not the

obligation, to engage in a future transaction on some underlying security,





or in a futures contract. In other words, the holder does not have toexercise this right, unlike a forward or future.For example, buying a call option provides the right to buy a specifiedquantity of a security at a set strike prices at some time on or beforeexpiration, while buying a put option provides the right to sell. Upon theoption holder’s choice to exercise the option, the party who sold, orwrote, the option must fulfill the terms of the contract.

Contract specifications

Every financial option is a contract between the two counterparties. With the terms of the option specified in a term sheet. Option contracts

may be quite complicated; however, at minimum, they usually containthe following specifications:

Whether the option holder has the right to buy (a call option) or the rightto sell (a put option)

The quantity and class of the underlying asset(s) (e.g. 100 shares of XYZCo. B stock).

The strike prices, also known as the exercise price, which is the price at

which the underlying transaction will occur upon exercise The expiration date, or expiry, which is the last date the option can be

exercised The settlement terms, for instance whether the write must deliver the

actual asset on exercise, or may simply tender the equivalent cashamount.

The terms by which the option is quoted in the market, usually amultiplier such as 100, to convert the quoted prices in to actual premiumamount.

ARBITRAGE

In economics and finance, arbitrage is the practice of taking advantage of a price differential between two or more markets: striking a combinationof matching deals that capitalize upon the imbalance, the profit being thedifference between the market prices. When used by academics, anarbitrage is a transaction that involves no negative cash flow at any





probabilistic temporal state and positive cash in at least one state; insimple terms, a risk-free profit. A person who engages in arbitrage iscalled an arbitrageur. The term is mainly applied to trading in financialinstruments, such as bonds, stocks, derivatives, commodities andcurrencies.

If the market prices do not allow for profitable arbitrage, the prices aresaid to constitute an arbitrage equilibrium or arbitrage-free market.Arbitrage equilibrium is a precondition for a general economicequilibrium.





COMMODITIESMARKET





Commodities Market in India

Organized futures market evolved in India by the setting up of "Bombay Cotton Trade Association Ltd." in 1875. In 1893, following widespreaddiscontent amongst leading cotton mill owners and merchants over thefunctioning of the Bombay Cotton Trade Association, a separate associationby the name "Bombay Cotton Exchange Ltd." was constituted. Futurestrading in oilseeds were organized in India for the first time with the setting up of Gujarati Vyapari Mandali in 1900, which carried on futures trading ingroundnut, castor seed and cotton.

Before the Second World War broke out in 1939 several futures markets inoilseeds were functioning in Gujarat and Punjab.

A three-pronged approach has been adopted to revive and revitalize themarket.

Firstly, on policy front many legal and administrative hurdles in thefunctioning of the market have been removed. Forward trading waspermitted in cotton and jute goods in 1998, followed by some oilseeds andtheir derivatives, such as groundnut, mustard seed, sesame, cottonseed etc. in1999. A statement in the first ever National Agriculture Policy, issued in July,2000 by the government that futures trading will be encouraged in increasing number of agricultural commodities was indicative of welcome change in thegovernment policy towards forward trading.





Secondly, strengthening of infrastructure and institutional capabilities of theregulator and the existing exchanges received priority. Thirdly, as the existing exchanges are slow to adopt reforms due to legacy or lack of resources, new promoters with resources and profession approach were being attracted witha clear mandate to set up demutualized, technology driven exchanges withnationwide reach and adopting best international practices. Most of theexisting Indian commodity exchanges are single commodity platforms; areregional in nature, run mainly by entities which trade on them resulting insubstantial conflict of interests, opaque in their functioning and have notused technology to scale up their operations and reach to bring down theircosts. But with the strong emergence of: National Multi-commodity Exchange Ltd., Ahmadabad (NMCE), Multi Commodity Exchange Ltd.,

Mumbai (MCX), National Commodities and Derivatives Exchange, Mumbai(NCDEX), and National Board of Trade, Indore (NBOT), all theseshortcomings will be addressed rapidly. These exchanges are expected to berole model to other exchanges and are likely to compete for trade not only among themselves but also with the existing exchanges.

