ROLE OF RETAIL INVESTORS IN THE CAPITAL MARKET

WITH SPECIAL REFERENCE TO INDIA BULLS, CHENNAI

By
K. SENTHIL KUMAR
Reg. No. 90706631033
Of
MOHAMED SATHAK ENGINEERING COLLEGE
KILAKARAI 623 806

A Project Report
Submitted to the
FACULTY OF MANAGEMENT SCIENCES

In partial fulfillment of the requirements

For the award of the degree
of
MASTER OF BUSINESS ADMINISTRATION
JUNE 2008

DEPARTMENT OF MANAGEMENT STUDIES

MOHAMED SATHAK ENGINEERING COLLEGE
KILAKARAI 623 806
TAMIL NADU
Date:

BONAFIDE CERTIFICATE
Certified that this project report titled ROLE OF
RETAIL INVESTORS IN THE CAPITAL MARKET WITH SPECIAL
REFERENCE TO INDIA BULLS, CHENNAI is the bonafide work of

K.

SENTHIL KUMAR who carried this project work under my

supervision. Certified further that to the best of any knowledge the work
reported herein does not form part of my other project report or
dissertation on the basis of which a degree or award was conferred on an
earlier occasion to this or any other candidate.

Mr.A.Ahamed Ansari M.A., MBA.,

Head of the Department,

Department of Management Studies,
Mohamed Sathak Engineering College,
Kilakarai 623 806.

Mr. S. Dhinesh Babu, MBA,M.Phil.,

Asst. Professor,
Department of Management Studies,
Mohamed Sathak Engineering College,
Kilakarai 623 806.

ABSTRACT
Financial markets are extremely volatile and hence the risk factor is an
important concern for financial agents. To eliminate this risk, the concept of
derivatives comes into the picture. During 2008 month of January to April, stock
market saw a heavy crash, and investors lost heavily because most of these investors
did not hedge their risks by using equity derivatives.
Given the importance of derivatives in an emerging market like India it is not
wonder that share broking firms are investing heavily in building up infrastructure and
mining up cliental base to increase market share. The latest trend in the market shows
retail investors are responding in line with the institutional investors which requires
efficient traders to make them to understand about the F&O strategies. Indian stock
market is also in line with performance of the overseas markets; recent market trend
clearly gives an indication, where proper derivative strategies could have saved
investors from huge losses. Now, as the market is showing a growth trend there is an
ample opportunity to the investors to take proper strategies to play in the market and
adhere to the popular saying BE FEARFUL WHEN OTHERS ARE GREEDY, AND
BE GREEDY WHEN OTHERS ARE FEARFUL i.e. take proper hedging positions
even when the market is in uptrend,

Nowadays traders are aware of these popular strategies but they are not aware
of
Which situations they can apply these derivatives strategies in the market.
Primary data are the responses collected from the retail investors, personnel
from Asset management companies-Financial Institutions (Broking Houses / subbrokers) and also from experts who do financial planning like Tax planning and
investment advises

ii
ACKNOWLEDGEMENT
This project has given me immense insights about the practical aspects of
retail investors and its working. I got to learn a lot about the retail investors trading
and the way they handle their clients and projects. This project also helped me to
improve my report making skills and the true understanding of trading practices.
Foremost I would like to thank my internal guide Mr. S. Dhinesh Babu,
Assistant Professor for approving this topic and guiding me throughout the project.
Then I would like to thank my external guide Mr.K.M. Rajarajan, Relationship
Manager without whom this project wouldnt be a grand success. He helped me at
each and every stage of this project.
Next I would like to thank all the clients of India bulls Securities Private
Limited who gave their valuable time and their insights on the research topic without
which it would be impossible.
Finally I like to thank God whose grace and mercy was with me throughout
this project report preparation.

SENTHILKUMAR .K

iii

TABLE OF CONTENTS

Sl.No

CHAPTER

TITLE

PAGE
No.

1.

Abstract

2.

Acknowledgement

II

3.

List of Tables

IV

4.

List of Figures

5.

INTRODUCTION
1.1 Statement of the problem
1.2 Objectives of the study
1.3 Scope of the study
1.4 Research Methodology
1.5 Limitations of study
1.6 Chapter scheme

7.

II

INDUSTRY PROFILE

7.

III

COMPANY PROFILE

8.

IV

DATA ANALYSIS AND

INTERPRETATIONS

9.

FINDINGS OF THE STUDY

10.

VI

SUGGESTIONS AND
RECOMMENDATION

iv

LIST OF TABLES
Sl.No.

Title

4.1

Respondents age

4.2
4.3

Annual income
Trading experience

4.4

Portfolio size

4.5

System trading

4.6

Parameters

4.7

Share purchase

4.8

Hearing prospects

4.9

Selection of funds

4.10

Share price in portfolio

4.11

Corporate actions

4.12

Execution per day

4.13

Products in trade

4.14

Trading product with respect to returns and risk

4.15

Sources of funds

4.16

Exposure

4.17
4.18

Safe sources of funds

Regular margin calls

4.19

Contract notes issued

4.20

Constantly leverage in margin

4.21
4.22

Stop loss orders

Safe order by SEBI regulation

4.23

Broker advice

4.24

Hedging positions

4.25

Impact of media

Page No.

LIST OF FIGURES
S.NO.

Title

4.1

Respondents age

4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10

Annual income
Trading experience
Portfolio size
System trading
Parameters
Share purchase
Hearing prospects
Selection the funds
Share price in portfolio

4.11

Corporate actions

4.12

Execution per day

4.13

Products in trade

4.14

Trading product with respect to returns and risk

4.15
4.16

Sources of funds
Exposure

4.17

Safe Sources of funds

4.18

Regular margin calls

4.19

Contract notes issued

4.20

Constantly leverage in margin

4.21

Stop loss orders

4.22

Safe order by SEBI regulation

4.23

Broker advice

4.24

Hedging positions

4.25

Impact of media

CHAPTER I

Page No.

INTRODUCTION
The Indian capital markets are witnessing a longest bull run scaling new highs,
but still remains to be highly volatile. Very large institutional investors are able to
mitigate their risk through expert management, but the retail investors remain
unsecured due to lack of knowledge and information availability, made them more
speculative. Investors are required to work harder and think differently aggressive,
unconventional stances and healthy practices could yield better benefits to them in a
long run.
The Capital Markets plays a crucial role in the growth of an economy for a
developing country like India; Retail investors began participating in the stock
markets in a small way with the dilution of the FERA in 1978. Multinational
companies, with operations in India, were forced to reduce foreign share holding to
below a certain percentage, which led to a compulsory sale of shares or issuance of
fresh stock. Indian retail investors, who applied for these shares, encountered a real
lottery because those were the days when the CCI decided the price at which the
shares could be issued. There was no free pricing and their formula was very
conservative.
The Indian capital market is undergoing several systematic changes since the
economic and financial reforms which started in 1991.Some of the important
milestones in the history of the capital markets were,

The setting up of Security and Exchange Board (SEBI) in 1992

The setting up of National Stock Exchange in 1984

Introduction of online trading in 1995 and the establishment of the

Depositories in 1996 and

Trade guarantee funds and Derivatives trading in the year 2000

Introduction of important acts like the Fraudulent Trade practices Act,

Prevention of Insider Trading Act and take over code and corporate governance norms
were recent developments that made the market more attractive. Despite of the abovementioned reforms, which took place in the Indian capital market, it still failed to

engross the retail investors in a big level. Retail participation in India is very less
considering the overall savings of the households. Investors who hold shares of
limited companies and mutual fund units are about 20 to 30 million. Those who
participate in secondary markets are only 2 to 3 million, and these investors are also
exposed to high risk and tend to loose out their money due to some unhealthy
investing and trading practices that lead to their relinquishment from the markets.
Hence the investors are needed to be empowered in planning their finance and
understanding the markets, thereby spreading the market wisdom. Therefore this is
like to conduct a study on the present investing and trading practices adopted by the
Indian retail investors and to suggest suitable recommendations, to bring
improvement and better practices, which may lead to prosperity of Indian retail
investors.
1.1 Statement of the problem:
To collect and consider the present investing and trading practices adopted by
the retail investors and to make suitable recommendations and improvements on the
prescribed practices in the market. Investing refers to investments made in Mutual
funds and IPOs. Trading refers to buying and selling of shares in cash and Derivative
(Futures and Options) markets.
1.2 Objectives of the study:

1.3 Scope of the study:

Primary data will be the responses collected from the
retail investors, personnel from Asset management companies-Financial Institutions
(Broking Houses / sub-brokers) and also to experts who do financial planning like Tax

planning and investment advises. Secondary data will be data and statistics available
through Internet and other relevant books and journals. Responses will be evaluated
and proper solutions will be recommended.
1.4 Research Methodology:
Primary data would consist of well structured
questionnaire administered to retail investors who actively take part in capital markets
and separate questionnaires will be administered to Personnel of various AMCs
Financial institutions (Broking houses/Sub-brokers) and experts who do financial
planning like Tax planning and investment advises. Secondary data will be collected
from websites, books and journals.
Sampling Scheme:
Simple Random Sampling.
Sampling Size: Sample size includes 250 responses from retail investors and 50
responses from asset management companies-Financial Institutions (Broking Houses /
sub-brokers) and also to experts who do financial planning like Tax planning and
investment advises. Analysis and interpretation will be made based on collected data.

