Professional Documents
Culture Documents
Every individual from dusk to dawn of life need some co-operation from the
Shrivastava (Branch Head, Share Khan Ltd. Jaipur) for giving his kind cooperation
(Relationship Manager, Share Khan Ltd.) for helping me in the collection of valuable
information about the topic selected and also for his guidance in the preparation of the
project.
I am greatly indebt to all the employees of SHARE KHAN Ltd. For their kind
co-operation during collection of data and information that helped me in conducting such
project-work.
Prof. Nishith Saxena (placement officer, UIMS), Ms. Juhi Jain (placement
committee incharge) and UIMS family for giving me opportunity to undertake the
project work and Guide for their inspiring guidance and timely suggestions during this
project.
Jitendra gupta
1
Preface
witnessed never before. The competition is likely to become so severe after the entry of
many players, retaining a customer is most difficult practice for any service provider.
Though India has a very big untapped market but the players will not flourish
unless they change the way the customers are being served. Given the awareness level of
today customers every player has to treat with care and make the customer feel that he is
the king. Number of Online Share trader in India has crossed the line. More and more
customers are coming under this umbrella and many of the existing one are changing
pavilion. So customer retention and satisfaction is now more important as it was never
before. Players keep coming with new schemes in order to attract new customers and
retain the existing one. This is being supplemented with increased advertising and brand
building efforts. Success of any organization depends upon its being proactive.
My topic of study was “studying the working process of share khan ltd.” This
project is an effort to do a depth study and analysis of various known and unknown
reasons for customer satisfaction and retention. “To err is human” and I am not an
exception, valuable comments are always welcomed since it will motivate to work with
2
DECLARATION
The empirical findings in this project report are based on the data collected by
myself. The matter presented in this report is not copied from any source. I understand
that any such copy is liable to the punishment in way the university authorities deem fit.
PLACE: JAIPUR
(JITENDRA GUPTA)
3
EXECUTIVE SUMMARY
saving. The investors has many choices to invest his money e.g. Saving Deposit, Fixed
Deposit, Insurance Policy, Company Deposits, Capital Market, Properties and many other
among all the option he have to choose one or two to invest his money and take care of
days. Therefore I have chosen the share market to study as the title given is “STUDY OF
LTD.JAIPUR”. For doing the project because it is purely a broking firm whole time
engaged in the stock market’s operation. In addition, it has number of customers in jaipur
city. The project work is carried out for 45 days and I have worked as full time
I have visited number of new investors who want to invest the market, the
questionnaire, and formal meeting and normal decision with the clients helped me for
collecting valuable information for the study of market and investors. It is also useful for
me to reach to the conclusion of the project. Most of them are in the age bracket of 30 –
40 years, I think this age group people are very enthusiastic to do anything and want to
achieve things in shorter span of time. Therefore they attracted towards stock market.
Because of volatile stock market gives higher return as well as losses to the investors.
The end result I found after doing the whole exercise is that the investors
expectations are very high they want more returns from short and small investment.
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INTRODUCTION AND HISTORY
Share khan is the retail broking arm of SSKI, an organization with more than eight
decades of trust & credibility in the stock market.
It is India's leading retail financial Services Company with We have over 1000 share
shops across 420 cities in India. While our size and strong balance sheet allow us to
provide you with varied products and services at very attractive prices, our over 750
Client Relationship Managers are dedicated to serving your unique needs. Sharekhan is
lead by a highly regarded management team that has invested crores of rupees into a
world class Infrastructure that provides our clients with real-time access to all
information and products.
Our flagship Sharekhan Professional Network offers real-time prices, detailed data and
news, intelligent analytics, and electronic trading capabilities, right at your fingertips.
This powerful technology complemented by our knowledgeable and customer focused
Relationship Managers. We are Creating a world of Smart Investor. Sharekhan offers a
full range of financial services and products ranging from Equities to Derivatives
enhance your wealth and hence, achieve your financial goals.
.Sharekhan' Client Relationship Managers are available to you to help with your financial
planning and investment needs. To provide the highest possible quality of service,
Sharekhan provides full access to all our products and services through multi-channels.
ShareKhanLtd.
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GROWTH OF THE COMPANY
Given the election year, the finance minister (FM) tabled a populist budget aimed
at pleasing a large section of rural population and also the salaried middle class. Apart
from the substantial increase in budgetary allocation for rural and social infrastructure,
the budget has proposed huge debt waiver and relief worth Rs60,000 crore to farmers.
But in spite of the increased expenditure, the fiscal prudence has been maintained with
Navneet Publications with a revised price target of Rs 80, at which the stock discounts its
2009-10 EPS of Rs 7.6 by 10.5x. The company’s Jan-Mar 2008-09 results are ahead of
The net sales for the quarter grew by a robust 29.5 per cent year on year to Rs
59.1 crore, which is ahead of their expectation of Rs 53.1 crore. The sales growth was on
The publication business witnessed a robust growth of 28.5 per cent year on year
to Rs 21.8 crore. The stationery business achieved a healthy growth of 33.8 per cent to Rs
stationery products.
The operating profit margin declined by 102 basis points to 9 per cent, mainly on
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Market
NSE
BSE
Corporate Announcement
7
INDUSTRY OVERVIEW
Do you know that the world's foremost marketplace New York Stock Exchange
(NYSE), started its trading under a tree (now known as 68 Wall Street) over 200 years
ago? Similarly, India's premier stock exchange Bombay Stock Exchange (BSE) can also
limited companies are bought and sold at a stock exchange. But what really are stock
exchanges? Known also as tNews on the stock market appears in different media every
securities (like stocks, bonds, options) featured by the centralization of supply and
demand for the transaction of orders by member brokers, for institutional and individual
All stock exchanges perform similar functions with respect to the listing, trading, and
clearing of securities, differing only in their administrative machinery for handling these
functions. Most stock exchanges are auction markets, in which prices are determined by
competitive bidding. Trading may occur on a continuous auction basis, may involve
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brokers buying from and selling to dealers in certain types of stock, or it may be
But where did it all start? The need for stock exchanges developed out of early trading
activities in agricultural and other commodities. During the middle Ages, traders found it
easier to use credit that required supporting documentation of drafts, notes and bills of
exchange.
India's other major stock exchange National Stock Exchange (NSE), promoted by leading
financial institutions, was established in April 1993. Over the years, several stock
exchanges have been established in the major cities of India. There are now 23
recognised stock exchanges — Mumbai (BSE, NSE and OTC), Calcutta, Delhi, Chennai,
Kochi, Kanpur, Ludhiana, Mangalore, Patna, Pune, Rajkot, Vadodara, Indore and
Meerut. Today, most of the global stock exchanges have become highly efficient,
each other and have fostered the growth of an open, global securities market.
• NSE
• BSE
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In all there are 23 stock exchanges in India, but the two most popular amongst all of them
are:-
Now, let’s discuss the history, functionality and other important details about these two
Indian stock markets are one of the oldest in Asia. Its history dates back to a 200
years ago. The East India Company was the dominant institution in those days and
business in its loan securities used to be transacted towards the end of eighteenth century.
By 1830’s business on corporate stocks and shares in the bank and cotton took place in
Bombay. The 1850’s witnessed a rapid development of commercial enterprise and the
brokerage business attracted many men into this field and by 1860 the number of brokers
increased to 60.
In 1860-61, the American civil war broke out and cotton supply from United
States stopped; and thus the “share mania” in India begun, due to which the share brokers
At the end of the American civil war, the brokers who thrived out of this war in
1874, found a place in a street, where they would easily assemble and transact business.
