STUDY ON INDIAN EQUITY BROKERAGE INDUSTRY

Summer Project Report

Submitted in partial fulfillment of the requirement for the award of the degree of

BACHELOR OF BUSINESS ADMINISTRATION

By:

NIPUN SACHDEVA

(BBA 4549/ 08)

Department of Management

Birla Institute of Technology

Noida Campus

BIRLA INSTITUTE OF TECHNOLOGY

(Deemed University U/S 3 of UGC Act 1956)

Mesra, Ranchi, Jharkhand

 DECLARATION

This is to certify that the work presented in the project entitled “STUDY ON
COMPARITIVE ANALYSIS BETWEEN EQUITY AND MUTUAL FUNDS” in the
partial fulfillment of the requirement for the award of degree of Bachelor of
Business Administration ,Birla institute of Technology, Mesra, Ranchi, is
an authentic work carried out under my supervision and guidance.

To the best of knowledge, the content of this project does not form a basis for
the award of my previous degree to anyone else.

Date: Mrs. K.L Misra

Department of
management

Birla Institute of
Technology

Noida (U.P)

2
 CERTIFICATE OF APPROVAL

The foregoing thesis entitled “STUDY ON COMPARITIVE ANALYSIS BETWEEN

EQUITY AND MUTUAL FUNDS” is hereby approved as a creditable study of the
research topic and has been presented in satisfactory manner to warrant its
acceptance as prerequisite to the degree for which it has been submitted.

It is understood that by this approval, the undersigned do not necessarily

endorse any conclusion drawn or opinion expressed therein, but approve the
project for the purpose for which it has been submitted.

Mrs. Meenakshi Sharma Dr. S L Gupta

Co-ordinator BBA Academic Co-

ordinator

Director

BIT Noida

3
 PREFACE

A well planned, properly, executed and evaluated industrial training helps a lot in inculcating
good work culture. It provides linkage between the student and industry in order to develop
the awareness of Industrial approach to problem – solving based on broad understanding of
the mindset of the investor and understanding their approach towards the stock market and
different kinds of market instruments available in the market, which one of the important
aspect of my industrial was training.

My project titled “STUDY ON INDIAN EQUITY BROKERAGE INDUSTRY” has

enabled me to have a broader knowledge about this procedure in Aditya Birla Money Ltd.
Basically it has given me the opportunity to have a detailed study about the existing systems
and practices being followed by the company.

This facility has also provided me an opportunity to gain practical experiences, which have
increased my sphere of knowledge to a great extent. It has also given me an opportunity to
gain knowledge of the stock market.

I have tried to summarize all my observations, experience and the knowledge acquired in this
project report.

Nipun Sachdeva

4
 ACKNOWLEDGEMENT

As any good work is incomplete without acknowledging the people who made it
possible, this report is incomplete without thanking the people without whom this project
wouldn't have taken shape.

This project is a result of continuous cooperation, effective guidance and support from our
project mentor Mrs. K .L . Mishra associated with this project.

We would like to express our regards and thanks to Mr. Gyanesh kumar, for giving us the
opportunity to work on this project and learn something new. We are indebted to him for
clarifying our concepts by sharing his valued experience in teaching, research and training
which have thereby become an unconscious part of our ideas and thoughts while analyzing
the brokerage industry.

A special thank to the Almighty for giving us the opportunity and strength to complete this
project.

Lastly we would like to thank our families and friends for their continuing support, blessings
and encouragement.

5
 Executive Summary

This report analyzes the Indian retail brokerage industry taking into account the health of the
capital markets and the intensity of competition among the brokerage companies.
The major growth drivers for brokerage revenue and trading volume are:

• Continuous fall in brokerage fees

• Adoption of technology — screen-based trading, electronic matching, and paperless

securities

• Centralized operations, effective risk management, and control on large

interconnected operations spanning multiple locations, which is enabled by telecom
connectivity and low costs

• Increasing access to capital and the ability to provide margin finance

Though the Indian brokerage industry has been consolidating steadily over the last 10 years,
the share of the top 10 brokers has risen to only around one-fourth of the total industry
revenues. In this fragmented market, leading players like ICICI Direct, Kotak Securities,
Indiabulls, Sharekhan, and 5 Paisa, apart from many small players, compete on the basis of
low brokerage fees and customer service.