1.5 Limitation of the Study

1)

The respondents are reluctant to express their views freely and openly.

2)

Due to the lack of technical knowledge of respondents, the research may

not fulfill 20% acceptance.

1.6 Chapter Scheme

This project is summarized into five different chapters.

Chapter - I
Consists of an introduction, Statement of the problem, Objectives of
the study, Methodology and Limitations of the study.
Chapter - II
Contains Industry profile.
Chapter - III
Consists of Company profile, which states about the promoter of the
company and a brief history about the company and product profile of the company.
Chapter - IV
Consists of analysis and interpretations of the collected data.
Chapter - V
Consists of Findings of the study.
Chapter VI
Consists of suggestions and recommendations. A copy of the questionnaire is
included as appendix at the end of this report.

CHAPTER-II
INDUSTRY PROFILE

Overview of the Indian Economy:

India is a large and growing economy with rapidly
expanding financial services sector. With a GDP of $550 billion and
$2.66Trillion at Purchasing Power Parity (PPP), India is the worlds 12th
largest economy in dollar terms and the 4th largest in PPP terms. The
projected growth rate of real GDP is greater than 7% per annum with higher
growth in many sectors such as financial services. India has a large and
rapidly growing middle class of 300 million people with increasing levels of
discretionary income available for consumption and investment purposes.
Foreign portfolio and direct investment inflows have risen significantly since
economic liberalization reforms began in FY1991 and have contributed to
healthy foreign currency reserves ($103 billion in December 2003) and a
moderate current account deficit of about 1% in FY 2003.
Indian Financial Sector:
History and Development:
Post economic liberalization in 1991 the Indian financial
services industry has experienced significant growth. During the last decade,
there has been a considerable broadening and deepening of the Indian
financial markets. The Indian markets have witnessed introduction of newer
financial instruments and products over the years. Existing sectors have been
opened to new private players. This has given a strong impetus to the
development and modernization of the financial services sector. The entry of
new players has resulted in a more sophisticated range of financial services
being offered to corporate and retail customers which has compelled the
existing players to upgrade their product offerings and distribution channels.
This is particularly evident in the non-banking financial services sector, such
as brokerage industry, where innovative products combined with new delivery
methods have helped the sector achieve high growth rates. The combined
average daily turnover at BSE and NSE for different market segments has
increased from approximately Rs. 4800 million in 1995-96 to approximately
Rs. 232,094 million in April 2004. Over this period, there has also been a
substantial growth in the market for other financial products like insurance,

mutual funds etc. The financial services marketplace is experiencing a

profound change as thirty million people in the middle class are entering their
prime saving and investing years. These people are willing to use advanced
communication tools, such as computers and telephones, and want to take
charge of their personal investment decisions.
Indian Capital Market:
The

Indian

capital

markets

have

witnessed

transformation over the last decade. India now finds its place amongst some
of the most sophisticated and largest markets of the world. With over 20
million shareholders, India has the third largest investor base in the world after
the USA and Japan. Over 9,000 companies are listed on Indian stock
exchanges. The Indian capital market is significant in terms of the degree of
development, volume of trading and its tremendous growth potential. Over the
past few years, the capital markets have also witnessed substantial reforms in
regulation and supervision. Reforms, particularly the establishment and
empowerment of SEBI, market-determined prices and allocation of resources,
screen-based nation-wide trading, dematerialization and electronic transfer of
securities, rolling settlement and derivatives trading have greatly improved
both the regulatory framework and efficiency of trading and settlement. There
are 23 recognized stock exchanges in India, including the OTCEI for small
and new companies and the NSE, which was set up as a model exchange to
provide nation-wide services to investors.
During 2002-03 the NSE and the BSE were ranked third
and sixth respectively amongst all exchanges in the world with respect to the
number of transactions. The year 2003, also witnessed setting up of the
NCDEX, an online multi-commodity exchange for trading of various
commodities.
Key initiatives in recent years include:
Depository and share de-materialization process have
enhanced the efficiency of the transaction cycle.

 Replacing the flexible, but Often exploited, long

settlement cycles with rolling settlement, to bring about transparency.
IT driven stock exchanges (NSE and BSE) with a
national presence (for the benefit of investors across locations) and other
initiatives to enhance the quality of financial disclosures by the listed
companies.
Empowering SEBI with powers to impose higher
penalties and establish itself as an independent regulator with adequate
statutory powers.
NSE, which in the recent past has accounted for the
largest trading volumes, has a fully automated screen based system that
operates in the wholesale debt market segment as well as the capital market
segment
Many new instruments have been introduced in the
markets, including index futures, index options, derivatives and options and
futures in select stocks.

Insurance Sector:
With the opening up of the market for private players,
various foreign and Indian private players have targeted the untapped market
potential by providing tailor-made products. Some key features of the Indian
insurance sector are stated below:
The presence of a host of new players in the sector
has resulted in a shift in approach and the launch of innovative products,
services and value-added benefits. Foreign majors have entered the country
and announced joint ventures in both life and non-life areas. Major foreign

players include New York Life, Aviva, Tokio Marine, Allianz, Standard Life,
Lombard General, AIG, AMP and Sun Life among others. As a result of
competition, the erstwhile state sector companies have become aggressive in
terms of product offerings, marketing and distribution.
The Insurance Regulatory and Development Authority
(IRDA) have played a proactive role as a regulator and a facilitator in the
sectors development.
The state sector Life Insurance Corporation (LIC), the
largest life insurer in 2000, sold close to 20 million new policies with a
turnover of approximately US$ 5 billion.

There are four public sector and nine private

sector insurance companies operating in general/ non-life insurance business

with a premium income of over US$ 2.58 billion.

The markets potential has been estimated to have

a premium income of US$ 80 billion with a potential size of over 300 million
people. The General Insurance Corporation (GIC) (which covers the non-life
sector) had a total premium income of US$ 2 billion in 2001-02. This has the
potential to reach US$ 9 billion in the next five years.
Industry Outlook:
Indian financial sector presents a huge retail finance opportunity.
Existing low penetration levels, increasing affordability of credit and rising
income levels have led to a growing demand for retail financial products. India
has a large pool of retail investor base spread throughout the country with a
huge pool of untapped surplus funds. The confidence of small investors has
increased with the growing levels of education and financial awareness, and
the tightening of regulatory systems. Exposure to global practices has made
the Indian customer more discerning and demanding. As a result of falling
interest rates, bank deposits, other traditional investment opportunities are

losing their attraction. Thus, Indian investors are getting attracted towards
alternate investments such as the equity markets and are looking for newer
financial products.
Huge opportunities offered in the retail financial services
sector are coupled with several challenges. The sector requires extremely
effective distribution systems that are capable of offering flexibility and
convenience to the customer, while maintaining cost-efficiency. There has
been a clear shift towards those entities that are able to offer products and
services in the most innovative and cost efficient manner. The financial sector
will need to adopt a customer-centric business focus.
It will also have to create value for its shareholders as
well as its customers, competing for the capital necessary to fund growth as
well as for customer market share. The financial services industry is
undergoing a consolidation with the large number of small players turning into
few large players. In future, it is expected that the players who can offer a
complete bouquet of financial products and services will capture the market
share.

