DECLARATION

I, Megha Sheth, hereby declare that the project work has been carried out through my own
efforts and under the guidance of Mr. Taral Pathak and Mr. Mayank Joshipura, faculty
of AES PGIBM, Ahmedabad.
This project has been submitted as a part of study curriculum of MBA program. The
report has not been submitted to any other university.

DATE
Signature

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ACKNOWLEDGEMENT
It is my great pleasure to present this report. I thank all those people who helped me to
make this project, by providing necessary information.
I would like to express my gratitude towards Mr. Amit Buch of Sharekhan who spent
his most valuable time and provided with all the necessary details regarding the company.
I would also like to thank Mr. Shrinivas Bhatt and Mr. Tejas Doshi, who shared their
knowledge and expertise.
I would also like to thank Mr. Taral Pathak and Mr. Mayank Joshipura of
AESPGIBM for their guidance throughout the preparation of the project and for their
valued suggestion.
At last I would like to thank all those people who helped me bring this project to fruitism

Date:
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EXECUTIVE SUMMARY
This project mainly focuses on Share Market as a whole, its history and development.
Herein, I discuss the basic concepts of the share market, what is equity market,
commodities market and derivatives market, how do they function and how are the
margins set. It also contains industry analysis based on Michael Porters Five Force
Model and Competition analysis.
It discusses Sharekhan as a stock broking company, its products and services. It discusses
the Seven S Model as applied to Sharekhan.
The report also contains the analysis of the Market survey carried out by me.

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Lastly, it includes an analysis on The Historic Market Crash of May 2006.

INDEX
SR. TITLE

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Industry Overview
Stock Exchanges
Transaction Cycle
Major Players
Industry Analysis
Entry Barriers
Competition Analysis
Traditional vs E-broking
About Sharekhan
7S Model
Sharekhan Stock Cluster
Publications
Products and Servicies
Comparision
SWOT Analysis
Derivatives
Commodities
Research at Sharekhan
Market Crash Analysis
Market Survey
Conclusion
Recommendation
My Learning
Bibliography

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2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
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19.
20.
21.
22.
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24.

PAGE NO.
6
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105
106
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INDUSTRY OVERVIEW
INTRODUCTION
Stock exchanges to some extent play an important role as indicators, reflecting the
performance of the countrys economic state of health. Stock market is a place where
securities are bought and sold. It is exposed to a high degree of volatility, prices fluctuate
within minutes and are determined by the demand and supply of stocks at a given time.
Stock brokers are the ones who buy and sell securities on behalf of individuals and
institutions for some commission.

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The Securities and Exchange Board of India (SEBI) is the authorized body, which
regulates the operations of stock exchanges, banks and other financial institutions. The
past performances in the capital markets especially the securities scam by Hasrshad
Mehta has led to tightening of the operations by SEBI. In addition the international
trading and investment exposure has made it imperative to better operational efficiency.
With the view to improve, discipline and bring greater transparency in this sector, constant
efforts are being made and to a certain extent improvements have been made.

HISTORY
Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200
years ago. The earliest records of security dealings in India are meager and obscure.
By 1830's business on corporate stocks and shares in Bank and Cotton presses took
place in Bombay. Though the trading list was broader in 1839, there were only half a
dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's
witnessed a rapid development of commercial enterprise and brokerage business attracted
many men into the field and by 1860 the number of brokers increased into 60.
In 1860-61 the American Civil War broke out and cotton supply from United States of
Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers
increased to about 200 to 250. However, at the end of the American Civil War, in
1865, a disastrous slump began (for example, Bank of Bombay Share which had touched
Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the
brokers who thrived out of Civil War in 1874, found a place in a street (now
appropriately called as Dalal Street) where they would conveniently assemble and transact
business.

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In 1887, they formally established in Bombay, the "Native Share and Stock Brokers'
Association" (which is alternatively known as "The Stock Exchange"). In 1895, the
Stock Exchange acquired a premise in the same street and it was inaugurated in 1899.
Thus, the Stock Exchange at Bombay was consolidated.

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Thus in the same way, gradually with the passage of time number of exchanges were
increased and at currently it reached to the figure of 24 stock exchanges.

DEVELOPMENT
An important early event in the development of the stock market in India was the
formation of the Native Share and Stock Brokers Association at Bombay in 1875, the
precursor of the present-day Bombay Stock Exchange. This was followed by the formation
of associations /exchanges in Ahmedabad (1894), Calcutta (1908), and Madras
(1937). IN addition, a large number of ephemeral exchanges emerged mainly in buoyant
periods to recede into oblivion during depressing times subsequently.

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In order to check such aberrations and promote a more orderly development of the stock
market, the central government introduced a legislation called the Securities Contracts
(Regulation) Act, 1956. Under this legislation, it is mandatory on the part of a stock
exchanges to seek government recognition. As of January 2002 there were 23 stock
exchanges recognized by the central Government. They are located at Ahmedabad,
Bangalore, Baroda, Bhubaneshwar, Calcutta, Chennai,(the Madras stock Exchanges ),
Cochin, Coimbatore, Delhi, Guwahati, Hyderbad, Indore, Jaipur, Kanpur, Ludhiana,
Mangalore, Mumbai(the National Stock Exchange or NSE), Mumbai (The Stock
Exchange), popularly called the Bombay Stock Exchange, Mumbai (OTC Exchange of
India), Mumbai (The Inter-connected Stock Exchange of India), Patna, Pune, and
Rajkot. Of course, the principle bourses are the National Stock Exchange and The
Bombay Stock Exchange , accounting for the bulk of the business done on the Indian
stock market.

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While the recognized stock exchanges have been accorded a privileged position, they are
subject to governmental supervision and control. The rules of a recognized stock exchanges
relating to the managerial powers of the governing body, admission, suspension, expulsion,
and re-admission of its members, appointment of authorized representatives and clerks, so
on and so forth have to be approved by the government. These rules can be amended,
varied or rescinded only with the prior approval of the government. The Securities
Contracts (Regulation) Act vests the government with the power to make enquiries into
the affairs of a recognized stock exchange and its business, withdraw the recognition the
task of regulating the stock exchange to the Securities Exchanges Board of India.

\ BSE(BOMBAY STOCK
EXCHANGE)
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875
as "The Native Share and Stock Brokers Association". It is the oldest one
in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It
is a voluntary non-profit making Association of Persons (AOP) and is currently engaged
in the process of converting itself into demutualised and corporate entity. It has evolved over
the years into its present status as the premier Stock Exchange in the country. It is the
first Stock Exchange in the Country to have obtained permanent recognition in 1956
from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.

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The Exchange, while providing an efficient and transparent market for trading in
securities, debt and derivatives upholds the interests of the investors and ensures redressal of
their grievances whether against the companies or its own member-brokers. It also strives
to educate and enlighten the investors by conducting investor education program and
making available to them necessary informative inputs.

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A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors,
who are from the broking community (one third of them retire ever year by rotation), three
SEBI nominees, six public representatives and an Executive Director & Chief
Executive Officer and a Chief Operating Officer.

\NSE(NATIONAL STOCK EXCHANGE)

NSE was incorporated in 1992 and was given recognition as a stock exchange in April
1993. It started operations in June 1994, with trading on the Wholesale Debt Market
Segment. Subsequently it launched the Capital Market Segment in November 1994 as a
trading platform for equities and the Futures and Options Segment in June 2000 for
various derivative instruments.

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NSE has been able to take the stock market to the doorsteps of the investors. The
technology has been harnessed to deliver the services to the investors across the country at
the cheapest possible cost. It provides a nation-wide, screen-based, automated trading
system, with a high degree of transparency and equal access to investors irrespective of
geographical location. The high level of information dissemination through on-line system
has helped in integrating retail investors on a nation-wide basis. The standards set by the
exchange in terms of market practices, Products , technology and service standards have
become industry benchmarks and are being replicated by other market participants.
Within a very short span of time, NSE has been able to achieve all the objectives for
which it was set up. It has been playing a leading role as a change agent in transforming
the Indian Capital Markets to its present form. The Indian Capital Markets are a far
cry from what they used to be a decade ago in terms of market practices, infrastructure,
technology, risk management, clearing and settlement and investor service.

10

\NCDEX (NATIONAL COMMODITIES AND DERIVATIVES

EXCHANGE)

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

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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

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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 to provide 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 derivatives

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\MCX(MULTI COMMODITY EXCHANGE)

MULTI COMMODITY EXCHANGE of India limited is a new order

exchange with a mandate for setting up a nationwide, online multi-commodity

marketplace, offering unlimited growth opportunities to commodities market participants.
As a true neutral market, MCX has taken several initiatives for users In a new
generation commodities futures market in the process, become the countrys premier
exchange.
MCX, an independent and a de-mutualized exchange since inception, is all set up to
introduce a state of the art, online digital exchange for commodities futures trading in the
country and has accordingly initiated several steps to translate this vision into reality.

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Market Watch:

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

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TRANSACTION CYCLE
Error!

PLACING AN
ORDER

FUNDS OR
SECURITIES

TRADE
EXECUTION

SETTLEMENT
OF TRADES

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CLEARING OF
TRADES

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A person holding assets (Securities/Funds), either to meet his liquidity needs or to

reshuffle his holdings in response to changes in his perception about risk and return of the
assets, decides to buy or sell the securities. He selects a broker and instructs him to place
buy/sell order on an exchange. The order is converted to a trade as soon as it finds a
matching sell/buy order. At the end of the trade cycle, the trades are netted to determine
the obligations of the trading members securities/funds as per settlement cycle.
Buyer/seller delivers funds/ securities and receives securities/funds and acquires ownership
of the securities.
A securities transaction cycle is presented above. Just because of this Transaction cycle, the
whole business of Securities and Stock Broking has emerged. And as an extension of
stock broking, the business of Online Stock broking/ Online Trading/ E-Broking has
emerged.

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MAJOR PLAYERS
1. S S KANTILAL ISHWARLAL SECURITIES PVT LTD.
(www.sharekhan.com)
2. ICICI WEB TRADE LTD. (www.icicidirect.com)
3. 5 PAISA.COM (www.5paisa.com)
4. KOTAK SECURITIES LTD. (www.kotakstreet.com)
5. INDIABULLS (www.indiabulls.com)
6. MOTILAL OSWAL SECURITIES LTD.
7. HDFC SECURITIES LTD. (www.hdfcsec.com)
8. UTI SECURITIES LTD.
9. IDBI CAPITAL MARKET SERIVICES LTD.
10. REFCO SIFY SECURITIES PVT LTD.

Parameters

A/c Opening

Brokerage

Interface

Fee
Trading

Demat

Banks

Off

Associated with

NIL

is

750

0.50

0.10

HDFC, UTI,

Indiabulls
5 paisa

750

OBC, IDBI &

Citibank

NIL

0.75

0.18

ICICI Bank

750

250

0.40

0.10

N.A.

800

NIL

0.20

0.05

Citibank, HDFC,

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ICICI Direct

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Sharekhan

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A/c

Delivery

OBC, UTI &

ICICI Bank
Kotak Street

500

N.A.

0.59

0.06

Kotak Bank &

Citibank

HDFC Securities

700

NIL

0.50

0.15

HDFC & Other 4

Banks

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\S. S. KANTILAL ISHWARLAL SECURITIES PVT.

LTD. (sharekhan.com):
Sharekhan, Indias leading stockbroker is the retail arm of SSKI, and offers you
depository services and trade execution facilities for equities, derivatives and commodities
backed with investment advice tempered by decades of broking experience. A research and
analysis team is constantly working to track performance and trends. Thats why
Sharekhan has the trading products, which are having one of the highest success rates in
the industry. Sharekhan is having 240 share shops in 110 cities; the largest chain
of retail share shops in India is of Sharekhan.
In future, Sharekhan is planning to enter in Mutual funds, Insurance sector and banking
sector to expand beyond the market currently covered by it. And it has started MF
(Mutual Funds) on priority basis but wants to grow in it.

\ICICI Web Trade Ltd. (ICICIdirect.com):

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ICICIdirect.com was the first entrant into e-broking. ICICdirect.com provides the 3-in-1
to the users which tie in their saving bank account and their Demat account to their
brokerage account electronically. This integration ensures that money is transferred
to/from their bank account and the shares are transferred from/to their Demat account
automatically without writing any cheques or transfer instructions while carrying out their
trades in shares.

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ICICIdirect.com has the option of trading in shares in cash, margin or spot segments. An
investor can also invest in 14 Mutual Funds (Prudential ICICI MF, Franklin
Templeton India MF, Alliance Capital MF, JM MF, Birla Sun Life MF, Sundaram
MF, IL&FS MF, Principal MF, HDFC MF, Standard Chartered MF, Reliance
Capital MF, Kotak Mahindra MF, TATA MF and DSP MERRILL LYNCH
MF) through their trading account.
ICICIdirect.com doesnt provide the facility of trading in a traditional way.