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 CONTENTS

Chapter 1 Introduction (8-13)

1.1 Introduction of the Study 8-9

1.2 Company Profile 10-11

1.3 Company’s products 12-13

Chapter 2 Literature Review (14-22)

2.1 Overview 14-17

2.2 Indian equity brokerage industry 17-22

Chapter 3 Objectives & Research Methodology (23-24)

3.1 Objectives of the Study 23

3.2 Research Methodology 24

Chapter 4 Data Analysis and Interpretations (25-33)

4.1 Statistical Analysis 25-29

4.2 SWOT Analysis 30-31

Chapter 5 Findings of the Study (32-40)

Chapter 6 Conclusion and Recommendation (41-42)

Bibliography 43

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 CHAPTER 1 INTRODUCTION

Aditya Birla Group

 US$28 billion, diversified business conglomerate led by Mr. Kumar Mangalam Birla
with a Decades of track record in building and acquiring global and scalable businesses

 Experience in multiple businesses across 25 countries with a Conservative

management, strong governance and rigorous financial discipline

Aditya Birla Money Limited formerly known as Apollo Sindhoori Capital Investments is a
leading player in the broking space with nearly 15 years of experience. It became a part of
Aditya Birla Group in March 2009, when the group acquired 76% of the company.

The Company has a strong distribution network of over 800 own branches and franchisee
network, a large customer base in excess of 1,80,000, a strong technology backbone and a
range of products delivered through a robust online and offline model. The Company
boasts of immense talent pool and vertical specialists which add to its positioning as a
major player in this segment.

Aditya Birla Money is listed on National Stock Exchange of India Limited [NSE] and The
Bombay Stock Exchange Limited [BSE]. It is also registered as Depository Participant
with both NSDL and CDSL

 ABFSG is the umbrella brand for the financial services business of the Aditya Birla
Group

 Vision : To be a leader and a role model in a broad based and integrated financial
services business

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 Includes seven businesses:

 Aditya Birla Capital Advisors Private Limited

 Aditya Birla Money Limited

 Aditya Birla Finance Limited

 Birla Insurance Advisory & Broking Services Limited

 Birla Sun Life Asset Management Company Limited

 Aditya Birla Money Mart Limited

 Birla Sun Life Insurance Company Limited

9
 COMPANY PROFILE

Aditya Birla Money is a leading player in broking space with nearly 15 years of
experience. Incorporated in 1995, the Company became a part of Aditya Birla Group in
March 2009.

The Aditya Birla Group is a household name in India, a US $28 billion conglomerate that
is in the league of the Fortune 500 companies. The Aditya Birla Group has a strong
presence across various financial services verticals as a part of the Aditya Birla Financial
Services Group (ABFSG) that include life insurance, fund management, distribution &
wealth management, security based lending, insurance broking and private equity.

Company has a strong network of 600 sub brokers & Direct Selling Agents in 416 cities
and towns across India, sub brokers and direct selling agents are focused business people
with a drive to succeed, equipped with expertise and support provided by us. We have
seen many success stories in the past and hope to continue to the same path of growth.

Aditya Birla Money Limited offers you immense scope as a Direct Selling Agent (DSA)
to generate attractive revenues, without any upper ceiling by marketing our bouquet of
products including,

• Internet Equity and Derivative Trading Accounts

• Internet Commodity Trading Accounts
• Gold Harvest Scheme

Equity & Derivative trading account – Internet & Branch

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Introduce clients to trade online and earn a share of the brokerage. Clients will be able to
trade on both NSE and BSE simultaneously across equity and derivatives segments. We
have state-of-the art technology and a dedicated team of staff to support clients. Our
clients enjoy highly competitive brokerage and excellent trading inputs from our
accomplished Research team.

Commodity trading account – Internet & Branch

Commodity trading has immense scope in view of the improving international commodity
trading scenario. Aditya Birla Money Limited has an excellent trading platform for trading
on NCDEX & MCX, at branch level and also on Internet. Clients also benefit from the
research reports offered by us.

GOLD HARVEST SCHEME

This scheme enables investors to derive the benefits of buying gold (Minimum 100 grams
and multiples thereof) in futures on commodity exchanges by locking in the price at the
current level. This is a highly beneficial scheme for investors who plan to invest in gold on
an installment basis.

The clients can enter into this scheme by paying just Rs.25,000/- as initial margin along
with duly filled in application form. The balance payment towards the 100 grams of gold
can be made in installments of Rs.10000/- or Rs.5,000/- or Rs.3,500/- depending on the
scheme duration.

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 ABML’S PRODUCTS

EQUITY

 Provides online investing along with Secure Electronic Integrated Broking Service
and a seamless and rich online trading experience to customers, offers a choice of 2
trading platforms customized on the basis of investment needs i.e. SpeedEx and Classic

EQUITY TRADING ON THE BASIS OF:

 DELIVERY: In this type of trading the investors have to pay the full price of the
stock and the stocks are deposited in their demat account. There is no predefined time
limit in case of the delivery based trading for selling the stocks

 INTRADAY: In this type of trading the investors have to pay the full price of the
stock and the stocks are deposited in their demat account. There is no predefined time
limit in case of the delivery based trading for selling the stocks

DERIVATIVES

Derivatives are investments which have no value of their own and derive their value from
underlying assets or stock

They mainly have three features which differentiate them from shares

• They have a particular lot size

• A time period associated with them

• Right and possession with the holder

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COMMODITIES

Commodity is raw or primary products and is traded on regulated commodities exchanges,

in which they are bought and sold in standardized contracts.