The current mindset of the people in India is that the Commodity exchangesare speculative (due to non delivery) and are not meant for actual users. Onemajor reason being that the awareness is lacking amongst actual users. InIndia, Interest rate risks, exchange rate risks are actively managed, but thesame does not hold true for the commodity risks. Some additionalimpediments are centered on the safety, transparency and taxation issues .

WHY STRUCTURED COMMODITY MARKET?

Today the business is not limited to our area only. Where the production isless but, demand is comparatively high prices of the product will go up. Onthe contrary where the production is high but demand is comparatively low the prices will go down.

If sellers and buyers come together at a place then it will create amarket. Here against one seller there will be more then one buyer.In this market buyers will come across the country for transactions.





In this market not only producer and seller are included butarbitrageur, speculator, and hedger can tread. In this way the totalarea of market will become broad.

In our country agricultural products form 25% of GDP. Totalturnover of commodity of market is nearly Rs.1, 10,000 corers. In

which 60,000 corers comes from agriculture and left is coming from coal, crude, etc…

Today in our country most of the trade is done in unorganizedmarket. In the market current and future contracts are done.Promissory contracts have been started science 1875. But due to

some restriction it was not properly worked. Presently nearly in122 commodities tread is being done.

Transaction in the organized market :

Organized markets have structured forms of transactions. The commodity exchanges are regulated as per rules and regulations define in The ForwardContracts (Regulation) Act, 1952 for regulating forward\future contracts. InDecember 2003, the National Commodity and Derivative Exchange Ltd(NCDEX) launched futures trading in nine major commodities.

MCX To begin with contacts in gold, silver, cotton, soybean, soya oil,

mustered seed, rapeseed oil, crude palm oil and RBD Palmolive are being offered. Now more then 40 commodity items are included. Day by day number of commodity items is incising. The various commodities that treadon the NCDEX and look at some commodity specific issues. In thiscommodity market classified as agriculture products, precious metal, othermetal and energy, which we discuss above.









NCDEX

NATIONAL COMMODITIES AND DERIVATIVESEXCHANGE

NCDEX started working on 15 th December, 2003. This exchangeprovides facilities to their trading and clearing member at different 130centers for contract.In commodity market the main participants are speculators, hedgers andarbitrageurs.Promoters of NCDEX are

National Stock Exchange(NSE) ICICI bank Life Insurance Corporation(LIC) National Bank for Agricultural and Rural Development (NABARD) IFFICO Punjab National Bank (PNB)

CRISIL

WHY NCDEX?

NCDEX is nationalized screen based system which is providing

transparent, private and easy services.

NCDEX is one of the traditional media which gives online

information

NCDEX is one of the Indian commodity exchange, constructed on

the basis of the current national institutes the exchange has been





established with the coloration of leading institutes like NABARD,

LIC, NSI etc….

In India NCDEX has maximum settlement guarantee fund.

NCDEX has appointed two exports for checking quality at the time

of delivery

FACILITIES PROVIDED BY NCDEX

NCDEX has developed facility for checking of commodity and also

provides a wear house facility By collaborating with industrial partners, industrial companies, news

agencies, banks and developers of kiosk network NCDEX is able toprovide current rates and contracts rate.

To prepare guidelines related to special products of securitization

NCDEX works with bank. To avail farmers from risk of fluctuation in prices NCDEX provides

special services for agricultural.

NCDEX is working with tax officer to make clear different types of sales and service taxes.

NCDEX is providing attractive products like “weather derivat ives.







The market watch window is used to view the market details for a particularor group of contracts and for a particular instrument type. This window displaysthe following details: Symbol, Expiry, price quotation unit, buy qty, buy price, sellprice, sell qty, last traded price, D.P.R, volume (in 000’s), value (in lac),% change,average trade price, high, low, open, close & open interest





CHAPTER: 2

CompanyProfile

INTRODUCTION OF SHAREKHAN

What is a share? What are futures? How do you trade incommodities? Lost in the financial jungle and need a guide? Allowshare khan, India’s leading stockbroker with over eight decades of stock market experience, to help you.









What is al l about Sharekhan?

NAME : S. S. K. I. SECURITEIS PVT. LTD.

HEAD OFFICE: SHAREKHAN LTD.

A – 206, PHOENIH HOUSE,

PHOENIH MILL COPUND,

SENAPATI, BAPTA MARG,

LOWER PAREL, MUMBAI – 400013

TYPE OF COMPANY: Pvt. Ltd.