\5PAISA.COM
5paisa is the trade name of India Infoline Securities Private Limited (5paisa), member of
National Stock Exchange and The Stock Exchange, Mumbai. 5paisa is a wholly owned
subsidiary of India Infoline Ltd, Indias leading and most popular finance and investment
portal. 5paisa has emerged as one of leading players in e-broking space in India.
16

The companys brokerage is one of the lowest in the industry. It also provides the research
on commodities. Investors can benefit from its analysis and advice available at the click of
the mouse. For those who prefer to trade the traditional way, India Infoline investor points
are available across the country.
India Infoline was founded by a group of professionals in 1995. Its institutional investors
include Intel Capital, one of the leading technology companies in the world promoted by the
UK government, ICICI, TDA and Reeshanar. The company offers a slew of products
such as stock and derivatives broking, commodities broking and mutual funds.

\KOTAK SECURITIES LIMITED (kotakstreet.com):

Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank and
Goldman Sachs (holding 25% - one of the worlds leading investment banks and
brokerage firms) is Indias leading stock broking house with a market share of 5 - 6 %.
Kotak Securities Ltd. has been the largest in IPO distribution - It was ranked number
One in 2003-04 as Book Running Lead Managers in public equity offerings by
PRIME Database. It has also won the Best Equity House Award from Finance Asia April 2004.

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Kotak Securities Ltd is also a depository participant with National Securities Depository
Limited (NSDL) and Central Depository Services Limited (CDSL) providing dual
benefit services wherein the investors can use the brokerage services of the company for
executing the transactions and the depository services for settling them. The company has
42 branches servicing around 1, 00,000 customers. Kotakstreet.com the online division of
Kotak Securities Limited offers Internet Broking services and also online IPO and
Mutual Fund Investments.
Kotak Securities Limited manages assets over 1700 crores under Portfolio Management
Services (PMS) which is mainly to the high end of the market. Kotak Securities Limited
has newly launched Kotak Infinity as a distinct discretionary Portfolio Management
Service, which looks into the middle end of the market.

\INDIA BULLS
Indiabulls is India's leading retail financial services company with 77 locations spread
across 64 cities. Its size and strong balance sheet allows providing varied products and
services at very attractive prices, our over 750 Client Relationship Managers are dedicated
to serving your unique needs.
Indiabulls is lead by a highly regarded management team that has invested crores of rupees
into a world class Infrastructure that provides real-time service & 24/7 access to all
17

information and products. The Indiabulls Professional Network offers real-time prices,
detailed data and news, intelligent analytics, and electronic trading capabilities, right at
your fingertips. This powerful technology is complemented by our knowledgeable and
customer focused Relationship Managers.
Indiabulls offers a full range of financial services and products ranging from Equities,
Derivatives, Demat services and Insurance to enhance wealth and to achieve the financial
goals.

\Motilal Oswal Securities Ltd. (MOSt):

One of the top-3 stock-broking houses in India, with a dominant position in both
institutional and retail broking, MOSt is amongst the best-capitalized firms in the
broking industry in terms of net worth. MOSt was founded in 1987 as a small subbroking unit, with just two people running the show. Focus on customer-first-attitude,
ethical and transparent business practices, respect for professionalism, research-based value
investing and implementation of cutting-edge technology have enabled it to blossom into a
thousand-member team.

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The institutional business unit has relationships with several leading foreign institutional
investors (FIIs) in the US, UK, Hong Kong and Singapore. In a recent media report
MOSt was rated as one of the top-10 brokers in terms of business transacted for FIIs.

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The retail business unit provides equity investment solutions to more than 50,000
investors through 270 outlets spanning 150 cities and 22 states. MOSt provides AdviceBased Broking, Portfolio Management Services (PMS), E-Broking Services, Depository
Services, Commodities Trading, and IPO and Mutual Fund Investment Advisory
Services. Its Value PMS Scheme gave a 160% post-tax return for the year ended March
2004
In AsiaMoney Brokers Poll 2003 MOSt has been rated as the Best Domestic Research
House- Mega Funds, while in 2000 and 2002 it has been rated as the Best Domestic
Equity Research House and Second best amongst Indian Brokerage firms respectively.

\HDFC SECURITIES LTD (HDFCsec):

HDFC securities is a brand brought to you by HDFC Securities Ltd, which has been
promoted by the HDFC Bank & HDFC with the objective of providing the diverse
customer base of the HDFC Group and other investors a capability to transact in the
Stock Exchanges & other financial market transactions. The services comprise online
buying and selling of equity shares on the National Stock Exchange (NSE). Buying and
selling of select corporate debt and government securities on the NSE would be introduced
18

in a subsequent phase. In a few months, they will also start offering the following online
trading services on the BSE and NSE:
Buying and selling of shares on the BSE
Arbitrage between NSE & BSE
3. Trading in Derivatives on the NSE
4. Margin trading products.
They are also planning to include buying and selling of Mutual Funds, IPO subscriptions,
Right issues, purchase of Insurance policies and asset financing.

\UTI SECURITIES LTD.: (UTISEL)

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Unit Trust of India incorporated UTI SECURITIES LTD on June 24, 1994 as a
100% subsidiary and on the repealing of the UTI Act, the capital is now held by the
Administrator of the Specified Undertaking of Unit Trust of India (ASUUTI). UTI
Securities has been working as an independent professional entity for providing financial
intermediary and advisory services to its corporate and retail clientele.

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The Company has presence in major cities with 20 branches and 50 franchisees to service
a wide range of clients. The company has also invested in the joint-venture company with
Standard Chartered Bank viz. Standard Chartered UTI Securities (P) Ltd. that is
engaged in primary dealership and Government securities. The company is very soon going
to start Commodity Trading through its subsidiary, USEc Commodities Ltd, which
provides facility of commodity trading on NCDEX and MCX.

\IDBI Capital Market Services Ltd.

IDBI Capital is a leading Indian securities firm offering a complete suite of products and
services to individual, institutional and corporate clients.
IDBI Capital Market Services Ltd. (IDBI Capital), a wholly owned subsidiary of
Industrial Development Bank of India (IDBI), is a leading Indian securities firm,
offering a complete suite of products and services to individual, institutional and corporate
clients. The services include fixed income trading, equities brokerage, debt and equity
derivatives, research, private placements, depository services, portfolio management and
distribution of financial products. Over the last five years, we have emerged as a leading
player in each of these businesses.
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March 1995 - Commenced Equity Broking on NSE CM segment

July 1995 - Built agent Distribution Network across the country
October 1996 - Commenced Debt Broking on NSE WDM segment
December 1996 - Started operations as a Depository Participant
1996 - Started to act as Arranger to Privately Placed Bond issues
April 1998 - Commenced operations as a Portfolio Manager
February 1999 - Acquired membership of BSE, Mumbai
November 1999 - Started operations as a Primary Dealer
June 2000 - Acquired Derivatives memberships of BSE and NSE
March 2002 - Achieved an outright secondary market turnover exceeding Rs100,000
October 2002- Commenced trading in Interest Rate Swaps

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\REFCO - SIFY SECURITIES INDIA PVT. LTD

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Refco-Sify Securities India Pvt. Ltd., headquartered in Mumbai, is a joint venture

between the Refco Group Holding Ltd., USA; and Satyam Infoway Limited
(NASDAQ: SIFY) to offer online and offline equity and derivatives trading for retail
customers as well as execution and clearing services for financial institutions.

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Refco also provides clients with prime brokerage services, fixed income, equities, foreign
exchange, OTC derivatives and asset management. Refco is a leader in providing clients
with the latest technological advances in products and services. Its proprietary systems and
global infrastructure provide the flexibility to meet all client requirements.

20

INDUSTRY ANALYSIS

INDUSTRY ANALYSIS USING PORTERS 5 FORCES

MODEL
POTENTIAL ENTERANT
Investmart
Various Banks
Geojit
Cipher
UTI Securities Ltd.
Refco Group Ltd.
IDBI Capital Mkt. Services Ltd.

COMPETITORS

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Web maintainers
NSCL
CSDL
NSE
BSE
MCX
NCDEX

ICICI Web Trade Ltd

5paisa.com
Kotak Securities Ltd
India Bulls
Motilal Oswal Securities Ltd
HDFC Securities Ltd
Marwadi Finance Ltd

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SUPPLIERS

BUYERS
Small Investors
Franchise/Business
Partners
HNIs
MF Companies
HUF
Institutional Investors

SUBSTITUTES
Mutual Funds
Insurance
Bank FD

21

\SUPPLIERS

NSDL & CSDL are the regulatory bodies for Depository Participants like
SSKI, SHCIL, ICICIdirect.com, etc. Also these regulatory bodies have got an
upper hand as the bargaining power stock broking houses like SSKI, etc. would
be less.
NSE & BSE are playgrounds where common investors trade through stock
broking houses, for which they have to take permission from NSE/BSE.
NSE & BSE are under the purview of SEBI, thats why stock broking houses
like SSKI, have low bargaining power. But here NSE/BSE have one advantage,
they cannot go for forward integration.
MCX & NCDEX are stock exchanges, which trade in commodities and
derivatives. Here again stock broking houses have to follow rules and regulation of
the same.

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\BUYERS

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

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Here the bargaining power of stock broking houses depends on how big the
investor is. So here we can say that bargaining power of stock broking houses is
high in case of small investors & HUF.
While, the bargaining power is moderate in case of HNI (High New Worth
Investors)/ MNIs (Medium Net Worth Investors) and business partners.
But in case of mutual fund companies and institutional investors bargaining 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. So the buyer can easily switch over to competitors product.

22

\COMPETITORS
The company is facing the competition from local as well as national level players.
The local players provide facility for off-line trading while the national players like
ICICIdirect.com and Kotakstreet.com, HDFC Security provide online trading
services.
There are also other big names like Indiabulls, Motilal Oswal, 5paisa and
Marwadi, which encircle the company from both the sides by providing online and
off-line trading with competitive services.

\POTENTIAL ENTRANTS
The potential entrants like Investmart, Jeojit and Cipher, which are coming in
near future to Rajkot City.

\SUBSTITUES

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

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

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The instruments like Bank FD, insurance, mutual funds are the substitutes.
If the use of this instruments increase this may be disadvantageous for the stock
broking houses.
The companies and banks, which are having these instruments, can plunge into
this industry.

23

ENTRY BARRIERS
Huge capital:- Capital is necessary not only for fixed facilities but also for
customers credit and absorbing start up losses. To start a stock broking house,
one needs huge capital for technology up gradation and skilled manpower.
Technology:- Technology for stock broking houses is life saving 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 job for a stock
broking house. It should comply with the regulation of the governing bodies like
SEBI, NSDL, etc. For a stock broking houses to plunge into the stock broking
industry, it needs to have some kind of financial background and expertise. Thus,
regulators constraints could be an entry barrier.

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Experience curve:- The core competency in this industry is the services, which
are provided to the end-users and the research, based activities which includes
TIPS, fundamental as well as technical script analysis. Also the most
important thing which helps the already established firms is-TRUST which
people would be having on firms like SSKI , Motilal Oswal, etc. which is very
difficult for new companies to imitate.

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Network:- The Reach to the customer is the key factor in the industry. The
network of the companies like Motilal Oswal, Sharekhan, and ICICI is very
efficient and spread all over India. It will take time for a new entrant to establish
such a huge network (e.g. Marwadi), which says, Network can come up as the
most difficult entry 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 brokerage rates 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 costing 1000 & 1500 account
opening charges respectively. But due to competition, they have come up with only
one account i.e. speed trade plus with the account charges of Rs.1000.

24

COMPETITION ANALYSIS
Follower:

The followers are those who just blindly follow the other players, which are
leaders and challengers.
The players like 5 paisa, Motilal Oswal, HDFC Securities, Kotakstreet are
the followers.
LEADER:

ICICIdirect.com is a leader in the online account which is having 1, 24,000

accounts in the country.
While in offline account Sharekhan is leading with 64,000 offline accounts.
NICHER:

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are focusing only on online investors.

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ICICIdirect.com and Kotakstreet.com are the two stock broking houses, which

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CHALLENGER:

Sharekhan, Kotakstreet and Indiabulls come under this head.

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Sharekhan challenges competitors by providing quality services and research

based advice.

Indiabulls is also challenging with low brokerage rates and class one services.