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In 1887, they formally established in Bombay, and were known as “Native Shares
In 1895, it acquired a premise in the same street and finally was inaugurated in 1899
NSE:-
With the liberalization of Indian economy it was found necessary to lift the Indian
stock markets on par with the international standards. The NSE was incorporated
NSE is India’s leading stock exchange covering more than 160 cities and towns
across the country. It provides the modern fully computerized trading system designed to
offer investors across the country a safe and easy way to invest to liquidate investment
and securities.
Investors in many areas of country did not have the same access and opportunity
to trade so there arise the need for setting up the national stock exchange. The NSE
network has been designed to provide equal access to investors from anywhere in India
On its recognition as a stock exchange under the Securities Contract Act, 1956 in
April 1993, NSE started operations in the Wholesale Debt Market (WDM) segment in
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June 1994. Capital market (equities) segment commenced operations in November 1994,
NSE started trading in the capital market segment on November3, 1994 and
within one year became the largest exchange in India, in terms of volumes transacted.
During the year 2005-06 NSE reported, a turnover of Rs 1,569,556 crores in the equity
segment.
The various transactions involved in online trading can be shown from the point of view
of the
• Client
• Broker
• Stock Exchange
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SIGNIFICANCE OF THE STUDY
Every research is conducted to fulfill certain objective and these objectives in turn
fulfill some purpose. MBA curricular is designed to give more practical exposes to the
student so that he can make use of theoretical knowledge in the real life situation, with
this thrust dissertation study has been included which provides opportunity to research to
gain practical insight of the market. This hand on experience helps him in identifying the
critical factor of consumer buying behavior. This rich experience will be great help in
researcher’s future endeavors and it also solves the purpose for the partial fulfillment of
MBA curriculum.
The report consists of a step–wise efforts towards meeting the objectives of the
study. It covers the step-wise collection of data collection and the representation of the
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data together with the analysis. It also includes some suggestions put forward hoping it
Equity Share:-
Total equity capital of the company is divided into equal units of small
denomination, each called a share. For example, in a company total equity capital of Rs.
2,00,00,000 is divided into 20,00,000 units of Rs 10 each. Each such unit of Rs. 10 is
called a Share. Thus, the company then is said to have 20,00,000 equity share of Rs 10
each. The holders of such shares are member of the company and have voting rights.
Most of the company are usually started privately by their promoter(s). However,
the promoter’s capital and the borrowing from bank and financial institution may not be
sufficient for setting up and running the business over a long term. Therefore, companies
invite the public to contribute toward the equity and issue share to individual investors.
The way to invite share capital from the public is through a ‘Public Issue’. Simply stated
a public issue is an offer to the public to subscribe the share capital of a company. Once
this is done, the company allot share to the applicants as per the prescribed rules and
The investors may subscribe issue made by corporate in the primary market. In
the primary market, resources are mobilized by the corporate through fresh public issues
(IPO’s) or through private placements. Alternately, investor may purchase shares from
the secondary market. To buy and sell securities you should approach a SEBI registered
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Why should one invest in equities in particular?
company. Shares are also known as Equities. Equities have a potential to increase in
value over time. It also provides investors portfolio with the growth necessary to reach
investor’s long-term investment goals. Research studies have proved that the equities
have outperformed most than other forms of investments in the long term. This may be
Examples:
• Over a 15-year period between the periods 1990 and 2005. Nifty has given an
• Mr. Raja invests in Nifty on January 1, 2000 (index value 1592.90). The Nifty
value as of end December 2005 was 2836.55. Holding this investment over this
period Jan 2000 to Dec 2005, he gets a return of 78.07%. Investment is shares of
ONGC Ltd. For the same period gave a return of 465.86%, SBI 301.17% and
Reliance 281.42%.
Therefore,
• Equities are considered the most challenging and the rewarding, as compared to
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• Research studies have proved that investments in some shares with a longer
tenure of investment have yielded far superior returns than any other investment.
However, this does not mean all equity investments would guarantee
similar high returns. Equities are high-risks investments. One need to study them
Since 1990, till date, Indian share market has returned about 17% to investors in
these stocks have paid on an average 1.5% dividend annually Dividend is a percentage of
the face value of a share that a company returns to its share holder from its annual profits.
Composed topmost other form of investments, investing in equity share offers a highest
• Market specific.
The stock – specific factor is relates to people’s expectation about the company,
its future earning capacity, financial health and management, level of technology and
marketing skills.
The market specific factor are influence by the investor’s sentiments towards the
stock market as a whole. This factor depends on the environment rather than the
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environment like high economic growth, friendly budget, stable government etc. can fuel
euphoria in the investors, resulting in a boom in the market. On the other hand,
unfavorable event like war, economic crisis, communal riots, minority government etc.
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A Share khan outlet offers the following services:
• Online BSE and NSE executions (through BOLT and NEAT terminals).
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• Free access to investment advice from Share Khan Research team.
• Daily research report and market review (High Noon, Eagle Eye).
• Cool Trading products (Daring Derivatives, Trading Ring and Market Strategy).
• Personalized advice.
CUSTOMEREDUCATION
AG ENDA
BROKERAGE: -
OTHER FEATURES:-
• share khan.com
• For the fund transfer and withdrawal, we have tie-up with four banks- HDFC
Bank.
• If you are having bank a/c in HDFC Bank you can transfer the funds and
• DIAL-N-TRADE:- Call and Trade through Toll free no. From anywhere in India
o -7500,39707500)
20
TESTIMO
CO
“V oted
“Voted by C b y C
In dia
In dia””
Share khan was the proud recipient of the CNBC Awaaz Award for the being the
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DERIVATIVES
Derivative is a product whose value is derived from the value of one or more
basic variable called underlying. The underlying asset can be equity, index, foreign
commodity prices and commodity linked derivatives remained the sole from of such
products for almost three hundred years .The financial deravatives came into spotlight in
post-1970 period due to growing instability in the financial markets. However, since their
emergence, these products have became very popular and by 1990s, they accounted for
contract.
USES OF DERIVATIVES
HEDGING
The 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.
Let us try understanding how one can use hedging in a real life scenario. Stocks carry
two types risk- company specific and market risk. While company risk can be minimized
by diversifying your portfolio, market risk cannoy be diversified but has to be hedged. So
how does one measure the market risk? Market risk can be known from Beta.
to the movement of the stock. The Beta measures the percentage impact on the stock
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prices for 1% change in the index. Therefore , for portfolio whose value goes down by
11% when the index goes down by 10%, the beta would be 1.1. When the index increase
by 10%, the value of the portfolio increase by 11%. The idea makes beta of your portfolio
Steps :
Determine the beta of the portfolio. If the beta of any stock is not known, it is
Short sell the index in such a quantum that the gain on a unit decrease in the index
would offset the losses on the on the rest of his portfolio. This is achieved by multiplying
Therefore in the above scenario we have to short sell 1.2 * 1 million = 1.2 million worth
of Nifty.
As , we see that portfolio is completed insulated from any losses arising out of a fall in
the market sentiment. However, as accost, one has to forego any gains that arise out of
the 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
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SPECULATION
Speculators are those who do not have any position on which they enter in futures
and option 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 interest, economics fundamentals and other data to take their positions.
Illustration:
Ram is a trader but has no time to track and analyze stock. However he fancies his
chances in predicting the market trend. So instead of buying different stocks he buys a
Sensex Futures.
On May1, 2001, he buys 100 Sensex futures @ 3600 on expectations that the
index will rise in future. On June 1, 2001, the Sensex rises to 4000 and at that time, he
Ram has made a profit of Rs. 40,000 by taking a call on the future value of the
Sensex. However, the Sensex had fallen he would have made loss. Similarly, if would
have been bearish he could have 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 at least three
months.
