MINOR PROJECT

ON
“ANALYSIS OF CONSUMER BEHAVIOR
TOWARDS SHARE TRADING IN INDIABULLS
SECURITIES LTD”

IN

INDIA BULLS

FOR THE PARTIAL FULFILMENT OF THE BBA PROGRAM OF

G.G.S. INDERPRASTHA UNIVERSITY DELHI
SESSION- 2006-2009

Submitted By:- Under Guidance:-

NEHA VERMA Mr. RAJESH BAJAJ
Project Supervisor
B.B.A. (MARKETING)
ENROL. NO. – 0101701706

Guru Gobind Singh University

Kashmiri Gate; New Delhi

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 ACKNOWLEDGEMENTS

I Shivani Sharma student of sem-5 BBA would like to express my sincere thanks to India
bulls Securities Ltd., Delhi for giving me the opportunity to carry out the Summer
Internship Program in their organization. The whole period spent with the organization
has been of immense learning experience about the Indian Stock Market.

Preparing a project of such a kind was not an easy task in itself and I am sincerely
thankful to all those people who help me lot, in preparing and completing this project.

I am grateful to India bulls Securities Ltd. who has given me this opportunity to carry out
the project “Analysis of Consumer Behavior towards Share Trading in India bulls
Securities Ltd.” A study on investor’s perception their behavior about equities.

I sincerely thank to Mr. Vishal Kumar (Branch Manager) for providing me this
valuable learning opportunit

SHIVANI SHARMA

2
 CERTIFICATE

I, Miss. Annu Aggarwal, hereby certify that Miss. Shivani Sharma of Tecnia Institute
Of Avanced Studies of G.G.S.I.P.U [Semester V] has completed her project, titled
‘ANALYSIS OF CONSUMER BEHAVIOR’ in the academic year 2006-2009. The
information submitted herein is true and original to the best of my knowledge.

______________________

Signature Of The Project Co-ordinator

[Miss Annu Aggarwal]

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 DECLARATION

I, Miss Shivani Sharma , of Tecnia Institute of Advanced Studies of

G.G.S.I.P.U [Semester V] hereby declare that I have completed my project,
titled ‘’ in the Academic Year 2006-2009. The information submitted herein
is true and original to the best of my knowledge.

___________________

Signature of Student
[NEHA VERMA]

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 EXECUTIVE SUMMARY

Investing in equities in a market like India is speculative and involves risk that may be
greater than other types of investment strategies. Before investing an Investor should be
careful enough about him investment decision to avoid erosion of wealth. As seen in the
recent times the volatility of market is more detrimental to the retail investors as it seems
to be lucrative for speculative gains of short duration of time. Hence an investor has to
evaluate his options carefully for a prudent investment, keeping long-term horizon in
mind.

The report has tried to bring out the parameters those are of paramount importance to
general public dealing in an equity trading on day-to day and delivery base trading. The
working methodology has been discussed i.e. the data collection methods, sampling
methods and the survey questionnaire methods. Thee questionnaire prepared is designed
so as to cover a wide range of customer “touch points”

The report given a view about the investors perception that what thy think while making
investments in shares.

A sample of 100 people was selected randomly and survey was done as per the
parameters of the questionnaire. The results of every parameter have been included in
this report and shown graphically (Pie Charts, bar graphs etc.) A complete structure of the
research design has been included.

Apart from above discussed points the brief history of India bulls Securities Ltd, its
business diversification and a brief introduction about the concept of share trading.

5
 CONTENTS

S.No. Title Page No.

1. INTRODUCTION 1
1.1 OVERVIEW OF THE INDUSTRY 2
1.2 BOMBAY STOCK EXCHANGE 4
1.3 NATIONAL STOCK EXCHANGE 5
2. COMPANY PROFILE 7
2.1 PROFILE OF THE COMPANY 8
2.2 MAIN OBJECTIVE OF THE COMPNAY 12
2.3 CREDIT TRADING 13
2.4 PROBLEMS OF THE COMPANY 23
2.5 COMPETITION INFORMATION 23
2.6 SWOT ANALYSIS 30
3. RESEARCH METHODOLOGY 32
3.1 SIGNIFICANCE 33
3.2 MANAGERIAL USEFULNESS OF THE STUDY 33
3.3 OBJECTIVE OF THE STUDY 33
3.4 SCOPE OF THE STUDY 33
3.5 METHODOLOGY 33
3.6 LIMITATIONS OF THE RESEARCH 37
4. CONCEPTUAL DISCUSSION 38
5. DATA ANALYSIS 75
6. CONCLUSION 83
7. RECOMMENDATIONS 85
8. ANNEXURE 89
9. BIBLIOGRAPHY 93

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 Chapter 1

INTRODUCTION

1
 INTRODUCTION OF THE INDUSTRY

1.1 OVERVIEW OF THE INDUSTRY

The only stock exchanges operating in the 19th century were those of Bombay set up in
1875 and Ahemadabad set up in 1894. These were organized as voluntary non-profit
making organization of brokers to regulate and protect their interests. Before the control
on securities trading became a central subject under the constitution in 1950, it was a
state subject and the Bombay securities contract (CONTROL) Act of 1952 used to
regulate trading in securities. Under this Act, the Bombay stock exchanges in 1927 and
Ahemadabad in 1937.

During the war boom, a number of stock exchanges were organized in Bombay,
Ahemadabad and other centers, but they were not recognized. Soon after it became a
central subject, central legislation was proposed and a committee headed by A.D.
Gorwala went into the bill for securities regulation. On the basis of committee’s
recommendations and public discussions the securities contracts (regulations) Act
became law in 1956.

DEFINITION OF STOCK EXCHANGE

“Stock exchange means anybody or individuals whether incorporated or not, constituted

for the purpose of assisting, regulation or controlling the business of buying, selling or
dealing in securities.”

It is an association of member brokers for the purpose of self regulation and protecting
the internets of its members. It can operate only if it is recognized by the Govt. under the
securities contract (regulation) Act, 1956 the recognition is granted under section 3 of Act
by the Central Govt. ministry of finance.

2
BYELAWS

Beside the above act, the securities contract (regulation) rules were also made in 1975 to
regulate certain matter of trading on Stock Exchange. These are also byelaws of the
exchanges, which are concerned with following subjects.

Opening/Closing of the Stock Exchange, timing of trading, regulation of blank transfer,

regulation of Badla or carryover business, control of statement, and other activities of
stock exchange, fixation of margins, fixation market price or making price, regulation of
intraday (jobbing), regulation of broker trading, brokerage charges, trading rules on
exchanges, attribution and settlement of disputes, settlement and clearing of the trading
etc.

REGULATION OF STOCK EXCHANGE

The securities contract (regulation) is the basis of the stock exchange in India. No
exchange can operate legally without the Govt. permission or recognition. Stock
exchanges are given monopoly in certain areas under section 19 of the above Act to
ensure that the control and regulation are facilitated. Recognition can be granted to a
stock exchange provided certain condition are satisfied and the necessary information is
supplied to the government. Recognition can also be withdrawn, if necessary. Where
there are no stock exchanges, the government can license some of the brokers to perform
the function of stock exchange in its absence.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

SEBI was setup as an autonomous regulatory authority by the Government of India in

1988 “to perform the interest of investors in the securities and to promote the
development of, and to regulate the securities market and for matters connected therewith
or incidental thereto.” It is empowered by two Acts namely the SEBI act, 1992 and the
securities contract (regulation) Act 1956 to perform the function of protecting investor’s
right and regulating the capital market.

3
1.2 BOMBAY STOCK EXCHANGE

The stock exchange, Mumbai, popularly known as “BSE” was established in 1875 as
“The Native share and stock broker association”, as a voluntary non-profit making
association. It has an evolved over the year into its present status as the premiere stock
exchange in the country. It may be noted that the stock exchanges the oldest one in the
Asia, even older than the Tokyo Stock Exchange, which was founded in 1878.

The Exchange, while providing an effective and transparent market for trading in
securities, uphold the interest of the investors and ensure redressed of their grievances,
whether against the companies or its own member brokers. It also strives to educate and
enlighten the investors by making available necessary informative inputs and conducting
investor education programmes.

A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public

representatives and an executive director is the apex body, which decides the policies and
regulates the affairs of the exchanges.

The executive director as the chief executive officer is responsible for the day today
administration of the exchange. The average daily turnover of the exchange during the
year 2006-07 (April-March) was Rs. 6984.19 crores and average number of daily trades
15.69 lakhs.

BSE INDICES

In order to enable the market participants analysis etc., to track the various ups and
downs in the Indian stock market, the Exchange has introduced in 1986 an equity stock
index called BSE-SENSEX that subsequently became the barometer of the moments of
the share prices in the Indian Stock market. It is a “Market capitalization weighted”
index of 30 components stocks representing a sample of large, well-established and
leading companies. The base year of Sensex is 1978-79. The Sensex is widely reported
in both domestic and international markets through print as well as electronic media.

4
Sensex is calculated using a market capitalization weighted method. As per this
methodology, the level of the index reflects the total market value of all 30-component
stocks form different industries related to particular base period. The total market value
of a company is determined by multiplying the price of its stock by the number of shares
outstanding. Statisticians call an index of a set of combined variables (such as price and
number of shares) a composite Index. An Indexed number is used to represent the results
of this calculation is order to make the value easier to work with the track over a time. It
is much easier to graph a chart based on Indexed values than one based on actual values
world over majority of the well-known Indices are constructed using “Market
capitalization weighted method”.

In practice, the daily calculation of SENSEX is done dividing the aggregate market value
of the 30 companies in the Index Divisor. The keeps the Index comparable over a period
or time and if the reference point for the entire Index maintenance adjustments. SENSEX
is widely used to describe the mood in the Indian Stock Markets. Base year average is
changed as per the formula new base year average = old base year average* (new market
value/old market value).

1.3 NATIONAL STOCK EXCHANGE

The NSE was incorporated in Now 1992 with an equity capital of Rs. 25 crores. The
international securities consultancy (ISE) of Hong Kong has helped in setting up NSE.
ISE has prepared the detailed business plans and installation of hardware and software
systems. The promotions for NSE were financial institutions, insurance companies,
banks an SEBI capital market ltd., Infrastructure leasing and financial services ltd. and
stock holding corporation ltd.

It has been set up to strengthen the move towards professionalisation of the capital
market as well as provide nation wide securities trading facilities to investors.

5
NSE is not an exchange in the traditional sense where brokers own and mange the
exchange. A two tier administrative set up involving a company board and a governing
abroad of the exchange is envisaged.

NSE is a national market for share PSU bonds, debentures and government securities
since infrastructure and trading facilities are provided.

NSE-NIFTY

The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new index,
which replaces the existing NSE-100 index, is expected to serve as an appropriate Index
for the new segment of futures and options.“Nifty” means National Index for Fifty
Stocks.The NSE-50 comprises 50 companies that represent 20 board Industry groups
with an aggregate market capitalization of around Rs. 5,70,000 crores. All companies
included in the Index have a market capitalization in excess of Rs. 1000 crores each and
should have traded for 85% of trading days at an impact cost of less than 1.5%.