25

TRADITIONAL VS E-BROKING
TRADITIONAL BROKING
Traditionally in Stock Market, the investors invested their money in shares under the
guidance of the Brokers of any stock broking company. This was convenient to those
investors who were not familiar with the computer and the use of internet. But it required
more dealers to the share broking companies to give guidance related to investment. There
was a chance of inaccuracy of price because it was a time consuming process. The costs of
the company also use to increase due to more paperwork. From the investors point of view,
there was a problem of privacy. The broker may leak the information of investor. So, to
remove these limitations of traditional broking, there was an emergence of new concept eBroking.

E-BROKING

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Today is a world of technology. So the person who adapt to it achieves success. E-broking
is broking through electronic means. E-broking is the broking in which the investors who
are familiar with the use of computer and internet directly trade in stock market. They
trade anytime at any place when the stock market is open. The cost of transaction is also
reducing with time. The investors have large range of options for trading. It is a paperless
transaction so it reduces the cost of the company. There is facility of live streaming quotes,
which gives exact price of the share prevailing in the market at that time. There are two
types of online trading services: discount broker and full service online broker.

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Discount online brokers allow you to trade via internet at reduced rate. Some
provide quality research, others dont. Full service online brokerage is linked to existing
brokerage. These brokers allow their clients to place online orders with the option of
talking/chatting with brokers if needed. Brokerage rates here are higher. Online trading is
still in its infancy stage in India with trading turnover at around Rs.10 crores per day
from online trading as compared to a combined gross turnover of around Rs.9000 to
10,000 crores handled by BSE and NSE together.

26

INTERNET TRADING IN INDIA:

In the past, investors had no option but to contact their broker to get real time access to
market data. The net brings data to the investor online and net broking enables him to
trade on a click. Now information has become easily accessible to both retail as well as big
investors.
The development of broking in India can be categorized into 3 phases. Stock brokers
offering on their sites features such as live portfolio manager, live quotes, market research
and news to attract more investors.
Brokers offering online broking and relationship management by providing and offering
analysis and information to investors during broking and non broking hours based on
their profile and needs i.e. customized services

ti

Brokers (e-brokers) will offer value management or services such as IPO online, asset
allocation, portfolio management, financial planning, and tax planning, insurance services
and enable the investors to take better and well-considered decisions.

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Presently internet trading can take place through the order routine system, which will route
client orders to exchanges trading systems for execution of trades on stock exchanges (BSE
and NSE). This will also require interface with banks to facilitate instant cash debit or
credit and depository system for debit or credit of securities.

27

ABOUT SHAREKHAN
INTRODUCTION
Share khan is a stock broking company. Share khan comes under retail arm of SSKI
(Shripal Sevantilal Kantilal Ishwarlal) investors services pvt. Ltd. It offers world-class
facilities for buying and selling shares on BSE and NSE demat services (DP) and
derivatives (F&O). SSKI group also comprises of institutional broking and corporate
finance.
Sharekhan is also about focus. Sharekhan does not claim expertise in too many things.
Sharekhan's expertise lies in stocks and that's what he talks about with authority. So
when he says that investing in stocks should not be confused with trading in stocks or a
portfolio-based strategy is better than betting on a single horse, it is something that is
spoken with years of focused learning and experience in the stock markets. And these
beliefs are reflected in everything Sharekhan does.

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Share khan is an eight decades old company, which started its online services in the year
2000, and it is the first who started online in 1984 that ventured into institutional
broking and corporate finance.

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Share khan as a retail broking arm of SSKI, caters to the needs of individual investors.
While the investment world abounds with Jack of all trades, share khan chose to build
their business by focusing on what they know best- market driven investment avenues like
equities, derivatives and commodities. They facilitate the investment process for their clients
and also provide value added services like research, stock ideas, demat, online trading etc.
to make their investment experience rewarding.

28

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 maintaining human
values.
Respond to progressive globalization and achieving international standards.
Efficiency and effectiveness built on ethical practices.

CORE VALUES
Customer satisfaction through

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Providing quality service effectively and efficiently

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Smile, it enhances your face value is a service quality stressed on periodic

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customer service Audits

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Maximization of stakeholder value

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Success through Teamwork, integrity and People

29

GENERAL INFORMATION

NAME

: S. S. KANTILAL ISHWARLAL
SECURITEIS PVT. LTD.

HEAD OFFICE

: SHAREKHAN LTD.
A 206, PHOENIX HOUSE,
PHOENIX MILL COMPOUND,

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SENAPATI BAPTA MARG,

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LOWER PAREL,
MUMBAI - 400013

: 1800 - 22 7500 , 3970 75 00

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PH NO

WEB SITE

: shrinivasb@branch.sharekhan.com

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E-MAIL

: www.sharekhan.com

CHIEF EXECUTIVE OFFICER: TARUN SHAH

BRANCH OFFICES

: 100 BRANCHES

30

CHANGING TREND
Remember the time when you left orders with your broker in the morning and received a
confirmation fax late in the evening?
You wondered whether you had acquired the shares at the best possible price for the day.
Today, the picture is different. Imagine a scenario where you log on to your account, get the
live quotes of scripts you are interested in, get advise from experts and research reports on
your investment choice and then just click the mouse to place your order, pay the amount due
(which automatically gets debited into your account with the on line brokerage firm), get
your account statement, and the delivery of your shares into your Demat account. All this
through just one click of a mouse. Seems like a dream? But with online trading this has
become a reality. A few seconds later, you get the confirmation on your screen. And after the
trade settlement, your bank and DP accounts will reflect the changes accordingly.
The speed of transaction, confidentiality about the prices and ease of settlement in the
paperless mode should be good reasons for retail investors to jump on to the Net. All they
need is a PC, a modem, a subscription to an ISP, an account with a bank (which has a web
presence) and a depository account. And they can choose from a plethora of e-trading web
sites.

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So, finally the changing trend is known as E-trading which really means Buying and selling
securities via the Internet or other electronic means such as wireless access, touch-tone telephones,
and other new technologies with online trading. In most cases customers access a brokerage
firm's Web Site through their regular Internet Service Provider. Once there, customers may
consult information provided on the Web Site and log into their accounts to place orders and
monitor account activity"

31

SSKI Group - Corporate Structure

Owns 56%

Owns 50.5% of
SSKI Securities Pvt. Ltd.
Morakhia Family & Associates

SSKI Investor Services Pvt. Ltd.

Retail broking arm of the group

Shareholding pattern

56% Morakhia family (promoters)

18.5% First Carlyle Ventures,

Mauritius

Investment Banking arm of the

group
Shareholding pattern

18.5% HSBC Private Equity

Management, Mauritius

50.5% SSKI Securities Pvt.

Ltd.

49.5 % Morakhia family

Among the top 3 branded retail service providers

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Integrated Equity Solutions Provider

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SSKI Corporate Finance Pvt. Ltd.

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(Rs. 200+crs average daily Vol- FY 03-04)

Multi-channel access to clients

Tailor made research and products

Depository Services
Derivatives
Innovative products for enhanced performance

32

COMPANY OVERVIEW
SSKI named its online division as SHARE KHAN and it is into retail
Broking
The business of the company overhauled 4 years ago on February 8, 2000.
It acts as a discount brokerage house to a full service investment solutions provider
It has specialized research product for the small investors and day traders
Largest chain of share shops, 68 Branches across India.
It has $25m/trades every day.
Leading player today with 20% market share
Over 10,000 online clients
The site was also launched on February 8, 2000 and named it as
www.sharekhan.com
The SpeedTrade account of share khan is the next generation technology product
launched on April 17, 2002

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SpeedTradePlus was launched on October 28, 2002 for trading in Derivatives

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It offers its customers with the trade execution facilities on the NSE, for cash as
well as derivatives, depository services

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It gives advice based on extensive research to its customers and provides them with
relevant and updated information to help them take their investment decisions.
Share khan offers its customers the convenience of a broker-DP.

33

MARKET COVERAGE
Ground Network
Largest in India

122 Franchisees and 68 branches

Depository/Demat account services

Covers 82 cities in 17 states across India

Trade execution facility on BSE and NSE
for Cash as well as Derivatives

Personalized Sharekhan research advice

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Uniform service standards

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Award-Winner

Winner of Chip
magazines Best
Financial Website
Award

35

SEVEN PS OF SHAREKHAN
\PRODUCT
Product Variety

Share khan offers 3 types of online trading accounts for its customers specially designed
according to their volume in share trading. Those 3 varieties are:
Classic- for retail investors
Speed Trade: for high net worth investors with large and active
equity
portfolio who need to monitor and action swiftly
Speed trade Plus- for high net worth investors dealing in derivative market.
Quality

User Friendly, attractive & colorful Website.

Design

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The website of Share khan namely www.sharekhan.com has been specially designed to
facilitate its users to buy and sell shares in an instant at anytime and from anywhere they
like. The site is user friendly allowing even a layman to easily operate without any hassles.

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Features:

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- Share khans product comes with the following features:

- Trade execution in a fraction of a second!
- Single Screen Trading Terminal
- Real time streaming quotes. Price watch on any number of scripts.
- Back up Facility to place trades on Direct Phone Lines.
- Intra day charts, updated live, tick-by-tick.
- Instant Order\ Trade Confirmation in the same window
- Market depth, i.e. Best 5 bids and offers, updated live for all scripts
- Online access to both accounts and DP.
- 128 - bit super safe encryption.
- Online fund transfer facility from leading Banks
- Online intra-day technical calls.
- Exhaustive database of over 2000 companies

36

Brand Name

The company as a whole in its offline business has named itself as SSKI Securities Pvt.
Ltd -Sevaklal Sevantilal Kantilal and Ishwarlal Securities Pvt. Ltd. The company has
preferred to name themselves under a Blanket Family Name.
But in its online division started since 1997, the company preferred to name itself as
SHARE KHAN. The Brand Name SHARE KHAN itself suggests the
business in which
the company is dealing so that the consumer could easily identify the product or service
category.
Services

Share khan offers its customers, depository services and trade execution facilities for
equities, derivatives and commodities backed with investment advice tempered by decades of
broking experience. The teams of its dedicated analysts are constantly at work to track
performance and trends.

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Dial-n-trade is also an exclusive service available to all Sharekhan customers for trading
in shares via the telephone. On dialing the toll free number 1600-22-7050 and on
entering the customers TPIN number, the customer will be directed to a telebroker who
will buy or sell shares for him.

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\PRICE

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List Price

1000

SPEED
TRADE
PLUS
1500

1000

1500

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CLASSIC SPEED
TRADE

One time
750
registration fee
Minimum
Nil
brokerage Charges
Quarterly
Brokerage

Share khan in its online business charges brokerage as follows:

- In equity Market:
On Trading: 0.1% On Delivery: 0.5%
- In Derivative Market
On Trading: 0.12% (Total brokerage) On Delivery: 0.1%
Service Tax

37

-8% on Brokerage.
Turnover tax + Stamp duty
-0.015% (Rs. 15 on every turnover of Rs. 100000)
Custody Charge

Re. 1 per script held per month.

Discounts

For investors with High Net worth, there are slabs in brokerage rates.
Payment Period

The transaction settlement date in the securities market is T+ 2 days i.e. the
payment of the transaction taken place has to be made within two days of its
occurrence.
Credit terms

Share khan allows its customers to trade up to 4 times i.e. by keeping 1/4th
margin with them.

Dematerialization charges

Re. 3 per certificate or Rs.15 per requests whichever is higher.

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\PROMOTION

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Online share trading is totally a new concept in Indian Market. Generally investor
doesnt like to come out from conventional way of share trading. Share khan has
introduced this product in. The concept and Product are still new in the market.
Therefore the company has undertaken extensive promotion campaign to create
awareness about the product. Share khan adopts the following tools for promoting
the product
Advertising

Company advertises its product through TV media on channels like CNBC, Print
Media-in leading dailies and outdoors media. It advertises itself as an innovative
Brand with a cartoon of tiger-called SHERU. Besides attractive and colorful
brochures as well as posters are used giving full details about the product.
Mails are sent to people logging on to sites like moneycontrol.com and rediff.com.
Also, stalls are opened up now and then at places where prospective customers can
be approached.

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 Sales Promotion

The Company offers Rs.500 instead of Rs.750 for corporate accounts (more than
20 accounts).
Also, it provides online trading accounts for just Rs.300 for IIM students.
Sales Force

The Company has an aggressive sales force, which is given incentives, based on their
sales. The sales force is given intensive training continuously.
Seminar

The Company also arranges seminar in corporate world for creating awareness
about the product. Recently, it had organized for a seminar in ONGC, IIM.
Direct Marketing

Company emphasizes more on direct marketing, as many people are still not aware
of this new way of smart trading. For this, the company recruits and trains sales
representatives so as to explain the product and solve customer queries related to the
product. This is the most effective way to communicate the three-in-one concept which
company offers.
Telemarketing

Channels

\PLACE

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This is another promotional tool company is using to boost up its sales. For this, the
company collects the database of the people belonging to different professional
segments.