Consolidation in the Indian Equity Trading Markets:

As the Indian capital markets are evolving, they are
undergoing rapid consolidation spurred primarily due to continuous increase
in

capital

requirements,

increased

regulatory

oversight,

customer

sophistication, availability of technology to provide high quality service to a

large customer base and increased back-office requirements. The margin
requirements for exposure and mark to market have increased as the
regulator and major exchanges enhance the risk management processes and
systems in order to be in line with global practices. Moreover the shorter
settlement cycle has required stronger back office capabilities thus
necessitating heavy capital investments. From T+5 settlement regime till
2000, markets are now in T+2 regimes for the last year, and it will soon be
changed to T+1 regime. These changes in regulatory framework have
enhanced the capabilities required to stay in the business in terms of capital

and infrastructure and have resulted in the smaller players getting driven out
of the system. These companies strengths lie in their strong balance sheets,
countrywide presence; strong brand awareness and highly trained sales force
delivering world-class service levels to the retail investor.
The retail presence in the stock markets has been
growing steadily with the advent of dematerialization and the recent
acceleration in opening of demats accounts. The current retail business has a
65% share of total exchange volumes, with FI/FII business having 15% share,
and proprietary trading by brokers & related parties accounting for the
remaining 20% share. The
retail participation is stated to grow more than 25% per annum for the next 10
years. The market shares of the top 5 brokers on NSE has increased from
less than 5.9 % in 1996-97 to about 13% in the previous quarter ended
December 31, 2003. The market share of the top 10 players on NSE has
grown from 10% in 1996-97 to 16.4% in 2002-03, and the share of the top 25
players on NSE has grown from 19.7% in 1996-97 to 29.1% in 2002-03.
This consolidation has markedly accelerated in the last 2
years, where the market share for the top 5 brokers has gone up from 7% to
about 13%, due to the impact of regulatory changes, introduction of new
technologies and increased customer sophistication. This development
parallels, on an accelerated timeline, the development of the US markets from
1970s to 1990s, where the top 5 brokers, like Charles Schwab, Etrade, Merrill
Lynch, Dean Witter, and Smith Barney rapidly expanded their market share
and gained control of close to 50% of retail trading volumes. 50% Volumes
done by top brokers Trading Volumes (Rs. Crores) Top Brokers 5 10 25 50
100 NSE Total Avg. India top 5 bulls brokers market.

CHAPTER-III

COMPANY PROFILE
Indiabulls is Indias leading Financial Services and Real Estate Company
having over 640 branches all over India. Indiabulls serves the financial needs
of more than 4,50,000 customers with its wide range of financial services and
products from securities, derivatives trading, depositary services, research &
advisory services, consumer secured & unsecured credit, loan against shares
and mortgage & housing finance. With around 4000 Relationship Managers,
Indiabulls helps its clients to satisfy their customized financial goals. Indiabulls
through its group companies has entered Indian Real Estate business in
2005. It is currently evaluating several large-scale projects worth several
hundred million dollars. Indiabulls Financial Services Ltd is listed on the
National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock
Exchange. The market capitalization of Indiabulls is around USD 3,330
million (30th September 2007). Consolidated net worth of the group is
around USD 950 million (30th September 2007). Indiabulls and its group
companies have attracted more than USD 800 million of equity capital in
Foreign Direct Investment (FDI) since March 2000. Some of the large
shareholders of Indiabulls are the largest financial institutions of the world
such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and
Farallon Capital. Business of the company has grown in leaps and bounds
since its inception. Revenue of the company grew at a CAGR of 159% from
FY03 to FY07.
Indiabulls became the first company to bring FDI in Indian
Real Estate through a JV with Farallon Capital Management LLC, a respected
US based investment firm. Indiabulls has demonstrated deep understanding
and commitment to Indian Real Estate market by winning competitive bids for
landmark properties in Mumbai and Delhi

Growth Story:
Indiabulls has emerged as one of the leading and fastest
growing financial company in less than two year, since its initial public offering

in September 2004. It has a market capitalization of around 3,330 million

(30th September 2007) and consolidated net worth of the group is around
USD 950 million.
Indiabulls Financial Services Ltd. established Indias one of the first
2000-01

trading platforms with the development of an in house team

Indiabulls expands its service offerings to include Equity, F&O, and

2001-03

Wholesale Debt, Mutual fund, IPO distribution and Equity

Research.
Indiabulls ventured into Insurance distribution and commodities

2003-04

trading.
Company focused on brand building and franchise model.
Indiabulls came out with its initial public offer (IPO) in September
2004.

2004-05

Indiabulls started its consumer finance business.

Indiabulls entered the Indian Real Estate market and became the
first company to bring FDI in Indian Real Estate.
Indiabulls won bids for landmark properties in Mumbai.
Indiabulls came out with its initial public offer (IPO) in September
2004.
Indiabulls started its consumer finance business.

2005-06

Indiabulls entered the Indian Real Estate market and became the
first company to bring FDI in Indian Real Estate.
Indiabulls won bids for landmark properties in Mumbai.

Indiabulls entered in a 50/50 joint venture with DLF, Kenneth

Builders & Developers (KBD). KBD has acquired 35.8 acres of land
from Delhi Development Authority through a competitive bidding
process for rs 450 crore to develop residential apartments.
Indiabulls Financial Services Ltd. is included in the prestigious
Morgan Stanley Capital International Index (MSCI).
Farallon Capital has agreed to invest Rs. 6,440 million in Indiabulls
2006-07

Financial Services Ltd.

Indiabulls ventured into commodity brokerage business.
Indiabulls has received an in principle approval from Government
of India for development of multi product SEZ in the state of
Maharashtra.
Dev Property Development plc. Has subscribed to new shares and
has also acquired a minority shareholding from the Company.
Indiabulls Financial Services Ltd. Board resolves to Amalgamate
Indiabulls Credit Services Limited and demerges Indiabulls
Securities Limited

Wide scope, sketchy analysis:

THE BOOM in the market and the rush for that hidden pot
of gold has led to a mushrooming of financial dotcoms. Everyone wants a
share of the pie, and what better way to get it than through the medium that is
all the rage. The Internet has the advantage of real time and gives you an
opportunity to follow the market at every turn. There are a number of financial
web sites to choose from, all aiming to give information on every aspect of
finance, from securities to credit cards. What differentiates them is the quality

and quantity of information provided, depth of analysis and accuracy of facts.

Indiabulls.com wants to be a gateway to the world of finance.
Layout and review:
The home page of indiabulls.com is similar to most other
financial web sites, as it gives an updated view of the main market indices,
both Indian and selects foreign ones. It also offers news reports and
newsbreaks. A real-time ticker (also available on most other sites) lists live
quotes of stock exchange scrips. On this real-time ticker, clicking on the
company links to the Reuters data fact-sheet on the company's price history,
background and charts. The home page features six main modules, each on a
specific investment area -- mutual funds, equity market, research, Portfolio,
personal finance and trading.
The mutual fund module provides useful information on
individual funds. The module home-page has an overall fund ranking system,
where one can find the top funds, according to one's specifications. For
instance, a test-search for the top five open-ended and balanced funds
resulted in a fact-sheet on the top five funds in that category. It also has an
extensive search facility that works on a keyword model. The page provides a
fact-sheet on the fund background, prospectuses and brief analysis. In a test
search, however, the prospectus and analysis were unavailable for certain
funds. Analysis of the funds
is in itself not extensive, and an investor might be inclined to use a web-site
dedicated to mutual funds rather than just a module that gives an overview.
The second module relates to equity market investing
and contains market reports, market statistics, information on board meetings
and an IPO corner. The IPO corner, in an innovative service, mails out forms
for individual IPOs, free of cost, in response to requests via e-mail. Market
commentary provides reports on key stocks, and the long- and short-term
outlooks for the market.
The third module, the research module, is well organized
and comprises a considerable volume of information on individual companies,