It comprises of:

 Oil

 Agro-products

 Seeds

 Metals

 gold

The indices for commodities are:

 MCX

 NCDEX

CURRENCY

Foreign exchange rates, like any other asset class move depending on various factors, like
demand supply, interest rate parity, trade and capital flows, speculators taking positions,
clients hedging risk arising from their trade and capital flows etc. Introduction of
Currency Futures complete the suite of instruments available for trading and hedging to
the Indian resident. The strong correlation that foreign exchange has to interest rates,
equity flows and commodities translate to opportunities to trade currency futures
independently or in conjunction with equities, commodities like gold or oil etc

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 CHAPTER 2 LITERATURE REVIEW

OVERVIEW

The Indian retail brokerage industry consists of companies that primarily act as agents for the
buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a
commission or transaction fee basis.
It has two main interdependent segments: Primary market and the Secondary market.

Evolution of the Indian Brokerage Market

The Indian broking industry is one of the oldest trading industries that had been around even
before the establishment of the BSE in 1875. Despite passing through a number of changes in
the post liberalization period, the industry has found its way towards sustainable growth. The
evolution of the brokerage market is explained in three phases: pre1990, 1990-2000, post
2000.

Early Years

The equity brokerage industry in India is one of the oldest in the Asia region. India had an
active stock market for about 150 years that played a significant role in developing risk
markets as also promoting enterprise and supporting the growth of industry.

The roots of a stock market in India began in the 1860s during the American Civil War that
led to a sudden surge in the demand for cotton from India resulting in setting up of a number
of joint stock companies that issued securities to raise finance. This trend was akin to the
rapid growth of securities markets in Europe and the North America in the background of
expansion of railroads and exploration of natural resources and land development.

14
Bombay, at that time, was a major financial centre having housed 31 banks, 20 insurance
companies and 62 joint stock companies.

In the aftermath of the crash, banks, on whose building steps share brokers used to gather to
seek stock tips and share news, disallowed them to gather there, thus forcing them to find a
place of their own, which later turned into the Dalal Street. A group of about 300 brokers
formed the stock exchange in Jul 1875, which led to the formation of a trust in 1887 known
as the “Native Share and Stock Brokers Association”.

A unique feature of the stock market development in India was that that it was entirely driven
by local enterprise, unlike the banks which during the pre-independence period were owned
and run by the British. Following the establishment of the first stock exchange in Mumbai,
other stock exchanges came into being in major cities in India, namely Ahmedabad (1894),
Calcutta (1908), Madras (1937), Uttar Pradesh and Nagpur (1940) and Hyderabad (1944).
The stock markets gained from surge and boom in several industries such as jute (1870s), tea
(1880s and 1890s), coal (1904 and 1908) etc, at different points of time.

Beginning of a new equity culture

A new phase in the Indian stock markets began in the 1970s, with the introduction of Foreign
Exchange Regulation Act (FERA) that led to divestment of foreign equity by the
multinational companies, which created a surge in retail investing. The early 1980s witnessed
another surge in stock markets when major companies such as Reliance accessed equity
markets for resource mobilisation that evinced huge interest from retail investors.

A new set of economic and financial sector reforms that began in the early 1990s gave further
impetus to the growth of the stock markets in India. As a part of the reform process, it
became imperative to strengthen the role of the capital markets that could play an important
role in efficient mobilisation and allocation of financial resources to the real economy.
Towards this end, several measures were taken to streamline the processes and systems
including setting up an efficient market infrastructure to enable Indian finance to grow further
and mature. The importance of an efficient micro market infrastructure came into focus
following the incidence of market abuses in securities and banking markets in 1991 and 2001
that led to extensive investigations by two respective Joint Parliamentary Committees.

15
The Securities and Exchange Board of India (SEBI), which was set up in 1988 as an
administrative arrangement, was given statutory powers with the enactment of the SEBI Act,
1992. The broad objectives of the SEBI include

• to protect the interests of the investors in securities

• to promote the development of securities markets and to regulate the securities
markets

The scope and functioning of the SEBI has greatly expanded with the rapid growth of
securities markets in India in the last fifteen years.

Following the recommendations of the High Powered Study Group on Establishment of New
Stock Exchanges, the National Stock Exchange of India (NSE) was promoted by financial
institutions with an aim to provide access to investors all over the country. NSE was
incorporated in Nov 1992 as a tax paying company, the first of such stock exchanges in India,
since stock exchanges earlier were trusts, being run on no-profit basis. NSE was recognized
as a stock exchange under the Securities Contracts (Regulations) Act 1956 in Apr 1993. It
commenced operations in wholesale debt segment in Jun 1994 and capital market segment
(equities) in Nov 1994. The setting up of the National Stock Exchange brought to Indian
capital markets several innovations and modern practices and procedures such as nationwide
trading network, electronic trading, greater transparency in price discovery and process
driven operations that had significant bearing on further growth of the stock markets in India.