ARBITRAGE
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An Arbitrageur is 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 give risk less profit. Arbitrageurs are always in a lookout for such
imperfections.
buying from lower priced market and selling at the higher priced market. In index futures
arbitrage is possible between the spot market and the future market (NSE has provided
• The Future price of Nifty can be worked out by taking the interest cost of 3
Future
speculative dealings and come 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
values of other underlying variable. Very often, the variables underlying the derivative
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Let us take an example of a simple derivative contract:
• Options
• Swaps
Forward contract
to buy or sell an asset (of a special quantity) at a certain future time for a certain price. No
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
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Choosing and understanding the right index in important as the movement of
stock index future is quite similar to that of the underlying stock index. Volatility of the
certain time in the future at a certain price. Index futures are all futures contract where the
underlying is the stock index (Nifty or Sensex) and helps a trader to take a view on the
market as a whole.
In India, we have index futures contracts based on S&P CNX Nifty and BSE
Sensex and near 3 months durations contracts are available at all times. Each contract
expires on the last Thursday of the expiry month and simultaneously a new contract is
Options
An option is a contract between two parties giving the taker (buyer) the right, but
not the obligation, to buy or sell a parcel of shares at a predetermined price possibly on,
or before a Stock market 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.
• Unlimited profit potential from any upside (remember Infosys, HFCL etc.)
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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 share of the underlying security at a specific price on or before a specific
date”.
‘Option’, as the word suggests is a choice given to the investor to either honor the
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.
Types of option
• Call Options
• Put Options
Call Options
Call option give the taker the right, but not the obligation, to buy the underlying
Illustration
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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 the privilege, Raj pays a
The buyer of a call has purchased the right to buy and for that, he pays a
premium.
When you expect prices to rise, then you take a long position by buying calls.
When you expect prices to fall, then you take a short position by selling calls.
Put options
A Put Options gives the holder of the right to sell a specific number of share of an
Illustration
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 the August. To have his privilege, Sam pays
When you expect to fall, then you take a long position by buying Puts. You are
bearish.
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When you expect prices to rise, then you take a short position by selling Puts.
Summary:
• Right to exercise and buy the shares • Obligation to sell shares if exercised
gain
PUT OPTION BUYER PUT OPTION WRITER (Seller)
• Pays premium • Receives premium
gain
Trading strategies
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• Puts in a Bullish Strategy.
An investor with a bullish market outlook should buy a call options. If you expect
the market price of the underlying asset to raise, then you would rather have the right to
purchase at a specified price and sell later at a higher price than have a obligation to
The investor’s profit potential buying a call option is limited. The investor’s profit
is the market price less the exercise price less the premium. The grater increase in the
The investor’s potential loss is limited. Even if the market takes a drastic decline
in price levels, the holder of a call is under no obligation to exercise the option. He may
The investor breaks even when the market price equals the exercise price plus the
premium.
An investor with a bullish market outlook can also go short in a Put option. An
investor anticipating a bull market could write put options. If market price increases and
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puts become out-of-the-money, investor with long put positions will let their option
expire worthless.
By writing Puts, profit potential is limited. A Puts writer profits when the price of
the underlying asset increases and the option expires worthless. The maximum profit is
An increase in volatility will increase the value of your put nad decrease your
return. As an option writer, the higher price you will be forced to pay in order to buy back
A vertical call spread is the simultaneous purchase and sale of identical call
To “buy a call spread” is to purchase a call with a lower exercise price and write a
call with a higher exercise price. The trader pays a net premium for the position.
To “sell a call spread” is the opposite here the trader buys a call with a higher
exercise price and write a call with a lower exercise price receiving net premium for the
position.
An investor with a bullish market outlook should buy a call spread. The “Bull
Call Spread” allows the investor to participate to a limited extent in a bull market, while
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A vertical Put spread is the simultaneous purchase and sale of identical Put option
To “buy a put spread” is to purchase a Put with a higher exercise price and to
write a Put with a lower exercise price. The trader pays a net premium for the opposition.
To “sell a put spread” is the opposite: the trader buys a put with a lower exercise
price and writes a put with a higher exercise price, receiving a net premium for the
position.
An investor with a bullish market outlook should sell a Put spread. The “vertical
bull put spread” allows the investor to participate to a limit extent in a bull market, while
Market watchers, players and investors have been rudely shaken by the volatility in the
Indian stock market. Indian stock markets were never caught in such a high volatile mode
earlier. This volatility wiped off investments worth billions affecting the F&O segments,
The BSE vulnerability, to foreign, especially US markets again came to the fore-
around the time when the country was celebrating the 16th year of independence.
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The BSE sensex fell 650pts on August16,2007, marking its second biggest plunge
in the history. The fall was more pronounced on NIFTY which shed about 300pts.
The sub-prime mass in the US market is believed, has slowed down the World’s
largest economy. This has actually hurt India, without much direct exposure of Indian
Before the scenario, the analyst companies, like Standard & Poor’s have come out
with their reports that the sub-prime crises would not affect the Indian economy, but
since, the market is sentiment driven, that is why, this great fall was beared.
When the market was facing highly volatile conditions, the Indian stock market was
IT scrips soared after the Government imposed curbs on overseas borrowings by Indian
companies. As an illustration, Polaris led the IT rally and gained about 12%.
Banks also gained as the US Federal Reserve added 38 billion dollars in bid to stem the
Industrial production numbers for the month of June, 2007 showed high growth in the
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-Also affecting the Indian stock market
The global indices suddenly seem to have lost steam spooked by the rising crude
oil prices and the clouds of recession hovering over the detrimental US market. It seemed
that the Indian market will negate these short-term set backs in the long run.
On 12Nov 2007, Sensex shed to 950pts with a net loss of 4.9%, while Nifty went
down to 21pts, losing about 3.8%. the steep fall of indices wiped of wealth in crores of
rupees. This was the most hurting fall for the Indian stock market. The very next day it
got somewhat stabilized, while two days later i.e. 14Nov 2007, it experienced the biggest
As a result of this, crude oil and commodity market rushed upwards once again,
taking inflation figure to above 3%. It resulted in rise in price of precious commodities
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owing to excess availability of money from the equity market, which at that time was,
Following the trend Worldwide, all the major indices fell around 4% and even
more. Dow Jones fell by 3.7%, losing about 500pts. Other European markets also
followed the same suit. The Brazilian market, which seemed rising for sometime, also
However the fall was brutal in the Asian economies. Nikkei fell 7.8%, while
Shanghai composite lost 6.9%. The biggest fall was witnessed by the Korean market,
since Seoul composite shed about 11.5%. All other Asian markets also followed the same
suit. As a result, foreign money went out of the market in a fortnight, as FII’s sold Rs380
crores.
The investor’s potential loss is limited. If the price of the underlying asset rises
instead of falling as the investors has anticipated, he may let the option expire worthless.
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The trader’s breakeven point is the exercise price minus the premium. To profit,
the market price must be below the exercise price. Since the trader has paid the premium,
An increase in volatility will increase the value of your put and increase your
return. An increase in volatility will make it more likely that the price of the underlying
Another option for the bearish investor is to go short on a call with the intent to
purchase it back in the future. By selling a call, you have net short position and needs to
be bought back before expiration and cancel out your position. For this, an investor needs
to write a call option. If the market price falls, long call holder will let their out-of-the-
money option options expire worthless, because they could purchase the underlying asset
The investor’s profit potential is limited because the trader’s maximum profit is
An increase in volatility will increase the value of your call and decrease your
return. When the option writer has to buy back the option in order to cancel out his
position he will be forced to pay a higher price due to the increased value of the calls.
A vertical out spread is simultaneous purchase and sale of identical put option but
To “buy a put spread” is to purchase a put with a higher exercise price to write a
put with a lower exercise price. The trader pays a net premium for the position.
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To “sell a put spread” is the opposite. The trader buys a put with a lower exercise
price and writes a put with a higher exercise price, receiving a net premium for the
position.