with a database of over 2,000 listed companies. The site details company
results, including the profit and loss accounts and balance sheets, information
on the company's background, ratios and investor issues, such as bonus
issues and price history. It also gives the company's history and a
comparative fact-sheet on firms in its peer group. The research might not,
however, be enough for a seasoned investor, as there is no detailed analysis
on the companies or the industries they operate in. There are more
specialized sites for such information, which would be more useful.
The portfolio module helps one keep track of personal
securities portfolio. The clients portfolio is updated on a real-time basis and
the module has a number of tools that can help him to manage and track the
shares the owners. It is yet to include mutual fund investments, as there is still
no facility for updating them on a real-time basis. It is, however, immensely
useful for the investor who is a keen trader but does not want the hassle of an
investment manager or costly portfolio-management software.
Finally, the personal finance module, which is packed with
information on taxation issues, credit cards and fixed deposits. An interesting
tool, the tax calculator, helps calculate personal tax liabilities. Perhaps the
most attractive feature of the site is the Stock Game, which allows the client to
trade phantom shares and try his hand at the stock market without making
any investment except your time. It is also a good way for an amateur to
practice analytical skills without running the risk of losing money. Other
features include a chat room, message board and an area related to technical
analysis.
Site idea:
On the whole, the website is well organized. Links are
well coordinated and lay out, and the search facilities are good. The site's
main problem is that it lacks depth in analysis. While indiabulls.com covers a
wide range of areas, aiming to give as much financial information as possible,
it is missing out on the fine details of analysis. At present, this site is useful
only for the amateur investor who is surfing the market but does not plan to

make any firm decisions. The site could be far more useful if it builds on the
current volume of information, and provides more analysis on the different
areas, especially mutual funds and individual companies. This is the only way
it can compete with the numerous other financial web sites. The concept of
trading shares on-line is still catching on in India. The site has taken the first
few steps by developing a phantom trading site. Therefore, it already has the
advantage of a framework within which shares can be traded on-line. This
could be further developed to cater to real trading.
GENERAL INFORMATION:
AUTHORITY FOR THE ISSUE:
The current Issue has been authorized by shareholders
vide a special resolution adopted pursuant to Section 81 (1A) of the
Companies Act, passed at Extraordinary General Meeting held on April 12,
2004.
PROHIBITION BY SEBI:
The subsidiaries, the Directors, the Promoters, any of the
associates of the group companies, other companies /entities promoted by
the Promoters, and companies/entities with which the Directors are
associated with as directors or promoters, have not been prohibited from
accessing the capital markets under any order or direction passed by SEBI.
None of the Directors or in the persons in control of the Promoter companies
have been prohibited from accessing the capital markets or restrained from
buying/selling/dealing in securities under any order or direction passed by
SEBI.

ELIGIBILITY FOR THE ISSUE:

The Company is eligible for the Issue in accordance with
Clause of the SEBI Guidelines as explained under with eligibility criteria
calculated in accordance with financial statements under Indian GAAP

 The Company has net tangible assets of at least Rs. 30

million in each of the preceding three full years of which not more than 50% is
held in monetary assets and is compliant with Clause 2.2.1(a) of the SEBI
Guidelines;
The Company has a track record of distributable profits in
accordance with Section 205 of Companies Act, for at least three of the
immediately preceding five years and is compliant with Clause 2.2.1(b) of the
SEBI Guidelines;
The Company has a net worth of at least Rs. 10 million in
each of the three preceding full years; and is compliant with Clause 2.2.1(c) of
the SEBI Guidelines;
Although the Company changed its name within the last
one year (from Indiabulls Financial Services Private Limited to Indiabulls
Financial Services Limited on February 27, 2004) more than 50% of the
revenue for the preceding full year is earned from the activity suggested by
the new name and is compliant with Clause 2.2.1(d) of the SEBI Guidelines;
The proposed Issue size is not expected to exceed five
times the pre-Issue net worth of the Company and incompliant with Clause
2.2.1(e) of the SEBI Guidelines
The net profit, dividend, net worth, net tangible assets
and monetary assets derived from the Auditors Report included in this Red
Herring Prospectus under the section Financial
MAIN OBJECTS OF THE COMPANY:
The main objects to be pursued by the Company on its incorporation are:
1. To hold investments in various step-down subsidiaries
for investing, acquiring, holding, purchasing or procuring equity shares,
debentures, bonds, mortgages, obligations, securities of any kind issued or
guaranteed by the Company.

2. To provide financial consultancy services; to provide

investment advisory services on the internet or otherwise; provide financial
consultancy in the area of personal and corporate finance; publish books and
CD ROMs and information related to the above.
3. To conduct the business of sale, purchase, distribution
and transfer of shares, debts, instruments and hybrid financial instruments
and to perform all related, incidental, ancillary and allied services.
4. To conduct depository participant services; to conduct
de-materialization and re-materialization of shares; set up depository
participant centers at various regions in India and to perform all related,
incidental, ancillary and allied services.
5. To receive funds, deposits and investments from the
public, Government agencies, financial institutions and corporate bodies;
grant advances and loans; conduct advisory services related to banking
activities, Project financing, funding of mergers and acquisition activities; fund
management and activities related to money market operations.
6. To carry on the business of portfolio management
services, investment advisory services; custodial services; asset management
services; leasing and hire purchase; mutual fund services and to act as
brokers of real estate and financial instruments.
7. To carry on the business of financing; provide lease
and hire purchase services; to provide consultancy in the area of lease and
hire purchase financing.
8. To operate mutual funds; receive funds from investors;
equity or debt instrument research activity instrument indebt and/or equity
instruments.
RISK FACTORS:

An investment in equity shares involves a high degree of

risk. The client should carefully consider all of the information in this Red
Herring Prospectus, including the risks and uncertainties described below,
before making an investment in the Companys Equity Shares. If any of the
following risks actually occur, the business, financial condition and results of
operations could suffer, the trading price of the Equity Shares could decline,
and the client may lose all or part of his investment.
INTERNAL RISK FACTORS:
The business is dependent on systems and operations availability; any
breakdowns in the transaction systems could lead to decline in the
companys sales and profits.
The Company and subsidiaries are dependent on the
technology systems to perform the critical function of gathering, processing
and communicating information efficiently, securely and without interruptions.
The Company and the subsidiaries could face business risk due to failures in
the control processes or technology systems that could constrain the ability to
manage the business. The operations are highly dependent on the integrity of
the technology systems and the success depends, in part, on the ability to
make timely enhancements and additions to the technology in anticipation of
client demands. To the extent, the experience system interruptions, errors or
downtime (which could result from a variety of causes, including changes in
client use patterns, technological failure, changes to systems, linkages with
third-party systems, and power failures), the business and operations of the
Company and the subsidiaries could be significantly impacted. Additionally,
rapid increases in client demand may strain the ability to enhance the
technology and expand the operating capacity. The Company and the
subsidiaries have installed back-up facilities including hardware systems,
communication/networking, and linkages with third party and software
platform at the own offices.
The Business is dependent on relationships formed by the relationship
managers with the clients; any events that harm these relationships

including the loss of the companys relationship managers will lead to

decline in the companys sales and profits.
The business is dependent on the team of
relationship managers who directly manage client relationships. The
Company and the subsidiaries encourage dedicated relationship managers to
service specific clients since the Company and the subsidiaries believe that
this leads to long-term client relationships, a trust based business
environment and over time, better cross-selling opportunities. The Company
and the subsidiaries had 476relationship managers and 32,359 clients as of
April 30, 2004; while no relationship manager or operating group of
relationship managers contributes a meaningful percentage of the business,
the business would suffer materially if a substantial number of relationship
managers either become ineffective or leave the organization. Such an event
would be detrimental to the business and profits.
The business is rapidly growing; any inability to manage this rapid
growth could result in disruptions in its business and may result in
reduced sales and profits.
The revenue grew at a CAGR of 132.97% over FY 2002
to FY 2004 during a severe downturn in overall industry volumes. However,
there can be no assurance that the Company and the subsidiaries will be able
to execute the strategy of increasing the client base in the future as well as
effectively service the clients requirements. Any failure on the part to scale
the infrastructure and management to meet the challenges of rapid growth
could cause disruptions to the business and could be detrimental to the longterm business outlook.
Indiabulls is rapidly growing and may require further infusion of funds
to satisfy the capital needs, which we may not be able to procure. Any
future equity offerings by indiabulls may lead to dilution of equity and
may affect the market price of its equity shares.
The growth is dependent on having a strong balance
sheet to support the activities. It may need to raise additional capital from time