Coverage

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Share khan uses various channel alternatives to reach to its customers through
Internet
Tele Marketing
Retail Share Shops
Franchisee Owners
Sales Force

Access to the website from any part of the globe.

Locations

Share khan has the largest chain of retail share shops in India. It has 180 share
shops located in 90 cities all over India like Pune, Thane, Chennai, Kolkata,
Banglore, Luckhnow, Darjleeng, Kanpur, Baroda, Midnapore, Surat, Delhi,
Gaziabad, Hydrabad, Allahbad, etc.

39

\PEOPLE
Employees

Selection: Employees are selected on the basis of their experience and

qualification as applicable to the job.
Training: Intensive training is provided to the employees till a week
once they join and even at times required after that.
Motivation: The employees are motivated through incentives they are
provided.
Research Team

Share khan has a team of dedicated analysts who have years of working
experience in the industries that they track, and a proven track record in using
their knowledge of the investment science to deliver results.
Customers,

The heart of sharekhan are really treated loyally like the kings. The customer
care, which comprises of highly trained executives operating from 9:30 to 8:00
p.m.

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\PHYSICAL EVIDENCE

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Locality of the office:

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Office Environment:

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In Ahmedabad, two franchise outlets are located in posh areas like Navrangpura
and Maninagar. A new franchise is going to open up in Vastrapur.

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The ambience within the office is what can make the customer feel comfortable in
trading. The cordial and friendly atmosphere at office is like a full time motivation
for the employees.
Interiors and Infrastructure:

The office is well furnished and has 24 computer terminals on which tick-by-tick
price movements of the securities are displayed.

\PROCESS
In this service organization, the ways in which the customers receive delivery of the
service constitutes the process. Here, the process involves adding value or utility
so that the customers get full satisfaction for the money spent by them.
Here the process begins from the step when customer wants to open e-invest account
and ends when his account is actually activated.
All Indian residents and NRI are eligible to avail this service.
40

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Customers can open a sharekhan e-invest account by filling a single application

form.
This form includes 9 agreements like
1. Main form with customer details
2. Agreement between sharekhan and client in respect of the ONLINEINVESTMENT SUPPORT service offered.
3. Agreement between the Depository Participant and the client for providing the
transaction statement through Internet.
4. Irrevocable power of attorney
5. Agreement between the DP and the person seeking to open an account with the
DP.
6. Maintenance of clients account on a running account bases by SSKI.
7. Agreement giving the right of lien on the credit balance of client in NSE trading.
8. Agreement giving the right of lien on the credit balance of client in BSE trading.
9. Risk disclosure document (cash segment)

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SEVEN S MODEL

Structure

Strategy

System
Super ordinate
Goals

Style

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Staff

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]STRUCTURE:
Share khan is flexible in terms of making temporary structural changes to
cope up with specific strategic tasks without any hassles. If need arises, the top
management can assign the role to any of its employees which it considers
capable and skillful.

]STRATEGY:
Share khan believes not only in developing the strategies but also in its
successful execution.

]SYSTEMS:
This constitutes of all the training and development systems, estimating budgets
and the accounting system of Share khan.

]STYLE:
Style refers to all the symbolic actions undertaken by top managers of Share
khan and its influence on the subordinates.

]STAFF:

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Share khan values its employees as its assets and therefore carefully trains and
motivates them by giving them incentives at regular intervals. Talented
employees are assigned as mentors and given real responsibility and moved into
higher positions.

]SKILLS:

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The term skills refer to those activities organizations do best and for which
they are known. Share khan is known for its timely advice (suggestions/tips),
which it caters to its customers and it boasts of 70-90% strike rates in
booking recommendations.

]SUPERORDINATE GOALS:

This refers to guiding concepts, values and aspirations that unite an

organization in some common purpose. It provides the customers the best
service as it believes in customer satisfaction and retention.

43

SHAREKHANS

STOCK CLUSTER

Share khan categorizes the stocks under coverage into six clusters. Each cluster
represents a certain profile in terms of business fundamentals as well as the kind of
returns you can expect over a certain time horizon. So a stock like Hindustan
Lever, a market leader with strong brands and top-quality management, sails into
the Evergreen category. And a stock like Hindustan Construction, trading at an
unwarranted discount and due for a re-rating, is an Ugly Duckling. And so
on.This helps you in identifying the stocks that fit your time horizons and
return objectives best.
Evergreen

Dominant players with strong brands, robust management

credentials, supernormal shareholder returns. Will steadily compound 18-20% per
year for next five to ten years.
Applegreen

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Potentially steady compounders, but five to ten years graph bit unclear. Could
gallop at 25-30 per year over the next two to three years.

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Emerging Star

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Ugly Duckling

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Young companies likely to rule chosen niches. Even better, the niches could balloon
into full-blow markets. Potentially ten-baggers if youre patient.

Trading below fair value or at huge discount to peer group. But somethings
cooking. Could double in two to three years time.
Vultures Pick

Companies with valuable assets at throwaway prices. Buy & await

predators.Stratlingly high returns possible.
Cannonball

Seasons favorites. Typically fast gainers in rising markets, could return 30-50%
within six months. Get in, cash in, get out.

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PUBLICATIONS OF SHAREKHAN
Sharekhans Valueline
Derivatives Digest
Eagle Eye
High Noon
Investors Eye

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Commodities Buzz

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Commodity Traders Corner

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Commodities Beat

Sharekhan Xclusive

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PRODUCTS OF SHAREKHAN
ShareKhans product

Other Services

Online

Classic A /C

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Speed Trade A/C

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Offline

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]OFFLINE
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 1st Year Demat A/C is Free, On 2nd Year AMC charge is applicable.

] ONLINE

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7 ways you benefit from online trading!

47

CLASSIC ACCOUNT

This account allows the client to trade through our website and is suitable for our retail
investors. Our online trading website also comes with a dial-n-trade service that enables
you to buy and sell shares by calling our dedicated toll free number (1-600-22-7050).

Suitable for:
Retail investors who are risk averse, invest long-term and do not trade too frequently

Free Depository Account

Multiple bank options

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Instant Cash transfer

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24 x 7 Orders Any time ordering

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Features:

Mobile Phone Alerts

24 x 7 Phone Responses
One Share at a time

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Benefits:
Trouble-free and secure storage for shares
Flexibility to order after market closes
Flexibility to choose a bank
Flexibility to buy/sell even 1 share at a time
Price:
Account Opening : Rs 750
Monthly Access fee : None

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Sharekhan has a tie up with 7 banks through which one can transfer or withdraw
his fund online.
1. HDFC BANK
2. IDBI
3. UTI
4. OBC
5. CITY BANK
6. INDUSLAND BANK
7. UNION BANK OF INDIA

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Anyone who has an account with either of the above-mentioned banks can use this
facility. Otherwise one has to transfer or withdraw the funds by cheque.
This account enables the customer to buy and sell shares through sharekhans
website. Its features are:
streaming quotes(using the applet based system)
Multiple watch lists
integrated banking, demat and digital contracts
instant credit and transfer
real-time portfolio tracking with price alert and of course the assurance of
secure transactions.

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50

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SPEEDTRADE

Speedtrade is the next generation online trading product that brings the power your
brokers terminal to your PC. It is ideal for active traders and jobbers who transact
frequently during days trading session to capitalize on intra-day price movements.

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With speed trade a customer gets:

1. instant order execution and confirmation.
2. single screen trading terminal( cash and derivatives)
3. real-time streaming quotes, tic-by-tic charts
4. market summary(most traded scrip, highest value)
5. hot keys similar to a brokers terminal
6. alerts and reminders
7. back up facility to place trades on direct phone lines.
8. trading in derivatives

HDFC BANK
IDBI
UTI
OBC
CITY BANK
INDUSLAND BANK
UNION BANK OF INDIA

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1.
2.
3.
4.
5.
6.
7.

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Sharekhan has a tie up with 7 banks through which one can transfer or withdraw his
fund online.

Anyone who has an account with either of the above-mentioned banks can use this
facility. Otherwise one has to transfer or withdraw the funds by cheque.

51

 Benefits:
ALL BENEFITS OF CLASSIC A/C
plus

SPEED critical for traders and arbitrageurs

Streaming quotes
Customized Market Watch a maximum of 2 at a time.
Detailed and up-to-date market information and analysis example, market
depth of a scrip- up to 6 charts visible at a time.

Price:

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Account opening charges: Rs 1000

Monthly Access charge: Rs 500

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53

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Charges of Different companies for online A/C

Opening Fee

Brokerage

Trading
A/C

Demate
A/c

Delivery

Square
Off

Bank Associated

Sharekhan

750

NIL

0.50

0.10

ICICI Direct

750

NIL

0.75

0.18

HDFC,UTI,
OBC, IDBI,
City Bank
ICICI Bank

IndiaBulls

750

250

0.40

0.10

NIL

0.20

0.05

0.59

0.06

0.50

0.15

5 Paisa
500

HDFC
Securities

700

NIL

Interface

ICICI Bank
UTI,OBC,HDFC
City Bank
Kotak Bank,
City Bank
HDFC & Other
Bank

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Kotak Street

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Parameters

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EQUITIES

Your Guide to the

Financial Jungle

PORTFOLIO
MANAGEMENT
SERVICES

Com
RESEARCH

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DERIVATIVES

IPO &
MUTUAL FUNDS

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COMMODITIES

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\OTHER SERVICES
DIAL-N-TRADE

Trade in Equity by using your phone!

Dial-n-trade is an exclusive service available to all Share Khan customers for
trading in shares via the telephone. Just dial 1-800-22-7050, enter your TPIN number
and you will be directed to a telebroker who will buy or sell shares for you.
Features:
7 dial-n-trade features, customers just cannot do without !

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1. dedicated numbers for order placements [1-800-22-7500 (toll free)/ 39707500

(local charges)]
2. automatic fund transfer with phone banking (for city bank and hdfc bank
customer)
3. simple and secure IVR (interactive voice response) based system for authentication
4. no waiting time. Enter your TPIN to be transferred to our telebrokers
5. trusted, professional advice from our telebrokers
6. after-hours order placement facility between 8am and 9.30 am
7. reliable services wherever you are

56

PORTFOLIO MANAGEMENT SYSTEM

With the Sharekhan Team Managing Your Portfolio, you can be assured that
your investments are in safe hands!

Sharekhan follows a multi-disciplined approach incorporating quantitative

analysis (use of models and statistical analyses), fundamental analysis (industry
and company analysis, market and economic trends) and technical analysis (buying

and selling patterns of stocks). This multi-pronged approach enables the portfolio
managers in controlling risks and provides risk-controlled returns for you. Our portfolio
managers try to develop a core equity portfolio based on quality and broad diversification,
controlling risks in the process. The common attributes that can be found across all our
equity portfolios are:

High-quality securities
Holdings widely diversified among industry sectors
Stocks with adequate market capitalization and free float
Stock concentration as per client risk profile but generally
greater than equal to 20.

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Right from choosing the combination of stocks most suitable for customers based on their
risk appetite to monitoring their movements and discussing them with customers at special
events. This is how Sharekhan makes investing completely hassle-free for customers.

57

MUTUAL FUND

Introduction
Everybody talks about mutual funds, but what exactly are they? Are they like shares in a
company, or are they like bonds and fixed deposits? Will I lose all my money in funds or
will I become an overnight millionaire? Big questions that get answered in just five
minutes.

Meaning

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A mutual fund is a pool of money that is invested according to a common investment

objective by an asset management company (AMC). The AMC offers to invest the money
of hundreds of investors according to a certain objective - to keep money liquid or give a
regular income or grow the money long term. Investors buy a scheme if it fits in with their
investment goals, like getting a regular income now or letting the money accumulate over
the long term. Investors pay a small fraction of their total funds to the AMC each year as
investment management fees.

Categories of Mutual Fund

There are three broad categories of funds in the Indian market - money market, debt and
equity. A money market fund invests in short-term government debt paper and is good for
parking money for the short term since the principal is safe, returns better than a bank
deposit and liquidity high. Debt funds invest mainly in debt instruments like government
securities, corporate and institutional debt paper. They are also called income funds since
people buy them for their income needs. Equity funds invest in the stock market and suit
long-term investors who want capital appreciation. Commodity, property and gold funds
are yet to come into India.