To put on a bear put spread by you the higher strike put and sell the lower strike
put. You sell the lower strike and buy the higher strike of either calls or puts to set up a
bear spread.
An investor with a bearish market outlook should buy a put spread. The “Bear put
Spread” allows the investors to participate to a limit extent in a bear market, while at the
A vertical call spread is the simultaneous purchase and sale of identical call
A vertical call spread is the simultaneous purchase and sale of identical call
To “sell a call spread” is the opposite here the trader buys a call with a higher
exercise price and write a call with a lower exercise price receiving net premium for the
position.
To put on a bear call spread you sell the mower strike call and buy the higher
strike call. An investor sells the lower strike and buys the higher strike of either calls or
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An investor with a bearish market outlook should sell a call spread. The “Bear
Call Spread” allows the investor to participate to a limited extent in a bear market, while
The investor’s profit potential is limited. When the market price falls to the lower
exercise price both out-of-the-money option will expire worthless. The maximum profit
that the trader can realize is the net premium: The premium he receives for the call at the
The Securities and Exchange Board of India Act, 1992 has been enacted to
provide for the establishment of a Board to protect the investors in securities and to
promote the development and to regulate the securities market and for matters connected
there with or incidental there to. It came into force on the 30th day of the January 1992.
Major part of the liberalization process was the repeal of the capital issues
(control) Act, 1947 in May 1992. With this, government’s control over issues of the
capital, pricing the issues, fixing of premium and rates of interest on debentures etc.
ceased, and the office which administered the Act, was abolished.
ensure effective regulation of the market, SEBI Act 1992 was entered to empower SEBI
with the statutory powers for (a) Protecting the interests of investors in securities. (b)
Promoting the development of the securities and (c) regulating the securities market. Its
regulatory jurisdiction extends over corporate in the insurance of the capital and transfer
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of securities, in addition to all intermediaries and person associated with the securities
market. SEBI can specify the matters to be disclosed and the standard of disclosure
required for the protection of investors in respect of issues; can issue direction to all
intermediates and other persons associated with the securities market in the interest of the
investors or of orderly development of the securities market and can conduct enquiries,
audits and inspection of all concerned and adjudicate offences under the Act. In short, it
has been given necessary autonomy and authority to regulate and develop an orderly
serious market. A code of conduct for each intermediary has been prescribed in the
regulations; capital adequacy and other norms have been specified; a system of
monitoring and inspiring their operations has been specified a system of monitoring and
inspecting their operations has been instituted to enforce compliance and disciplinary
actions are being taken against the intermediaries violating any regulation.
The Central Government may, by notification appoint for the purpose of this Act,
a Board by the name of the securities and exchange board of India under section 3 of the
SEBI Act. The board shall be a body corporate by the name aforesaid having perpetual
succession and a common seal with proper subject to the provision for this act to acquire
the hold and dispose of the property, both movable and immovable and to contract, and
shall by the said name, sue or sued. The head office of the Board shall be at Mumbai. The
Board may establish officers at other places in India. The SEBI has offices in Mumbai,
• A Chairman.
40
• Two members from amongst the officials of the Ministers of the Central
• One member from amongst the officials of the Reserve Bank of India constituted
The SEBI shall protect the interest of the investors in securities and to promote
and development of and to regulate the securities market by such measures as it thinks fit.
• Regulating the business in stock exchange and any other securities markets.
other intermediates who may associated with securities markets in any manners.
of securities, foreign institutional investors, credit rating agencies and such other
• Registering and regulating the working of venture capital funds and collective
41
• Regulating substantial acquisition of shares and take over of companies.
• Levying fees or other charges for carrying out the purpose of this section.
A person in the following capacity shall buy, sell or deal in securities after
An application shall be made for registration in the prescribed manner with the
prescribed fee. But the SEBI may, by order, suspend or cancel a certificate of registration.
• Stock broker.
• Sub – broker.
• Bank to an issue.
• Registrar to an issue.
• Merchant banker.
• Underwriter.
• Portfolio manager.
• Investment adviser.
• Depository.
42
• Mutual Fund.
DEPOSITORY PARTICIPANT
form at the request of the investor through a registered Depository Participant. It also
interfaces with the investors. A DP can offer depository services only after it gets proper
registration from SEBI. Banking and services can be availed through the branch whereas
As per the available statistics at BSE and NSE, 99.9% settlement takes place in
Demat mode only. Therefore, in view of the convenience in settlement through Demat
mode it is advisable to have a beneficiary owner (BO) account to trade the exchanges.
At present two Depositers viz. National securities depository limited (NSDL) and
Central Depositary Services (I) Limited (CSDL) are registered with SEBI.
NSDL
The first depositary in India established in Aug 1996 and promoted by Institutions
of National Stature Responsible for Economic Development of the country has since
Using innovative and flexible technology systems, NSDL work to support the
investors and brokers in the capital market of the country. NSDL aims at ensuring the
43
safety and soundness of Indian market places by developing settlement solution that
increase efficiency minimize risk and reduce costs. At NSDL, we play a quiet but central
role in developing products and services that will continue to nature the growing needs of
CSDL
CSDL was set up with the objective of providing convenient, dependable and
secure depository services at affordable cost to all market participants. CSDL received
Union Finance Minister, Shri Yashwant Sinha flagged off the operations of CSDL on
July 15, 1999. Settlement of trades in the demat mode through BOI shareholding Limited,
All leading stock exchanges like the National Stock Exchange, Calcutta Stock
Exchange, Delhi Stock Exchange, the Stock Exchange, Ahmedabad etc. have established
At the end of Dec 2005, over 5000 issuers have admitted their securities units of
(1 of 1956).
44
• A bank included for the time being in the second schedule to the Reserve Bank of
• A foreign bank operating in India with the approval of Reserve Bank of India.
institution mentioned in sub clause (i), (ii), (iii), (iv) jointly or severally.
• A stock broker who has been granted certificate of registration by the Board under
• A non – banking finance company, having a net worth of not less than rupees fifty
lakhs.
• Provided that such company shall act as a participant only on behalf of any other
person.
The Regulations empower NSDL to set its own selection criteria in the Bye Laws.
Therefore, the applicants must also adhere to the following criteria stated in NSDL bye
Laws.
• The applicant should not have been convicted in any of the five years
45
misappropriation of funds and securities, theft, embezzlement of funds, fraudulent
conversion or forgery.
• The applicant should not have been expelled, barred or suspended by SEBI, self
The following departments of SEBI take care of the activities in the secondary market.
Supervision department segments of the markets viz. equity, equity derivatives, debt
STOCK EXCHANGES
46
purpose of the assisting, regulating or controlling the business of buying selling or
dealing in securities. Stock exchange could be a regional stock exchange whose area of
which is permitted to have nationwide trading since inception. NSE was incorporated as a
securities can enter into transaction to purchase and sell shares, bonds, debentures etc.
resources for their companies and business ventures through public issues.
The first organized stock exchange in India was started in Mumbai in 1875 with
the formation of the Native Share and Stock Broker Association. Thus the Mumbai stock
exchange is the oldest one in the country with the growth of joint stock companies, the
stock exchange also made a steady growth and at present there are 23 recognized stock
In India, there are only two online trading stock exchanges, one is BSE and other
is NSE.
Functioning
Stock exchange is a place where buyers and sellers of securities can enter into
transaction to purchase and sell shares, bonds, debentures to raise resources for their
companies and their business ventures through public issues transfer of resources from
those having idle resources to other who have a need for them is most effectively
achieved through a security market. Stated formally, security market provides channels
47
investments by a variety of intermediaries, through a range of financial products called
‘Securities’.