The base period for the close of prices on Nov 3, 1995, which makes one year of
completion of operation of NSE’s capital market segment. The base value of the Index
has been set at 1000.

NSE-MIDCAP INDEX

The NSE madcap Index or the Junior Nifty comprises 50 stocks that represents 21 abroad
Industry groups and will provide proper representation of the madcap segment of the
Indian capital Market. All stocks in the index should have market capitalization of
greater than Rs. 600 crores and should have traded 85% of the trading days at an impact
cost of less 2.5 %.

The base period for the index is Nov 4, 1996, which signifies two years for completion of
operations of the capital market segment of the operations. The base value of the Index
has been set at 1000.

Average daily turn over of the present scenario 258212 (Laces) and number of averages
daily trades 2160 (Laces).

6
 Chapter 2

COMPANY PROFILE

7
 COMPANY PROFILE

2.1 PROFILE OF THE ORGANIZATION

INTRODUCTION TO INDIABULLS

Indiabulls is India's leading retail financial services company with over 414 locations in
more than 124cities. While our size and strong balance sheet allow us to provide you
with varied products and services at very attractive prices, our over 5400 Client
Relationship Managers are dedicated to serving your unique needs.

Indiabulls is lead by a highly regarded management team that has invested crores of
rupees into a world class Infrastructure that provides our clients with real-time service &
24/7 access to all information and products. Our flagship Indiabulls Professional
Network offers real-time prices, detailed data and news, intelligent analytics, and
electronic trading capabilities, right at your finger-tips. This powerful technology is
complemented by our knowledgeable and customer focused Relationship Managers.
Indiabulls offers a full range of financial services and products ranging from Equities to
Insurance to enhance your wealth and hence, achieve your financial goals. Indiabulls
Client Relationship Managers are available to you to help with your financial planning
and investment needs. To provide the highest possible quality of service, Indiabulls
provides full access to all our products and services through multi-channels.

8
 INNOVATION IS THE KEY TO SUCCESS- PROVED BY
INDIABULLS

Sameer Gehlaut and Rajiv Rattan

Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal, friends got together to start the

company. For some years they worked in the oil field services industry. The idea to start

their own outfit on a technology platform was born in 1999 when Gagan Banga joined

the three IIT-Delhi engineers who promoted the company. These first generation

entrepreneurs knew very well that nothing small works. They didn’t want to build a small

business which would get overnight success and shut down; rather they wanted to build a

sustainable profitable business.

This idea was to target the huge untapped retail segment of the market. The first task of
course was to work out a sound business model, which was sustainable and profitable.
They soon realized the implicit strength of their model. India was toying around with the

9
idea of brokerage getting done through the internet and clients directly managing their
accounts. Around the middle of 1999, the core promoters had got together and acquired a
shut down brokerage firm from its promoters at that time. The whole idea was to get a
brokerage license from the stock exchange and a membership of the stock exchange.

In 1999-2000, there was dotcom boom, there were a lot of dotcoms coming into being, lot
of venture capitalists were funding the dotcoms business but none of the dotcom had any
revenue model so the scope of a dotcom business was immense. Indiabulls came into
existence to take advantage of this. The three promoters got together and took over a
defunct brokerage company Orbis Securities- the whole idea was to get a brokerage
license and a membership of the stock exchange. This brokerage firm was restarted and it
started making miniscule amount of revenue for the company – it basically catered to the
HNIs - High Networth Individuals(?). Immediately after this the venture capitalists were
contacted. In this there were several models, which were discussed including involving a
strategic investor. Initially the company was promoted as a dotcom company. The
promoters chose the famous Charles Schwab model, which perfectly addressed their
need to have the business on a technology platform. The idea was that since it worked in
other parts of the world, it would work here also. The company thus had clear-cut
revenue model. It was very clear in the minds of the promoters that revenue was very
important. Profitability is the key to the entire thing. The emphasis on profitability was
there from day one. Indiabulls has been profitable for every financial year beginning
2000-01 the only financial year it has not been profitable has been 1999-2000. The
company focused on the retail segment and used Internet to exploit the massive scope in
the retail segment. The company also enjoyed the first mover advantage, as at that time
there was no company catering to the needs of retail segment through Internet Sameer
Gehlaut, took over as chairman and CEO, and now looks after sales, marketing and
external relationships, while Rajiv Rattan, in the role of CFO and president, manages
operations, finance and back office.

10
THE INDIABULLS PHILOSOPHY – YOU COME FIRST

We have created a unique organization that is designed for you – the Smart Investor –.
We passionately believe in the Smart Investor who wants to make his own educated
investment choices and demands world class access to a full range of services and
products ranging from Equities to Insurance, combined with the highest level of integrity,
service and professionalism.

Indiabulls is a full service investment firm offering clients access to a tremendous range
of financial services from 414 locations across 124 cities. We have a strong team of over
4400 Client Relationship Managers focussed on serving your unique needs. Our world
class infrastructure, built with tens of crores of investment, provides our clients with real-
time service, multi-channel & 24/7 access to all information and products. As we've
expanded and developed to serve the needs of all kinds of investors, we've been guided
by one underlying philosophy: You come first.

We are proud to introduce to you Indiabulls Professional NetworkTM that offers real-
time prices, equity analysis, detailed data and news, intelligent analytics, and electronic
trading capabilities, right at your finger-tips. This powerful technology is complemented
by our knowledgeable and customer focussed Relationship Managers who are available
to help with your financial planning and investment needs.

We invite you to learn more about Indiabulls by calling 1600 11 1130 (toll free) or visit
our 135 Indiabulls Offices Nationwide or explore the services we offer through the
Indiabulls Market Trader.TM

HISTORY AND OTHER CORPORATE MATTERS OVERVIEW

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s
Orbits InfoTech Private Limited at New Delhi under the Companies Act, 1956 with
Registration No. 55 – 103183. The name of the Company was changed to M/s.
Indiabulls Financial Services Private Limited on March 16, 2007 due to change in the

11
main objects of the Company from Infotech business to Investment & Financial Services
business. It became a Public Limited Company on February 27, 2006 and the name of
Company was changed to M/s. Indiabulls Financial Services Limited. Company was
promoted by three engineers from IIT Delhi, and has attracted more than Rs.700
million as investments from venture capital, private equity and institutional investors
such as LNM India Internet Ventures Ltd., Transatlantic Corporation Ltd., Farallon
Capital Partners, L.P., R R Capital Partners L.P., and Infinity Technology Trustee Pvt.
Ltd. and has developed significant relationships with large commercial banks such as
Citibank, HDFC Bank, Union Bank, ICICI Bank, ABN Ambro Bank, Standard Chartered
Bank, Lord Krishna Bank and IL&FS. Company and there subsidiaries have facilities
from the above mentioned banks and financial institutions aggregating to Rs. 1760
million. Companies headquarters are co-located in Mumbai and Delhi, allowing it to
access the two most important regions for Indian financial markets, the Western region
including Mumbai, rest of Maharashtra and Gujarat; and the Northern region, including
the National Capital Territory of Delhi, nearby cities, parts of Haryana, Uttar Pradesh and
Punjab; and access the highly skilled and educated workforce in these cities. The
Marketing and Sales efforts are headquartered out of Mumbai; with a regional
headquarter in Delhi; and its back office, risk management, internal finances etc. are
headquartered out of Delhi, allowing our Company to scale these processes efficiently for
the nationwide network.

2.2 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 our 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

12
 and corporate finance; publish books and CD ROMs and any other information
related to the above.

3. To conduct the business of sale, purchases, 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 in debt and/or equity instruments.

2.3 CREDIT RATING

The company ranks at 82nd position in the list of most valuable companies in India has a
market capitalization of approx US $ 800 million. The consolidated net worth of the
company is approx US $ 400 million.

13
Indiabulls Securities Limited has been granted ‘PR1+’ rating for its unsecured short
term borrowing program of Rs. 300 million. Vide letter dated May 5, 2007 the rating
agency has increased the unsecured short term borrowing limit to Rs. 350 million
maintaining the ‘PR1+’ rating. ISL also enjoys ‘A+’ rating for medium to long term
unsecured borrowing program of Rs. 300 million. The Rating to the company has been
assigned by Credit Analysis Research Limited. As for the present issue of equity shares
of our Company, credit rating is not required.

SHAREHOLDERS AGREEMENT

Shareholders Agreement was entered into by and among our Company (formerly Orbis
Infotech Private Limited), Infinity Technology Trustee Private Limited as the trustee of
Infinity Venture India Fund, LNM India Internet Ventures Limited, Transatlantic
Corporation Limited (together the “VC Investors”) and the Promoters dated November 2,
2006. The VC Investors invested an aggregate amount of Rs. 206,000,000 in our
Company for which they were issued 55,425 equity shares at an average price of Rs.
3,716.73 per equity share. Pursuant to a letter agreement (the “Letter Agreement”) dated
May 27, 2006 between the parties to the Shareholders Agreement, each of the VC
Investors have agreed not to enforce rights that have accrued to them before the said
Letter Agreements and have agreed that the Shareholders Agreement, together with all
the rights and obligation on the parties will stand terminated immediately upon the listing
of the shares of our Company and consequent to the listing, the rights of the Shareholders
Agreement, including the rights that have arisen prior to such termination shall be
terminated. A copy of the Shareholders Agreement, and a copy of the Letter Agreement
terminating the Shareholders Agreement are available for inspection as material
documents at the corporate offices of our Company.

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Key Competitive Strengths

DIVERSE BRANCH NETWORK

Since Company inception in FY 2006 Company and its subsidiaries have grown from a
single location to a nationwide network spread over 414 Offices in 124 cities. They have
a pan India distribution networks for the purpose of distribution of financial products and
services. Such a diverse and integrated network provides a centralized platform to there
clients.

BOUQUET OF FINANCIAL PRODUCTS AND SERVICES

Company and its subsidiaries offer various financial services and products ranging from
equity, F & O and wholesale debt, mutual fund, insurance and IPO distribution, equity
research analysis, depository services to cater to the specific needs of the retail and
institutional investors thus providing all these services in a single platform.

Advanced Technology team that delivers market leading product innovation

There ongoing investment in technology is a key element in expanding there product and
service offerings, enhancing there delivery systems, providing fast and consistent client
service, reducing processing costs, and facilitating there ability to handle significant
increases in client activity without a corresponding rise in risk and staff. Company and its
subsidiaries have an in-house technology team of 27 people comprising of several
engineers. The in-house technology team has been responsible for developing the
technology products for operating at a large scale with efficient back office systems. The
application of technology allows Company and its subsidiaries to build scaleable product
and service offerings. The in-house technology team developed one of the first Internet
trading platforms in India, one of the first in-house real-time CTCL link with NSE.
Company and its subsidiaries introduced integrated accounts with automated gateways
with client bank accounts so that they can transfer funds to and from their bank account
to their brokerage account with the Company. This has enhanced customer ability to
access their funds for market related activities. The in-house technology team has good

15
expertise to create mission critical applications and in the maintenance and upkeep of
high transaction processing of there web-site.