58

Investing in Mutual Funds through Sharekhan

We're glad to announce that you will now be able to invest in Mutual Funds through us!
We've started this service for a few mutual funds, and in the near future will be expanding
our scope to include a whole lot more. Applying for a mutual fund through us is open to
everybody, regardless of whether you are a Sharekhan customer.
You have two choice through which you can invest in Mutual Fund.
A) On the main page of this micro-site and scheme snapshot page we have provided with a
link to PDF version of application form, which you just need to download, print and fill
up relevant details. Submit the duly filled copy with payment either to Nearest Sharekhan
Branch Or Mutual Fund Company.

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B) Alternatively you can call up our customer service 1600-22-7500 and give your
contact detail whereby we will arrange to mail you a hard copy of application of desired
schemes from the list offered by Sharekhan.

59

SHAREKHAN DEPOSITORY SERVICE

Dematerialization and trading in the demat mode is a safer and faster alternative to the
physical existence of securities. Demat as a parallel solution offers freedom from delays,
thefts, forgeries, settlement risks and paperwork. This system works through depository
participants(DPs) who offer demat services and hold the securities in the electronic form for
the investor. Sharekhan depository services offers dematerialization services to individual
and corporate investors. It has a team of professionals and the latest technological
expertise dedicated exclusive to their demat department, apart from a national network of
franchisee, making their services quick, convenient and efficient. At Sharekhan, their
commitment is to provide a complete demat solution which is simple safe and secure.
The services offered by depository participants:-

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1. convert physical holding into electronic holding (which is called dematerialization of

securities)
2. keep custody of holdings in electronic form.
3. transfer the shares in the electronic form from one account to another.
4. facilitate pledge of electronic securities.
5. give electronic credit of new share allotments such as public issue, bonus, rights etc.
6. convert electronic holding into physical holding.( which is called rematerialization)
Research based advice

Every investors needs and wants are different. To meet these needs share khan provides a
comprehensive e set of research reports so that one can take the right investment decision
regardless of his investing preference. The research and development at sharekhan is done
at its head office in Mumbai.
The R&D department forwards all the details regarding all stocks and scripts to all the
branches through internet. At the end of each trading day there is a teleconference through
which the R &D department head talks with each branch head and discusses about each
days closing position and shows their predictions about next days opening position. The
queries regarding stock positions and other relevant matters of the branch heads of each
branch is solved through teleconference.
60

IPO
IPO is an acronym for Initial Public Offering. This is the first sale of stock by a
company to the public.
Primary and Secondary Market
Since buying an IPO means buying directly from the company issuing the shares,
IPOs constitute the PRIMARY MARKET.
Buying shares from the stock exchange is buying from the SECONDARY
MARKET.
All shares, which are traded in the secondary market, have come through the
primary market as IPOs.
Why Do Companies Go Public?

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Gain credibility through more scrutiny.

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To raise funds for expansion/startup.

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Easier mergers and acquisitions through availability of more number of stocks.

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To get listed in a major stock index (meaning prestige, respect, credibility).

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TYPES OF MARKETS FOR EQUITY

INVESTMENT
Primary Market
Company announces IPO and distributes forms

Mohan fills up form and

submits it to the company

Shyamlal fills up form and

submits it to the company

Shyamlal is allotted some shares @

Rs 95 per share

Secondary Market

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Mohan is NOT allotted shares by

the company. There were not
enough shares to offer

Shyamlal sells some of his shares in the

market (at a higher price, say Rs. 105).

Mohan buys some shares from the

stock market through a broker at
this price

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ONLINE IPO

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SWOT ANALYSIS
During this training at sharekhan, we had come to know the Strengths-WeaknessesOpportunities-Threats for the company and it is very useful for a company to analyze
them. Therefore, the SWOT analysis is presented here and the suggestions for maintaining
strengths and removing weaknesses are explained.

Strengths:

9 Well-maintained infrastructure.
9 Dedicated, Intelligent and Loyal staff.
9 On-line Trading products.
9 Lowest brokerage and other charges w.r.t. Competitors.
9 The best investment advice correct up to 70-90 % through dedicated
9 research and reports.
9 Wide product range to enable the clients to choose the best alternative.
9 One of the best DPs in India.

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Weaknesses:

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9 A positive image in the existing clients.

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9 Less awareness in the market.

9 Time consuming process for account opening, resolving the problems of the

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customers, etc.

9 Service quality is not maintained accordingly how they are promoted.

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 Opportunities:
9 Slope of stock market towards delivery based transaction.
9 Large potential market for delivery and intra-day transactions.
9 Open interest of the people to enter in stock market for investing.
9 Attract the customers who are dissatisfied with other broker & DPs.
9 An indirect opportunity generated by the market from its bullishness.
9 Large untapped market in the Saurashtra region of Gujarat.

Threats:
9 Decreasing rates of brokerage in the market.
9 Increasing competition against other brokers & DPs
9 Poor marketing activities for making the company known among the
customers.
9 A threat of loosing clients for any kind of weakness of the company.

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9 Loosing the untapped market with the entry of the competitors.

65

DERIVATIVES
INTRODUCTION
Keeping in view the experience of even strong and developed economies the world over, it is
no denying the fact that financial market is extremely volatile by nature. Indian financial
market is not an exception to this phenomenon. The attendant risk arising out of the
volatility and complexity of the financial market is an important concern for financial
analysts. As a result, the logical need is for those financial instruments, which allow fund
managers to better, manage or reduce these risks.
Out of various risks, Credit Risk and Interest Rate risk are the two core risks, which are
commonly acknowledged by various categories of Financial Institutions particularly banks.
Effective management of these core risks is a critical factor in comprehensive risk
management and is essential for the long-term financial health of business organizations,
especially banks.

MEANING

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A derivative is a financial instrument, which derives its value from some other financial
price. This other financial price is called the underlying. The underlying asset can be
equity, FOREX, commodity or any other asset.

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A wheat farmer may wish to contract to sell his harvest at a future date to eliminate the
risk of a change in prices by that date. The price for such a contract would obviously
depend upon the current spot price of wheat. Such a transaction could take place on a
wheat forward market. Here, the wheat forward is the derivative and wheat on the spot
market is the underlying. The terms derivative contract, derivative product, or
derivative are used interchangeably. The most important derivatives are futures and
options.
Example: A very simple example of derivatives is curd, which is derivative of milk. The price of curd
depends upon the price of milk, which in turn depends upon the demand, and supply of
milk.
See it this way. American depository receipts/ global depository receipts of ICICI,

Satyam and Infosys traded on stock exchanges in the USA and England have their own
values? No. They draw their price from the underlying shares traded in India.
Consider how the value of mutual fund units changes on a day-to-day basis. Dont mutual
fund units draw their value from the value of the portfolio of securities under the schemes?
Arent these examples of derivatives? Yes, these are. And you know what, these
examples prove that derivatives are not so new to us. Nifty options and futures,
66

Reliance futures and options, Satyam futures and options etc are all examples of
derivatives. Futures and options are the most common and popular form of derivatives.

DERIVATIVES: IN INDIAN CONTEXT:

In Indian context, the intensity of derivatives usage by institutional investors (viz. Banks,
Financial Institution; Mutual Funds, Foreign Institutional Investors, Life and General
Insurers) depend on their ability and willingness to use derivatives for one or more of the
following purposes:
Risk containment: using derivatives for hedging and risk containment purposes
Risk Trading/Market Making: Running derivatives trading book for profits and
arbitrage; and/or
Covered Intermediation: On-balance-sheet derivatives intermediation for client
transaction, without retaining any net-risk on the balance sheet (except credit
risks).

TYPES OF DERIVATIVES

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Derivative as a term conjures up visions of complex numeric calculations,

speculative dealings and comes across as an instrument, which is the prerogative of
a few smart finance professionals. In reality it is not so. In fact, a derivative
transaction helps cover risk, which would arise on the trading of securities on
which the derivative is based and a small investor can benefit immensely. A
derivative security can be defined as a security whose value depends on the values of
other underlying variables. Very often, the variables underlying the derivative
securities are the prices of traded securities.

67

Derivatives and futures are basically of 3 types:

Forwards and Futures

Options

Swaps

DERIVATIVES

Options

Put

Futures

Swaps

Call

Interest

Currency

Security

FORWARDS:

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Commodit

Forwards

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A forward contract is the simplest mode of a derivative transaction. It is an agreement to

buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No
cash is exchanged when the contract is entered into.
Illustration: - Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to
buy it outright. He can only buy it 3 months hence. He, however, fears that prices of
televisions will rise 3 months from now. So in order to protect himself from the rise in
prices Shyam enters into a contract with the TV dealer that 3 months from now he
will buy the TV for Rs 10,000. What Shyam is doing is that he is locking the current
price of a TV for a forward contract. The forward contract is settled at maturity. The
dealer will deliver the asset to Shyam at the end of three months and Shyam in turn
will pay cash equivalent to the TV price on delivery.

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FUTURES:
It is an agreement between two parties to buy or sell an asset at a certain time in the future
at a certain price through exchange traded contracts.
A Future represents the right to buy or sell a standard quantity and quality of an asset or
security at a specified date and price. Futures are similar to Forward Contracts, but are
standardized and traded on an exchange, and are valued, or "Marked to Market
daily. The Marking to Market provides both parties with a daily accounting of their
financial obligations under the terms of the Future. Unlike Forward Contracts, the
counterparty to a Futures contract is the clearing corporation on the appropriate exchange.
Futures often are settled in cash or cash equivalents, rather than requiring physical
delivery of the underlying asset. Parties to a Futures contract may buy or write Options on
Futures.
OPTIONS:
An option is a contract, which gives the buyer the right, but not the obligation to buy or
sell shares of the underlying security at a specific price on or before a specific date.

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Option, as the word suggests, is a choice given to the investor to either honor the contract;
or if he chooses not to walk away from the contract. There are two kinds of options: Call
Options and Put Options.

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A Call Option is an option to buy a stock at a specific price on or before a certain date.
When you buy a Call option, the price you pay for it, called the option premium, secures
your right to buy that certain stock at a specified price called the strike price. If you decide
not to use the option to buy the stock, and you are not obligated to, your only cost is the
option premium.
Put Options are options to sell a stock at a specific price on or before a certain date. In
this way, Put options are like insurance policies. With a Put Option, you can "insure" a
stock by fixing a selling price. If something happens which causes the stock price to fall,
and thus, "damages" your asset, you can exercise your option and sell it at its "insured"
price level. If the price of your stock goes up, and there is no "damage," then you do not
need to use the insurance, and, once again, your only cost is the premium.
Technically, an option is a contract between two parties. The buyer receives a privilege for
which he pays a premium. The seller accepts an obligation for which he receives a fee.

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 CALL OPTIONS
Call options give the taker the right, but not the obligation, to buy the underlying shares at
a predetermined price, on or before a predetermined date.
Illustration: - Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call -Premium 8
This contract allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any
time between the current date and the end of next August. For this privilege, Raj pays
a fee of Rs 800 (Rs eight a share for 100 shares).
The buyer of a call has purchased the right to buy and for that he pays a premium.

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Now let us see how one can profit from buying an option; Sam purchases a December
call option at Rs 40 for a premium of Rs 15. That is he has purchased the right to buy
that share for Rs 40 in December. If the stock rises above Rs 55 (40+15) he will break
even and he will start making a profit. Suppose the stock does not rise and instead
falls he will choose not to exercise the option and forego the premium of Rs 15 and
thus limiting his loss to Rs 15.

Call Options-Long & Short Positions

When you expect prices to rise, then you take a long position by buying calls. You are
bullish.
When you expect prices to fall, then you take a short position by selling calls. You are
bearish.

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PUT OPTIONS

A Put Option gives the holder of the right to sell a specific number of shares of an
agreed security at a fixed price for a period of time.
Illustration:- Raj is of the view that the a stock is overpriced and will fall in future,
but he does not want to take the risk in the event of price rising so purchases a put
option at Rs 70 on X. By purchasing the put option Raj has the right to sell the stock
at Rs 70 but he has to pay a fee of Rs 15 (premium).

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So he will breakeven only after the stock falls below Rs 55 (70-15) and will start
making profit if the stock falls below Rs 55.

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Put Options-Long & Short Positions

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When you expect prices to fall, then you take a long position by buying Puts. You are
bearish.
When you expect prices to rise, then you take a short position by selling Puts. You are
bullish.