Faster and efficient securities settlement system is an important ingredient of a successful

stock market. To speed the securities settlement process, The Depositories Act 1996 was
passed that allowed for dematerialisation (and rematerialisation) of securities in depositories
and the transfer of securities through electronic book entry. The National Securities
Depository Limited (NSDL) set up by leading financial institutions, commenced operations
in Oct 1996. Regulations governing selection of various types of market intermediaries as
depository participations were made. Subsequently, Central Depository Services (India)
Limited promoted by Bombay Stock Exchange and other financial institutions came into
being.

Rapid Growth

16
The last decade has been exceptionally good for the stock markets in India. In the back of
wide ranging reforms in regulation and market practice as also the growing participation of
foreign institutional investment, stock markets in India have showed phenomenal growth in
the early 1990s. The stock market capitalization in mid-2007 is nearly the same size as that of
the gross domestic product as compared to about 25 percent of the latter in the early 2000s.
Investor base continued to grow from domestic and international markets. The value of share
trading witnessed a sharp jump too. Foreign institutional investment in Indian stock markets
showed continuous rise reaching about USD10 bn in each of these years between FY04 to
FY06. Stock markets became intensely technology and process driven, giving little scope for
manual intervention that has been the source of market abuse in the past. Electronic trading,
digital certification, straight through processing, electronic contract notes, online broking
have emerged as major trends in technology. Risk management became robust reducing the
recurrence of payment defaults. Product expansion took place in a speedy manner. Indian
equity markets now offer, in addition to trading in equities, opportunities in trading of
derivatives in futures and options in index and stocks. ETFs are showing gradual growth.
Within five years of introduction of derivatives, Indian stock markets now are ranked first in
stock futures and fourth in index futures. Indian stock markets are transaction intensive and
thus rank among the top five markets in this regard. Stock exchange reforms brought in
professional management separating conflicts of interest between brokers as owners of the
exchanges and traders/dealers. The demutualisation and corporatisation of all stock
exchanges is nearing completion and the boards of the stock exchanges now have majority of
independent directors. Foreign institutions took stake in India’s two leading domestic stock
exchanges. While NYSE Group led consortium took stake in the National Stock Exchange,
Deutsche Borse and Singapore Stock Exchange bought equity in the Bombay Stock
Exchange Ltd.

17
 Indian Brokerage Industry

India in Global Markets

The stature and significance of India is growing in the world capital markets. India is not
only attracting greater interest from world markets, but is also assuming increasing
importance in global finance.

• India is a major recipient of foreign institutional flows amongst the emerging markets.
Since the opening up of domestic stock markets to foreign investors, cumulative net
FII investments reached Rs 517 Bn by 2008 end.
• India is major destination of private equity flows into the emerging markets
• India was host to the annual meetings/conference of the World Federation of
Exchanges (2005) and International Organization of Securities Commission (IOSCO)
(2007)
• India emerged a trillion dollar market capitalisation market in 2007, and was among
the top 10 stock exchanges in the world in terms of market capitalisation
• India is amongst the top fifteen stock exchanges in the world in respect of equity
turnover
• India emerged as a leading player in commodities futures market
• India is amongst the top five in the number of transactions
• India is among the top five in respect of volume traded in Stock Index Futures and
Stock Futures
• India is one of the few markets with extensive dematerialisation of shares
• India’s T+2 securities settlement cycle is at par with the global standards
• Indian stock markets have the largest number of listings, with trading taking place in
about 2,500-3,000 stocks
• India’s most popular stock index (Sensex) is constructed on the basis of full float
methodology, one of the firsts in the Asian region and a global standard
• Indian market indices such as Sensex and CNX Nifty are listed in foreign exchanges
for trading as ETFs.

The year that was(2008)…

 Secondary market trading volumes down 33% YoY

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  FII outflows of ~USD 12 bn
 Nifty down ~36%
 Advisory transactions stable though some ground lost
 PE deals had fallen to almost half
 ECM activity down ~90%
 DCM relatively stable, though activity level were lower in second half of the FY08
due to liquidity crunch and counterparty fears
Recent Trends (2009)…
 Global risk aversion is unwinding and Confidence levels returning, being reflected in
performance of the indices
 Liquidity and credit flows improving
 Political stability and India re-rating
 FII and Domestic Flows resuming, USD 7bn FII inflow in April & May
 Secondary volumes showing early signs of uptrend, average daily volumes of Rs 800
bn vs. 620 bn in previous year

19
 Various important measures taken by the Indian Government to
improve the condition of Indian stock market.

Measures Objective Status

Allow foreign institutional Liberalization of stock market • Foreign investment up to 49% will be
investors to invest in equity to attract foreign investment allowed in these companies with a
and debt markets in order to boost economic separate FDI cap of 26% and FII cap
growth. of 23% after approval from FIPB

