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A report on SECURITIES MARKET

AND

TRADING MECHANISM

AND COMPARATIVE ANALYSIS FOR ANANDRATHI FINANCIAL SERVICES LTD. JAIPUR A report on Summer Internship Program 2010, Submitted towards partial fulfillment of Post Graduate Diploma In Business Management (Approved by A.I.C.T.E, Government of India), INSTITUDE OF MANAGEMENT STUDIES, GHAZIABAD Lal Quan, G.T. Road, Ghaziabad 201-009

At

ANANDRATHI FINANCIAL SERVICES LTD. C-98, 1st Floor, Subhash Marg, C Scheme, Jaipur, Rajasthan (A Regional Office of AnandRathi Financial Services Ltd.)

Under the Supervisor of Submitted By Mr. Avadh Mangal Deep

Raj Jangid Sr. Equity Manager AnandRathi Financial Services Ltd. Jaipur Ghaziabad Student IMS,

Internship Session 10th May 2010 to 10th July 2010

CARTIFICATE OF DECLARATION

I, students of PGDBM (2009-11) IIst Year, Institute of Management Studies, Ghaziabad, hereby declare that the project report on Securities Market and Trading Mechanism And Comparative Analysis For AnandRathi Financial Services Ltd. Jaipur has been done under the guidance and involvement of Mr. Avadh Mangal (Sr. Equity Manager), AnandRathi Financial Services Ltd, Jaipur and Prof. Niraj Sanghi, (Academic Professor of finance dept.), Institute of Management Studies, Ghaziabad for the period 10th May 2010 to 10th July 2010. All information and data provided in this report are collected from primary and secondary sources that are true to the best of my knowledge.

--------------------------------Deep Raj Jangid INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 2

Student Institute of Management Studies, Ghaziabad

Date:

CERTIFICATE OF COMPLETION

This is to certify that Mr. Deep Raj Jangid, Student of PGDBM (2009-2011), Institute of Management Studies, Summer Ghaziabad, Internship has successfully 2010 completed conducted his by Program

AnandRathi Financial Services Limited, Jaipur from 10th May 2010 to 10th July 2010 on project entitled, Securities Market and Trading Mechanism And Comparative Analysis For AnandRathi Financial Services Ltd. Jaipur During his summer internship program, the performance of him was excellent, based on our evaluation. We wish his bright future.

Date:

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Mr. Rajkumar Jain (Director, Regional Branch)

Mr. Vinod Pandey (HR Manager)

Mr. Avadh Mangal (Sr. Equity Manager)

(AnandRathi Financial Services Ltd.) C-98, 1ST FLOOR, SUBHASH MARG, C SCHEME, JAIPUR, RAJASTHAN (A REGIONAL OFFICE OF ANANDRATHI FINANCIAL SERVICES LTD.)

ACKNOWLEDGEMENTS I would like to express my sincere gratitude to the training heads Mr. Avadh Mangal (Sr. Equity Manager) and Mr. Jitendra Singh (Relationship Manager) AnandRathi Financial Services Ltd, Jaipur, for guiding me throughout my summer internship and research project. Her encouragement, time and effort are greatly appreciated. I would then like to thank my faculty guide, Prof. Niraj Sanghi, (Academic Professor of finance dept.) Institute of Management Studies, Ghaziabad, for all his valuable inputs and constant support towards me throughout my project and providing me an opportunity to learn outside the classroom. It was a truly wonderful learning experience. I would like to dedicate this project to my parents. Without their help and constant support this project would not have been possible. I would like to thank all my training colleagues for their valuable suggestions and support in project report. Last but not the least, I would like to thank all the respondents who offered their opinions and suggestions and sometimes critical views throughout the survey which made me constantly update myself come out with a successful project.

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ABSRACT The project aims to make a detailed study of Securities Market and its functions in context of Indian Stock exchanges (BSE and NSE) and a comparative analysis of Products of AnandRathi with some well known selected companies and in the process identify the strengths and weaknesses of AnandRathi.

The project aims to understand Indian Securities Market in context of BSE and NSE. Also understand the trading mechanism of Stock Exchanges in India. The project aims also to know primary market and secondary market.

The project consists of a detailed analysis of the comparison of various products on AnandRathi with that of the selected major players in the market.

The different selected companies apart from AnandRathi on, which the project is entirely focused, are namely: 1. 2. 3. 4. ANANDRATHI FINANCIAL SERVICES LTD. BONANZA PORTFOLIO LIMITED ANGEL BROKING LIMITED INDIABULLS SECURITIES LIMITED

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5. 6. 7. 8.

MOTILAL OSWAL SECURITIES LIMITED SHAREKHAN LIMITED INDIA INFOLINE LIMITED KARVY STOCK BROKING LIMITED Table 1: Companies for comparison

The comparative study is primarily based in terms of the various products offered by companies like online product (software and webid) and offline products, services, tips, and brokerages.