Strong Sales and Marketing Teams with continuous reinvestment and training

Company’s relationship manager channel (through a team of 4400 Relationship

Managers as on july 30, 2007) offers a single point contact to retail customers whereby
their high net worth clients have separate relationship managers catering to them. These
managers offer personalized services to the customers helping build strong and
continuing relationships with them. Also, our marketing associate channel helps
Company and its subsidiaries in client acquisitions at minimal costs with client loyalty.
The marketing associate’s channel also helps Company and its subsidiaries in increasing
their penetration in smaller town and cities.

STRONG CROSS SELLING OPPORTUNITIES

With 414 branches spread over 124 cities all over India and variety of financial products
and offerings coupled with online, relationship manager & marketing associate channels,
Company and its subsidiaries have strong cross product selling opportunities thus
providing a multi-channel delivery systems to there diverse client base of 3,25,000 clients
as on July 10, 2007.

STRONG TEAM OF EXPERIENCED PROMOTERS

Indiabulls has a strong team of promoters who are engineers from Indian Institute of
Technology and have several years’ experience in financial services industry. They
believe that their strong technical experience will help them in achieving our key
business strategies.

LEADING PRODUCT INNOVATION AND MARKETING STRATEGIES

Management is innovative and nimble and has historically introduced many new and
innovative products to the market place that have played a significant role in their

16
growth. Company’s relationship manager model has introduced private banking
experience to the clients. The relationship managers are trained and incentives to work
with their client base and enhance ability to cross sell and leverage the large client base.
Indiabulls have launched marketing associate model, which replaces the traditional sub-
broker model with an authorized person that client can appoint independently and provide
them with the benefit of their trading, clearing and servicing strengths. Its equity analysis
product provides clients with unbiased research. Company plans to continuously innovate
and introduce market leading products and services to add to its competitive advantage.

WELL CAPITALIZED PLAYER, WITH STRONG BANKING RELATIONSHIPS

AND CREDIT RATINGS

Indiabulls consolidated net worth is Rs. 1023.19 million making us a well capitalized
companies. The Company and ISL have received sanctioned facilities of Rs. 1760 million
from 11 leading commercial banks and financial institutions. The details of the banking
relationships as of June 24, 2007 are as follows:

ABILITY TO COMBINE PEOPLE & TECHNOLOGY IN UNIQUE WAYS

They provide multiple distribution channels by combining people and technology. Clients
can visit one of the 414 offices in 124 cities or access via telephone, call centre or online
channel. Web enabled tools such as technical analysis, information, news, interactive web
based programs and tools and back office solutions for clients and marketing associates;
Power Indiabulls an order entry, routing and management technology through
technology platform, for actively- trading investors.

Strong market presence and increased market share leads to virtuous cycle of
growth and profitability

They’re growing client base and market share have increased their market presence,
brand recognition enhanced their profitability and increased the available credit facilities
from the banks further strengthening its strong balance sheet. Company’s brand and
profitability allows them to recruit good and efficient employees, compensate them

17
attractively and provides the flexibility toes for investments in the business and
technology systems. These attributes in turn have a positive effect on the growth of its
client base thereby increasing its market share, leading to higher profits and credit
facilities and thus forming a virtuous circle.

KEY BUSINESS STRATEGIES

Their focus on the client has allowed Company and its subsidiaries to offer a range of
services that have changed the investing landscape and created a new model of financial
services that melds people and technology to provide an integrated human assisted
technology interface service for investors who range from self-directed full-time active
investor to those who prefer to deal with through a marketing associate in smaller towns
and cities. Their key strategies include:

 Defend and maintain their differentiation as the firm that delivers ethical and useful
services

 Build and expand “investing insight” through product offerings such as Equity
Analysis which is objective,

 Uncomplicated and not driven by commission

 Give clients new levels of choice tailored to their desire for help, tools for investing
their assets, their willingness to pay for additional services and the level of business
they can do with the company.

 Provide clients with tools, relationship managers and choices that support their
desired investment outcomes. Indiabulls has developed a client specific approach as a
core element of its business strategy and are constantly focusing on acquiring new
clients and expanding their customer base. They believe that the strong secular
growth of the Indian financial Markets, due to increased household penetration of
financial assets; increasing liquidity and market capitalization of Indian Markets, led

18
 by the listing of many public sector entities; and the increasing affluence of Indian
households and savers provides an impetus to the growth perspective.

They believe that this diversification and growth strategy will continue to produce results
and allow Company and its subsidiaries to grow business at a rapid pace irrespective of
market conditions. In addition, management believes that the growth of the Indian
financial markets, due to increased household penetration of financial assets; increasing
liquidity and market capitalization of Indian markets, led by the listing of many public
sector entities; and the increasing affluence of Indian households and savers, favors our
long term growth outlook.

The table below encapsulates the financial metrics on an annual basis, and compares that
with the Market trading volume.

(NSE Yearly Trading Volume is taken as representative of Market activity).

The core pillars of our business strategy are discussed below:

Increase the number of Client Relationships

They are focused on increasing the number of client relationships through a wide network
of offices throughout India and having more number of relationship managers to service
these relationships. They plan to grow their business by growing the number of client
relationships. During a downturn of the markets they believe that increased number of
client relationships will add stability to their earnings.

Offer Diversified Financial Products & Services – Capture Greater Share of Wallet

Company and its subsidiaries offer to their clients a wide range of financial services and
products allowing the clients to leverage their relationship with Indiabulls and get
products suiting their varied needs. This strategy allows them to gain “share of wallet” of
the clients’ consumption of financial services. They offer to the client a comprehensive
product offering and are able to increase their revenues per client by selling different

19
products to the same client. Indiabulls offer equity, debt & derivatives brokerage, IPO
distribution, mutual funds and insurance products. Their strategy is to increase the
number of client relationships and then leverage those client relationships into offering in
a whole suite of financial products.

Multiple Channels – Enhance Customer Experience and Opportunities to interact

with us

Company’s clients can access their products and services through 414 offices spread
across 124 cities; through operator assisted call Centers; or through their website
www.indiabulls.com; or through their respective relationship managers or through
marketing Associates. These multiple channels provide flexibility to the clients and allow
them to utilize their existing business Relationship with them through any channel from
any part of India. Company’s strategy is to provide the most convenient, efficient and
value added channel to the client at the lowest possible cost, and allow the clients with
choice and varied access points. Indiabulls believe that their multiple channel strategy has
been particularly effective in the affluent segment where many sophisticated clients like
to have a close-by office they can access and yet have the flexibility of Internet account
management, transactions and electronic funds transfer and settlement.

Relationship Manager driven sales model, provide high quality service and exploit
cross-sell opportunities

Company’s clients benefit from the personal attention and advice of the trained and
motivated relationship managers. All its relationship managers are qualified and educated
professionals, who have been extensively trained in-house to provide the products and
services to the clients. These relationship managers are encouraged to develop long-term
relationships with the clients and can access a variety of resources within the Company,
such as insurance specialists, research services and others to add value to their clients.
Most of the clients have dedicated relationship managers irrespective of the channel they
use.

20
LOW COST AND HIGHLY SCALABLE BUSINESS

Indiabulls has utilized the technologies available and have constantly invested in products
and innovations to provide an enhanced experience to its customers. The benefits of such
infrastructure include integrated customer trading account with depositary services;
electronic gateway for instant funds transfer to and from the bank to the brokerage
account; and comprehensive client systems that track all activity in various segments.
They believe that technology and systems are one of the key competitive edges in terms
of lowering their operating costs; managing the business; reducing risk and providing an
enhanced experience to the clients with superior service standards.

BROKERAGE OFFERING

Company’s retail equity business primarily covers secondary market equity broking. It
caters to the needs of individual Indian and Non-resident Indian (NRI) investors. They
offer broker assisted trade execution and automated online investing and trading facilities
to their customers. Automated online investing and trading includes automated order
placement and execution of market and limit equity orders; and advanced trading
platforms for active traders. All investors have full access to real - time quotes,
personalized portfolio tracking, charting and quote applications, real-time market
commentary, real-time quotes and news.

ONLINE AUTOMATED CHANNEL

Automated Online Business contributes more than 34.6% of its overall revenues. They
control more than 20% market share in the online business. Clients are able to obtain
financial information and execute trades on an automated basis through their online
channel using product offerings like Power Indiabulls and Indiabulls Market Trader.
This channel is designed to provide added convenience for clients and minimize its costs
of responding to and processing routine client transactions. Online channels include the
Indiabulls Group Professional Network that provides access via their web-site
www.indiabulls.com to information and trading service on the Internet. Additionally,
Power Indiabulls online trading system is designed for the high volume trader and

21
provides enhanced trade information and order execution integrated software-based
trading platforms. While most client transactions are completed through the online
channel, they continue to stress the importance of blending the power of the Internet with
personal service to create a full-service client interface. They offer an online portal where
the clients can execute securities purchase and sales transactions through the Internet.

This covers the Equity, Debt & Derivatives segment in the Indian securities market.
With an objective of assisting our customers in taking investment decisions, the portal
also provides financial information on various companies listed. For executing a
transaction clients can directly log on to our website without requiring any assistance
from offline intermediaries

THIRD PARTY FINANCIAL PRODUCTS OFFERING

They distribute third party products and services through our comprehensive retail
distribution network. The products offered include third party insurance, mutual funds
and initial and secondary public offerings. They have a pan India retail distribution
network, comprising 7000 relationship managers and 414 branches spread over 124 cities

SOME OF THE UNIQUE FEATURES ARE:

 Trading via branch network, telephones and Internet account. That is Both online
and offline (by telephone).

 Automated Extended Margin Trading Facility.

 Integrated Trading and Depositary Account.

 Technology transforming desktop into NEAT like terminal for Internet trading.

 One Screen for both Cash and Derivatives Trading.

 Facility to Buy Today & Sell Tomorrow itself.

22
  Equity Research Department which studies the market and provides information.

 Up-to-date news, data and analysis via Indiabulls.com.

 Equity Analysis Report to support your investment decisions.

2.4 PROBLEMS OF THE ORGANIZATION

• The other of India Bulls is that they give more attention to HNIs (high networth
individuals) as compared to retail investors or individuals; this is why volumes of
trading at India Bulls are less as compared to its competitors.

• Most of the processing and clarifications (account opening, payments, etc) are routed
to the head office in Mumbai due to lack of decision –making powers of local
branches which delays the speedy execution of decision

2.5 COMPETITION INFORMATION

5paisa.com

Company Background

Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000 e-
broking was started under the brand name of 5 paisa.com. Apart from offering online
trading in stock market the company offers mutual funds online.It also acts as a
distributor of various financial services i.e GOI securities, Company Fixed Deposits,
Insurance.Limited ground network, present in 20 Cities.