Soaring Sensex
The stock markets are on song, but their volatility and the rampant speculation deter
The Indian stock markets are sizzling. The primary measure of the mood in the markets,
the Bombay Stock Exchange's (BSE) Sensex, appears to be on steroids. Analysts and
self-appointed market pundits predict the Sensex will be at 10,000 by the end of the year.
48
Citing recent economic performance, which shows that the Indian economy grew by 8.5
per cent in the first quarter of 2007-08, they say international investors see India as a
promising destination for investment. Skeptics remain muted amid the feel-good in the
markets. Indian markets continued to remain scam-prone. On October 21, the markets
tumbled by over 200 points. Although the Sensex recovered ground during the day, it
collapsed again the following day. The attempt to get domestic financial institutions (FI)
to prop the market failed. The media, which have generally aided the Bull Run in the
bourses, reported that that the Prime Minister's Office (PMO) was tracking the
happenings.
The government was only investigating the sharp increase in the price of "penny
stocks" - companies whose share prices have appreciated by as much as 1,000 per cent in
a matter of days in some cases. Earlier, Union Finance Minister P. Chidambaram said
Indian markets were in the "comfort zone". He asserted that there was "no scam in the
offing".
Chidambaram said he was not particularly concerned about the movement of the
Sensex. He said he would rather place emphasis on the price-earnings ratio (P/E), a
measure of the earning potential of equities in relation to their prices. Chidambaram said
that as long as P/E ratios remained in the "comfort zone", there was no cause for worry.
Chidambaram said the government maintained a close watch. The Securities and
Exchange Board of India (SEBI) was looking into the sharp increase in the price of penny
stocks.
Although the Sensex recovered ground, gaining more than 400 points by October
29, several worrying issues remain unattended. First, there is growing evidence that the
49
volatility in Indian markets has increased significantly. In fact, it is not only increasing
established in Indian markets in recent years not only exposes investors to greater
volatility but also greatly destabilizes markets. There is growing concern that the size of
these players can have serious consequences for Indian markets, investors and regulatory
structures. Skeptical analysts and market-watchers point to the fact that the huge size of
50
The volatility in the markets and the rampant speculation that accompanies it has
been aided by a lack of regulatory oversight. The system of trading in the Indian markets
is like gambling. It also discourages investors from taking a long-range (of at least five
to10 years) view of the companies they are investing in. Instead, investors are primarily
51
BeingRatedAmo
Com
Mumbai Stock Exchange Limited is the oldest stock exchange in Asia with a rich
heritage. Popularly known as BSE it was establish as “the Native Share and Stock
Brokers Association” in 1875. It is the first stock exchange in the country to obtain
permanent recognition in 1956 from the government of India under the Securities
Contracts (Regulation) Act, 1956. The Exchange pivotal and pre eminent role in the
development of Indian capital market is widely recognized and its index. SENSEX is
demutualised and corporatized entity incorporated under the provision of the Companies
Act, 1956, pursuant to the BSE (Corporatization and Demutualization) Scheme, 2005
52
National Stock Exchange
The National Stock exchange of India Limited has genesis in the High Powered
form all across the country on a equal footing. Based on the recommendation, NSE was
promoted by leading Financial Institution at the behest of the government of India and
was incorporated in November 1992 as a taxpaying company like other stock exchanges
in the country.
act, 1956 in April 1993, NSE commenced operations in the whole sale Debt Market
(WDM) segment in June 1994. The Capital Market segment commenced operations in
November 3, 1994 and within a short span of 1 year became the largest exchange in India
Trading volumes in the equity segment have grown rapidly with the average daily
turnover increasing from Rs 17 crores during 1994-95 to Rs 6,253 crores during 2005-06.
During the year 2005-06, NSE reported a turnover of Rs 1,569,556 crores in the equities
segment.
NIFTY
53
NIFTY is the sensitivity index NSE (NATIONAL STOCK EXCHANGE) NIFTY
is a basket of 50 constituent stocks. It consists of the 50 largest and most actively traded
12
destabilizing tendencies in the country's system. The best policy option is to reduce the
The expected but abrupt end to the Bull Run in India's stock markets, once more
focused attention on the volatility that has come to characterize India's stock markets.
This volatility has been visible in the medium and long term as well.
These wild fluctuations have meant that for those who bought into the market at
the right time and exited at the appropriate moment, the average return earned through
capital gains were higher despite the extended Bull Run in the latter year.
54
The BSE Sensex display board at Church gate station in Mumbai.
Movements in the Sensex during these two years have clearly been driven by the
behavior of foreign institutional investors (FIIs), who were responsible for net equity
purchases of as much as $6.6 and $8.5 billion respectively. In sum, the sudden FII
interest in Indian markets in the last two years account for the two bouts of medium-term
A recent analysis, FIIs controlled on average 21.6 per cent of shares in Sensex
for trading because they are not held by promoters, government or strategic shareholders,
55
the average FII holding rises to more than 36 per cent. In a third of Sensex companies,
Given this presence of FIIs, their role in determining share price movements must
be considerable. Indian stock markets are known to be narrow and shallow in the sense
that there are few companies whose shares are actively traded. Thus, though there are
more than 4,700 companies listed on the stock exchange, the BSE Sensex incorporates
just 30 companies, trading in whose shares is seen as indicative of market activity. This
shallowness would also mean that the effects of FII activity would be exaggerated by the
influence their behavior has on other retail investors, who, in herd-like fashion tend to
These features of Indian stock markets induce a high degree of volatility for four
reasons:-
increase, it would in the first instance encourage further investments so that there
ratios to be delayed. And when the correction begins, it would have to be led by
an FII pull-out and can take the form of an extremely sharp decline in prices.
• Secondly, as and when FIIs are attracted to the market by expectations of a price
increase that tend to be automatically realized, the inflow of foreign capital can
result in an appreciation of the rupee vis-a-vis the dollar (say). This increases the
return earned in foreign exchange, when rupee assets are sold and the revenue
converted into dollars. As a result, the investments turn even more attractive,
56
triggering an investment spiral that would imply a sharper fall when any
correction begins.
• Thirdly, the growing realization by the FIIs of the power they wield in what are
in volatility.
markets in periods of unusually high prices. Thus, most recently, the Securities
Monday, May 17, 2004, when the Sensex recorded a steep decline to a low of
4505.
57
During the year ending, the markets seemed have braced for a Happy New Year,
with both Sensex and Nifty picking up, after a month long slump, on the back of global
brightening. At that time, Sensex secured 625pts, while Nifty added 343pts. During that
period, Sensex also hitted the 20-k mark, significantly without the rallies relying much on
Data gathered from reports, reveals that, the FII’s net investments of Rs 220
crores was surprisingly beaten by domestic institutional investors who invested up close
to about Rs 1734 crores in the market. If comparison is made between the 50-scrip Nifty
with the 30-scrip Sensex, we find that the Nifty had outperformed, that too taking two
times advanced.
As a result, in Asian markets, all indices went up including, Hang Seng, Nikkei,
Seoul composite, etc. as a matter of exception, the Chinese stock market could not
perform and fell about 4%. Some investment experts had the view that the Chinese
market was over-valued. Even the investment guru, Mr. Warren Buffet termed it as a
“Too hot”. This situation favored India, as it seemed better and safer destination to park
claiming some portion of BSE too. On this domestic front also, the auto makers seemed
to rule the world as Tata motors, Mahindra & Mahindra, etc, submitted their collective
bids for Jaguar and Land Rover. This showed the strong position of Indian stock market.
58
STOCK MARKET CRASH
Black Monday saw bloodbath on Dalal Street as the Indian stock markets
crashed by over 1430 points in afternoon trade (the market has since then recovered
somewhat), reminding investors that there is no one-way bet on the stock market.