to time, dependent on business conditions and it may not be able to procure

such additional funds due to factors beyond its control. The factors that would
require its to raise additional capital could be business growth beyond what
the current balance sheet can sustain; additional capital requirements
Imposed due to changes in regulatory regime or new guidelines; or significant
depletion in the existing capital base due to unusual operating losses. Any
fresh issue of shares/convertible securities would dilute existing holders, and
such issuance may not be done at terms and conditions, which are favorable
to the then existing investors or indiabulls.
The strategy to enter into the sale of diversified financial services and
products exposes indiabulls to additional risks.
The Company and the subsidiaries are rapidly expanding
the business offerings and these additional products might expose the
company to new business risks for which it may not have the capability or the
systems to manage.
EXTERNAL RISK FACTORS:
Competition:
The Company and its subsidiaries face significant
competition from companies seeking to attract clients financial assets,
including traditional and online brokerage firms, mutual fund companies and
institutional players, having wide presence and strong brand name. As the
Company and the subsidiaries enter newer markets, it is likely to face
additional competition from those who may be better capitalized, have longer
operating history, have greater retail and brand presence, and better
management than indiabulls. If it is unable to manage the business it might
impede its competitive position and profitability. The Company and the
subsidiaries have competed successfully in the past with companies that were
larger in sales and infrastructure than indiabulls, and have acquired
considerable market share. Indiabulls intend to continue competing vigorously

to capture more market share and adding more management personnel to

manage the growth in an optimal way.
Legal and Compliance Risk:
Legal and compliance risk refers to the possibility that will
be found, by a court, arbitration panel or regulatory authority, not to have
complied with an applicable legal or regulatory requirement. Indiabulls may be
subject to lawsuits or arbitration claims by clients, employees or other third
parties in the different jurisdictions in which we conduct the business. In
addition, the Company and the subsidiaries are subject to extensive
regulation by the SEBI, the NSE, BSE, NCDEX, RBI, and IRDA another state
and market regulators in India. New laws/rules and changes in any law and
application of current laws/rules could affect the manner of operations and
profitability. Indiabulls may incur substantial costs related to litigation if we are
subject to significant legal action.
Terrorist attacks and other acts of violence or war involving India and
other countries could adversely affect the financial markets, results in a
loss of business confidence and adversely affect the business, results
of operations and financial condition.
Terrorist attacks and other acts of violence or war,
including those involving India or other countries and other such acts, could
adversely affect Indian and worldwide financial markets. Such acts may also
result in a loss of business confidence and have other consequences that
could adversely affect the business, results of operations and financial
condition. Travel restriction as a result of such attacks or otherwise may have
adverse impact on the ability to operate effectively. Increased volatility in the
financial markets can have an adverse impact on the economics of India and
other countries including economic recession.
Regional conflicts in South Asia could adversely affect the Indian
economy, disrupt the operation and cause its business to suffer.

South Asia has from time to time experienced instances

of civil unrest and hostilities among neighboring countries. Military activity or
terrorist attacks in the future could influence the Indian economy by disrupting
communications and making travel and transportation more difficult. Such
regional tensions could create a greater perception that investments in Indian
companies involve a higher degree of risk. This, in turn, could have a material
adverse effect on the market for Indian companies, including our equity
shares and on the market for the services.
The performance is linked to the stability of policies and the political
situation in India.
The role of the central and state governments in the
Indian economy affecting producers, consumers and regulators has remained
significant over the years. The Government of India has pursued policies of
economic liberalization, including relaxing restriction on the private sector. The
current Government of India has announced policies and taken initiatives that
support the continued economic liberalization policies that had been pursued
by the previous government. There is no assurance that these liberalization
policies will continue in the future. Protests against privatization could slow
down the Pace of liberalization and deregulation. The rate of economic
liberalization could change, and specific laws and policies affecting
technology companies, foreign investment, currency exchange rates and
other matters affecting investment in the securities could change as well. A
significant change in Indias economic liberalization and deregulation policies
could disrupt our business and economic conditions in India. Any political
instability could delay the Indian economic reforms and could have an
adverse effect on the market for the Equity Shares and on the market for the
services.
After this Issue, the prices of the Companys equity shares may be
volatile, or an active trading market for the Companys equity shares
may not develop.

The price of the Companys equity shares on Indian stock

exchanges may fluctuate after this Issue as a result of several factors,
including:
Volatility in the Indian and global securities market
The results of operations and performance
Market for investment in the banking sector
Performance of the Indian Economy
Perceptions about our Companys future performance or
the performance of Indian financial services companies
Performance of the Companys competitors in the Indian
financial services and market perception of investments in the Indian financial
services sector;
Significant development in the regulation of financial
services market / banking sector
Adverse media reports on the Company or on the Indian
financial services industry
Change in the estimates of the Companys performance
or recommendations by financial analysts
Significant development in Indias economic liberalization
and deregulation policies; and
Significant

development

in

Indias

fiscal

and

environmental regulations.
There has been no public market for the Companys
equity shares till now and the prices of the Companys equity shares may
fluctuate after this Issue. There can be no assurance that an active trading
market for the equity shares wills developer be sustained after this Issue, or
that prices at which the Companys equity shares are initially offered will
correspond to the prices at which the Companys equity shares will trade in

the market subsequent to this Issue. The Companys share price could be
volatile and may also decline.
Indiabulls offers services across a broad array of products, including
Stocks, Options and Futures
Depository Services
Commodities
Insurance Products
Mutual Funds
Bonds and Debt Product

The Competitive Strengths:

It has a distinct set of competitive advantages that make it
uniquely capable of winning in the marketplace which are as follows
Diverse Branch Network
Bouquet of financial products and services
Advanced technology team that delivers market leading
product innovation
Strong sales and marketing teams with continuous
reinvestment and training
Strong cross-selling opportunities
Strong and experienced promoters
Leading product innovation and marketing strategies
Well capitalized player, with strong banking relationships
and credit ratings
Ability to combine people and technology in unique ways

 Strong market presence and increased market share

leading to a virtuous cycle of growth and profitability.
The Financial Performance:
For indiabulls, financial success means consistently
achieving superior growth rates and consistent margins. The expense
management is guided by an investment philosophy that continually balances
long-term investment with short-term profitability. The liquidity and capital
management reflect a growing balance sheet and financials interns of
revenues and profits. Annual Results: The consolidated revenues and net
profits for FY 2004 were Rs. 719.49 million and Rs. 194.07million
respectively; consolidated revenues and net profits for FY 2003 were rs.
266.69 million and Rs. 51.26million respectively.
BUSINESS OVERVIEW:
They have emerged as a diversified financial services
company that offers a wide range of financial products and services under the
brand Indiabulls. On March 30, 2001 the Company was registered as an
NBFC under section 45-IA of RBI Act to carry on the business of NBFC, not
accepting public deposits, as the company is a holding company.
Subsequently, the Company has started investing and providing loans to the
subsidiary companies engaged in different activities as mentioned in the
above diagram. With effect from April 1, 2004, the Company has also
commenced the activity of providing credit facilities to retail customers.
Indiabulls operates through the three subsidiaries India bulls Securities
Limited, India bulls Insurance Advisors Pvt. Ltd. and India bulls Commodities
Pvt. Ltd. with a presence in equity, debt and derivatives brokerage, and
depositary services, access to third party insurance products from Birla Sun
life Insurance Company and mutual fund products of various asset
management companies, and related financial services.

The Company and the subsidiaries provide brokerage,

services and third party financial products and other services through a variety
of channels to retail and institutional clients and operate nationally in India. It
is headquartered in New Delhi with a network of 70 offices spread across 55
cities. The Company and its subsidiaries target the retail and the institutional
segment of the market through direct and indirect channels. The direct
channel for business is through the sales employees who operate out of the
70 offices in 55 cities.
The indirect channel for business is through the network
of marketing associates, people who are not on the rolls of the companys has
invested heavily in building a strong sales team and as on April 30, 2004 it
had over 476 relationship managers in its 70 offices spread all over the
country. With the sales and marketing team, the Company and the
subsidiaries are able to cross sell many financial products such as insurance
and mutual funds. It has experienced substantial growth at a CAGR of
132.97% over FY 2002 to FY 2004 in revenues and achieved a substantial
market share in the Equity, F&O and Debt market leading to a combined
average daily turnover of Rs. 4451.5 million for the FY 2004.