Online Account Types

• Investor Terminal : Investors / Students

• Trader Terminal : Day Traders / HNI’s

23
PRICING FOR RETAIL CLIENTS

Investor Terminal

• Account Opening: Rs 500

• Demat 1st Yr: Rs 250

• Initial Margin: Rs 2500(Compulsory)

• Min Margin Retainable: Rs 1000

• Brokerage:

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

PRICING FOR HNI CLIENTS

Trader Terminal

• Account Opening: Rs 500

• Demat 1st Yr: Rs 250

• Initial Margin: Rs 5000(Compulsory)

• Min Margin Retainable: Rs 1000

• Brokerage:

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

24
 (Negotiable to 0.05% each side & 0.25%)

• Account Access Charges

Monthly Rs 800, adjustable against Brokerage

Yearly Rs 8000, adjustable against brokerage

Deal Clinchers v/s 5 Paisa

• Downtime

Recent past 5 paisa Trader Terminal (T.T) is experiencing high frequency

downtime between 3 – 3:30 p.m due to server load (as their T.T is feature heavy
compared to Speetrade charting)

• Manual Accounting

The 5 paisa accounting system is manual, Online fund transfer through bank is not
credited instantly. Limit is provided EOD for shares sold from DP, or call Similarly limit
released for shares sold under BTST is manual Delay in receiving pay-out of clear funds
from trading to Bank Account

• Min Account Balance

Concept of Min Rs 1,000 to be maintained in form of cash / securities to keep

account active. This can be withdrawn only on closure of account.

Kotakstreet

Company Background

Kotakstreet is the retail arm of kotak securities. Kotak Securities limited is a joint venture
between Kotak Mahindra Bank and Goldman Sachs

25
Online Account Types

•Twin Advantage / Green Channel: 2 DP’s, Limit against shares

•Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction

•High Trader: 6 Times Exposure Cash & Derivatives, Auto sq off 2:55

PRICING OF KOTAK

•Account Opening: Rs 500

•Demat: Rs 22.5 p.m

•Initial Margin: Rs 5000(Compulsory)

•Min Margin Retainable: Rs 1000

•Brokerage Slab wise: Higher the volume, lower the brokerage. Even older customers
(on 0.25% & 0.40%) have been moved to the slab wise structure.

Deal Clinchers v/s Kotakstreet

•Rigid Account Opening Terms

No Flexibility of A/c opening charges (Rs 500) + Compulsory margin Rs 5000/-

Account opening free with Rs 10,000 Margin OR competitor Contract Note.

•No Customization of commercial Terms

No Flexibility in Leverage – Dependent on Type of Account ( 4 to 6 times only)

No flexibility in Brokerage, driven by slab structure

•Many Other Charges

26
 Rs 22.5 p.m towards DP AMC charges

DP incoming charges extra, 0.02%

Rs 1,000 as retainable Margin to keep account active

Rs 25 per call after 20 calls for the month

•Restricted Access to Terminal like product

KEAT Desktop restricted distribution on payment of Rs 500, Non refundable

ICICIDirect

Company Background

ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an affiliate of

ICICI Bank Limited and the Website is owned by ICICI BankLimited

Account Types

•ICICI Direct e-invest Account: Plain Vanilla Account with focus on 3 in 1 advantage.
Differentiated in services within the account

1. Cash on spot

2. MarginPlus

Premium trading interface of ICICI Direct Link is given to DBC partners and
HNI’s

•Account Opening: Rs 750

•Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr.
These schemes are introduced 3-4 times a year.

27
•Demat: NIL, 1st year charges included in Account Opening Plus a facility to open
additional 4 DP’s without 1st yr AMC

•Initial Margin: Nil

•Brokerage: All brokerage is inclusive of stamp duty and exclusive of other taxes. Slab
wise brokerage ranges from 0.75% to 0.25% depending on volume.

Deal Clinchers v/s ICICI Direct

•Poor online Interface

Slow website interface with no real-time quotes creates dissatisfaction among high
frequency traders

•Margin trading restriction

The margin trading system is available up to 2:45 p.m, with outstanding net positions
under margin segment automatically squared off at any time between 2:45 – 3:30 p.m.
Thus no control of square off price.

•Morning Trades Issue

Being one of the websites with largest no of after hour orders which are pushed 1 st thing
in the morning, creates a choking of orders to the exchange, causes delay of
confirmations for new order placed during the early morning trades.

•Restriction of BTST

The sale of shares purchased is restricted to T+1 day and is not permitted on T+2 Day.

28
•No leverage for Delivery trades

Delivery is restricted to the total money allocated into the trading account.

•No flexibility on leverage on Intra-day trades

The leverage of 4 times is available for intra- day trades.

•Restriction of Bank Account

The choice of bank is restricted to ICICI Bank.

•Higher Brokerage rates with slabs

The delivery brokerage is pegged at 0.75% and trading at 0.10% each side, this makes is
very unviable for customers dealing in large volumes. Although progressively the
delivery and trading brokerage reduce as volumes go up.

2.6 SWOT ANALYSIS

STRENGTHS

The `do-it-yourself' framework of online share trading offers retail investors the three
benefits of transparency, access and efficiency. Paperwork diminishes significantly, and
no more painful trips to your broker to check if everything's in order. Online trading has
made it possible to universalize access to retail investors. This was earlier very difficult,
as the cost of servicing often-outweighed transaction volumes. Online brokerage ranges
between 0.05-0.20 per cent of the value of transactions for non-delivery-based trades, and
between 0.25-0.95 per cent for delivery-based trades. Once major investments in online
infrastructure are over and done with - and with the economies of scale coming into play
- it is expected that brokerage rates would head further downwards.

29
WEAKNESSES

Every thing in the world has a flip side to it - Transaction velocity is crucial. And more
often than not, connections are lousy. There's also a degree of investor skepticism about
online payment and settlement mechanisms in spite of all the encryption and fire walling
brought into play. Time and technology will soon assuage these concerns, which hark
back to the `physical' days.

OPPORTUNITIES

You have some money to dabble with. Trading shares on BSE/NSE has always been your
dream. When will you ever find the time? And besides, the hassle of finding a broker is
not easy. This is your main opportunity.

Realizing there is untapped market of investors who want to be able to execute their own
trades when it suits them, brokers have taken their trading rooms to the Internet. Known
as online brokers, they allow you to buy and sell shares via Internet.

THREATS

On to some threat perception - Domestic funds, foreign institutional investors and

operators comprise the three main market constituents. And all three include term
investors as well as opportunists in their pecking order. Some, for instance, hitch their
fate with what the FIIs are up to.

30
 Chapter 3

OBJECTIVE AND
RESEARCH
METHODOLOGY

31
 RESEARCH METHODOLOGY

2.1 SIGNIFICANCE

The main significance of the project is to study the preferences and perceptions of
investors regarding various financial products from the stable of India bulls
Securities Ltd.

2.2 MANAGERIAL USEFULNESS OF THE STUDY

This project is very useful to study investor’s behavior towards different attributes
such as risk, return, liquidity etc. of investment in Equities.

2.3 OBJECTIVE

To study the issues and challenges that investor’s face while making investment
in share market. To study the preferences and perceptions of investors regarding
various financial products from the stable of Indiabulls Securities Ltd. so that the
firm can benefit from the findings of the report in launching any new investment
product in future. To study the consumers bahaviour in respect of investment in
shares Trading. To study about Risk Management with the help of equities.

2.4 SCOPE OF THE STUDY

To study the consumers bahaviour in respect of investment in shares Trading.

2.5 METHODOLOGY

The methodology section is the blue print for researcher activity and specifies
bow the investigator intents to study the people or describe social settings. In
other words the methodology section make explicit the study desire and
constitutes the “how to do it” phase.

32
The project study has been conducted by collecting primary data only using
structured questionnaire. No secondary data is used.

I have put my best possible effort to do this research and collect the necessary
information to learn about this topic thoroughly.

DATA COLLECTION

The data collected was a primary & secondary in nature. Primary data was
collected using structured questionnaire. The questionnaire has been designed for
the target group to get the best amount of data possible keeping in view the
importance and authenticity of the information and convenience of the
respondent. The selection of investor was predetermined in nature Personal
contacts were established to conduct a face-to-face interview. Interview was
conducted under strict supervision to maintain the standards of the data collected.

Type of Research: - Descriptive research

Descriptive research includes Surveys and fact-finding enquiries of different kinds.

The main characteristic of this method is that the researcher has no control over the
variables; he can only report what has happened or what is happening.

DATA SOURCES

There are two types of data.

Primary Data The data that is collected first hand by someone specifically for
the purpose of facilitating the study is known as primary data. So in this research
the data is collected from respondents through questionnaire.

Secondary Data For the company information I had used secondary data like
brochures, web site of the company etc. The Method used by me is Survey
Method as the research done is Descriptive Research.

33
RESEARCH INSTRUMENTS

Selected instrument for Data Collection for Survey is Questionnaire.

QUESTIONNAIRE DESIGN/FORMULATION

Questionnaire: - A questionnaire consists of a set of questions presented to

respondent for their answers. It can be Closed Ended or Open Ended

Open Ended: - Allows respondents to answer in their own words & are difficult to
Interpret and Tabulate.

Close Ended: - Pre-specify all the possible answers & are easy to Interpret and
Tabulate.

IMPORTANCE SCALE

A scale that rates the importance of some attribute.

RATING SCALE

A scale that rates some attribute from “highly satisfied ” to “highly unsatisfied “
and “very inefficient” to “very efficient”

SAMPLING UNIT: -

Who is to be surveyed? The marketing researcher must define the target population
that will be sampled. The sample Unit taken by me; General public of different age
group, different gender and different profession

SAMPLING FRAME:-

The source from which the sample is drawn

34
Sampling Technique: -

How should the respondent be chosen? In the Project sampling is done on basis of
Probability sampling. Among the probability sampling design the sampling
design chosen is stratified random sampling. Because in this survey I had stratified
the sample in different age group, different gender and different profession

Sample Size/ Population Size: - How many people should be surveyed?

My sample size is 100

RESEARCH DESIGN

Research design is a specification of methods and procedures for acquiring the

information we need to solve the problems. Research design was adopted for the
purpose of collection and analysis of data in a manner aimed at getting relevant
information. It was conceptual structure within which research was conducted,
collected, measured and analyzed.

RESEARCH IDEA

To know the market scene of trading and Investment in equities through India
bulls securities Ltd.

RESEARCH QUESTION

What is the market trend regarding investment? What difficulties and challenges
investors are facing while making investments?

RESEARCH DESIGN

“To get an insight into the mind of investors regarding trading and investment in
Equities”

35
 “To get an insight into the mindset of investors regarding the importance assigned
to different attributes such as risk, return, liquidity etc. of various investment
channels such as equities. In the report this tries to understand the investor’s
behavior while trading.”

“To study the preferences and perceptions of investors regarding various financial
products from the stable of India bulls Securities Ltd. so that the firm can benefit
from the findings of the report in launching any new investment product in
future.”

3.6 LIMITATIONS OF THE RESEARCH

 To study share market is a very vast topic and the search is just limited to a small
portion.

 Due to the reluctant nature of the respondents it was not an easy task to collect
relevant information from them.

 Sometime it was difficult to make the respondents understand the purpose of the
survey.

 Busy schedule of the respondents was also a major hindrance to establish a contact
with them.

 It may be possible the information provided by them is not true.