The results of the project would conclude of a detailed analysis of collected secondary data and well supported by analysis of primary data collected through a survey in the Jaipur city. The survey was mainly conducted to study the customer knowledge in Securities Market and trading products offered by various broker firms.

After a detailed study, I would find out the merits and demerits of the AnandRathi and based on those, I would suggest some recommendations to the company in areas where the company to has to really work on.

Finally I would like to interpret the results of the project by combining both the primary and the secondary data analyses then identified the areas where the company is really strong and the areas where it needs to have a second look.

The Project helped me enhance my knowledge on various technicalities of the Indian Securities Market and gave me a broader prospective of various investment opportunities available in the market.

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TABLE OF CONTENTS CHAPTER NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. CONTENTS Certification of Declaration Certificate of Completion Acknowledgement Abstract Table of Contents List of Tables List of Figure List of Abbreviation Purpose of Study Objectives of The Project Scope of the Study Limitations of The Study Research Methodology Source of Data Literature Study Capital Market Investment Instruments PAGE NO. 2 3 4 5 7 8 9 10 16 16 16 16 17 18 19 22 31

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18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37.

Organizational Structure About AnandRathi Financial Services Limited About AnandRathi Team AnandRathi Private Wealth Management AnandRathi Investment banking AnandRathi Institutional Equity Companies, Profiles Comparative Analysis of Secondary Data SWOT Analysis of AnandRathi Comparative Analysis of Primary Data Merits and Demerits of AnandRathi Findings Recommendations My Experience and Learning Conclusion Annexure - I (Questionnaire) References WebID Bibliography Glossary 6. LIST OF TABLES

34 35 39 41 44 48 50 61 64 65 70 72 74 76 78 79 82 84 85 86

S. NO. 1. 2. 3. 4. 5. 6.

TABLES Companies for Comparison Primary Market Activities Secondary Market Activities Companies for Comparison Companies for AnandRathi Financial Services Ltd with other broking firms Features of AnandRathi Financial Services Ltd

PAGE NO. 5 26 30 50 63 81

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7. LIST OF FIGURES

S.NO. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12.

FIGURES Research Methodology Capital Market Segments Primary Market Structure Derivative Market Structure Organizational Structure Evolution of Wealth Management Protection, Growth and Distribution Product Offering Service Offering Industry Coverage Aims of Questionnaire Departments in AnandRathi

PAGE NO. 17 23 23 32 34 41 42 43 43 45 65 76

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8. LIST OF ABBREVIATIONS

ADRs: American Depository Receipts ALBM: Automated Lending and Borrowing Mechanism ALBRS: Automated Lending and Borrowing under Rolling Settlement AMC: Asset Management Company AMFI: Association of Mutual Funds in India ASC: Accounting Standards Committee ATSs: Alternative Trading system B2B: Business-to-Business BIFR: Board for Industrial and Financial Reconstruction BIS: Bank for International Settlement BLESS: Borrowing and Lending Securities Scheme INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 10

BMC: Base Minimum Capital BSE: The Stock Exchange, Mumbai CBDT: Central Board of Direct Taxes CC: Clearing Corporation CCIL: Clearing Corporation of India Limited CDs: Certificate of Deposits CDSL: Central Depository Services (India) Limited CFM: Carry Forward Margin CFRS: Carry Forward under Rolling Settlement CH: Clearing House CIMC: Collective Investment Management Company CISs: Collective Investment Schemes CIVs: Collective Investment Vehicles CLF: Collateralised Lending Facility CM: Clearing Member CMIE: Centre for Monitoring Indian Economy COSI: Committee on Settlement Issues COTI: Committee of Trade Issues CP: Custodial Participant CPs: Commercial Papers CRAs: Credit Rating Agencies CRISIL: Credit Rating Information Services of India Limited CRR: Cash Reserve Ratio CSD: Collateral Security Deposit CSE: Calcutta Stock Exchange DCA: Department of Company Affairs DDBs: Deep Discount Bonds DEA: Department of Economic Affairs INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 11

DFIs: Development Financial Institutions DIP: Disclosure and Investor Protection DNS: Deferred Net Settlement DPs: Depository Participants DRR: Debenture Redemption Reserve DSCE: Debt Securities Convertible into Equity DvP: Delivery versus Payment ECB: Euro Commercial Borrowings ECNS: Electronic communication Networks EDGAR: Electronic Data Gathering, Analysis and Retrieval EDIFAR: Electronic Data Information Filing and Retrieval EFT: Eletronic Fund Transfer ELSS: Equity Linked Saving Schemes EPS: Earning Per Share ETFs: Exchange Traded Funds F&O: Futures and Options FCCBs: Foreign Currency Convertible Bonds FDI: Foreign Direct Investment FDRs: Foreign Deposit Receipts FDs: Fixed Deposits FIBV: International World Federation of Stock Exchanges FIIs: Foreign Institutional Investors FIMMDA: Fixed Income Money Markets and Derivatives Association FIs: Financial Institutions FRAs: Forward Rate Agreements FVCIs: Foreign Venture Capital Investors GDP: Gross Domestic Product GDRs: Global Deposit Receipts INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 12