• Outstanding limit for FII investment in

debt securities raised from USD1.75
bn to USD2.0 bn and the same for the
corporate debt raised from USD0.5 bn
to USD1.5 bn
Expanding the product range Bring Indian market at par SEBI approved new derivative products :
offered by the stock with the international mini-contracts on equity indices, options
exchanges standards and diversify with longer life/tenure, volatility index and
product portfolio. F&O contracts, Options on Futures, Bond
Indices and F&O contracts, Exchange-
Traded Currency (Foreign-Exchange)
Futures and Options and Exchange Traded
products to cater to different investment
strategies
Allowing Indian companies to • Facilitate market • Mutual funds were allowed to invest in
issues ADRS and GDRS integration and give ADRs/GDRs and foreign securities
freedom to the companies. within the overall limit of USD4 bn
Allow Indian nationals and • Access to more funds for • Venture capital funds were allowed to
companies to invest abroad investment invest in foreign securities

20
 • Guidelines on issue of Indian
Depository Receipts (IDRs) were
issued
Divestment of government Facilitate growth through Providing minimum public shareholding
ownership privatization of 25% in all listed companies
Strengthening of institutional • To ensure transparency • SEBI permitted listed companies to
framework in primary and • Investor protection send abridged annual report to the
secondary markets • Provide a standard shareholders

framework for operations • Exclusive email ID to be given by the

Demutualization • Deregulation primary market intermediaries for

• Reduces the conflict of registering investor complaints

interest • Stock exchanges advised to update the

applicable VAR margin rates at least
five times in a day

• SEBI approved and notified the

Corporatization and Demutualization
Schemes of 19 stock exchanges
BSE and NSE to set up and To capture all information • BSE and NSE began maintaining a
maintain corporate bond relating to trading. reporting platform for corporate bonds.
reporting platforms Investor protection • BSE and NSE jointly launched a
common portal at
www.corpfiling.co.in to disseminate
filings made by companies listed in
both the exchanges.
Making PAN compulsory Strengthening KYC (Know PAN made compulsory for all categories
Your Client) of investors for opening a DEMAT
account with effect from Apr 1, 2006
Transactions necessarily Investor protection and It was made mandatory.
settled through the clearing greater control.
corporations/clearing house
Permit Gold Exchange Generate options for SEBI allowed the launch of Gold
Traded Funds companies and investors Exchange Traded Funds (GEFTs)
Introduction of mutual fund Minimize risk for investors • Mutual funds were allowed to invest in
schemes and ensure returns. ADRs/GDRs and foreign securities

21
 within the overall limit of USD4 bn
• Mutual fund trustees are required to
certify that the scheme approved by
them is a new product and is not a
minor modification of an existing
scheme/product
• SEBI Mutual Fund regulations were
amended so as to permit the launch of
Capital Protection Oriented schemes

• SEBI directed MFs to dispatch

statement of accounts to unit holders
under SIP/STP/SWP on every quarter.

22
 CHAPTER 3 OBJECTIVES AND RESEARCH
METHODOLOGY

Objectives

♦ To give idea to retail investor about the concept of fundamental analysis of

shares – the safest approach for investing in stock market.

♦ To give an overview of the Indian brokerage industry.

♦ To evaluate the causes for share market fluctuations both in terms of volumes

and price.

♦ To learn different patterns of investment

♦ To disseminate the improvement suggested by the customer to the

organization.

♦ To evaluate the advantages and disadvantages of the various schemes

launched by a Brokerage firm on itself.

♦ To understand Customer behavior in investment pattern

♦ Pyramids of customers and their interest I investment

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 Research Methodology

Research Methodology is a way to systematically solving the research problem. It may be

understood as a science of studying how research is done scientifically. Here we talk of
Research Methodology we not only talk of Research Methods adopted to get the desired
results but also consider the logic behind these methods. The well defined Methodology
means all the methods to views of the business profile, market segmentation to analyses
the data.

SOURCES OF DATA

This research is based mostly on secondary sources .

Methodology –(OTJ-On the job)

Methodology of the project starts with –

• In the first phase we are trained and they teach us different things about market.
• After that they conduct a mock viva, in this they ask about the real life problem faced
by the customers.
• They provide leads and after that we make calls.
• Then after that we have to provide details of product and convince them
• Then we have to visit them and get the formed filled from them.
• Maintaining diary of clients and contacting them at regular basis.

The next part is knowing the pattern of the banking sectors scripts. How they move with
the correspondence to the market movement and also the economy.

• Get the knowledge of technical as well as fundamental methods.

24
• Observe the patterns of the scripts.