PH NO: 1800 - 22 7500, 3970 75 00

E-MAIL: [email protected]

WEB SITE: www.sharekhan.com

CHIEF EXE.OFFICER : TARUN SHAH

BRANCH OFFICES: 150+ BRANCHES

mailto:[email protected]

http://www.sharekhan.com/



mailto:[email protected]





M ore About Sharekhan

SSKI named its online division as SHARE KHAN and it is into

retail Broking

The business of the company overhauled 6 years ago on

February 8, 2000.

It acts as a discount brokerage house to a full service investment

solutions provider

It has a 4000+ member strong team.

It has specialized research product for the small investors and

day traders

Largest chain of share shops which is 150+ share shop in 450

city, 2000+ Franchisees & over 172 Branches across India.

It has $25m /trades every day.

Leading player today with 20% market share

Over 95% online clients

The site was also launched on February 8, 2000 and named it as

www.sharekhan.com

The Speed Trade(web based) account of share khan is the next

generation technology product launched on April 17, 2002





Trade Tiger was launched on October 28, 2002 for trading in

Derivatives

It offers its customers with the trade execution facilities on the

NSE, for cash as well as derivatives, depository services.

SH AREKH AN ORI GI NS

Share khan is an equities focused organization tracing its lineage to

SSKI (Shripal Sevantilal Kantilal Ishwarlal), a veteran equities

solutions company with over 8 decades of experience in the Indian

stock markets.

Share khan is 80 years old company which is started online in

the year 2000 & it is the first company who started online in1984 they ventured into institutional broking& corporate

finance.







• Derivatives

•

Innovative products for enhanced performance

• Best research team in the world





Sharekhan’s Corporate Structur e

& The management team







MR. SHANKAR VAILAYA- OPERATION DIRECTOR

VISION

To empower the investor with quality advice and superior service to help him

take better investment decisions. We believe that our growth depends on

client satisfaction .

MISSION

To provide the best customer service and product innovation tuned to

diverse needs of clientele

Continuous up-gradation with changing technology, while maintaininghuman values.

Respond to progressive globalization and achieving international

standard.





Efficiency and effectiveness built on ethical practices .

CORE VALUE

Customer satisfaction through

Providing quality service effectively and efficiently

“Smile, it enhances your face value ” is a service quality stressed

on periodic customer service Audits

Maximization of stakeholder value

Success through Teamwork, integrity and People

ACHIEVEMENTS OF SHAREKHAN

A wired companies along with Reliance, HII, Infosys,etc by„Business Today , January 2004 edition.

It was awarded „Top Domestic Brokerage House four times byEuro and Asia money.

It was winner of „Best Financial website „award .





India s most preferred brokers within 5 years. “Awaaz customersAward 2005 ”.











Name : Share khan portfolio ManagementServices

Address : 201-202& 302, Dynamic house,Nr. Vijay Cross Road, Navrangpura,Ahmedabad-380009.

Area Manager : Mr. Munaf Kadari

Territory Manager : Mr. Riddhish Mehta

Relationship Manager: 20

Sales Executives: 15





PORTER S 5 FORCES MO DEL

POTENTIAL ENTERANT

Invest martVarious BankRefco Group Ltd.GeojitCipherUTI Securities Ltd.IDBI Capital Mkt.Services Ltd.





SUPPLIERS NSDL & CSDL are the regulatory bodies for Depository Participantslike SSKI, SHCIL, ICICIdirect.com, etc. Also these regulatory bodieshave got an upper hand as the bargaining power stock broking houseslike SSKI, etc.would be less

BUYERSSmall InvestorsFranchises/BusinesspartnersHNI’SMF CompaniesHUFInstitutional Investors

SUPPLIERS

NSDLCSDLNSEBSEMCX

NCDEX

COMPETITORS

ICICI Web Trade Ltd.Kotak Securities Ltd.India BullsMotile Oswal SecuritiesIndia Info line Ltd.

SUBSTITUTES

Mutual Funds

Insurance

Bank FD





NSE & BSE are playgrounds where common an investor tradethrough stock broking houses, for which they have to take permission

from NSE/BSE.

NSE & BSE are under the purview of SEBI, that’s why stock broking houses like SSKI, have low bargaining power. But here there isone advantage that NSE/BSE have i.e. they cannot go for forwardintegration.