36
 Chapter 4

CONCEPTUAL
DISCUSSION

37
 CONCEPTUAL DISCUSSION

INTRODUCTION AND CONCEPT OF SHARE TRADING

Trading in shares is old phenomena its regulation had been started when securities
contract act had been formed in 1956. Transfer of resources from those with idle
resources to others who have a productive need for them is most efficiently achieved
through the securities market. It provides a channel for reallocation of savings to
investments.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) is a regulatory

governing body of security market. The SEBI Act 1992 was enacted to empower SEBI
with statutory powers for:

(a) Protecting the interests of investors in securities.

(b) Promoting the development of the securities market

(c) Regulating the securities market

Its regulatory jurisdiction extends over corporate in the issuance of capital and
transfer of securities. It has powers to register and regulate all the market all market
intermediaries and also to penalize them in case of violations of the provisions of the
ACT, rules and regulations made there under. SEBI has a full autonomy and authority to
regulate and develop an orderly securities market.

The share market can be segmented in two parts one is Primary Market another is
Secondary Market.

38
 Financial market can be divided into following four sub-markets

Financial Market

Financial Market

Money Market Capital Market

Primary capital Secondary capital

Market Market

Primary Money Secondary Money

Market Market

PRIMARY MARKET

It provides opportunity to issuers of securities government as well as corporate to raise

resources to meet their requirements of investments. In this market companies issue fresh
security sin exchange of funds through public issues or private placements. The market
design for primary market is provided in the provision of Companies Act, 1956 which
deals with issues, listing and allotment of securities. The investors have to apply the
shares by filling the application form issue by the company along with the application

39
money. According to Disclosure and Investor Protection guidelines of SEBI, 1992
company has to disclose all the necessary information regarding pricing of issues, listing
requirements, disclosure norms lock-in-period for promoters contribution, contents of
offer documents pre and post issue obligations etc.

Company can issue shares at face value, at premium or at discount. Another method of
pricing which is now days common is issuing the securities through online system of the
stock exchange has to comply with the section 55 to 68a of the companies Act, 1956 and
SEBI guidelines 2007. The company is required to enter in to an agreement with the
stock exchanges which have the requisite system for online offer of securities. The
advantages for this new system are:-

(a) The investors part with money only after allotment.

(b) It eliminates refunds except in case of direct applications.

(c) It reduces the time taken for issue process

SECONDARY MARKET

Secondary market is the place for sale and purchase of existing securities. It enables an
investor to adjust his holdings of securities in response to changes in his assessment about
risk and return. It enables him to sell securities for cash to meet his liquidity needs. It
essentially comprises of the stock exchanges which provide platform for trading of
securities and a host of intermediaries who assist in trading of securities and clearing and
settlement of trades. The securities are traded, cleared and settled as per prescribed
regulatory framework under the supervision of the exchanges and oversight of SEBI.

TRADING MECHANISM

Earlier trading on stock exchanges in India used to take place through open outcry
without use of information technology for immediate matching or recording of trades.
This was time consuming and inefficient. This imposed limits on trading volumes and

40
efficiency. In order to provide efficiency, liquidity and transparency National Stock
Exchange introduced a nation wide on line fully automated screen based trading system
where a member can punch in to the computer quantities of securities and the prices at
which he likes to transact and the transaction is executed as soon as it finds a matching
sale or buy order from a counter party. Screen based trading electronically matches orders
on a price/time priority and hence cuts down on time, cost and risk of error, as well as on
fraud resulting in improved operational efficiency. It enables market participants,
irrespective of their geographical locations to trade with one another and it provides equal
access to everybody.

NSE has main computer which is connected through Very Small Aperture Terminal
(VSAT) installed at its office. The main computer runs on a default tolerant STRATUS
mainframe computer at the exchange. Brokers have terminals installed at their premises
which are connected through VSATs. An investor informs a broker to place an order on
his behalf.

41
 PRODUCTS AND SERVICES

FUNCTIONAL AREAS OF INDIABULLS

The product range offered by Indiabulls includes

• Equity Analysis

• Equities & Derivatives

• Depository Services

• Commodities

• Loans

• Real Estate

INDIABULLS EQUITY ANALYSIS

Building and maintaining your ideal portfolio demands objective, dependable

information. Indiabulls Equity Analysis helps satisfy that need by rating stocks
based on carefully selected, fact-based measures. And because we're not focused on
investment banking, we don't have the same conflicts of interest as traditional
brokerage firms. This objectivity is an important difference in our ratings.

What is Indiabulls Equity Analysis?

 An Equity Rating approach is objective and easy to understand

 Indiabulls Equity Analysis provides clients with an objective stock rating system
for more than 500+ stocks

 An unbiased approach to help in deciding which shares to buy and sell.

42
  Includes third party opinions to facilitate more informed investing decisions.

FEATURES OF INDIABULLS EQUITY ANALYSIS

This feature of Equity Analysis provides its clients in short and precise the company’s
background, stock price, asset class, ratings along with the 3rd party opinions. Following
are the parameters:

OVERVIEW:

Contains precise information about the industry (cement, pharmaceutical, IT, etc), current
stock price, asset class (large cap; mid cap; small cap) and 52 week high-low.

COMPANY BACKGROUND /DETAILS:

 Services and products offered

 Client profile

 Core competency

 Achievements and its relative position (market share) in the industry.

1. EQUITY RATINGS:

Ratings are based on a set of parameters, which are as follows:

 Fundamentals - Assessed on parameters like net profit margin and ROE (Return on
Equity).

 Valuation - Assesses the attractiveness of a particular stock. Higher the current value
of the company, lower is its future attractiveness.

43
  Risk - Assessed on parameters like price volatility, liquidity of the stock, debt/equity
ratio, etc.

 Momentum - Assesses the potential of the stock to keep performing at a stronger

than market level in the future. The more the number of buy/buy-hold
recommendation the better the momentum rating for the company.

2. CURRENT CONSENSUS OPINION:

Perspective from the viewpoint of the Analyst which are used to generate ratings for each
company (scrip wise). This includes the following:

 Third party opinions

 Only for companies researched by some analysts

 Parameters include Buy, Buy/Hold, Hold, Weak/Hold, Sell, No opinion

3. FUNDAMENTAL INFORMATION :

Under this parameter the company’s share is compared with the industry and market
which is based on the following parameters:

 Revenue: Income generated from sales of the product.

 Market capital : Number of shares * market price

 Price/sales: Stock's current price / revenue per share

 Profit margin(%): This parameter is an indicator of profitability which is

calculated as: Net earnings after taxes/revenues

44
 ROE (%) Return on Equity : This is useful in comparing the profitability of a
company to other firms in the same industry and this calculated as: Net
income/shareholder’s equity

 Long Term Debt/Equity: A measure of financial leverage indicating the

proportion of equity and debt used by the company to finance its assets.

4. PEER ANALYSIS:

The Scrip is compared with it peers with respect to various parameters like revenue,
growth P/E and the analyst Consensus.

This includes the following:

 Revenue: Income generated from sales compared to its peers.

 Growth %: Growth measured in terms of percentage which is compared to its peers

in the same industry.

 P/E: PE Ratio is calculated as the current market price of a share divided by the
earnings per share (EPS). Higher P/E multiple would indicate the investor’s
willingness to pay more for the stock relative to its earnings which is reflected in
a high growth %.

 Analyst consensus: The Analyst views are mentioned under this category.

5. GROWTH EXPECTATIONS AND VALUATION MEASURES

This parameter is based on the following valuations:

 Annual EPS Trend

 Current P/E multiples

45
 Valuing Potential Growth

ANNUAL EPS TREND:

 EPS: The EPS is arrived by dividing the net profit by the number of shares in the
company. The ratio shows the kind of price that investors are willing to pay for each
rupee of earnings.

 Indiabulls Equity Analysis provides the clients with a measure of the companies
future profitability with the help of forecasted EPS, which is derived from historical data.

 It shows the trend of the annual EPS generated.

CURRENT P/E MULTIPLES

 P/E: It measures the stock ‘price relative’ to its earnings. PE Ratio is calculated as
the current market price of a share divided by the earnings per share (EPS).

 It includes trailing data, which indicates last 4 quarters along with the estimated
financials.

 Here the higher P/E multiple would indicate the investor’s willingness to pay
more for the stock relative to its earnings which is reflected in a high growth %.

 It is useful to compare the P/E ratios of companies in the same industry, market,
or against the company's own historical P/E. This explains the use of this ratio in case of
peer analysis and the comparative analysis with respect to the industry and the market as
a whole.

46
VALUING POTENTIAL GROWTH

 PEG: The PEG (price/earnings to growth) ratio is a tool that can help investors find
undervalued and overvalued stocks.

(a). If PEG =1 - then market is pricing the stock to fully reflect the stock's EPS
growth.

(b). If PEG > 1 - then the stock is possibly overvalued or that the market
expects future EPS growth to be greater than what is currently in the
market.

(c). If the PEG < 1 - it is a sign of a possibly undervalued stock or that the
market does not expect the company to achieve the earnings growth that is
reflected in the market.

B. DEPOSITARY SERVICES

Indiabulls is a depository participant with the National Securities Depository

Limited and Central Depository Services (India) Limited for trading and
settlement of dematerialized shares. Indiabulls performs clearing services for all
securities transactions through its accounts. We offer depository services to create
a seamless transaction platform – execute trades through Indiabulls Securities and
settle these transactions through the Indiabulls Depository Services. Indiabulls
Depository Services is part of our value added services for our clients that create
multiple interfaces with the client and provide for a solution that takes care of all
your needs.

SCHEDULE OF CHARGES

• NSDL

• CDSL

47
C. PERSONAL LOANS

Offers the shortest route to a loan with minimum paperwork and procedures. With
Easymoney, you can avail of easy loans for a minimum of Rs.10, 000 to a
maximum amount of Rs.1,00,000.

FEATURES OF EASYMONEY ARE:

 Flexible loan tenor of up to 4 years (i.e. 1 month to 48 months).

 Loans available from a minimum of Rs.10,000 up to a maximum of Rs.100,000.

 Easy monthly repayment through equated monthly installments (EMI).

 Mediclaim Insurance bundled with every loan you avail.

 Easy documentation and quick disbursal.

 You take today and you can pay it tomorrow with no penalties

DOCUMENTS REQUIRED:

 Residence Proof

 Identity Proof

 Income Proof

D. EQUITY & DERIVATIVE

Equity Business caters:

 Needs of independent investors.

48
  Active traders

 Non-Resident Indian (NRI) investors.

INDIABULLS OFFERS:

 Broker assisted trade execution

 Automated online investing

 Access to all IPO's.

Indiabulls offers the purchase and sale of securities, which includes Equity, Derivatives
and Commodities Instruments listed on National Stock Exchange of India Ltd (NSEIL),
The Stock Exchange, Mumbai (BSE) and NCDEX.

TYPES OF ACCOUNTS

 Indiabulls Signature Account - Comprehensive services including research and

investing guidance for independent investors.

 Power Indiabulls - Indiabulls is dedicated to empower Active Traders through

personal service and advanced trading technology.

 Non-Resident Indian (NRI) Investor Services - With an extensive range of

investment products, you will discover an unwavering commitment to helping you invest
in India.

All of this comes to you backed by your Relationship Manager available to you 24x7.