25
 Chapter 4 Data Analysis And Interpretation

Statistical Analysis

FII & MF Activity in Equity Markets

FY09 was the first fiscal in India's history when FIIs were net sellers in Indian equities;
secondary market FII outflows for the year were Rs. 479 billion. Interestingly, FY08 was the
year of record net FII inflows of Rs. 517 billion. However, mutual funds continued to be net
buyers for the sixth consecutive year. In FY09, mutual funds were net buyers to the tune of
Rs. 66 billion, which is a 52% drop from Rs. 137 billion of net buying in FY08.

26
Equity Market Volumes:

The average daily equity market volumes for FY09 were Rs. 612 billion, down 16% from Rs.
726 billion in FY08. However, during the six years beginning FY03, the year when cash and
derivatives were fully active on both the exchanges, total market volumes have grown by
50% compounded annually. During this period, volumes in the derivatives and cash segments
have grown at a compounded annual growth rate (CAGR) of 72% and 27%, respectively. The
notable trends in customer segmental volume mix that influence market volumes are as
follows:

1. The contribution of retail volumes has declined from 61% in FY08 to 55% FY09; the
retail contribution ratio has been more volatile than the other two market segments.

2. The contribution of institutional volumes, i.e. volumes from FII and domestic
institutional investors (DIIs) such as mutual funds, banks and insurance companies
has remained stable at 15% for FY08 and FY09.

3. The contribution of proprietary volumes, which include arbitrage and other

proprietary volumes of stock brokers, has increased from 24% in FY08 to 30% in
FY09.

27
Growth in average daily volumes on the NSE & BSE from FY03 to FY09 (Rupees in
billions)

Source: NSE & BSE

28
Segmental mix of total volumes (NSE & BSE combined)

2008-09

2009-10

29
 Source: NSE & BSE

Demat Accounts

Increasing Equity penetration by growth in demat accounts (in millions)

Source: CDSL & NSDL

Note:

1. Number of demat accounts in million

2. FY09 figure includes figures of NSDL as on 31 March 2009 and figures of CDSL as on 28
February 2009

3. All the above numbers indicate active accounts except of CDSL for the period between
FY00 to FY05, which are total number of demat accounts with CDSL .The number of demat

30
accounts in the country shows the depth of equity penetration. CDSL and NSDL together
have over 15 million active demat accounts.

Capital Market
Players
Individual Clients (Broking and
Distribution) (60)

Asset Management (Traditional and

alternative) (20)

Investment Banking (Advisory, ECM)

(12)

Institutional Equities (Equities &

Derivatives) (20)

Others (Treasury, Financing, Trading

etc.)
(25)

~INR 140 bn

Figures in brackets indicate revenue size in INR bn

Source: Edelweiss Capital – Investor Presentation

31
 SWOT ANALYSIS ON BROKERAGE INDUSTRY
SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats
SWOT analysis is an important tool for auditing the overall strategic position of a business
and its environment.
STRENGTHS
• Multiples engines of growth- an
integrated financial services platform
• Well established and continuously
expanding geographical footprints
• Unique, stable and scalable business
model
• Adoption of technology — screen-
based trading, electronic matching,
and paperless securities
• Centralized operations, effective risk
management, and control on large
interconnected operations spanning
multiple locations, which is enabled
by telecom connectivity and low costs
• Accessibility of capital increases and
margin finance increases
OPPORTUNITIES
• Structure of the industry, market size,
and growth rates-huge potential in
Indian market
• Government is continuously
liberalizing the market
• Proactive and progressive nature of
Indian brokerage industry(India ranks
amongst top five globally in this
32
WEAKNESSES
• Lack of visible goodwill among minor
players
• Lack of trust on companies by
customers
• Psyche of people in India is
converging
• Companies are still running on selling
concept
• Weak infrastructural facilities
• Compliance with strict rules and
norms set by govt.
THREATS
• High degree competition
• Fluctuations in government policies
• Political framework
• Developing Indian economy
• Companies must develop and
implement physical, administrative
and technical safeguards to achieve
the following
 segment) goals:
• Economy is still growing at healthy o Ensure the security and
rate leading to investment / capital confidentiality of customer
requirement
records and information
• Huge market opportunity for wealth o Secure against any anticipated
management service providers as
threats or hazards to the
Indian wealth management business is
transforming from mere wealth security or integrity of such
safeguarding to growing wealth. information

• Leveraging technology to enable best o Secure against unauthorized

practices and processes access to or use of such

• Corporates looking at consolidation / information that could result in

acquisitions / restructuring opens out substantial harm or

opportunities for the corporate inconvenience to any customer

advisory business. • Corporate espionage

33
 Exchange-wise Brokers and Sub-Brokers in Indian Stock
Exchanges
Stock Exchange Brokers Sub Brokers % Corporate
Brokers

Ahmedabad 317 119 48

Bangalore 256 156 49
Bombay 840 10691 79
Bhubaneshwar 219 17 9
Calcutta 962 88 21
Cochin 434 42 18
Coimbatore 135 22 36
Delhi 375 343 57
Gauhati 110 4 4
Hyderabad 304 199 40
Inter Connected 788 3 36
Jaipur 507 34 4
Ludhiana 293 38 29
Madhya Pradesh 174 5 20