May 2006
On May 22, 2006, the Sensex plunged by 1100 points during intra-day trading,
leading to the suspension of trading for the first time since May 17, 2004. The volatility
of the Sensex had caused investors to lose Rs 6 lakh crores ($131 billion) within seven
press statement when trading was suspended to assure investors that nothing was wrong
59
with the fundamentals of the economy, and advised retail investors to stay invested.
When trading resumed after the reassurances of the Reserve Bank of India and the
Securities and Exchange Board of India (SEBI), the Sensex managed to move up 700
The Sensex eventually recovered from the volatility, and on October 16, 2006, the
Sensex closed at an all-time high of 12,928.18 with an intra-day high of 12,953.76. This
was a result of increased confidence in the economy and reports that India's
January 2008
In the third week of January 2008, the Sensex experienced huge falls along with
other markets around the world. On 21 January 2008, the Sensex saw its highest ever loss
of 1,408 points at the end of the session. The Sensex recovered to close at 17,605.40 after
The next day, the BSE Sensex index went into a free fall. The index hit the lower
circuit breaker in barely a minute after the markets opened at 10 AM. Trading was
suspended for an hour. On reopening at 10.55 AM IST, the market saw its biggest intra-
day fall when it hit a low of 15,332, down 2,273 points. However, after reassurance from
the Finance Minister of India, the market bounced back to close at 16,730 with a loss of
875 points.[2]
Over the course of two days, the BSE Sensex in India dropped from 19,013 on
60
A US depression is on anvil. Though not confirmed but in a hush way it is
becoming the talk of the town. According to many experts the Depression in US
Economy has already arrived. The mess of sub-prime mortgage has become somewhat
unmanageable and is slowly taking the US towards an economic recession. The federal
Bank of America is trying hard to keep this situation under control. The recent reduction
in interest rates and announcement of relief package are some of the steps taken in this
direction.
investors, in fear of a deep recession, want to liquefy their assets and, therefore, are
making heavy selling of their stocks. This has affected the stock markets of entire Globe.
The Indian stock market is no exception. The market is very uncertain and nobody knows
exactly where it will head in the days to come. Owing to such fluctuations in the market,
millions of small investors in India have lost their money and sleep.
First positive effect of this Depression is that the Indian stock market is again
returning to its core fundamentals. For the last few months the market was soaring at such
a high pace that it defied any business logic or commonsense. People were not ready to
listen the same advice and everybody was ready to ride this bandwagon of a super bullish
environment. The pace in the market was primarily due to heavy buying from big
investors (FIIs to be precise). However, this buying was so huge that an imaginary
the performance of the companies in their respective fields. However, the stocks of these
61
companies were telling entirely different stories. The stocks which used to sell on a price
range of 15 to 20 Price by earning ratio (P/E) were being sold for a P/E ratio of 45-50.
This price was simply an inflated price with no solid logic behind it. However, people
were in a rush to buy shares even on these prices on the belief that the prices will soar
The recent fall in the stock market has helped in cooling off the heated share
prices and has brought a common sense in the market. The prices have come down to
their realistic value and this in fact is a very positive development for the Indian
economy. The fall in prices has given a buying opportunity to those investors who
wanted to buy stocks of companies but could not do so owing to their exorbitant prices.
In the long run, this price correction will greatly help the Indian companies as only long
term and serious investors will be able to get the real profit. The short term and non-
serious investors will slowly move away and stability will come in the market.
The second positive development of this US depression will come in the form of a
fall in the global prices of Oil. A US depression clearly means a fall in the demand of oil.
The lowering of demand will result in the fall of oil prices. This fall in oil prices will help
India and China the most as these economies are having the fastest growth rate and a
decrease in oil prices will keep deflation in control. The end result: more demand and
more production.
There is one scenario, however, which may spoil the party. If the OPEC countries
(the group of Oil exporter’s countries) decide to lower their oil production in view of fall
in demand from America, there will again be a increase in the global oil prices. It is,
however, believed that OPEC can be persuaded for not doing this.
62
The third and final benefit from a US depression for India is that soon we may see
a fall in the interest rate here. As US federal bank is regularly lowering it’s interest rates
to control the economy, the investment in US is becoming less and less attractive. As a
result, the big investors are heading towards other profitable markets like India. This has
resulted into a big dollar inflow into India making our currency rupee very strong which
is pinching the exporters. Further, as interest rates are at their peak at the moment, this,
along with a strong rupee has made many Indian companies postpone their investment
plans for future. This situation, however, cannot last for long as doing so will hamper the
growth rate. The only solution available is to decrease the interest rate which will make
lending easy and spur the growth in many sectors. This will increase the inflow of money
into the economy and give a boost to the demands. Further, a lower interest rate will also
put a break on dollar inflow as the investment in India will become less profitable.
Though, today, the Reserve Bank of India has not announced any decrease in interest rate
and has asked the Banks to take a decision on their own, it is certain that sooner or later a
reduction in interest rate is inevitable. Since India’s economy is not heavily dependent on
US Economy and it has its own huge domestic market, a lower interest will give a boost
The recent stock market crash was not unexpected. The market just required a
trigger and when it got it, it fell down like the jack of cards.
63
Firstly, during the period between August and December, the Sensex touched new
• Reliance Energy
• HDFC Bank
• ICICI Bank
All these companies made an overall impact of about 55% on the market. This
was not a positive sign for a market since the trading in Indian stock market greatly
depends upon the market sentiments. Actually, what happened was that when the Sensex
peaked up, the midcaps and small caps also showed some rise. When it was perceived
that the Sensex will touch new heights then these momentum shares went to their peak
levels. There were some shares which became four times oversubscribe of their actual
• Reliance Petroleum
• Reliance Natural
• Ispaat Industries
• Essar Oil
The investors got huge profits on investing in such companies. Gradually the
serious investors turned into speculators and this speculative behavior made them to bear
heavy losses.
64
Secondly, the unexpected behavior of FIIs became a major cause of the crash.
Generally, during December i.e. the Christmas time, the FIIs do not show any market
momentum. But this year, was an exception, the FIIs went on buying from the Indian
market due to which there was a continuous inflow of funds in the market. This resulted
in peaking up the share prices. But suddenly, when FIIs drew all the money in one time
Thirdly, the international market was not in a good mood at that time. The main
issue of concern, at that time was the US subprime crisis. This crisis was not yet solved
and a new issue raised its heads up in India, which were the participatory notes (P-notes).
Fourthly, there is a change in the global investment climate. One of the primary
triggers is the huge fear of the United State’s economy going into a recession with
foreign institutional investors trying to reallocate their funds from risky emerging
Fifthly, the current volatility is also linked to global bourses. There is a big
correlation among global markets. The presence of hedge funds across asset classes,
along with increased global movement of capital, has increased event-related volatility.
65
MAJOR FACTORS RESPONSIBLE FOR THIS CRASH
SUBPRIME CRISIS:-
The major reason behind the economic crisis on an international level was the US
subprime mortgage. This crisis initiated when the American inflation and retail sales gave
bad results. As per the figures of 2007, the increase in CPI of America was the biggest
until now. Results also demonstrated that the purchase price index increased about 6.3%.
Simultaneously, the results of December showed the net decrease of retail sales about
0.4%, which was even more than expected. Some of the important financial institutions
of America like Citygroup, Meril Linch & company, in their fourth quarter results
Currently, the market is experiencing a similar sharp fall in equity indices and a
large bout of volatility, thanks to negative news flows emanating from the US Economy
Now, market participants are slowly coming to terms with the harsh reality that
Indian capital Markets can no longer rely only on the India growth story, but will have to
learn to live with global macro-economic developments that could temporarily offset
strong domestic fundamentals. Market men feel that with the present crisis impacting
global liquidity, the risk perception of global investors has also changed and that they are
finding comfort in parking their money in safer assets like government bonds and
treasury bills. As a result, emerging equity Markets, which are considered to be more
66
risky compared to developed Markets, may not be able to attract huge investment, at least
doubt that the stock market's basic strength lies in the strong India growth story.