 Indiabulls is India's leading retail financial services company with 414 locations
spread across 124 cities.

49
 Over 4400 Client Relationship Managers are dedicated to serving your unique
needs.

 Is complemented by our knowledgeable and customer focussed Relationship

Managers.

 Provides our clients with real-time service & 24/7 access to all information and
products.

 Indiabulls offers a full range of financial services and products ranging from
Equities to Insurance to enhance your wealth and hence, achieve your financial goals.

POST REGISTRATION SERVICES:

 Deliver and receive cheques and securities

 Obtain market information

 Place orders

 Get access to IPOs via the Book Building route as well as to all the fixed price
issues.

DOCUMENTS REQUIRED FOR TRADING ACCOUNT AND

D-MAT A/C

 2-passport size photograph.

 Photocopy of Income Tax Permanent Account Number (PAN) Card - If you do

not have a PAN, then you would be required to give a declaration to that effect and fill
form 60.

50
 IDENTITY PROOF - PHOTOCOPY OF ANY OF THE
FOLLOWING:

 Passport

 PAN Card

 Voter ID

 Driving License

 Ration Card

 Address Proof - Photocopy of any one of Driving License / Passport/Ration

Card/Voter Card/ Bank Statement.

FEATURES OF POWER INDIABULLS

(It is a unique offering by the company which helps an investor to trade online).

An investor can avail this feature by paying a fee of Rs. 750; with this he can track all the
listed scripts at NSE.

The features include:

 Live Streaming Quotes

 Fast Order Entry

 Tic by Tic Live Charts

 Technical Analysis

 Live News and Alerts

51
 Extensive Reports for Real-time Accounting

E. INDIABULLS RESOURCES LTD

Indiabulls Resources Ltd, a 100 per cent subsidiary of Indiabulls Financial Services
Ltd., has been established with the objective of evolving as an independent oil company
over time. The immediate short-term goal is to partner with oil companies who are
willing to come to India and bid in the current NELP-6 round.

Through its group companies, Indiabulls is also engaged in real estate development. The
company is in the process of developing modern commercial complexes in the heart of
Mumbai. Indiabulls Estates Pvt Ltd. the real estate arm of Indiabulls Financial
Services, will set up an integrated township spread across 100 acres in Sonepat, 15 km
from Delhi.

52
 EQUITY MARKET AND DERIVATIVE MARKET

What is equity ?

Financing a company through the sale of stock in a company is known as equity

financing. Alternatively, debt financing (for example issuing Bonds) can be done to avoid
giving up shares of ownership of the company. Unofficial financing known as trade
financing usually provides the major part of a company's working capital (day-to-day
operational needs). Trade financing is provided by vendors and suppliers who sell their
products to the company at short-term, unsecured credit terms, usually 30 days. Equity
and debt financing are usually used for longer-term investment projects such as
investments in a new factory or a new foreign market. Customer provided financing
exists when a customer pays for services before they are delivered, e.g. subscriptions and
insurance.

EQUITY MARKET

Public equity markets are those where corporates raise resources through IPOs by getting
listed in the stock exchanges. Public equity markets are subjected to a wide range of
governance, disclosure, transparency and compliance norms set by the securities
exchanges commissions/government agencies and also the self-regulatory functions set
by the exchanges themselves. Institutional and retail investors mostly use this channel.

The distinct advantages of the public equity capital are:

a. Lower cost of capital for the firm

b. Provide liquidity for current stockholders

c. Shift monitoring costs for private lenders

d. Firm can learn from information contained in the stock price movements.

53
However, public equity capital has some costs too. These include

a. Disclosure of proprietary information

b. Agency costs of outside equity

c. Costs of reporting/filing with regulators/exchanges

d. Costs of corporate control

e. Under-pricing

A few features generally observed in the respect of the IPO markets include:

 Typically, IPO prices are below the level that they reach on the market a few
days or weeks later, when more public information is available (under pricing).
However the extent of under-pricing will narrow with several companies coming
up for listing.

 Each IPO generates beneficial information externalities for other companies

that are about to go public.

 Privatized companies tend to list in public equity markets that offering better
legal protection of shareholders.

 The decisions to go public are affected by firms’ ownership structure. When

company has only one owner or when banks holds majority shares, companies are
less likely to prefer public equity.

54
PUBLIC EQUITY CAPITAL

Governments:

The scope of government in further development of public equity markets could consist
of:

 Extend the realm of regulation to other markets as well

 Extend fiscal support to corporates accessing public equity markets

 Evolve policy framework that will streamline compliance requirements and thereby
costs of regulation

 Refine regulation so as to make it cohesive, comprehensive and more integrated.

 Choice of public equity markets in case of privatization and divestment process of

government stake.

DERIVATIVE MARKET

A derivative security can be defined as a security whose value depends on the values of
other underlying variables. Very often, the variables underlying the derivative securities
are the prices of traded securities. In fact, a derivative transaction helps cover risk, which
would arise on the trading of securities on which the derivative is based and a small
investor, can benefit immensely.

Let us take an example of a simple derivative contract:

• Ram buys a futures contract.

• He will make a profit of Rs 1000 if the price of Infosys rises by Rs 1000.
• If the price is unchanged Ram will receive nothing.
• If the stock price of Infosys falls by Rs 800 he will lose Rs 800.

55
As we can see, the above contract depends upon the price of the Infosys scrip, which is
the underlying security. Similarly, futures trading has already started in Sensex futures
and Nifty futures. The underlying security in this case is the BSE Sensex and NSE Nifty.

DERIVATIVES AND FUTURES ARE BASICALLY OF 3 TYPES:

• Forwards and Futures

• Options
• Swaps

FORWARD CONTRACT

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

buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No
cash is exchanged when the contract is entered into.

ILLUSTRATION 1:

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

ILLUSTRATION 2:

Ram is an importer who has to make a payment for his consignment in six months time.
In order to meet his payment obligation he has to buy dollars six months from today.
However, he is not sure what the Re/$ rate will be then. In order to be sure of his
expenditure he will enter into a contract with a bank to buy dollars six months from now

56
at a decided rate. As he is entering into a contract on a future date it is a forward contract
and the underlying security is the foreign currency.

The difference between a share and derivative is that shares/securities is an asset while
derivative instrument is a contract

What is an Index?

To understand the use and functioning of the index derivatives markets, it is necessary to
understand the underlying index. A stock index represents the change in value of a set of
stocks, which constitute the index. A market index is very important for the market
players as it acts as a barometer for market behavior and as an underlying in derivative
instruments such as index futures.

THE SENSEX AND NIFTY

In India the most popular indices have been the BSE Sensex and S&P CNX Nifty. The
BSE Sensex has 30 stocks comprising the index which are selected based on market
capitalization, industry representation, trading frequency etc. It represents 30 large well-
established and financially sound companies. The Sensex represents a broad spectrum of
companies in a variety of industries. It represents 14 major industry groups. Then there is
a BSE national index and BSE 200. However, trading in index futures has only
commenced on the BSE Sensex.

While the BSE Sensex was the first stock market index in the country, Nifty was
launched by the National Stock Exchange in April 1996 taking the base of November 3,
1995. The Nifty index consists of shares of 50 companies with each having a market
capitalization of more than Rs 500 crore.

FUTURES AND STOCK INDICES

For understanding of stock index futures a thorough knowledge of the composition of

indexes is essential. Choosing the right index is important in choosing the right contract

57
for speculation or hedging. Since for speculation, the volatility of the index is important
whereas for hedging the choice of index depends upon the relationship between the
stocks being hedged and the characteristics of the index.

Choosing and understanding the right index is important as the movement of stock index
futures is quite similar to that of the underlying stock index. Volatility of the futures
indexes is generally greater than spot stock indexes.

Everytime an investor takes a long or short position on a stock, he also has an hidden
exposure to the Nifty or Sensex. As most often stock values fall in tune with the entire
market sentiment and rise when the market as a whole is rising.

Retail investors will find the index derivatives useful due to the high correlation of the
index with their portfolio/stock and low cost associated with using index futures for
hedging

UNDERSTANDING INDEX FUTURES

A futures contract is an agreement between two parties to buy or sell an asset at a certain
time in the future at a certain price. Index futures are all futures contracts where the
underlying is the stock index (Nifty or Sensex) and helps a trader to take a view on the
market as a whole.

Index futures permits speculation and if a trader anticipates a major rally in the market he
can simply buy a futures contract and hope for a price rise on the futures contract when
the rally occurs. We shall learn in subsequent lessons how one can leverage ones position
by taking position in the futures market.

In India we have index futures contracts based on S&P CNX Nifty and the BSE Sensex
and near 3 months duration contracts are available at all times. Each contract expires on
the last Thursday of the expiry month and simultaneously a new contract is introduced for
trading after expiry of a contract.

58
EXAMPLE:

Futures contracts in Nifty in July 2007

Contract month Expiry/settlement

July 2007 July 27

August 2007 August 24

September 2007 September 28

On July 27

Contract month Expiry/settlement

August 2007 August 25

September 2007 September 28

October 2007 October 26

The permitted lot size is 100 or multiples thereof for the Nifty. That is you buy one Nifty
contract the total deal value will be 100*3000 (Nifty value)= Rs 3,00,000.

In the case of BSE Sensex the market lot is 50. That is you buy one Sensex futures the
total value will be 50*4000 (Sensex value)= Rs 2,00,000.

The index futures symbols are represented as follows:

BSE NSE

BSXJUN2007 (June contract) FUTDXNIFTY28-JUN2007

BSXJUL2006 (July contract) FUTDXNIFTY28-JUL2007

BSXAUG2006 (Aug contract) FUTDXNIFTY28-AUG2007

59
OPTIONS

Stock markets by their very nature are fickle. While fortunes can be made in a jiffy more
often than not the scenario is the reverse. Investing in stocks has two sides to it –a)
Unlimited profit potential from any upside (remember Infosys, HFCL etc) or b) a
downside which could make you a pauper.

Derivative products are structured precisely for this reason -- to curtail the risk exposure
of an investor. Index futures and stock options are instruments that enable you to hedge
your portfolio or open positions in the market. Option contracts allow you to run your
profits while restricting your downside risk.

Apart from risk containment, options can be used for speculation and investors can create
a wide range of potential profit scenarios.

We have seen in the Derivatives School how index futures can be used to protect oneself
from volatility or market risk. Here we will try and understand some basic concepts of
options.

What are options?

An option is a contract, which gives the buyer the right, but not the obligation to buy or
sell shares of the underlying security at a specific price on or before a specific date.

‘Option’, as the word suggests, is a choice given to the investor to either honour the
contract; or if he chooses not to walk away from the contract.

To begin, there are two kinds of options: Call Options and Put Options.

A Call Option is an option to buy a stock at a specific price on or before a certain date. In
this way, Call options are like security deposits. If, for example, you wanted to rent a
certain property, and left a security deposit for it, the money would be used to insure that
you could, in fact, rent that property at the price agreed upon when you returned. If you
never returned, you would give up your security deposit, but you would have no other

60
liability. Call options usually increase in value as the value of the underlying instrument
rises.