The consolidated revenues and net profits have grown at

a CAGR of 132.97% and 118.31% respectively over last two years. The
revenues have grown from Rs. 132.55 million in FY 2002 to Rs. 266.69 million
in FY 2003 and to Rs.719.48 million in FY 2004. The net profits have
increased from Rs. 40.61 million in FY 2002 to Rs. 51.05 million in FY 2003
and to Rs. 193.54 million in FY 2004. The total number of employees grew
from 110 as in FY 2002 to 178 as in FY 2003 and to 606 as on April 30, 2004.
BUSINESS MODEL:
The Company and the subsidiaries have a vast client
base of 32,359 clients as on April 30, 2004 spread allover India and it has
been augmenting its client base across the country, which makes the
business model a low risk model as compared to a business model which
may be dependent on very few clients. The revenues are largely based on
fee/commission income generated through providing securities brokerage &
related financial services to individual investors and independent advisors.
The Company and the subsidiaries focus on a core client base of individual
investors and the marketing associates who serve them. It offers the following
products and services in the financial markets:
Stocks
Options and Futures25
Depository Services
Commodities
Insurance Products
Mutual Funds
Bonds and Debt Products

Internet Based Share Trading System:

ISLs Internet Based Share trading system handles over
22,871 clients spread all across the country. At the core of the Internet based
share trading system is an in-house developed application that interfaces with
the NSE and allows users to carry the stock transactions online. This
application has following features:
Supports for both Cash Market and Derivatives
Common Integrated Risk Management for both segments
A feature rich browser based terminal
Desktop based installable terminal for the highly active
trader
Electronic Payment Interface to participating Retail Bank
Indiabulls Equity Research & Analysis
Support for Non-Resident Indian Customers
Multiple Tick by Tick Charts and Technical Analysis
Streaming Quote
Multiple and fully customizable market watches and
multiple order books.

TECHNOLOGY INFRASTRUCTURE:
The Company and the subsidiaries have a high-end
technical infrastructure to meet the demands of its growing business.
Internet Trading Server setup:
As explained above, the Internet trading application
developed by us is a system comprising a large number of components and
interfaces to various entities like the NSE, HDFC Bank, Depository etc. This

application has been co-located out of the Data center of Videsh Sanchar
Nigam Limited in Mumbai. The decision to co-locate out of a World Class
Level 3 data center stems from the fact that this set-up has to have the
highest levels of reliability and uptime. The Level 3 data centered VSNL
provides the following infrastructure in the form of
Raised floors
HVAC temperature control systems
Air-Sense State of the art Aspirating smoke detection
FM 200 based Fire suppression systems
Video camera surveillance systems, Biometric access &
sensors
Security breach alarms
Gigabit Local Area Network
On site Power Systems with multiple backup generators
feeding a redundant UPS grid to offer the highest levels of reliability.

Network setup:
The Company and the subsidiaries have more than 400
desktops all over the country being used by the employees at the branches.
All branches have 10/100 Mbps Local Area Networks with structured cabling
and switches / hubs from well-known network equipment manufacturers. Each
office has dedicated Internet connectivity through which employees arable to
communicate with head office and customers for all servicing and operational
matters. Leased lines have been taken from well-known ISPs. These leased
lines are backed up by ISDN lines and dialup accounts. Most of the larger
offices have multiple connectivity to Internet to prevent any downtime in
operations.

Inter Branch Connectivity:

The Company and the subsidiaries have plans to
implement a Virtual Private Network to connect all the branches in the country.
The wide area network planned shall be a mixed network of leased line,
optical fiber and radio links depending upon the needs and infrastructure of
each location. The wide area network thus created shall provide the following
immediate benefits
Better inter branch communication leading to better
efficiency and reduced costs.
Centralized

order

entry

leading

to

central

risk

management and greater control.

Extension of Back office terminals to branches leading to
improved customer service.

CHAPTER IV
DATA ANALYSIS AND INTERPRETATIONS

Data analysis and interpretation is an attempt to organize and summaries data

in order to increase results in such a manner that enables the researcher to relate
critical points, with the study objectives.
The information collected may be illegible, incomplete, and inaccurate to a
certain extent.

Thus collected data is lying scattered in several data collection

formats. The data lying in such a crude form are not ready for analysis. The
researcher must take some measures, to bring the data a term where it can be easily
analyzed. Various steps, which are required for this purpose are editing, coding and
tabulating.
Editing refers to inspecting, correcting and modifying the collected data.
Coding refers to assigning number or other symbol, to each answer or placing them in
categories to prepare data for tabulation.
Tabulating refers to bringing together the similar data into rows and columns
and totaling them in an accurate and nearing to full form.

1. Age
The aim here is to categorize the respondents with respect to age.
Table No.4.1 Age
Sl. No
1
2
3
4

Age

No. of.

Percentage

25 35
36 45
46 55
56 and above

Respondents
120
132
30
18
300

40
44
10
06
100

Total

Source: Survey data

Inference:
It is observed from the above table that 44% of the respondents are in the age
group of 36 to 45. 40% are below 25 to 35 age group and 10% of the respondents are
in the age group 46 to 55. Besides this 6% of the respondents fall in the category of 56
and above.

Figure No.4.1 Age

2. Annual Income
It gives annual income of respondents.
Table No.4.2 Annual Income
Sl. No
1
2
3
4

Annual income

No. of.

Percentage

Below 1 lakh
1 lakh 3 lakhs
3 lakhs 5 lakhs
5 lakhs and above

Respondents
54
102
114
30
300

18
34
38
10
100

Total

Source: Survey data

Inference:
It is inferred from the above table that 38% of the respondents annual
income is between 3 lakhs 5 lakhs which is followed by 1 lakh 3 lakhs (34%),
below 1 lakh (18%) and 5 lakhs and above.

Figure No.4.2 Annual Income

3. Experience
This question is asked to know the trading experience of respondents.
Table No.4.3 Experience

Sl. No
1
2
3

Trading

No. of.

Percentage

experience
< 5 years
5 15 years
> 15 years

Respondents
60
138
102
300

20
36
34
100

Total

Source: Survey data

Inference:
It is understood from the table that most of the respondents (46%) have
trading experience of 5 - 15 years. 34% and 20% of the respondents have the
experiences of > 15 years and < 5 years respectively.

Figure No.4.3 Experience

4. Portfolio size
The table below indicates portfolio size, which means that combination
of various assets in share market invested by respondents.
Table No: 4.4 Portfolio size
Sl. No
1

Annual income

No. of.

Percentage

Less than 1 lakh

Respondents
54

18

2
3
4

1 5 lakhs
5 15 lakhs
More than 15 lakhs

108
90
48
300

36
30
16
100

Total

Source: Survey data

Inference:
The above table reveals that, out of 300 Respondents 36% have the portfolio
size of 1 5 lakhs. This is followed by 5 15 lakhs (30%), less than 1 lakh (18%) and
more than 15 lakhs (16%).

Table No: 4.4 Portfolio size

5. Type of trading
This question is asked in order to find out what type of trading the
respondents prefer.
Table No.4.5 Type of trading
Self related as
Trader
Investor
Total

System trading involved in

Day trading
Delivery
184
156
26
124
210
280

Percentage
Day trading
Delivery
88
56
12
44
100
100

Source: Survey data

Inference:
It is inferred from the table that majority taken trader which is followed by
investor trading.

Table No.4.5 System trading

6. Parameters

This question is asked to know traders involving based on the parameters.

Table No.4.6 Parameters
Traders

Online
Offline
Intraday
Delivery
Total

Parameters
Safe &
Risky

Percentage
Safe &
Risky

Reliable
105
78
52
62

63
43
102
34

Reliable
35
26
18
21

26
18
42
14

297

242

100

100

Source: survey data

Inference:
From the above table, it is understood that most of the respondents says to
online trading which accounts to 35%.