But on the other hand, the market is heavily dependent on capital coming from
different parts of the world that provide immense liquidity to the system. When any
development directly impacts these players negatively, the Indian market is bound to get
affected. If we can enjoy the benefit of an upward rally, the main drivers behind them
being foreign players, we should also learn to take some pain on the downside when they
Sep.07 Dec.07
67
As the dollar took a beating against all major international currencies, the Indian
The rupee appreciated throughout the month with foreign banks selling dollars
"The rupee has strengthened basically due to two reasons today, the dollar's
fundamental weakness and expectations of good inflows into the local markets. The
greenback lost ground against the Japanese Yen, Euro, Sterling, Pound and against the
rupee. There is also an expectation in the market that despite the recent measures taken
by the RBI — the cap on NRE deposit rates and bar of overseas corporate bodies as an
investor class — dollar inflows will continue," said Mr Sharukh Wadia, Senior Vice-
The weakness of the dollar is expected to continue with unemployment rates in the
US remaining high at over six per cent, said a forex dealer in a foreign bank.
A section of the market feels that the sentiment in the local market is now
positive.
The Indian currency has risen more than 10 percent this year and nearly 2 percent
since the U.S. Federal Reserve announced a larger-than-expected cut in its key lending
• As of Jan 21,2008 one U.S. dollar was worth 39.27 Indian rupees, more than 10
• To put the currency situation in historical context, the dollar hasn’t dipped this
68
REASONS
• The rupee’s rise is part of a larger trend of dollar weakness against all
inadequate capital inflows to finance the huge current account deficit, the
• Till 2005, the USD 13 trillion US economies provided nearly 50% of the
Dollar.
of interest rates. As interest rates of any economy decrease, the value of its
69
demand as the returns decrease. Hence investors move out of that
• The impressive growth story, booming real estate and infrastructure makes
during the whole of 2005. Foreign direct investment nearly tripled in the
past financial year to US$16 billion from US$5.5 billion a year earlier.
IMPACT
• The rise in rupee will have an adverse impact on the fortunes of sectors dependent
on earnings in dollars like IT, textile, auto component manufacturers, BPOs and
KPOs etc.
• As the amount of Rupees per Dollar EARNED will decrease, the pressure
guys have started feeling the pinch and are demanding a rescue act from
the government.
70
• According to the CII’s 19th Business Outlook Survey of Exporters, 71 %
• The news is good for importers whose buying costs will greatly decrease as the
whopping 77.3 per cent and alcoholic beverages by 32.8 percent in the
• Overall imports have shown a rising trend, largely due to high imports of
non-oil items. Non-oil imports have grown by 42.85 per cent higher so far
Thailand, Australia, among others have risen, while those from Argentina,
China, Ivory Coast, Malaysia and Sri Lanka have shown a decrease in
71
• India imports 70-75 percent of its oil requirement. Even if the cost of oil
per barrel has hit a record high of $84 in recent times, the appreciating
• As India pays in dollars for its oil imports, the cost lowers significantly
even as the rupee gains in strength. If at $84 to a barrel India would pay
barrel, at Rs 39.91 India will have to pay only Rs 3,352 for every barrel, a
gain of Rs 91.
• A stronger rupee, will also force Indian companies to become even more efficient,
which will make them more competitive in the global market, especially as
The rupee exchange rate is neither completely free-floating nor fixed, but is
“managed” by the Reserve Bank of India through buying and selling other currencies. Up
until April, the Reserve Bank was buying lots of U.S. dollars, as much as $24 billion to
keep the rupee at around 44 to the dollar. But with investor sentiment so hot on India and
money pouring in from abroad, the Reserve Bank found itself having to spend more and
more on foreign currencies just to keep the rupee stable. When inflation shot up to over
Instead of going in for direct intervention, the RBI has taken the following
72
• Overseas investment limit of corporate enhanced to 300 per cent of net worth
300 million.
from $50,000.
• Interest rates on FCNR deposits have been reduced below LIBOR and those on
NRI rupee deposits equated to LIBOR - effectively near-zero rates given forward
premiums.
On October 16, 2007, SEBI (Securities & Exchange Board of India) proposed
curbs on participatory notes which accounted for roughly 50% of FII investment in 2007.
SEBI was not happy with P-notes because it was not possible to know who owned the
underlying securities, and hedge funds acting through P-notes might therefore cause
This was, however not the end of the volatility. The next day (October 18, 2007),
the Sensex tumbled by 717.43 points — 3.83 per cent — to 17998.39. The slide
continued the next day when the Sensex fell 438.41 points to settle at 17559.98 at the end
of the week, after touching the lowest level of that week at 17226.18 during the day.
FORECASTING :-
73
The effect of the housing/lending stocks
risks and retail investors are unwinding their leveraged investments. Together they are
causing increased volatility in the fixed income, equity and derivative markets.
• Sub-prime lending and leveraged loan markets may shut down or at least
• Although the meltdown may pop up some good opportunities - the shockwaves
from the US subprime collapse will put the private equity deals on hold for the
74
The situations indicate that Bear Stearns has problems only with those CDOs
issued in respect of Mortgage Backed Securities. Those CDOs were issued at the peak of
the US housing market, so they have the least float. The older CDO issues will have more
Penny stocks and junk scripts look attractive to the investor when the indices are
rising, since the price of these shares usually rise faster than the rise in prices of other
shares. However, then the market falls, the investor is left with junk, which has no value.
As a matter of principle, you should invest in stock of the only such companies whose
fundamentals are known to you. Do not depend on tips, however reliable the source of tip
may be. Most of the tips are generated by people with vested interest. Even when the
source of the tip is genuine, the time frame the issuer has in mind may be different. If you
are tempted to act on a tip, study facts before you decide to go ahead.
Do not panic
ticker. CNBC channel is for the short-term traders and day-traders, do not let the opinions
expressed there affect your investment decision. If you are confident your investment is
fundamentally strong, every fall should give you an opportunity to buy rather than sell.
Of course, while you do that keep in mind the principle I have narrated in the next
paragraph.
75
This strong advice comes from Warren Buffet, the most successful disciple of
Ben Graham. The greatest mistake most investors make is to sell the shares that have
appreciated, and hold the ones, which are giving a negative return. The investment
strategy should be the other way round; you should sell the losers and let the winners
ride.
I do not mean that you should sell every share that has depreciated. The right
course is to keep pruning your field regularly to identify the weed so that they could be
removed, and to identify the flowers that should be watered as long as their fundamental
If you can understand a business and you find value there, invest. Do not be
tempted to invest in industry about which you do not have much idea. While there is so
much money to be made in technology shares, yet if you do not understand the business,
it is better you do not go into it. My personal investment philosophy is to invest in the
business, which I would be comfortable running on my own. I apply the same principles
qualified analyst to do the analysis. A basic book on reading the financial statements of a
company will be a great investment. When I say that more money is made by being
inactive in the market, I certainly do not mean that you should invest and forget. On the
other hand, you should keep reviewing the performance of the company you have
invested in.
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OBJECTIVE
Under this summer training a small project was undertaken, the primary objective
of which was to obtain a feedback from the clients of SHAREKHAN. Particularly about
their experience while opening the online trading account with SHAREKHAN.
The secondary objective of this project was to help out the clients with their
practice. It is also bridges the gap between the theoretical knowledge and practical
In addition to the above finding out the investor’s expectations from the stock
Secondary objective:-
options available in the stock market, how the investments are beneficial to the investors,
what are the risks involved, how the broking company operates etc.