When you buy a Call option, the price you pay for it, called the option premium, secures
your right to buy that certain stock at a specified price called the strike price. If you
decide not to use the option to buy the stock, and you are not obligated to, your only cost
is the option premium.

Put Options are options to sell a stock at a specific price on or before a certain date. In
this way, Put options are like insurance policies

If you buy a new car, and then buy auto insurance on the car, you pay a premium and are,
hence, protected if the asset is damaged in an accident. If this happens, you can use your
policy to regain the insured value of the car. In this way, the put option gains in value as
the value of the underlying instrument decreases. If all goes well and the insurance is not
needed, the insurance company keeps your premium in return for taking on the risk.

With a Put Option, you can "insure" a stock by fixing a selling price. If something
happens which causes the stock price to fall, and thus, "damages" your asset, you can
exercise your option and sell it at its "insured" price level. If the price of your stock goes
up, and there is no "damage," then you do not need to use the insurance, and, once again,
your only cost is the premium. This is the primary function of listed options, to allow
investors ways to manage risk.

Technically, an option is a contract between two parties. The buyer receives a privilege
for which he pays a premium. The seller accepts an obligation for which he receives a
fee.

61
 CALL OPTION

An option is a contract between two parties giving the taker (buyer) the right, but not the
obligation, to buy or sell a parcel of shares at a predetermined price possibly on, or before
a predetermined date. To acquire this right the taker pays a premium to the writer (seller)
of the contract.

There are two types of options:

• Call Options

• Put Options

CALL OPTIONS

Call options give the taker the right, but not the obligation, to buy the underlying shares
at a predetermined price, on or before a predetermined date.

ILLUSTRATION 1:

Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call --Premium 8 This contract
allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any time between the
current date and the end of next August. For this privilege, Raj pays a fee of Rs 800 (Rs
eight a share for 100 shares).

The buyer of a call has purchased the right to buy and for that he pays a premium.

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

62
Let us take another example of a call option on the Nifty to understand the concept better.

Nifty is at 3000. The following are Nifty options traded at following quotes.

Option contract Strike price Call premium

JUNE Nifty 3000 Rs 90

3100 Rs 65

JULY Nifty 3000 Rs 160

3100 Rs 130

A trader is of the view that the index will go up to 3100 in July 2007 but does not want to
take the risk of prices going down. Therefore, he buys 10 call of July contracts at 3100.
He pays a premium for buying calls (the right to buy the contract) for 130*10*100= Rs
130000/-.

In July 2006 suppose the Nifty index goes up to 3100. He sells the call or exercises the
option and takes the difference in spot index price which is (3100-3000) * 100 (market
lot) = 10,000 per contract. Total profit = 100,000/- (10,000*10).

He had paid Rs 130,000/- premium for buying the call option. So he earns by buying call
option is Rs 40,000/- (130,000-60,000).

63
If the index falls below 3100 the trader will not exercise his right and will opt to forego
his premium of Rs 60,000. So, in the event the index falls further his loss is limited to the
premium he paid upfront, but the profit potential is unlimited.

CALL OPTIONS-LONG & SHORT POSITIONS

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

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

HEDGING

We have seen how one can take a view on the market with the help of index futures. The
other benefit of trading in index futures is to hedge your portfolio against the risk of
trading. In order to understand how one can protect his portfolio from value erosion let us
take an example.

ILLUSTRATION:

Ram enters into a contract with Shyam that six months from now he will sell to Shyam
10 dresses for Rs 4000. The cost of manufacturing for Ram is only Rs 1000 and he will
make a profit of Rs 3000 if the sale is completed.

Cost (Rs) Selling price Profit

1000 4000 3000

However, Ram fears that Shyam may not honour his contract six months from now. So
he inserts a new clause in the contract that if Shyam fails to honour the contract he will

64
have to pay a penalty of Rs 1000. And if Shyam honours the contract Ram will offer a
discount of Rs 1000 as incentive.

Shyam defaults Shyam honours

1000 (Initial Investment) 3000 (Initial profit)

1000 (penalty from Shyam) (-1000) discount given to Shyam

- (No gain/loss) 2000 (Net gain)

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

The above example explains the concept of hedging. Let us try understanding how one
can use hedging in a real life scenario.

Stocks carry two types of risk – company specific and market risk. While company risk
can be minimized by diversifying your portfolio market risk cannot be diversified but has
to be hedged. So how does one measure the market risk? Market risk can be known from
Beta.

Beta measures the relationship between movement of the index to the movement of the
stock. The beta measures the percentage impact on the stock prices for 1% change in the
index. Therefore, for a portfolio whose value goes down by 11% when the index goes
down by 10%, the beta would be 1.1. When the index increases by 10%, the value of the
portfolio increases 11%. The idea is to make beta of your portfolio zero to nullify your
losses.

65
Hedging involves protecting an existing asset position from future adverse price
movements. In order to hedge a position, a market player needs to take an equal
and opposite position in the futures market to the one held in the cash market.

Every portfolio has a hidden exposure to the index, which is denoted by the beta.
Assuming you have a portfolio of Rs 1 million, which has a beta of 1.2, you can factor a
complete hedge by selling Rs 1.2 mn of S&P CNX Nifty futures.

STEPS:

1. Determine the beta of the portfolio. If the beta of any stock is not known, it is safe to
assume that it is 1.

2. Short sell the index in such a quantum that the gain on a unit decrease in the index
would offset the losses on the rest of his portfolio. This is achieved by multiplying
the relative volatility of the portfolio by the market value of his holdings.

Therefore in the above scenario we have to shortsell 1.2 * 1 million = 1.2 million worth
of Nifty

Now let us study the impact on the overall gain/loss that accrues:

Index up 10% Index down 10%

Gain/(Loss) in Portfolio Rs 120,000 (Rs 120,000)

Gain/(Loss) in Futures (Rs 120,000) Rs 120,000

Net Effect Nil Nil

66
As we see, that portfolio is completely insulated from any losses arising out of a fall in
market sentiment. But as a cost, one has to forego any gains that arise out of
improvement in the overall sentiment. Then why does one invest in equities if all the
gains will be offset by losses in futures market. The idea is that everyone expects his
portfolio to outperform the market. Irrespective of wh The same methodology can be
applied to a single stock by deriving the beta of the scrip and taking a reverse position in
the futures market.

Thus, we have seen how one can use hedging in the futures market to offset losses in the
cash market

Either the market goes up or not, his portfolio value would increase.

SPECULATION

Speculators are those who do not have any position on which they enter in futures and
options market. They only have a particular view on the market, stock, commodity etc. In
short, speculators put their money at risk in the hope of profiting from an anticipated
price change. They consider various factors such as demand supply, market positions,
open interests, economic fundamentals and other data to take their positions.

EXAMPLE:

Ram is a trader but has no time to track and analyze stocks. However, he fancies his
chances in predicting the market trend. So instead of buying different stocks he buys
Sensex Futures.

On May 1, 2006, he buys 100 Sensex futures @ 3600 on expectations that the index will
rise in future. On June 1, 2006, the Sensex rises to 4000 and at that time he sells an equal
number of contracts to close out his position.

Selling Price : 4000*100 = Rs 4,00,000

Less: Purchase Cost: 3600*100 = Rs 3,60,000

67
 Net gain Rs 40,000 Ram has made a profit of Rs 40,000 by taking a call on the future
value of the Sensex. However, if the Sensex had fallen he would have made a loss.
Similarly, if would have been bearish he could have sold Sensex futures and made a
profit from a falling profit. In index futures players can have a long-term view of the
market up to atleast 3 month

ARBITRAGE

An arbitrageur is basically risk averse. He enters into those contracts were he can earn
riskless profits. When markets are imperfect, buying in one market and simultaneously
selling in other market gives riskless profit. Arbitrageurs are always in the look out for
such imperfections.

In the futures market one can take advantages of arbitrage opportunities by buying from
lower priced market and selling at the higher priced market. In index futures arbitrage is
possible between the spot market and the futures market (NSE has provided a special
software for buying all 50 Nifty stocks in the spot market.

• Take the case of the NSE Nifty.

• Assume that Nifty is at 1200 and 3 month’s Nifty futures is at 1300.

• The futures price of Nifty futures can be worked out by taking the interest cost of
3 months into account.

• If there is a difference then arbitrage opportunity exists

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

Sale = 1070
Cost = 1000+30 =

68
Arbitrage profit = 1040

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

69
 BENEFITS OF TRADING WITH INDIABULLS

• Personal Relationship Manager

• Most competitive brokerage & DP charges (Delivery-0.5% and

Intraday-.005%)

• No annual maintenance charges.

• Technology transforming desktop into NEAT like terminal for internet trading.

• Trading via branch network, telephone and internet account I.e. both Online &
Offline.

• Real time Online fund Transfer & Exposure updating facility with HDFC Bank,
Citibank & ICICI Bank.

• Integrated Trading and Depository Account.

• Margin Trading of 4 times the cash deposited for delivery based trade.

• Margin Trading of 10 times the cash deposited for intraday based trade.

• Margin Trading of 2 times the approved category A based shares.

• Quality equity Research department, Which studies the market and provides
personalized information.

• Equity Analysis report to support your investment decisions.

70
 INDIABULLS-IN NEWS 2006-2007

Farallon pays Rs 88cr for 33% stake in Indiabulls arm [The Times Of India ( Jan 3,
2006 )

Merrill Lynch acquires 2% in Indiabulls [Economic Times - India ( June 29, 2006)

Amaranth to pick up 42.5% stake in Indiabulls [Economic Times - India ( June 08, 2007 )

US Fund Amaranth LLC Acquires 42.5 Percent Stake In Indiabulls IPO ...
[Business Wire -San Francisco, CA, USA ( June 07, 2007 ) ]

Toddler takes giant steps [Business India ( Feb 28-Mar 13, 2007 ) ]

Indiabulls raises $60m via GDR issue [ Sify ( Feb 25, 2007 ) ]

Indiabulls GDR priced at Rs 107 per share [Moneycontrol.com (Feb 25, 2006)]

Indiabulls prices $45mn GDR issue [Business Standard (Feb 25, 2006 ) ]

Indiabulls raises $60 mln via GDR issue - BSE [Reuters India (Feb 25, 2007)]

Indiabulls Financial prices GDR issue at US $45 million [Myiris.com (Feb 25,
2007)]

Indiabulls GDR priced at Rs 107/share [Economic Times (Feb 25, 2006)]

Indiabulls' net grows 173% in Q3 [Economic Times (Jan 13, 2006)]

Indiabulls for FII stake in Credit Services [Moneycontrol.com (Jan 13, 2007)]

Indiabulls third-quarter net jumps, income rises too [Hindustan Times (Jan 13,
2006)]

71
Indiabulls Q3 net soars 175% to Rs 18.4cr - New Delhi,India [Moneycontrol.com
(Jan 13, 2007)]

Indiabulls Q3 profits soar 173% to Rs. 18.4 crores [Sify (Jan 13, 2007)]

Indiabulls plans to hike FII limit to 100%, EGM postponed: [New Kerala (Jan 13,
2007)]

Farallon buys 33% in Indiabulls arm [The Economic Times (Jan 3, 2007)]

Farallon buys 33% in Indiabulls Credit [Business Standard (Jan 3, 2007)]

DLF and INDIABULLS JV buys DDA plot in South Delhi for 450 crores.