If you expect a fall in price(Bearish)

If you expect a rise in price
(Bullish)

CALL OPTIONS

PUT OPTIONS

Short

Long

Long

Short

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IMPORTANT FACTORS IN DERIVATIVES

HEDGING
We have seen how one can take a view on the market with the help of index futures. The
other benefit of trading in index futures is to hedge your portfolio against the risk of
trading. In order to understand how one can protect his portfolio from value erosion let us
take an example.
Illustration: Ram enters into a contract with Shyam that six months from now he will
sell to Shyam 10 dresses for Rs 4000. The cost of manufacturing for Ram is only Rs
1000 and he will make a profit of Rs 3000 if the sale is completed.
Cost (Rs)

Selling price

Profit

1000

4000

3000

However, Ram fears that Shyam may not honor his contract 6 months from now. So
he inserts a new clause in the contract that if Shyam fails to honor the contract he will
have to pay a penalty of Rs 1000. And if Shyam honors the contract Ram will offer a
discount of Rs 1000 as incentive.
Shyam honors

1000 (Initial Investment)

3000 (Initial profit)

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Shyam defaults

(-1000) discount given to Shyam

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1000 (penalty from Shyam)

2000 (Net gain)

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- (No gain/loss)

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As we see above if Shyam defaults Ram will get a penalty of Rs 1000 but he will
recover his initial investment. If Shyam honors the contract, Ram will still make a
profit of Rs 2000. Thus, Ram has hedged his risk against default and protected his
initial investment.
The above example explains the concept of hedging.

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SPECULATION

Speculators are those who do not have any position on which they enter in futures and
options market. They only have a particular view on the market, stock, commodity etc. In
short, speculators put their money at risk in the hope of profiting from an anticipated price
change. They consider various factors such as demand supply, market positions, open
interests, economic fundamentals and other data to take their positions.
Illustration: Ram is a trader but has no time to track and analyze stocks. However, he
fancies his chances in predicting the market trend. So instead of buying different
stocks he buys Sensex Futures.
On May 1, 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 sells
an equal number of contracts to close out his position.
Selling Price : 4000*100

Rs 4,00,000

Less: Purchase Cost: 3600*100

Rs 3,60,000

Net gain

Rs 40,000

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Ram has made a profit of Rs 40,000 by taking a call on the future value of the Sensex.
However, if the Sensex had fallen he would have made a loss. Similarly, if would
have been bearish he could have sold Sensex futures and made a profit from a falling
profit. In index futures players can have a long-term view of the market up to atleast 3
months.

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ARBITRAGE
An arbitrageur is basically risk averse. He enters into those contracts were he can earn
riskless profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives risk less profit. Arbitrageurs are always in the look out for
such imperfections.
In the futures market one can take advantages of arbitrage opportunities by buying from
lower priced market and selling at the higher priced market. In index futures arbitrage is
possible between the spot market and the futures market.

Assume that Nifty is at 1200 and 3 months Nifty futures is at 1300.

The futures price of Nifty futures can be worked out by taking the interest
cost of 3 months into account.
If there is a difference then arbitrage opportunity exists.

Let us take the example of single stock to understand the concept better. If Wipro is
quoted at Rs 1000 per share and the 3 months futures of Wipro is Rs 1070 then one
can purchase ITC at Rs 1000 in spot by borrowing @ 12% annum for 3 months and
sell Wipro futures for 3 months at Rs 1070.
=

1070

Cost= 1000+30

1030

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Sale

40

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Arbitrage profit

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These kinds of imperfections continue to exist in the markets but one has to be alert to
the opportunities as they tend to get exhausted very fast.

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MARGINS
The margining system is based on the JR Verma Committee recommendations. The
actual margining happens on a daily basis while online position monitoring is done on an
intra-day basis.
Daily margining is of two types:
1. Initial margins
2. Mark-to-market profit/loss
The computation of initial margin on the futures market is done using the concept of
Value-at-Risk (VaR). The initial margin amount is large enough to cover a one-day loss
that can be encountered on 99% of the days. VaR methodology seeks to measure the
amount of value that a portfolio may stand to lose within a certain horizon time period
(one day for the clearing corporation) due to potential changes in the underlying asset
market price. Initial margin amount computed using VaR is collected up-front.
The daily settlement process called "mark-to-market" provides for collection of losses
that have already occurred (historic losses) whereas initial margin seeks to safeguard
against potential losses on outstanding positions. The mark-to-market settlement is done
in cash.

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A client purchases 200 units of FUTIDX NIFTY 29JUN2001 at Rs 1500.

The initial margin payable as calculated by VaR is 15%.
=
=

Rs 3,00,000 (200 x 1500)

Rs 45,000

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Total long position

Initial margin (15%)

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Let us take a hypothetical trading activity of a client of a NSE futures division to

demonstrate the margins payments that would occur.

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Assuming that the contract will close on Day + 3 the mark-to-market position will
look as follows:
POSITION ON DAY 1

Net cash

Close Price

Loss

Margin released

1400 x 200 =

20,000 (3,00,000 -

3,000 (45,000 -

17,000 (20,000

2,80,000

2,80,000)

42,000)

- 3000)

Payment to be
made

outflow

(17,000)

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NEW POSITION ON DAY 2

Value of new position = 1,400*200= 2,80,000
Margin = 42,000
Close Price

Gain

Addn Margin

1510 x 200 =

22,000

3,300

3,02,000

(3,02,000 - 2,80,000)

(45,300 - 42,000)

Net cash inflow

18,700

Payment to be recd

(22,000 3300)
18,700

POSITION ON DAY 3
Value of new position = 1510*200 = Rs 3, 02,000
Margin = Rs 3,300
Close Price

Gain

1600*200

Net cash inflow

18,000 (3,20,000-3,02,000)

=3,20,000

18,000 + 45,300* =
63,300
63,300

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Payment to be recd

Addn margin

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Margin released (Day 1)

Position on Day 2

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Initial margin

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Margin account*

Rs 45,000
(-) Rs 3,000
Rs 42,000

Total margin in a/c

(+) Rs 3,300
Rs 45,300*

Net gain/loss
Day 1 (loss)

(Rs 17,000)

Day 2 Gain

Rs 18,700

Day 3 Gain

Rs 18,000

Total Gain

Rs 19,700

The client has made a profit of Rs 19,700 at the end of Day 3 and the total cash inflow
at the close of trade is Rs 63,300.

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COMMODITIES

Commodities Market In India

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Organized futures market evolved in India by the setting up of "Bombay Cotton Trade
Association Ltd." in 1875. In 1893, following widespread discontent amongst leading
cotton mill owners and merchants over the functioning of the Bombay Cotton Trade
Association, a separate association by the name "Bombay Cotton Exchange Ltd." was
constituted. Futures trading in oilseeds was organized in India for the first time with the
setting up of Gujarati Vyapari Mandali in 1900, which carried on futures trading in
groundnut , castor seed and cotton. Before the Second World War broke out in 1939
several futures markets in oilseeds were functioning in Gujarat and Punjab.
A three-pronged approach has been adopted to revive and revitalize the market. Firstly,
on policy front many legal and administrative hurdles in the functioning of the market
have been removed. Forward trading was permitted in cotton and jute goods in 1998,
followed by some oilseeds and their derivatives, such as groundnut, mustard seed, sesame,
cottonseed etc. in 1999. 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 the government
policy towards forward trading.
Secondly, strengthening of infrastructure and institutional capabilities of the regulator 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
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professional approach were being attracted with a clear mandate to set up demutualized,
technology driven exchanges with nationwide reach and adopting best international
practices.
Most of the existing Indian commodity exchanges are single commodity platforms; are
regional in nature, run mainly by entities which trade on them resulting in substantial
conflict of interests, opaque in their functioning and have not used technology to scale up
their operations and reach to bring down their costs. But with the strong emergence of:
National Multi-commodity Exchange Ltd., Ahmedabad (NMCE), Multi Commodity
Exchange Ltd., Mumbai (MCX), National Commodities and Derivatives Exchange,
Mumbai (NCDEX), and National Board of Trade, Indore (NBOT), all these
shortcomings will be addressed rapidly. These exchanges are expected to be role 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 exchanges are
speculative (due to non delivery) and are not meant for actual users. One major reason
being that the awareness is lacking amongst actual users. In India, Interest rate risks,
exchange rate risks are actively managed, but the same does not hold true for the
commodity risks. Some additional impediments are centered around the safety,
transparency and taxation issues.

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WHY STRUCTURED COMMODITY MARKET?

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

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If sellers and buyers come together at a place then it will create a market. 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 but arbitrageur,
speculator, and hedger can tread. In this way the total area of market will become
broad.
In our country agricultural products form 25% of GDP. Total turnover of
commodity of market is nearly Rs.1, 10,000 corer. In which 60,000 corer comes
from agriculture and left is coming from coal, crude, etc
Today in our country most of the trade is done in unorganized market. 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 in 122 commodities tread is being done

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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 Forward Contracts (Regulation) Act,
1952 for regulating forward\future contracts. In December 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, soyabean, 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 tread on the NCDEX and look at some commodity specific
issues. In this commodity market classified as agriculture products, precious metal, other
metal and energy, which we discuss above.

Te
c

hs

hr

is

ti

COMMODITIES

79

Commodities are suitable for Future Trading

The following are some of the key factors, which decide the suitability of the
commodities for future trading: The commodity should be competitive, i.e., there should be large demand for and
supply of the commodity - no individual or group of persons acting in concert
should be in a position to influence the demand or supply, and consequently the
price substantially.
There should be fluctuations in price.
The market for the commodity should be free from substantial government control.
The commodity should have long shelf life and be capable of standardization and
gradation.

THE FOLLOWING ITEMS ARE TRADED IN THE

MULTI COMMODITY EXCHANGE
Bullion: Gold, Gold M, Gold HNI, Silver, Silver M, Silver HNI
Oil & Oil Seeds : Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soymeal,

is

ti

RBD Palmolein, Crude Palm Oil, Groundnut Oil, Mustard Seed, Mustard Seed Oil,
Cottonseed Oilcake, Cottonseed
Spices: Pepper, Red Chilli, Jeera, Turmeric

hr

Metal: Steel Long, Steel Flat, Copper, Nickel, Tin

hs

Fibre: Kapas, Long Staple Cotton, Medium Staple Cotton

Pulses: Chana, Urad, Yellow Peas, Tur

Te
c

Cereals: Rice, Basmati Rice, Wheat, Maize, Sarbati Rice

Energy: Crude Oil

Others: Rubber, Guar Seed, Gur, Guargum Bandhani, Guargum, Cashew Kernel,
Guarseed Bandhani

80

NEED FOR FUTURES TRADING IN COMMODITIES

Commodity Futures, which forms an essential component of Commodity Exchange, can be
broadly classified into precious metals, agriculture, energy and other metals. Current
futures volumes are miniscule compared to underlying spot market volumes and thus have
a tremendous potential in the near future.
Futures trading in commodities results in transparent and fair price discovery on account
of large-scale participations of entities associated with different value chains. It reflects
views and expectations of a wider section of people related to a particular commodity. It
also provides effective platform for price risk management for all segments of players
ranging from producers, traders and processors to exporters/importers and end-users of a
commodity.
It also helps in improving the cropping pattern for the farmers, thus minimizing the losses
to the farmers. It acts as a smart investment choice by providing hedging, trading and
arbitrage opportunities to market players. Historically, pricing in commodities futures has
been less volatile compared with equity and bonds, thus providing an efficient portfolio
diversification option.

hr

is

ti

Raw materials form the most key element of most of the industries. The significance of raw
materials can further be strengthened by the fact that the "increase in raw material cost
means reduction in share prices". In other words "Share prices mimic the commodity price
movements".

HEDGING

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c

hs

Industry in India today runs the raw material price risk; hence going forward the industry
can hedge this risk by trading in the commodities market.

Hedging is a sophisticated mechanism, which provides the necessary immunity to the above
interests in the marketing of commodities from the risk of adverse price fluctuations.
A Hedge is a countervailing contract transacted in a futures market through which those
who have bought in the ready market will sell in the futures market and those who have
sold in the ready market would buy in the futures market. In each of these two cases, a
purchase in the ready market is off-set by an opposite sale in the futures market and a sale
in the ready market is off-set by purchase in the futures market.
When the purchase or sale commitment in the ready market is fulfilled, the sale or
purchase hedge contract is closed out by an offsetting reverse purchase or sale contract in the
futures market.
81

The practice of hedging is based on the assumption that the ready and futures prices of the
commodity move more or less parallel to each other. The ready and futures prices of a
commodity ordinarily do move together in sympathy with each other because both ready
and futures prices are basically determined by the demand and supply factors of that
particular commodity.
When the price of a commodity has declined in the ready market, its price in the futures
market would normally have also declined so that the loss incurred in the ready market
would be recovered by the profit made in the futures market.

is

ti

Similarly, if the price rises in the ready market after the hedge sale had been entered into
the futures market, there would be a loss in the futures market, which would, however, be
made up with the profit made in the ready market. But, in certain circumstance, the ready
and futures prices may not move together or the spread between the two may increase or
decrease sharply. To the extent that they do not move together by the same extent, hedging
itself may be a source of minor gains or losses. But a dealer, manufacturer or exporter is
not, per se, interested in such speculative losses or gains. His only interest is to ensure that
he gets the necessary insurance against unforeseen fluctuation in prices. By and large,
hedging in a futures market does afford such a protection to the various functionaries.
Hedging on futures markets cannot be practiced unless there are operators willing to
assume the risk of adverse price fluctuations which the hedgers desire to transfer. These
operators are called speculators. They, thus provide the much needed breadth and liquidity
to the futures markets which in their absence would remain narrow and unstable.