120

105

102

100
78

80

63

60

52

43

62
34

40
20
0

Online

Offline

Intra day

Safe & Reliable

Risky

Table No.4.6 Parameters

7. Share purchase

Delivery

This question is asked to find out parameters based on which the

respondents buy a share.

Table No.4.7 share purchase

Sl. No

Parameters

No. of.

Percentage

Share price

Respondents
113

38

2
3

movement
Sector movement
Studying the

98
54

32
18

fundamentals
Recommendations

35
300

12
100

Total

Source: Survey data

Inference:
It is inferred from the above table that the respondents used to
buy share by studying share price movement (38%) which is followed by sector
movement (32%, studying fundamentals (18%) and recommendations given by others
(12%).

Table No.4.7 share purchase

8. Red hearing prospectus

It shows that the apply for IPOs, read the IPOs form and Red hearing
prospectus before applying for an IPOs by the respondents.
Table No.4.8. Red hearing prospectus

Sl. No

Red hearing

No. of.

Percentage

1
2

prospectus
Yes
No

Respondents
270
30
300

90
10
100

Total

Source: Survey data

Inference:
From the above table, it is inferred that most of the respondents (90%) are
apply for IPOs, read the IPOs form and Red hearing prospectus before applying for
an IPOs.

Table No.4.8. Red hearing prospectus

9. Selection the funds

This question is asked to find out which type of funds the respondents
want to invest.
Table No.4.9 Selection the funds
Items

No. o. Respondents
Returns
Risk

Percentage
Returns
Risk

Small cap

High

60

High

94

High

24

High

45

Mid cap

Low 30
High 124

Low
High

36
66

Low
High

50
50

Low
High

41
31

Large cap

Low
High

Low
High

27
51

Low
High

25
26

Low
High

31
24

Total

Low 15
High 247

Low 24
High 211

Low 25
High 100

Low
High

28
100

Low

Low

Low

100

Low

15
63

60

87

100

Source: Survey data

Inference:
It is evident from the above table that the majorities respondents prefer
mid cap funds which is followed by small cap and large cap funds.

Table No.4.9 Select the funds

10. Share price in portfolio

This question is asked to follow the share price in the portfolio.

Table No.4.10 share price in portfolio

Sl. No
1
2
3

Share price in the

No. of.

Percentage

portfolio
Always
Some time
Never

Respondents
126
162
12
300

42
54
04
100

Total

Source: Survey data

Inference:
From the above table, it is inferred that most of the respondents (54%) share
price in your portfolio is sometime. Then 42% and 4% of the respondents were the
ratio of share price in your portfolio to always and never respectively.

Table No.4.10 share price in portfolio

11. Corporate actions

This table shows that follow the corporate actions taken by companies
that hold in the portfolio.
Table No.4.11 Corporate Actions
Sl. No

Hold in the

No. of.

Percentage

1
2

portfolio
Yes
No

Respondents
282
18
300

94
06
100

Total

Source: Survey data

Inference:
From the above table, it is inferred that most of the respondents (94%) are
corporate actions taken by companies that hold in the portfolio.

Table No.4.11 Corporate Actions

12. Execution per day

It shows that the many trades execution per day
Table N0.4.12 Execution per day
Sl. No
1
2
3
4

Execution per day

No. of.

Percentage

<5
5 15
15 20
> 20

Respondents
42
108
132
18

18
36
44
06

300

100

Total

Source: Survey data

Inference:
From the above table, it is inferred that most of the respondents (44%) trades
execute on a day 15 20.

Table N0.4.12 Execution per day

13. Products in trade

It shows that products in trade
Table No.4.13 Products in trade

Sl. No
1
2
3

Product in trade

No. of.

Percentage

Cash
Future
Options

Respondents
126
90
84
300

42
30
28
100

Total

Source: Survey data

Inference:
From the above table, it is inferred that most of the respondents (42%) are
products you trade on cash.

Table No.4.13 Products in trade

14. Trading product with respect to returns and risk

It shows that the appropriate with respect to returns and risk desired from
trading products.
Table No.4.14 Trading product with respect to returns and risk
Items
Cash

No. o. Respondents
Returns
Risk
High 36
High 121

Percentage
Returns
Risk
High 16
High
49

Future

Low
High

33
57

Low
High

42
65

Low
High

61
26

Low
High

48
26

Options

Low 09
High 125

Low
High

21
60

Low
High

17
58

Low
High

24
25

Total

Low 12
High 218

Low 24
High 246

Low 22
High 100

Low
High

28
100

Low

Low

Low

100

Low

54

87

100

Source: Survey data

Inference:
From the above table, which trading products mostly desired by respondents
that analyze result were high returns in options (125) and low returns in cash (33), as
well as high risk in cash (121) and low risk in cash (42) respectively.

Table No.4.14 Trading product with respect to returns and risk

15. Source of funds

It shows that the source of funds for trading.
Table No.4.15 Source of funds
Sl. No

Funds for trading

No. of.
Respondents

Percentage

1
2

Own ash
Exposure given by

broker
Margin trading

70
90

23
30

140
300

47
100

Total

Source: Survey data

Inference:
It inferred above that the table, which source of funds for trading involving
the share market, respondents were mostly feeling for margin trading (47%) was
good. Then 30% and 23% of the ratio of respondents were exposure given by broker
and own cash respectively.

Table No.4.15 Source of funds

16. Exposure
This question is asked to find out trade by taking exposure from broker.
Table No.4.16 Exposure

Sl. No
1
2

Exposure from broker

No. of.

Percentage

Yes
No

Respondents
167
133
300

56
44
100

Total

Source: Survey data

Inference:
This table was establish slightly different within yes and no (167&133)
answered by respondents, but find out the answer yes (56%) in taking extra exposure
from broker.

Table No.4.16 Exposure

17. Safe source of funds

This question is asked to follow the based on safe source of funds

Table No.4.17 Safe source of funds

Sl. No

Safe source of funds

No. of.

Percentage

1
2

Own ash
Exposure given by

Respondents
102
43

34
14

broker
Margin trading

155
300

52
100

Total

Source: Survey data

Inference:
Most of the respondents are feeling for their funds safety in margin trading
(52%). Then 34% and 14% of the respondents were the ratio of safe source of funds
in own cash and exposure given by broker respectively.

Table No.4.17 Safe source of funds

18. Margin calls regularly

This question is asked to find out get margin calls regularly from your
broker whenever you are in margin.

Table No.4.18 Margin calls regularly

Sl. No
1
2

Margin calls regularly

No. of.

Percentage

Yes
No

Respondents
276
24
300

92
08
100

Total

Source: Survey data

Inference:
From the above table, it is inferred that most of the respondents (92%) are
get margin calls regularly from your broker whenever you are in margin.

Table No.4.18 Margin calls regularly

19. Contract notes issued

This question is asked to verify the trades with contract notes issued by
brokers.

Table No.4.19 Contract notes issued

Sl. No

Contract notes issued

No. of.

Percentage

1
2
Total

Yes
No

Respondents
288
12
300

96
04
100

Source: survey data

Inference:
From the above table, it is inferred that most of the respondents (96%) are
Trades with contract notes issued by brokers.

Table No.4.19 Contract notes issued

20. Constantly leverage in margin

This question is asked to know constantly leverage in margin to utilize
the market movement.

Table No.4.20 Constantly leverage in margin

Sl. No
1
2
Total

Margin to utilize

No. of.

Percentage

Always
Sometime

Respondents
168
132
300

56
44
100

Source: survey data

Inference:
From the above table, most of the respondents (56%) are utilize in margin
depend upon market movement.

Table No.4.20 Constantly leverage in margin

21. Stop loss orders

This question is asked to follow stop loss orders while trading.
Table No.4.21 Stop loss orders
Sl. No

Stop loss orders

No. of.

Percentage

1
2
Total

Always
Sometime

Respondents
210
90
300

70
30
100

Source: survey data

Inference:
From the above table, Hugh respondents (70%) are follow stop loss orders
while trading.

Table No.4.21 Stop loss orders

22. Safe guarded by SEBI regulations

This question is asked to feel traders benefited or safe guarded by SEBI
regulations.
Table No.4.22 Safe guarded by SEBI regulations
Sl. No
1
2
Total

Safe guarded by SEBI

No. of.