MCX and NCDEX are stock exchanges, which tradein commodities and derivatives. Here again stock broking houseshave to follow rules and regulation of the same.

BUYERS

There are various types of investors who trade through stock broking houses like SSKI, which includes investors like small investors,medium net worth investor, business partners, institutional

investor and mutual fund. Companies. Here the bargaining power of stock broking houses depends onhow big the investor is.

So here we can say that bargaining power of stock broking houses ishigh incase of small investors & HUF.





While the bargaining power is moderate i n case of HNI(High New Worth Investors)/ MNI’s (Medium Net WorthInvestors) and business partners.

But in the case of mutual fund companies and institution investorsbargaining power is less.

There is competitive buzz in stock broking industry;competitors are offering low brokerage and best services

with added feature. So switching cost is pretty much less. Sothe buyer can easily switch over to competitors product.

COMPETITORS The company is facing the competition from local as well asnational level players. The local players provide facility for off-linetrading while the national players like ICICIdirect.com andKotakstreet.com, HDFC Security provide online trading services.

There are also other big names like India bulls, Motile Oswal,5paisa and Marwari, which encircle the company from both thesides by providing online and off-line trading with competitiveservices.

POTENTIAL ENTRANTS

The potential entrants like Invest mart, Jeojit and Cipher, which arecoming in near future to Rajkot City.

Nationalized banks are also planning to enter this field by tying up with broking houses. E.g. Bank Of Baroda.





SUBSTITUTES

Here substitutes are such instruments, which can be used instead of investing in shares.

The instruments like Bank FD, insurance, mutual funds are thesubstitutes.

If the use of this instruments increase this may be disadvantageousfor the stock broking houses.

The companies and banks, which are having these instruments, canplunge into this industry.

ENTRY BARRIERS

Huge capital: - Capital is necessary not only for fixed facilitiesbut also for customer’s credit and absorbing start up losses. To start astock broking house, one needs huge capital for technology upgradation and skilled manpower.

Technology - Technology for stock broking houses is lifesaving device. Stock broking requires huge capital to make their

products user friendly, which in turn requires capital to employ





skilled manpower. Thus, technology could be one of the entry barriers.

Regulatory Constraints: - Obtaining a license is a tedious jobfor a stock broking house. It should comply with the regulation of the governing bodies like SEBI, NSDL, etc. For a stock brokinghouses to plunge into the stock broking industry, it needs to havesome kind of financial background and expertise. Thus, regulatorsconstraints could be an entry barrier.

Experience curve: - The core competency in this industry isthe services, which are provided to the end-users and the research,

based an activity which includes “TIPS”, fundamental as well astechnical script analysis. Also the most important thing which helpsthe already established firms is- “TRUST” which people would behaving on firms like SSKI , Motilal Oswal, etc. which is verydifficult for new companies to imitate.

Network: - The “Reach” to the customer is the key factor in theindustry. The network of the companies like Motilal Oswal, Sharekhan, and ICICI is very efficient and spread all over India. It willtake time for a new entrant to establish such a huge network (e.g.Marwadi), which says, “Network can come up as the most difficultentry barrier to overcome.”

Expected Retaliation :- Whenever a new player comes in the

industry, the old companies have an option to reduce the prices of their product. This kind of practice is called expected Retaliation,which is also possible in this industry in terms of less brokeragerates and reduced account opening charges. E.g. before the entry of so many new companies, Sharekhan was having two types of accounts viz. speed trade and speed trade plus, which were costing1000 & 1500 account opening charges respectively. But due tocompetition, they have come up with only one account i.e. speedtrade plus with the account charges of Rs.1000.





MARKET COVERGE





Ground Network – Largest in India

• 122 Franchisees and 68 branches

• Covers 82 cities in 17 states across India

• Trade execution facility on BSE and NSEfor Cash as well as Derivatives

• Depository/Demat account services

• Personalized Share khan research advice

• Uniform service standandard





PRODUCT & SERVICES OF SHARE KHAN





Sharekhan services del ivery modules.

Share shops. Online trading.