Te
c

hs

hr

A speculator operating in a futures market is the one who buys or sells futures contracts
without any countervailing commitments or transactions in the actual commodity with a
view to making profit from the fluctuations in the prices.
The basic distinction between a hedge and speculative transaction on a futures market is
that while in the case of a hedge transaction there is a corresponding opposite transaction in
the ready market, in the case of a speculative transaction, there is no corresponding
transaction in the ready market.
While the motives of the speculator in entering into futures trans actions are different from
a hedger, the form or nature of transactions entered into by both in the futures market is
similar. When a transaction takes place in a futures market, the transaction may well be
between two hedgers or two speculators or between a hedger and a speculator.
While it is possible for the individual parties to enter into futures contracts, such contracts
are generally entered under the auspices of commercial bodies known as commodity
exchanges or associations.
The need for organizing futures trading under the auspices of such commodity exchanges or
associations arises mainly in order to ensure that payment of differences arising from
settlement of purchase and sale contracts entered into by the members of such exchanges or
associations take place in a smooth and orderly manner and thus defaults on account of
non-payment of such differences are avoided. Futures trading in these commodity
82

exchanges/associations are confined to or conducted through its members in accordance

with the procedure laid down in its rules members in accordance with the procedure laid
down in its rules and bye-laws.
Further, these exchanges/associations also help in evolving standard terms of contracts in
which the quantity and quality of the goods traded, period of delivery and all other terms
are pre-determined, the only variable being the price at which the contracts helps the
members of associations in entering into uniform types of contracts in which the quantity
and quality of goods, period of delivery etc. are pre-determined so that they can be entered
into primarily for the purpose of exchange of money differences.

REGULATORY BODY
The Forward Markets Commission (FMC) is the regulatory body for commodity
futures/forward trade in India. The commission was set up under the Forward Contracts
(Regulation) Act of 1952. It is responsible for regulating and promoting futures/forward
trade in commodities. The FMC is headquartered in Mumbai while its regional office is
located in Kolkata. Curbing the illegal activities of the diehard traders who continued to
trade illegally is the major role of the Forward Markets Commission.

ti

WHY COMMODITIES MARKET?

hr

is

India has very large agriculture production in number of agri-commodities, which needs use
of futures and derivatives as price-risk management system.

Te
c

hs

Fundamentally price you pay for goods and services depend greatly on how well business
handle risk. By using effectively futures and derivatives, businesses can minimize risks,
thus lowering cost of doing business.
Commodity players use it as a hedge mechanism as well as a means of making money. For
e.g. in the bullion markets, players hedge their risks by using futures Euro-Dollar
fluctuations and the international prices affecting it.
For an agricultural country like India, with plethora of mandis, trading in over 100
crops, the issues in price dissemination, standards, certification and warehousing are bound
to occur. Commodity Market will serve as a suitable alternative to tackle all these
problems efficiently.

83

FUTURE PROSPECTS
With the gradual withdrawal of the government from various sectors in the postliberalization era, the need has been felt that various operators in the commodities market
be provided with a mechanism to hedge and transfer their risks. India's obligation under
WTO to open agriculture sector to world trade would require futures trade in a wide
variety of primary commodities and their products to enable diverse market functionaries to
cope with the price volatility prevailing in the world markets. Government subsidy may go
down as a result of WTO. The MSP programme will not be sustainable in such a
scenario. The farmer will have to look at ways of being in a position to trade on
commodity exchanges in future. Also, corporate will feel the pressure to hedge their price
risk once the frontiers open up for free trade.
Indian markets have recently thrown open a new avenue for retail investors and traders to
participate: commodity derivatives. For those who want to diversify their portfolios beyond
shares, bonds and real estate, commodities are the best option.

ti

KEY BENEFITS OF COMMODITIES @

SHAREKHAN:

hr

is

You are getting 20time exposer in MCX &10 time in NCDEX depends on commodity
to open an account

hs

We have sms facility where u getting market information as well as buy/sell call

Te
c

You are also getting yahoo chat, where our dealer/RM are always help for market
information as well as buy/sell call

84

RESEARCH AT SHAREKHAN

Research at Sharekhan is broadly categorized into three categories:

Te
c

hs

hr

is

ti

Fundamental analysis
Technical analysis
Market analysis

85

RESEARCH

FUNDAMENTAL
ANALYSIS

TECHNICAL
ANALYSIS

SHAREKHAN

-CHART BUSTERS
- DAY TRADERS
HITLIST
- BRAVE HEART
STRATEGY
- PUNTERS CALL

RATING

-INTRA DAY
MARKET CALLS
& INFORMATION

- OUTPERFORMER
- NEUTRAL
- UNDERPERFORMER

ti

SHAREKHAN
SPECIAL

- DERIVATIVES
INFO KIT
- FUTURES
COMMENTARY

is

CLUSTER
- EVERGREEN
- APPLE
- EMERGING
STAR
- CANNON
BALL
- UGLY
DUCKLING
- VULTURE
PICK

Institutional
Research

DEALING
ROOM

hr

- BUY
- HOLD
- SELL
- SPOT LIGHT

Sector
Watch

DERIVATIVES

hs

RECOMMENDATION

Market
Strategy

CASH

Te
c

Stock
Idea

SSKI

MARKET
ANAYSIS

86

EDITORIAL

- PRE MKT
REPORT
- LIVE
- POST MKT
REPORT

ti

ANALYSIS ON THE HISTORIC MARKET

CRASH IN MAY

hr

is

AT A TRADING house in Kolkata, on May 22, when the markets crashed..

Te
c

hs

In the U.S. stock market that took the Standard & Poor's 500 ($INX) down
5.5% from May 5 through May 22. Or the 7% pounding that the Nasdaq
Composite ($COMPX, news, msgs) absorbed in the same period to turn that index
negative for 2006.
In India, they had to suspend trading for an hour when the Bombay Stock Exchange
index, the Sensex, fell by 10% during the first two hours of the May 22 trading day.
Trading was also halted for the session in Russian equities after the main index on the
Moscow exchange fell 11% late in the day. The Sensex, despite an end of the day rally,
still fell 4.2% for the day and at the end of the day was down 22% over the last eight
trading sessions. Russian equities are down 25% from their May 5 high.
It was inevitable, yet it took many by surprise. In May, the Bombay Sensex, the
benchmark index for India's stock markets, fell by more than 1,800 points or by close to
15 per cent of its value, after experiencing a near-relentless climb over the preceding
months. The decline began after May 10, when the market closed with the Sensex at an
all-time high of 12,612. The decline from that day to June 1 amounted to 2,541 points or
87

more than 20 per cent. A fifth of paper wealth created from nothing disappeared in a
matter of three weeks.
Any disinterested observer, not influenced by those talking the market up, would see this
decline as inevitable. In the preceding rise, moderated occasionally by limited volatility, the
Bombay Sensex had moved from 5054 on July 22, 2004 to 7,077 on June 21, 2005,
9,067 on December 9, 2005, and 12,612 on May 10, 2006. This implies an increase
of 35 per cent in the second half of 2004, a smaller 8 per cent in the first half of 2005,
31 per cent in the second half of 2005 and 33 per cent in the period between January 1
and May 10, 2006.
This persistent and rapid rise had taken the price-earnings (P/E) ratio of Sensex
companies from 14.5 on July 1, 2004 to 22.2 on May 10, 2006. If investors expect a
reasonable return of 15 per cent on their investments and the price to earnings ratio reflects
expected earnings from holding equity, P/E ratios in May would indicate that investors
believed that average returns from holding shares would rise by more than 300 per cent.
Since this was unlikely, investments that triggered the boom must have been driven by
expectations of capital gains from share price appreciation, and therefore, been largely
speculative.

Te
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hs

hr

is

ti

Yet, the euphoria generated by this rise in stock prices spawned a number of arguments on
the implications of the rise. The first was that the stock market was merely reflecting the
confidence generated by the robust performance of the Indian economy, with growth rates
moving to the 8-9 per cent range. Second, that this economy-wide performance was leading
to much better corporate performance, so that the appreciation in the share prices of
individual companies was warranted by their expected profitability. Third, that these
features made the Indian stock market experience different from that in other emerging
market countries, in that the boom was warranted and should provide no cause for
concern. And, finally, that all this suggests that financial liberalization has taken the
Indian stock market to maturity, making it a good indicator of the health of the economy.
What the substantial volatility and downturn in May proves is that none of these
arguments is valid. It is indeed true that the rate of growth of the Indian economy has
improved, though the extent of the improvement may be exaggerated by modifications in
methods of computation. But in explaining this improvement, what needs to be taken into
account is the rise in government expenditures supported by increased receipts, the change
in the composition of government expenditure and an improvement of exports of both goods
and services.

88

The contribution of the stock market to these factors is virtually nil: market players are
more beneficiaries of tax concessions rather than contributors to government receipts;
market sentiment is in favor of reduced rather than increased government expenditures and
there is no direct way in which stock market activity can influence export performance.

ti

That there is no relationship between growth performance and stock market activity was
demonstrated amply by the fact that the revised estimates of GDP (gross domestic
product), released on May 31, showing a creditable 8.4 per cent growth during 2005-06
and a remarkable 9.3 per cent during the first quarter of 2006, did little to stop the
market's decline. Expectations that drive the market seem to have little to do with the
actual performance of the economy.

Te
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hs

hr

is

If it is not growth in the real economy but speculation that triggered the boom, it is not
surprising that the downturn did occur in Indian markets, as it did in other emerging
markets that have experienced speculative booms in the past. This, contrary to what was
argued, makes the experience in India similar to that in other liberalized "emerging
markets". In fact, what is striking about the recent slump in the Indian market is that
though steeper it was synchronized with similar declines in markets worldwide. Led by the
United States, the downturn occurred in a number of emerging markets, including Russia,
Turkey, Indonesia South Korea and Taiwan. India is as vulnerable as these countries to
periodic booms and busts.
The most-quoted reason why global investors have gone bearish on all markets, resulting
in the generalized downturn, is the expectation of a rise in interest rates led by rates in the
U.S. This is indeed surprising since, in the past, a rise in interest rates in the U.S. was
seen as a factor that would direct capital flows to and generate a boom in U.S. financial
markets, while inducing sluggishness elsewhere. The reason why this has not happened this
time is that investments during the recent speculative boom have been financed with
borrowing. As Financial Times of May 30 reported: "Low interest rates in the developed
world would have allowed investors to leverage, borrowing cheaply to pick up the higher
returns on offer elsewhere. It is these investors who are likely to have unwound trades over
the past fortnight, weakening stocks and local bonds." Thus, it is not speculation alone
89

that is at issue, but leveraged speculation, which makes expectations of a rise in interest
rates the cause for a global downturn.
Limit speculative investors
In the circumstances, the only way in which damaging financial crises can be avoided is to
regulate the market and limit the presence and activity of speculative investors. There have
been too many instances in East Asia, Latin America, Turkey and elsewhere where a
financial crisis was preceded by a surge in capital flows other than foreign direct investment
(FDI) and a simultaneous boom in stock and/or real estate markets. Independent of
their inclinations, the exact causal mechanisms they identify and where they place the
burden of blame, analysts of those periodic crises have accepted the reality that liberalized
financial markets are prone to boom-bust cycles. Hence, there was little reason to view the
India-boom as being "different" and "warranted by fundamentals", justifying further
financial liberalization in the process. Financial liberalization driven by the belief that a
boom was a sign of strength rather than vulnerability inevitably went bust.

hr

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Unfortunately, the Indian government seems committed to pursuing financial liberalization

without much caution. The result has been that while official spokesmen have listed
periodically the gains that India can make from FDI, an overwhelming share of capital
flows into India has been contributed by portfolio investors, especially foreign institutional
investors (FIIs). The recent boom has been clearly the result of a surge in FII investments.
Having averaged $1,829 million during the period 1999-2000 to 2001-02, and fallen
to $377 million in 2002-03, FII investments surged thereafter. Inflows averaged $9,599
million a year during 2003-05.