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METHODOLOGY
Methodology Specifies:-
informal decision.
Sources of information:-
• Primary Sources:-
• Through Questionnaire.
• Normal decision.
• Secondary Sources:-
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RESEARCH METHODOLOGY
- Secondary Data
Data sources:
Secondary Data
Under Secondary sources, we tapped information from internal & external sources.
www.icicidirect.com
www.indiabulls.com
sources.
Primary Data
Primary data is a data that is collected for the first time in the processing of the
analysis.
The researchers have adopted the contact through telephone for the purpose of
collecting Primary data. The researchers discuss with Team Manager and employees of
ANALYSIS
To make our research project most effective in a given time period of two months
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Conclusive Research Design. The data has been collected from both Primary as well as
Secondary sources and we also did the fieldwork for which utmost care has been taken to
Findings
On surveying various people who are involved in share trading both as trader as
well as investor, we found that brokerage is the most important factor on which people
MOSTIMPORTANTFACTORWHILESELECTINGABROKING
HOUSE
BROKERAGE
IMAGE
FACTORS
CONVINIENCE(IN
TRADE)
CUSTOMERSERVICE
FEATURES
TIPS&SUGGESTION
AMC
decision making. Although brokerage leads the pack it has only 19% contribution, and is
closely followed by broking houses’ image with 18% and convenience in trade with 16%.
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AMC & tips & suggestions having only 10% contribution each towards decision making
18%
10% 10%
19% 15%
12%
16%
On surveying SHAREKHAN Customer why they opted for same, we got to know
it was because of image SHAREKHAN carries in the market, followed by its competitive
brokerage, convenience in trade, features, customer service, tips and suggestions, and
AMC.
REASONFORSELECTINGSHAREKHAN
IMAGE
BROKERAGE
FACTOR
CONVINIENCE(INTRADE)
FEATURES
CUSTOMERSERVICE
TIPS&SUGGESTION
AMC
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Analysis
83
SHAREKHAN ICICIDIRECT INDIABULLS
. COM . COM
ONWARDS
TYPE OF 3(off line,fast trade & Web based Web based& software
A/C speed trade)
THROUGH
WEBSITE
OR SOFT-
WARE
SHAREKHAN ICICIDIRECT INDIABULLS
.COM .COM
NSE/BSE/ NSE/BSE/ NSE/BSE/ NSE/BSE
MUTUAL
FUNDS
SOFT- 500/-P.M. N.A. N.A.
WARE
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CHARGES (NEGOTIABLE
ON BROKERAGE)
DAIL-N- UNLIMITED On 21st RM NUMBER
TRADE
call Rs 20/- PROVIDED
TRADING
DEMAT NIL (THROUGH INCLUDING RS. 17/-
TRANSAC-
TION SHAREKHAN) IN BROKERAG(Rs35) PER
CHARGES TRANSACTION
(ON SELLING)
TIE UP HDFCBANK, ICICIBANK ONLY HDFC BANK,
WITH (COMPULSORY)
BANKS
COM .COM
BUY YES YES BUT YES
TODAY
ONLY ON
SELL
TOMOR- 127 SCRIPS
ROW
OF NSE
SMS YES YES YES
ALERTS
MINIMUM 4 TO 8 TIMES 4 TIMES 4 TIMES
MARGIN ONWARDS
EXPO-
SURE
MINIMUM Nil 5000/- 500 BLOCKED BY
MARGIN THE SYSTEM
Volume Nil Nil NIL
require-
ment
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BROKE- .03%(INTRADAY) .07% (INTRA-DAY) .04%(INTRADAY)
RAGE
.3% .75% .4%
Pure Click To
Successfu
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Limitations
• In such a short span of 45 days , it is very difficult to study the whole financial
• Most of the people are having conservative thinking and do not have any idea on
capital market.
• The focus of study is only on share market because is such a short span of time it
is very difficult to study the whole capital market and its functions.
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Recommendation
• Share Khan Ltd. Should try to track clients from BRO’s and software companies
as in these companies majorities employees fall into the age group of 25-35 that is
young influential, they should be the mainly targeted because these people have
disposable income and are high risk taking people so they would be interested
• Share Khan Ltd can also target colleges and B-schools for growth. Company can
sponsor event in these places so that more and more people will get to know about
• Share Khan Ltd has recently opened many new branches in Pune area. They have
clients from various categories and for convenience of the client. Share Khan Ltd
should make tie-ups with other banks (ICICI & HDFC Bank).
• Share Khan Ltd should give knowledge of derivative product. Derivatives product
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• Share Khan Ltd can also use the method of mass marketing by giving
in public places.
Some of the most common mistakes that investors should avoid are as follows:
Buying tips:
In market, punters and market makers use to the optimum trading. What you as an
investor should do is not buy anything that you do not understand. Do your own research.
The trading bug is infectious and hard to get rid of. Trading reduces returns. The
most common mistake that investors should realize is that companies are meant as
‘investments’ and not as trading opportunities. You start making more mistakes with
The most common mistake is that people buy according to market trends instead
of buying businesses. A bull run does not mean that a company with a bad business will
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Taking a position in a stock, which has not business model, can be dangerous.
You may be left with dud paper at the end of day. ‘Vanishing Companies’ are common
place in India.
Over confidence:
Do not be overconfident. Many investor fall pray to over confidence, trading too
often and these blunders can really cost you. Never bypass the basic tenets of investing.
Panic:
Fear stops you optimizing profit or minimizing losses. Let fundamentals dictate
your decisions not emotions.
Chasing performance:
Too many investors buy stocks when they are at their peak, after a long run-up.
The fundamental rule is “Buy low, sell high”.
INFOSYS
ONGC
BHARTI
RELIANCE
INDUSTRIES
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If investor does not want to take more risk and he is interested in investing share market
then investor can go for long term investment in share market. As we see from the above
data that if any person can hold the share of above mentioned companies for one year he
must be update himself regarding the current performances of the companies in which he
Conclusion
At the end of this report, I would like to conclude that the Indian Capital Market
is a puzzle and it is very tough call to anticipate any conclusion on it and making
suggestion to the individual investor. But Share Khan Ltd has got success in solving it by
development in various industrial sector and infrastructure. Share Khan Ltd has scope to
expand and many areas to work on. I hope suggestion made by me will be helpful to
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Share Khan Ltd will go on to explore new heights in future. Share Khan Ltd has to
implement its hardcore marketing effort to remain always strong in this competitive
world.
At the end, I would like to say that sometimes and rumors derived the capital
Questionnaire
Investment Experience
• How long you have been investing (in investment funds, stock, bonds or foreign
exchange trading)?
• No experience
• < 3 years
• 3 to 6 years
• > 6 years
Age
• What is your current age?
• > 55
• 46 to 55
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• 35 to 45
• < 35
Financial Situation
• What is your currently disposable income ?
• Below 20000
• 20000 -50000
• 50000-80000
• Above 80000
• What percentage of your total liquid asset (i.e. asset including self occupied
• > 50%
• 26% to 50%
• 10% to 25%
• < 10%
Investment Objective
• What is your investment objective?
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• To preserve the principal and earn a stable amount of regular income.
• In 2 to 5 years.
• In 5 to 10 years.
• Which of these statements would best describe your attitude towards risk?
me.
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• I can tolerate some risk and look for some capital growth to keep pace
with inflation.
• I can tolerate some risk and look for moderate capital growth above
inflation.
• I can tolerate a high degree of risk and look for the highest capital growth
potential.
• Which one of these statements would best describe would best describe if the
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Annexure &Bibliography
1. www.sharekhan.com.
2. www.nse.com
3. www.ncfm.com
4. www.google.com
5. www.bse.com
6. www.msn.com
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