1. Web based classic interface for investors. 2. Web based applet – fast trade for investors.

3. Trade tiger exe for active traders. Dial & Trade.

1. 1800-22-75002. 1800-22-70503. City code – 30307600





Segmented Customer As Per H is Profi le

1. Those who investing first time in the sock market :-

First Step.

2. Those who transact occasionally: - Classic.

3. Those who trade actively in the market: - Trade tiger.

4. Those HNIS looking for personalised & exclusiveinvestment

& portfolio management services (PMS).









OFFERING OF THE COMPANY

Share khan s products are basically divided into online and offline products.

OFFLINE TRADING A/C

Offline A/c is the A/c for the investors who are not familiar with

the use of computer.

The A/C opening charges Rs.500(One time)

For 1 st Year De-mat A/C is Free, On 2 nd Year AMC charge is

applicable.

SHAREKHAN

ONLINEOFF-LINE





ONLINE TRADING (95%)

The various benefits the client gets from the online trading are:

• Freedom from Paperwork: Integrated trading, bank and De-mataccount (auto pay-in and pay-out of securities) withdigital contracts removes all paperwork.

• Instant Credit and Transfer: Instant transfer of fundsfrom bank accounts of client's choice to his/her Sharekhan trading account.

• Trade Anywhere: Enjoy the ease of trading from any part of the world in a completely secure environment.

• Dial n Trade: Call Share khan on a toll free number to place or ders through share khan s telebrokers.

• Timely Advice: Make informed decisions with expertadvice, investment calls and live market commentary.

• Real-Time Portfolio Tracking: Benefit from real-time

information of your investment and current portfolio value. • After-Hour Orders: The Client can place orders after the

market hours, which get executed as soon as markets open.





BRIEF INFORMATION ABOUTSHAREKHAN S ONLINE TRADING A/C

Basically it s a share trading account, with a new and latest concept,including live terminal of NSE/BSE/F&O/COMMODITY. Herecustomers are able to trade online in shares with almost no paperwork, fastand hassle free processing.

Share khan provide with a 3-in-1 Account.

1) Online Trading Account2) De-mat Account3) Saving Bank Account

ONLINE TRADING ACCOUNT

Online Trading account is an electronic account which enables customersto trade in Shares through Internet without help of your broker.

1) NSE/BSE/F&O/COMMODITY TERMINALLIVE SCREEN2) ONLINE DAILY TIPS (4 TIPS PER DAY)3) DIAL & TRADE FACILITY (TOLL FREE)4) IPO ONLINE









NSE/BSE/F&O/COMMODITY Live Terminals

Provide you online fluctuations rates on your computer screen.

Online daily tips

1) Mails

Also provide daily 4 mails (pre market before 9.15a.m,Noon session at12p.m,post market after 3.30p.m & late evening at 8p.m) to registeredcustomers.

2) Relationship Manager

3) Tips through SMS

4) Tips through Yahoo Messenger Online









DE-MAT ACCOUNT

It s an electronic form of Sh are Certificates Storage Facility. Hereyou get a free De-mat Account.

No opening charges

Free De-mat account for firstyear,Rs.400/year from next year( year continued from the dayof opening)

Auto Pay-in & Auto Pay-out of Securities

Waver of Pay-in and Pay-outCharges (Due to linked De-mat Account)

SAVING BANK ACCOUNT

You can have a saving account for trading online with net bankingfacility.

Share khan provide a linked saving account facility from following banks

HDFC BANK CITT BANK

AXIS BANK IDBI BANK INDUSIND BANK UNION BANK OBC BANK BANK OF INDIA ICICI BANK







DOCUMENTATION FOR OPENING AN ACCOUNT

2 Passport size Photograph Identity proof of each holder(PAN CARD is compulsory) Residence proof of holder 2 cheque of Rs.750 &Rs.10000 separate in favor of “SHARE

KHAN LTD” (if cheque leaf do not contain holder s name

then please provide photocopy of following)1) First page of passbook 2) Last page of transaction details3) Latest bank statement

OR

Identity Proof Residence Proof

1. PAN card 1. Ration card2. Driving license 2. Latest receipt of LIC

premium3. Passport 3. Latest Telephoto/Electricity

bill4. Voter s ID ca rd

If following photocopy of proof are provided are valid for identity andresidential both.