Percentage

regulations
Yes
No

Respondents
282
18
300

94
06
100

Source: survey data

Inference:
From the above data, it is obvious that majority of the respondents (94%) are
benefited or safe guarded by SEBI regulations.

Table No.4.22 Safe guarded by SEBI regulations

23. Broker advice

This question is asked to take broker advice while trading.

Table No.4.23 Broker advice

Sl. No

Broker advice

No. of.

Percentage

1
2
Total

Yes
No

Respondents
186
114
300

62
38
100

Source: survey data

Inference:
From the above table, more number of respondents (62%) is taking
broker advice while trading.

Table No.4.23 Broker advice

24. Hedging positions

This question is asked to find the hedge positions while trading.
Table No.4.24 Hedging positions
Sl. No
1
2
Total

Hedging positions

No. of.

Percentage

Yes
No

Respondents
270
30
300

90
10
100

Source: survey data

Inference:
From the above table, more number of respondents (90%) is used hedge
positions while trading.

Table No.4.24 Hedging positions

25. Impact of media

This question is asked to know the media affect the investment decision
while trading
Table No.4.25 Impact of media
Sl. No
1
2
Total

Impact of media

No. of.

Percentage

Yes
No

Respondents
270
30
300

90
10
100

Source: survey data

Inference:
This table reflects, it is obvious that respondents (90%) are media affect
your investment decision while trading

Table No.4.25 Impact of media

5. Chi-Square test - I
Table No. 4.5 cross tabulation between portfolio size with age
Age group
25 - 35

36 - 45

46 - 55

56 and
above

Total

Portfolio size
1 5 lakhs
5 15 lakhs
Less than 1
lakh
More than 15
lakhs
Total

53
42
18

41
34
29

8
9
5

6
5
2

108
90
54

28

48

120

132

30

18

300

Inference
Ho There is no significant relationship between portfolio size and age.
HA There is a significant relationship between portfolio size and age.

Table No.4.6 calculation of chi square test I

O

(O-E)

(O-E)2

(O-E)2/E

18

21.6

-3.6

12.96

0.6

53

43.2

9.8

96.04

2.223

42

36

36

19.2

-12.2

148.84

7.752

29

23.76

5.24

27.458

1.156

41

47.52

-6.52

42.51

0.895

34

39.6

-5.6

31.36

0.792

28

21.12

6.88

47.33

2.241

5.4

-0.4

0.16

0.0296

10.8

-2.8

7.84

0.726

4.8

3.2

10.24

2.133

3.24

-1.24

0.538

0.475

6.48

-0.48

0.230

0.036

5.4

-0.4

0.16

0.0296

2.88

2.12

4.494

1.560

Calculated value of chi square test

= 21.648

(O-E) 2
E
Degree of Freedom = (c-1) (r-1) = (4-1) (4-1) = 9
Table value of chi square test at 9 degrees of freedom = 16.919
The calculated value of chi-square is 21.648. The table value of chi-square at 9 is
16.919 the calculated value is more than table value, hence the null hypothesis
rejected.

14. Chi-Square test - II

Table No. 4.14 cross tabulation between products in trade and execution per day

Execution per
day

Products in
trade
Cash
Future
options
Total

<5

5 - 15

15 - 20

> 20

Total

21
13
8
42

46
33
29
108

54
40
38
132

5
4
9
18

54
108
90
300

Inference
Ho There is no significant relationship between products in trade and execution per
day.
HA There is a significant relationship between products in trade and execution per
day.

Table No.4.14 calculation of chi square test - II

O

(O-E)

(O-E)2

(O-E)2/E

21

17.64

-3.36

11.2896

0.64

13

12.6

0.4

0.16

0.0127

11.76

-3.76

14.1376

1.2022

46

45.36

0.64

0.4096

0.009

33

32.4

0.6

0.36

0.0111

29

30.24

-1.24

1.5376

0.0508

54

55.44

-1.44

2.0736

0.0374

40

39.6

-0.4

0.16

0.004

38

36.96

1.04

1.0816

0.0293

7.56

-2.56

6.5536

0.8669

5.4

-1.4

1.96

0.3630

5.04

3.96

15.6861

3.1114

Calculated value of chi square test

= 6.3378

(O-E) 2
E
Degree of Freedom = (c-1) (r-1) = (4-1) (4-1) = 9
Table value of chi square test at 6 degrees of freedom = 12.592
The calculated value of chi-square is 6.3378. The table value of chi-square at 6 is
12.592 the calculated value is less than table value, hence the null hypothesis
accepted.

A STUDY ON HEALTHY INVESTING AND TRADING PRACTICES

FOR
RETAIL INVESTORS IN INDIAN CAPITAL MARKET
Name:

Age in years:
(a) 25-35

(b) 36-45

(c) 45 55

(d) 56 and above

Annual income:
(a) Below 1 Lakh
(b) 1 Lakh 3 Lakhs
(d) 5 Lakhs and above

(c) 3 Lakhs 5 Lakhs

1. How long have you been trading in the share market?

(a) < 5 Yrs

(b) 5 15 years

(c) > 15 years

2. Indicate your portfolio size

(a) Less than 1 lakh
lakhs

(b) 1 5 lakhs
(c) 5 15
(d) More than 15 lakhs

3. Indicate the appropriate (Tick)

4.

YOU RELATE YOURSELF AS

SYSTEM TRADING INVOLVED IN

DAY TRADING

DELIVERY

TRADER
INVESTOR
Tick the appropriate based on the parameters
Parameters

SAFE & RELIABLE

Traders
Online
Offline
Intra day
Delivery
5. What are the Parameters based on which you buy a share?
a. Based on Share price movement
b. Based on sector movement

RISKY

c. By studying the fundamentals

d. By recommendations given by others.

6. Do you apply for Ipos? If yes do you read the IPO form And Red hearing
prospectus before applying for an IPO?
(a) Yes

(b) No

7. Indicate the appropriate (Tick)

Small Cap
Mid Cap
Large Cap

Returns
O High
O Low

Risk
O High
O Low

O High
O Low
O High
O Low

O High
O Low
O High
O Low

8. What kind of Transaction is your investment based on?

(a) Short term
(b) Mid term
(c) Long term
9. Indicate the appropriate (Tick)
Short Term
Mid Term
Long Term

Returns
O High
O Low

Risk
O High
O Low

O High
O Low
O High
O Low

O High
O Low
O High
O Low

10. Do you follow the Share prices in your portfolio?

(a) Always

(b) Sometime

(c) Never

11. Do you follow up the corporate actions taken by companies that you hold in
your
portfolio?
(a) Yes

(b) No

12. How many trades do you execute on a day?

(a) < 5

(b) 5 15

(c) 15 20

(b) future

(c) Options

(d) > 20

13. Products you trade on?

(a) Cash

14.Tick the appropriate with respect to returns and risk desired from trading
Products
Returns
Risk
Cash
O High
O High
O Low
O Low
Future

O High
O Low
O High
O Low

O High
O Low
O High
O Low

(b) Exposure given by broker

(c) Margin

Options
15. Source of funds for trading
(a) Own cash
trading

16. Do you trade by taking extra exposure from broker?

(a) Yes

(b) No

17. Rank the following based on safe source of funds?

Own Cash
Exposure given by broker
Margin Trading
18. Do you get margin calls regularly from your broker whenever you are in
margin?
(a) Yes

(b) No

19. Do you verify your Trades with contract notes issued by brokers?
(a) Yes

(b) No

20. Do you constantly leverage your margin to utilize the market movement?
(a) Always

(b) Sometime

21. Do you follow stop loss orders while trading?

(c) Never

(a) Always

(b) Sometime

(c) Never

22. Do you feel traders are benefited or safe guarded by SEBI regulations?
(a) Yes

(b) No

23. Do your take you broker advice while trading?

(a) Yes

(b) No

24. Do you hedge you positions while trading?

(a) Yes

(b) No

25. Do media affect your investment decision while trading?

(a) Yes

(b) No

BIBLOGRAPHY

1) Organization Theory and Behavior

Rao P.S Narayana

Industrial Management

Tripathi

3) Research Methodology

C.R Kothari

2) Personnel Management and