Madras 182 115 39

Magadh 198 3 11
Mangalore 66 1 14
National SE 1014 11359 91
OTCEI 769 19 76
Pune 192 161 30
Saurashtra Kutch 426 20

UPSE 463 19 20
Vadaodara 311 41 21

Source: Securities and Exchange Board of India

34
 Major players

Comparative Financials

Rs. Crore Rs. Crore Rs. Crore

Company Name Total PAT Net
income worth
Apollo Sindhoori Capital Invsts. Ltd.(Now 122.03 21.59 45.1
ABML)
Arihant Capital Markets Ltd. 61.24 14.18 39.07
Bajaj Capital Insurance Broking Ltd. 26.05 2.87 6.99
Brics Securities Ltd. 68.01 48.89 111.78
Edelweiss Securities Ltd. 384.97 186.44 258.24
Emkay Global Financial Services Ltd. 131.79 23.5 132.26
Geojit B N P Paribas Financial Services Ltd. 208.52 48.23 233.61
India Infoline Ltd. 672.45 128.69 989.85
Indiabulls Securities Ltd. 628.31 248.66 364.02
L K P Securities Ltd. 59.06 3.46 15.66
Motilal Oswal Financial Services Limited. 34.79 17.18 399.92
Networth Stock Broking Ltd. 54.22 3.05 53.89
Reliance Capital Ltd. 952.76 1039.23 5926.97
Religare Commodities Ltd. 32.31 0.88 4.93
Total 3436.51 1786.85 8582.29

35
 Chapter 5 Findings From The Study

Performance Highlites

1. Edelweiss Securities Ltd.

Segment sales (net) Rs.( in cr.)

Agency Business 370.29
Capital Based Business 140.16

2. Indiabulls Securities Ltd.

Segment sales

Broking & Related Activities 618.05

Others 0.59

3. India Infoline Ltd.

Segment sales ( Net)

Commodities Brokerage & Related 3.57

Equity Brokerage & Related Income 156.36
Financing & Investing Income 105.49
Life Insurance Agency Income 0.65
Marketing & Online Media 3.09

4. Motilal Oswal Financial Services Ltd.

Segment sales (net)

Equity Broking & Other Related Activities

(Consolidated) 593.68

Financial Activity (Consolidated) 35.58

Investment Banking (Consolidated) 62.82

36
 5. Reliance Capital Ltd.

Segment Sales (Net)

Asset Management (Consolidated) 472.92

Consumer Finance (Consolidated) 394.58
Finance & Investments (Consolidated) 1742.76
General Insurance (Consolidated) 2346.12

6. Religare Enterprises Ltd.

Segment sales

Financial Advisory Services 1.13

Investment Operations 30.73

PRODUCT GRID FOR BROKERAGE INDUSTRY

37
 Product grid comprises of all the products offered by brokerage or securities industry. This
industry is one of major emerging industry in the country as it helps in dealing with various
financial aspects which help in building a good financial portfolio for an individual or
corporate. Product grid, in simpler terms, can be explained as the whole basket of products
offered by brokerage industry to its customers. This can further be explained by taking
various companies operating in this sector and thereby comparing the products offered by
these companies.

Motilal Reliance Karvy India Kotak India Birla Share

Oswal Money Bulls Securities Infoline Global Khan
Finance

Equities Y Y Y Y Y Y Y Y

Derivatives Y Y Y Y Y Y Y Y

Margin Y N N N N N Y N
funding

Depository Y Y Y Y Y N N Y
services

Portfolio mgt Y Y Y Y Y Y Y Y

Commodities Y Y Y Y N Y N Y
trading

Wealth mgt Y N N N N Y N N

Research Y N N Y Y Y N Y

Mf Y Y Y Y Y Y Y Y

Structured N Y N N Y N N N
products

Third party N Y Y N Y N N N
products

Insurance N Y Y N N Y N N

Real estate N Y Y N N N Y N

Tax planning N Y N N N N N N

38
Off-shore N Y N N N N N N
investments

e-broking Y Y N N Y N N N

Mortgages N N Y N Y Y N N

IPO Y Y N Y Y Y Y Y

Loans N N Y N Y Y Y N

BPO N N Y N N N N N

KPO N N Y N N N N N

Bonds N N Y N N N N N

Promoter N N Y N N N Y N
financing

Buy-back N N Y N N N Y N
financing

ESOP N N N N N N Y N
financing

Retail N N Y Y N N N N
financing

Corporate N N Y N N N Y N
financing

Asset Y N N N N N N N
financing

On-line Y Y N Y Y Y N Y

Debt market Y Y Y Y Y N N Y

Investment N N Y N N N N N
banking

In the above grid, various companies operating in brokerage sector has been taken which
helps in contributing to make it an industry. Along with the companies list of products have
been taken which are offered by different company. On Y-axis list of products has been taken
and on X-axis list of companies has been taken in order to study which product is being
offered by which company. In other words, comparison between the companies has been

39
done on the basis of products offered by them which help in establishing one firm distinct
from other.