1. Photo copy of valid Driving license2. Photo copy of valid Passport3. Photo copy voter s ID card





NOTE: Registration numbers of each proof, date of issue, date of expiry should be in validity period and be easily legible in provided

photocopy. All documents should be self attested.

OTHER FACILITY

Dial-n-Trade

Provide you complete trading facility through phone. Toll freenumbers for the phone trading facility as an alternative of NetTrading where you can call “N” number of times.

TOLL FREE NO: 1800 22 7500(both only for BSNL &MTNL)

1800 22 7050

LOCAL NO : 079-30307600(Chargeable)

Exposure

Provide you 10 times exposure (Intraday) on your cash balance inshare khan Trading Account, and 4times on Delivery.

Also provide you margin on your (shares) DP balance.





BROKERAGE STRUCTURE

SCHEME A/C CHARGE MARGIN VALIDITY PREPAID CASH BROKERAGE F&O BROKERAGE

Prepaid 1st leg 2nd leg Delivery 1st legsameleg

nextday options

WEH

A 750 5000 6 Month 0.05 0.05 0.50% 0.05 0.05 0.1

2.50%0R

100

B 1000 5000 6 Month 0.045 0.045 0.45% 0.045 0.045 0.092.25%0R 95

C NIL 10000 1 year 2000 0.035 0.035 0.40% 0.04 0.04 0.082.00%0R 90

D NIL 10000+ 1 year 6000 0.025 0.025 0.25% 0.025 0.025 0.051.50%0R 75

E NIL 10000+ 1 year 10000 0.0225 0.0225 0.22% 0.0225 0.0225 0.0451.25%0R 60

F NIL 10000+ 1 year 18000 0.02 0.02 0.20% 0.02 0.02 0.041.00%0R 50

G NIL 10000+ 1 year 30000 0.015 0.015 0.18% 0.015 0.015 0.030.50%0R 40

H NIL 10000+ 1 year 60000 0.01 0.01 0.15% 0.01 0.01 0.020.50%0R 30

I NIL 10000+ 1 year 100000 0.0075 0.0075 0.10% 0.0075 0.0075 0.015

0.50%0R

25

MARGIN

J NIL 25000 0.03 0.03 0.30% 0.03 0.03 0.062.25%0R 95

K NIL 50000 0.025 0.025 0.25% 0.025 0.025 0.052.00%0R 90

L NIL 100000 0.02 0.02 0.20% 0.02 0.02 0.041.50%0R 75

COMMODITY CURRENCY SPOT

M NIL 25000+ 0.03 0.03 0.30% 0.03 0.03 0.62.25%0R 95





Other charges stamp duty + turn over tax+ service tax, IPO/MF Online ,you can fill the new IPO through this account ,without any paper work.Only you need to do is provide the quantity of number of shares you areinterested to apply for.

SWOT Analysis

During this training at Share khan, we had come to know the Strengths – Weaknesses – Opportunities – Threats for the company and it is very usefulfor a company to analyze them. Therefore, the SWOT analysis is presentedhere and the suggestions for maintaining strengths and removing weaknesses

are explained.

Strengths:

Well-maintained infrastructure. Dedicated, Intelligent and Loyal staff. On-line trading products. Lowest brokerage and other charges w.r.t. Competitors.

The best investment advice correct up to 70-90 % through dedicated

Research and reports. Wide product range to enable the clients to choose the best

alternative. One of the best DPs in India. A positive image in the existing clients.





Weaknesses:

Less awareness in the market. Time consuming process for account opening, resolving the problems

of the customers, etc. Service quality is not maintained accordingly how they are promoted.

Opportunities:

Large primary market to sit as a book runner for the other companies

just like Kotak securities ltd. that runs the books of share holdings for

many companies Slope of stock market towards delivery based transactions. Large potential market for delivery and intra-day transactions. Open interest of the people to enter in stock market for investing.

Attract the customers who are dissatisfied with other brokers & DPs. An indirect opportunity generated by the market from its bullishness.

Threats:

Decreasing rates of brokerage in the market.

Increasing competition against other brokers & DPs.





Poor marketing activities for making the company known among the

customers.

A threat of losing clients for any kind of weakness of the company. Indirect threat from instable stock market, i.e., low/no profit of Share

khan’s clients would lead them to go for other broker/DP.




Documents

A PROJECT REPORT ON.pdf