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hs

More recently, FIIs are estimated to have pumped in $10.7 billion into India's markets
in 2005 and a further $5 billion by May 11 this year. It is widely acknowledged that the
stock market surge was the direct result of these investments, though it is true that
domestic investors, including mutual funds have rushed to the market recently to profit
from the boom.

90

Te
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hs

hr

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In the course of the boom, the nature of the foreign investor has also changed with a
growing presence in India of institutions such as hedge funds, which are not regulated in
their home countries and are known to resort to speculation in search of quick and large
returns. These hedge funds, among other investors, exploit the route offered by sub-accounts
and opaque instruments such as participatory notes to invest in the Indian market. FIIs
are permitted to invest on behalf of clients who themselves are not registered in the country.
These clients are the `sub-accounts' of registered FIIs. Participatory notes are instruments
sold by FIIs registered in the country to unregistered clients abroad and are derivatives
linked to an underlying security traded in the domestic market.
By the end of August 2005, the value of equity and debt instruments underlying
participatory notes that had been issued by FIIs amounted to close to half of the
cumulative net FII investment. Through these routes, entities not expected to play a role in
the Indian market have had a significant influence on market movements, even though the
regulator often does not even know of their presence in the market. And their presence is
determined by the objective of quick profit financed with borrowing, if necessary.
The damaging effect of these investors came through when, because of changed expectations,
they decided to pull out around $2 billion between May 11 and May 25. In the event, a
sharp downturn in the Sensex ensued. It is necessary to be clear as to why these
expectations changed. They are primarily related to developments outside India, especially
expectations of a rise in U.S. interest rates that could increase the cost of funds borrowed
by speculators to make their investments. This also explains the synchronized decline in
markets worldwide
91

Decline in India's markets is because of concern over the deficit in the current account of
the country's balance of payments, estimated to touch 3.6 per cent of GDP in 2006-07.
The conclusion is that the country must attract more foreign investment to finance that
deficit and must therefore continue with reform, including with financial liberalization that
explains the recent mayhem in the stock market. In fact, the same issue of Financial
Times approvingly quotes a study by the consulting firm McKinsey that "calculates" that
reform of India's banking sector can lift GDP growth to 9-9.5 per cent.
The Indian market is driven by global decisions, which in turn are determined by the
speculative activities of key investors the government seeks to attract. Once we recognize
that financial volatility is the result of the speculative behavior of these firms, measures to
reduce the presence and influence of these investors seem to be the need of the day.

nifty
4000

is

ti

3500

nifty

hr

3000

hs

10
-M
11 ay
-M
15 ay
-M
17 ay
-M
22 ay
-M
23 ay
-M
24 ay
-M
25 ay
-M
26 ay
-M
29 ay
-M
30 ay
-M
31 ay
-M
a
1- y
Ju
n
5Ju
n

2500

Te
c

date
nifty
10-May
3756
11-May
3701
15-May
3491
17-May
3635
22-May
2896
23-May 3199.35
24-May
3116
25-May
3178
26-May
3210
29-May
3215
30-May
3185
31-May
3071
1-Jun
2962
5-Jun
3017

92

date
9-May
10-May
11-May
15-May
17-May
19-May
22-May
23-May
24-May
25-May
26-May
29-May
30-May
31-May
1-Jun
5-Jun

sensex
12514
12612
12435
11822
12217
10938
9826
10822.78
10573.15
10666
10809
10853
10787
10399
10071
10213

1 30 00
1 25 00
1 20 00
1 1 5 00
1 1 0 00
1 05 00
1 00 00
95 00
90 00

ti

85 00

hr

is

80 00

In the end,

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c

hs

sensex

Downward slide: We are not in a bear market as yet. For that to happen, there should be stagnant growth,
high inflation and equity should lose charm

93

MARKET SURVEY
RESEARCH OBJECTIVE
The main objective of the study is to analysis the awareness of Share market among the
people of Rajkot City.

SOURCES OF DATA
There are two main sources of data
1. Primary Data
2. Secondary Data

Primary Data

ti

The data, which is collected directly from the respondent to the base of knowledge and
belief of the research, is called primary data.

Secondary Data

hs

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is

The most preferred way is to interview the individuals to get a sense of how they feel

Te
c

When the data is collected and compiled from the published nature or any others primary
data is called secondary data.
So far as our research is concerned, we have not collected any information from any sources.
So, we have not used secondary data for our research.
SAMPLING PROCESS
It is very true that to do the research with the whole universe. As we know that it is
feasible to go to population survey because of the n number of customers and their scattered
location. So for this purpose sample size has to be determined well in advance and selection
of sample also must be scientific so that it represents the whole universe.
So far as our research is concerned, we have taken sample size of 300 respondents. We
have selected Income Earners with savings to invest.
94

All the respondents are stratified on the basis of their profession and savings. We
have selected the selected the samples as per per convenience.

Sample Universe
Sampling Technique
Sample Size
Sampling Unit:

Rajkot City
Convenient Sampling
300 Respondents
Professional
Business Man
Government Employees
Employees working in private firms

= Random
= Random
= Random
= Random

SCOPE OF STUDY
The research would be useful in the following respect.
9 This will help the company to know the taste of masses and turn it towards
Equity, Derivatives and Commodities.

is

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9 This will help the company, how to make people aware about Equity, Derivatives
and Commodities by imparting best education.

hs

hr

9 This will help the company to frame effective Marketing Strategy as well as select
the right media for advertising to create brand awareness as well as to give
knowledge of the product.

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9 Mind share of Sharekhan can be known.

9 This will also help to select right medium for trading in Equity, Derivatives and
Commodities segment.

95

LIMITATION OF THE STUDY

The limitations of the study are as follow:

Personal Bias:
Individuals may have personal bias towards particular investment option so they may not
give correct information and due to which the conclusion may be derived.
Time Limit:
The time duration given for the research is less.
Area:
The area was limited to Rajkot City only, so we cannot know the degree of the literacy
outside the city.
Sample Size:

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The last limitation is Sample Size, which is of 300 only; due to which we may not get the
proper results.

96

ANALYSIS & INTERPRETATION

1.Gender Ratio:

Male
196

Female
104

250
200

196

150
104
100
50
0
Male

Female

Series1

30-50
127

More than 50
53

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hr

Below 30
110

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ti

2.Age:

140
120
100
80

Series1

60
40
20
0
Below 30

30-50

More than
50

97

3.Education Qualification:
Post Graduate

Graduate

Under Graduate

112

172

16

200
180
160
140
120
100
80
60
40
20
0

172

112

16

Post Graduate

Graduate

Under Graduate

Series1

hr

is

Business
Man
70

Professional
48

120

Te
c

140

Non-Govt.
Employees
62

hs

Govt.
Employees
120

ti

4.Occupation:

120
100

80

70

62

48

60
40
20

0
Govt.
Employees

Non-Govt.
Employees

Business
Man

Professional

Series1

98

5.Investment Pattern:
Securities
Bank F.D.
Post office
Insurance
Mutual Fund
Gold
Equity
Derivatives
Commodities

No.
114
63
28
30
22
19
10
14

Percentage(%)
38
21
9
10
7
6
3
5

114

120
100
80

63

60

38

40
20

21

30

28

10

22

19

10

14

D
er
iv
at
iv
es
C
om
m
od
iti
es

E
qu
ity

ti
is

Percentage(%)

hs

hr

No.

G
ol
d

M
ut
ua
lF
un
d

In
su
ra
nc
e

P
os
to
ffi
ce

B
an
k

F.
D
.

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It can be seen from the graph that the respondents have given first preference for investment
to Bank F.D. and Gold, Equity, Derivatives and Commodity having almost equal
share.

99

6. Preference for investment in Derivatives & Commodity:

Instruments
Bullion
Spices
Fiber
Oil
Metal
F&O

Percentage(%)
26
3
11
17
14
25

79

76

50
43
33
26

25

19
11

17

14

3
Bullion

Spices

Fiber

Metal

F&O

Percentage(%)

hs

hr

is

No.

Oil

ti

90
80
70
60
50
40
30
20
10
0

No.
79
33
19
50
43
76

Te
c

When asked to the respondents that out of the given options which one would they prefer?
So they prefer Bullion first. So the preference for commodity (Bullion) is more than the
Derivatives.

100

7. Factors that are to be consider by Individual at the time of investment

Obstacles
Risk Reduction
Leverage Benefit
Arbitrage Benefit
Speculative Motive
Liquidity preference

No.
129
112
12
15
32

Rank
1
2
5
4
3

No.
140
120
100
80
60
40
20
0
Liquidity
preference

Speculative
Motive

Arbitrage
Benefit

Leverage
Benefit

Risk
Reduction

No.

hr

is

ti

So, each and every investor are not risk taker though they want more return from the
investment.

hs

8. Medium preferred by individuals at the time of investment

Te
c

Factor
Broker
Magazine
Internet
Other

No.
117
55
102
26

Rank
1
3
2
4

140
120

117
102

100
80
55

60
40
20

26
1

0
Broker

Magazine
No.

Internet

Other

Rank

101

9. Exchange preferred by individuals for Equity & Derivatives

BSE
NSE

155
145

155

156
154
152
150
148

145

146
144
142
140
BSE

NSE
Series1

10. Commodity
MCX
NCDEX

111

hr

is

ti

189

hs

200
180
160
140
120
100
80
60
40
20
0

189
111

Te
c

MCX

NCDEX

Series1

102

11. Constraints that are holding back individuals from investment

No.
64
58
70
108

Lack of knowledge
Lack of Guidance
Lack of Fund Availability
Lack of Risk taking Ability

Percentage (%)
21
19
23
36

120

108

100
80

70

64

58

60

36

40

21

23

19

20
0
Lack of
knowledge

Lack of
Guidance
No.

Lack of Fund Lack of Risk

Availability taking Ability

Percentage (%)

ti

12. Individuals take decision through

is

No.
97
73
19
20
68
23

Te
c

hs

hr

Independently
Broker/Agent
News Channels
News Papers
Internet
Tax consultant

120
100
80
60
40
20
0

Rank
1
2
6
5
3
4

97

73

68
19

23

20
5

t
s
ly
ls
er
nt
en
ne
g
e
n
ap
d
A
a
/
P
r
h
en
s
C
ke
ep
s
ro
ew
d
w
B
N
In
e
N
No.

3
t
ne
er
t
In
x
Ta

nt
ta
l
u
ns
co

Rank

103

13. Medium reliable for individual for trading

Stock Broking Companies
Franchisees
Online

180
160
140
120
100
80
60
40
20
0

168
43
89

168

89
43

Stock Broking
Companies

Franchisees

Online

Series1

hr

is

Rank
3
2
5
8
7
1
6
4

Te
c

hs

Broking Company
India Bulls
ShareKhan
Marwadi
Motilal oswal
HDFC Securities
ICICI Direct
Kotek street
Skse

ti

14. Most preferred Broking Companies of the Rajkot City

104

CONCLUSION

Te
c

hs

hr

is

ti

Most of the people in Rajkot City are investing in fixed return Instruments.
But there are investors who use Equity as an investment tool.
Those people who want to invest in Derivatives & Commodities are investing
mainly for reducing risk and they consider them as investment tool.
People generally want to take trading decisions independently or under the
guidance of Friends or Well Known Stock Broking Houses.
Literature and Self Experience can be taken as the best method to impart
education about equity, derivatives & commodities

105

RECOMMENDATION

Te
c

hs

hr

is

ti

Sharekhan needs to make its marketing team strong and also it should increase
marketing activities such as promotional campaigns.
Sharekhan should educate the investors about Equity, Derivatives & Commodities
by organizing classes, corporate presentations, taking part in consumer fairs,
organizing events
Company should show the benefits of trading on Derivatives & Commodities
Sharekhan should turn existing customers (who are trading in Equity only) towards
Derivatives & Commodities.
Sharekhan can also use Newspapers and Local New Channels as a medium of
advertising.
Company may appoint special team for giving education & attracting people towards
trading on Equity, Derivatives & Commodities.

106

MY LEARNING

Te
c

hs

hr

is

ti

During the two months training program, I increased my knowledge on stock market. I
learned how to trade in the stock market. I learned various aspects of Equity, Derivatives,
Commodities. I learned about the various products and services offered by Sharekhan and
their practical application.

107

BIBLIOGRAPHY
The Economic Times
Sharekhans Publications
Websites:
1. www.Google.com
2. www.bseindia.com
3. www.nseindia.com
4. www.sharekhan.com
5. www.ncdex.com.
6. www.mcx.com

Te
c

hs

hr

is

ti

7. www.moneycontrol.com

108