Therefore, while comparing different companies on the basis of their product basket or
product portfolio we have seen that Equities and Derivatives are two main products offered
by each and every firm in this industry in our country. Apart from this there are huge
difference among the firms in their product offerings as there are few products which are
being offered by one company only whereas, there are few which are offered by many firms.
In the list of 33 different products, Karvy offers 21 products to its customers reaching on top
in our analysis whereas, Share Khan Limited offers only 10 products and remains at the last
position.

RECENT DEVELOPMENTS GOVERNING REGULATION OF

STOCK MARKETS

40
Systematic and streamlined regulation is the key strength and sustainability of the securities
markets. Though formal regulation of the securities markets is about 70 years old, some of
the recent developments in the financial markets are reshaping the scope and focus of the
regulation. These include -

• There is growing harmonisation of regulation across different markets. Organisations

such as International Organisation for Securities Commissions (IOSCO) are playing a
very important role in adoption of uniform principles and guidelines across the
markets.
• Markets have become more democratized with more people and institutions
participating in the market related activities.
• Securities markets are transforming from being membership driven to public
corporation following demutualization and corporatisation of stock exchanges in
mature and emerging markets.
• Two most important pieces of regulation that came into being in the recent period are
in the form of market structure reforms in the US, known more popularly as
regulation NMS, which underlines the promotion of competition across the markets
under three major principles; best price, open access and transparency. Under the new
trade-through role, in whichever market a customer placed his order, it should be able
to access the best price that is immediately and automatically available anywhere in
the national market system.
• The trade-through rule will not allow markets to ignore better priced automated
quotes displayed by the competitors. Similarly, open access to displayed prices will be
a major feature governing the competition of the markets. The regulation also
stipulates that all significant markets must display their quotations and trade reports
should be available to all interested parties on fair terms and non discriminatory
manner.
• Another equally important development is the Markets in Financial Industry Directive
(MiFiD) that will come into force from 1 Nov, 2007 and stipulates wide ranging
norms for financial institutions in the European Union. Major features of the MiFiD
include wider scope of coverage of the financial institutions and the related business
activities, greater degree of harmonization across the European markets and facilitate
cross border business and stipulated capital requirements.

41
Chapter 6 Conclusion And Recommendation

42
 Conclusion

The project is “INDIAN EQUITY BROKERAGE INDUSTRY”. So to analyze the

marketing research some important findings have been obtained about the
Indian investors and Indian investment organization. Most of the Indians are
aware about high risk and high return. So it is necessary that government will
encourage to investors to invest in Market.

Large census are not well aware of this financial instruments, they only known
with the term mutual & share are something which exit in the market. Traditional
person take it as a speculation.

Lack of awareness is declining the market of such financial product so from my

point of view proper mechanism should be adopted to make learn this census
about the product and make him able to understand the market of such product
so that they also penetrate.

Some important findings are that the women are defensive investors and small
investors want to invest their money in banks or post offices. But after research
it has found that the current economic situation and government role people are
attracting towards market investment.

Investment related organization should be transparent and they should be less

flexible. Government should guide to people about the investment Organization
and investment options because people are very conscious about the
government approval organization, because they are ready to take the risk if
government is ready to prevent or sustain them.

Aditya Birla Money Ltd has a great opportunity to increase their market potential
especially in this market situation. Most of the branded broking agencies are
coped by security exchange board of India due to their illegal works and scams
related to IPO’s. Aditya Birla Money Ltd has a unique brand name who assures to
people about the transparent work and obtaining their belief.

43
 Recommendation

Since the project is related to assess the risk profile of investor and
how to increase the market potential of “Aditya Birla Money Ltd”. So
every precise aspect like risk taking, influencing factors of
investment Organization government role, age, sex income factors
have been analyzed.

Since the problem is related to investors profiles. Market potential of

“Aditya Birla Money Ltd” therefore some recommendations are
being put for improvement.

 Investors (especially lower and middle income group should

invest some percent of their income in stock market or mutual
fund.
 Investment related organization should be transparent and
they should guide to see the mentality of investors like
attacking investors or defensive investors
 Government should monitor the stock market closely and they
should provide some guide to investors about investment

44
 BIBLIOGRAPHY

BOOKS

 PHILIP KOTLER “PRINCIPLES OF

MARKETTING”
 CR KOTHARI “ C. R. KOTHARI”

WEBSITES

www.adityabirlamoney.com

www.indiabulls.com

www.moneycontrol.com

www.nseindia.com

JOURNAL

BUSINESS TODAY “NEW EDITION”

NEWS PAPER

ECONOMIC TIMES

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