26 APRIL 2007

DLF and Indiabulls have acquired 35.8 acres of Residential Development under Public-
Private Partnership Project by putting in the highest bid of Rs 450.01 crores in the open
auction carried out by DDA.

Sources have indicated that the Residential Development will feature high end residential
apartments in private landscaped surroundings, and the Public-Private project will
involve the construction of housing units for Economically Weaker Section of the society
with all civic amenities. The residential development is in prime location at South Delhi
between Anand Mai Marg and Delhi-Mehrauli Road.

The residential development will be a unique project in New Delhi with beautifully
landscaped gardens and world class amenities and will feature around 750 residential
apartments in high rise buildings.

DLF and Indiabulls had also bought 3 out of 5 mills in Lower Parel in the NTC auctions.
While DLF had acquired Mumbai Textile Mills for Rs 702 crores, Indiabulls had
acquired Jupiter and Elphinstone Textile Mills for Rs 718 crores. DLF is country’s largest
real estate developer and is planning a mega issue of 10,000 crores, the largest by any

72
Indian company. To date DLF has completed and under development of over 207 million
sq ft across its residential, commercial and retail businesses with a spread of 54 million sq
ft under commercial, 19 million sq ft under retail and 134 million sq ft under residential
projects.

Recently Mr L N Mittal, the famous steel magnate and one of world’s richest man had
acquired 8.2% stake in Indiabulls subsidiary for Rs 90 crores valuing the subsidiary
at Rs 1,100 crores. On the news of winning the auction Indiabulls shares ended 12%
higher than previous closing at an all time high of Rs 279 and taking the market
capitalization of the company to more than a billion dollars. Indiabulls had earlier
reported Rs 253 crores in net profit for the last financial year.

LN Mittal buys 8% in Indiabulls Credit for 90 crores

29 MARCH 2007

Mr L N Mittal, the famous steel magnate and world’s third richest man has acquired
8.2% stake in Indiabulls Credit Services, the majority owned subsidiary of Indiabulls
Financial Services for Rs 90 crores, through LNMIIV Ltd. The investment at approx Rs
62 per share values Indiabulls Credit Services at Rs 1,100 crores.

This investment follows Farallon Capital’s two prior rounds of investments in Indiabulls
Credit Services. Recently Farallon had paid Rs 55 per share and invested $ 20 million in
the company and last year Farallon had paid Rs 22 per share to buy 33% stake for Rs 88
crores in Indiabulls Credit Services.

Mr. L N Mittal, through LNMIIV Ltd, has been an investor in Indiabulls Financial
Services, the listed company since the year 2000 when he had originally bought 61.3 lac
shares representing approx 7.52% stake in the company at an average price of Rs 6 per
share. LNM’s original investment in Indiabulls Financial Services has appreciated by
more than 40 times in 6 years, he continues to be a large shareholder in the company. The
total foreign shareholding in the company has gone up to 56.6% as per the latest stock

73
exchange filings and some of the shareholders who own more than 5% equity in the
company are Fidelity, Capital International and Merrill Lynch.

74
 Chapter 5

DATA ANALYSIS

75
 DATA ANALYSIS

ANALYSIS OF THE PREFERRED INVESTMENT AREA

The investment was broadly divided into five areas, mainly-Bank deposits. Shares,
Mutual Fund ,Real Estate and insurance plans.

45

40

35

30

25

20 No. of Respondents

15

10

0
Bank Shares Mutual Real Insurance
Deposits Funds Estates plan

 Following observations can be made on the basis of above analysis:

 Bank Deposits being the most preferred area, 43% respondents out of hundred
invested in bank deposits.

 The second preferred area was Shares as 27% respondents were investing in the share
market.

 Then preferred area was the Mutual Funds with 13% of respondents

 Real estates were the least preferred area i.e. only 7%

76
 ANALYSIS OF THE FACTORS AFFECTING THE INVESTMENT

The factors are categorized in to four parameters to know the purpose of investment made
by the investor.

15
4

52
29

High returns
Moderate Return
Low Risk
Moderate Risk

 52% respondents go invests for higher returns.

 29% respondents prefer Moderate Return for their investments.

 15% prefer moderate risk.

 Only 4% for Low risk.

77
 ANALYSIS FOR INTERMEDIATING COMPANY

These factors are categorized into brokerage, Information provided by them the exposure
limit or loan facility provided by them and their Brand Name.

40

35

30

25

20
No. of Respondents
15

10

0
Kotak Sec. Indiabulls ICICI Fortis sec othe rs
direct

 21% respondents choose Kotak Securities Ltd.

 38% respondents choose Indiabulls Securities Ltd. for trading.

 7% respondents choose ICICI direct.

 4% respondents choose Fortis.

 30% go for others.

78
 ANALYSIS OF THE FACTORS FOR BROKING HOUSE

These factors are categorized into brokerage, Information provided by them the exposure
limit or loan facility provided by them and their Brand Name.

16 12

Brokerage
Expertise Know ledge
Exposure/Loan
28 Brand name
44

 44% respondents choose their broking house on basis of information provided by

them.

 28% prefer by the exposure limit and the loan facility provided to them.

 12% by the brokerage charge by the broking house.

 16% by Brand Name.

79
 ANALYSIS OF THE INFLUENCE OF THE PAST PROFILE OF A
COMPANY

NO
42%
Yes
58%

 58% respondents say yes they study profile of the company before making
investment.

 42% respondents say no.

80
ANALYSIS OF THE REQUIREMENT OF EXPERTISE

NO
7%

Yes
93%

 93% respondents say yes, they required expertise knowledge.

 7% respondents say no.

81
 MOST IMPORTANT SERVICE PARAMETER

Service Parameters

3% 20%
Speed
42% Quality
Information
Others
35%

 The most important service parameter that came up as a result of survey is

Information i.e. the investors feel that the information contained in the service
package is the key to more profits.

 Second major parameter is Quality of service.

 20% investors feel that the quickness of service is above par than any other aspect.

82
 Chapter 6

CONCLUSION

83
 FINDINGS

The perceptions of people about share markets are very strong. But they can be
influenced, if not completely changed.

The reason people prefer staying away from the share markets is lack of confidence -
about their own understanding of the market and the very nature of the market.

The fact that stock markets themselves are volatile and wide open to changes in external
forces makes it much more difficult for people to consider them as an investment
alternative.

The right kind of campaigning directed towards increasing the awareness of people will
get new customers. But more than that, this campaign will help retain customers, which is
the key to staying ahead in the market.

Indiabulls Securities is currently one of the biggest broking houses in the country and its
strategies to penetrate further into the market will certainly take it way ahead of its
competitors.

84
 Chapter 7

RECOMMENDATIONS

85
 RECOMMENDATIONS

 INTRODUCTION PROGRAMS must be held for the sales teams before letting them
go into the field. In these induction classes the experienced sales staff employees
should share their valuable live experiences and knowledge, which they have
experienced while in field.

 Weekly magazines must be published and distributed to the investors that can help
them for making better investments.

 Sales team must be fully equipped with latest technology such as using Laptop that
can be used for making presentation to the customers especially to the corporate
clients about their product and services provided by them.

 Make your site user friendly so that more and more people know about trading and do
the same also.

 Advertisement through Canopy, help to generate leads.

 Company should advertise with a concern that has a brand name in the market.

OTHER RECOMMENDATIONS

1. Strong Need Of Brand Building

2. Promotional Strategies

3. Solid Network Required To Develop The Business Further

4. Make The Branch Self Informative

5. The RM should provide an in depth demonstration of the software and

client should be assisted regularly.

86
6. Provision of a manual for online clients for ease of operation.

7. Time lag between the complaints put and follow up should be reduced.

8. Database should be verified properly, so that repeated entries do not occur.

This will reduce inconvenience to the clients, who complained about multiple
calls received.

87
 PROMOTIONAL STRATEGIES

 Press publicity:

 Outdoor publicity:

Press publicity:

 Paper inserts

 Advertisements in newspaper (local and national).

 Interest cards distribution

 Mailers/personal invitations to selective section of the society

 Leaflets

OUTDOOR PUBLICITY:

 Banners in commercial areas and prime sites.

 Air balloons at shopping complex.

 Bus stands shelters.

 Off site ATM for developing business

88
ANNEXURE

89
 ORGANISATIONAL CHART

CHAIRMAN & CEO

Sameer Gehlant Rajeev Rattan Surabh Mital

CEO President & CEO CEO

Oivyesh Shah
Gagan Banga Head online sales
Head online sales

T.S. Muglani Ashok Sharma

Pheeta Nagpal Suresh Jain
Chief Tech Finance
Head- HR V.P
officer Controller

90
 SURVEY QUESTIONNAIRE

Name :

Address :

Phone no :

1. Where do you prefer to invest your money?

a) Bank Deposits

b) Shares

c) Mutual Funds
d) Real estate

e) Insurance Plans

2. What are the factors, which attracts you for the investment?

a) High Return b) Moderate Return

c) Low Risk d) Moderate Risk

3. Do you prefer to invest in shares?

a) Yes b) No

4. If yes, out of following, which intermediating company would you go For?

a) Kotak Securities b) Indiabulls Securities

c) ICICI d) Fortis
Securities

d) Others, please specify

5. If Indiabulls, What are the factors, which attract you to deal with Indiabulls?

6. If Others, What are the factors, which attract you, please specify?

7. What attracts you to invest in Shares?

91
a) Brokerage b) Expertise Knowledge

c) Exposures/loan d) Brand

8. On what basis do you prefer to trade in shares?

a) Daily b) Monthly

c) Yearly d) other, please specify

9. Does the companies profile matter for the investment decisions?

a) Yes b) No

10. Do you require the opinion of portfolio managers to manage your investment?

a) Yes b) No

11. What is the most important service parameter that you look for

while trading.

a) Information b) Speed

c) Quality d) Other

12. Any recommendation / Suggestion

92
BIBLIOGRAPHY

93
 BIBLIOGRAPHY

INTERNET WEBSITE

 www.indiabulls.com

 www.nseindia.com

 www.bseindia.com

 www.sebi.gov.in

 www.moneycontrole.com

JOURNALS & ARTICLES

 Economics Times

BOOKS

C.R. Kothari, Marketing Research

 NCFM W.Breen, “Low Price-Earnings Ratio & Industry Relatives”, Financial

Analysts’ Journal, July-Feburary 1968.
 W.Breen & Savage J. “Portfolio Distribution & Security Selection Models”, Journal
of Finance, December 1968.
 S.Basu, “Investment Performance of Common Stocks in Relation to Their Price-
Earning Ratios: A Test of the Efficient Market Hypothesis”, Journal of Finance, June
1977.
 Basu, Sanjoy, "The Relationship between Earnings Yield, Market Value and Return
for NYSE Common Stocks: Further Evidence," Journal of Financial Economics 12
(1983): 129-156.

 Indiabulls Broachres and Mannuals

94
95