GDS: Gross Domestic Savings GNP: Gross National Product GOI: Government of India G-Sec: Government Securities i-BEX: ICICI Securities Bond Index IBRD: International Bank for Reconstruction and Development ICAI: Institute of Chartered Accountants of India ICICI: Industrial Credit and Investment Corporation of India Limited. ICSE: Inter-Connected Stock Exchange of India Limited IDBI: Industrial Development Bank of India IFC: International Finance Corporation IFSD: Interest Free Security Deposit IISL: India Index Services and Products Limited IOC: Immediate or Cancel IOSCO: International Organisation of Securities Commission IPF: Investor Protection Fund IPO: Initial Public Offer IRDA: Insurance Regulatory and Development Authority IRS: Interest Rate Swap ISIN: International Securities Identification Number ISSA: International Securities Services Association IT: Information Technology ITM: In-The-Money LAF: Liquidity Adjustment Facility LIC: Life Insurance Corporation of India Limited MCFS: Modified Carry Forward System MFs: Mutual Funds MFSS: Mutual Fund Service System INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 13

MIBID: Mumbai Inter-bank Bid Rate MIBOR: Mumbai Inter-bank Offer Rate MMMF: Money Market Mutual Fund MNCs: Multi National Companies MOU: Memorandum of Understanding MTM: Mark-To-Market NASDAQ: Natioanl Association of Securities Dealers Automated Quotation System NAV: Net Asset Value NBFCs: Non-Banking Financial Companies NCAER: National Council for Applied Economic Research NCDs: Non-convertible Debentures NCDS: Non-convertible Debt Securities NCFM: NSE's Certification in Financial Markets NDS: Negotiatied Dealing System NEAT: National Stock Exchange Automated Trading NGOs: Non Government Organisations NIBIS: NSE's Internet-based Information System NIC: National Informatics Centre NPAs: Non Performing Assets NRIs: Non Resident Indians NSCCL: National Securities Clearing Corporation of India Limited NSDL: Natioanl Securities Depository Limited NSE: Natioanl Stock Exchange of India Limited OCBs: Overseas Corporate Bodies OECLOB: Open Electronic Consolidated Limit Order Book OIS: Overnight Index Swaps ORS: Order Routing System OTC: Over the Counter INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 14

OTCEI: Over the Counter Exchange of India Limited OTM: Out-of the-Money P/E ratio: Price Earning Ratio PAN: Permanent Account Number PCM: Professional Clearing Member PDAI: Primary Dealers Association of India PDO: Public Debt Office PDs: Primary Dealers PRI: Principal Return Index PRISM: Parallel Risk Management System PSUs: Public Sector Undertakings PV: Present Value QIBs: Qualified Institutional Buyers RBI: Reserve Bank of India ROCs: Registrar of Companies RTGS: Real time Gross Settlement S&P: Standard and Poor's SAT: Securities Appellate Tribunal SC(R)A: Securities Contracts (Regulation) Act, 1956 SC(R)R: Securities Contracts (Regulation) Rules, 1957 SCMRD: Society for Capital Market Research and Development SDs: Satellite Dealers SEBI: Securities and Exchange Board of India SEC: Securities Exchange Commission SGF: Settlement Guarantee Fund SGL: Subsidiary General Ledger SGX-DT: The Singapore Exchange Derivatives Trading Limited SIPC: Securities Investor Protection Corporation INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 15

SLR: Statutory Liquidity Ratio SPAN: Standard Portfolio Analysis of Risks SPV: Special Purpose Vehicle SROs: Self Regulatory Orgaisations SSS: Securities Settlement System STP: Straight Through Processing STRIPS: Separate Trading of Registered Interest and Principal of Securities SUS 99: Special Unit Scheme 99 T-Bills Treasury Bills TDS: Tax Deducted at Source TM: Trading Member TRI: Total Return Index UTI: Unit Trust of India VaR: Value at Risk VCFs: Venture Capital Funds VCUs: Venture Capital Undertakings VSAT: Very Small Aperture Terminal WAN: Wide Area Network WAP: Wireless Application Protocol WDM: Wholesale Debt Market Segment of NSE YTM: Yield to Maturity ZCYC: Zero Coupon Yield Curve

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9. PURPOSE The project is being done as a part of summer internship program of Institute of Management Study, Ghaziabad. The completion of the project is submitted towards partial fulfillment of Post Graduate Diploma In Business Management (Approved by A.I.C.T.E, Government of India). 10. OBJECTIVES OF THE PROJECT To study of Securities Market and its functions in respect of BSE and NSE. To understand working of broker firm like AnandRathi Securities Pvt. ltd. To compare the products of AnandRathi with respect of some other selected companies. To identify the strengths and weaknesses of AnandRathi and suggest areas where it could focus more and improve upon.

11. SCOPE OF THE STUDY This study aims to make an understanding of Securities Market and its trading INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 17

functions in respect of BSE and NSE. This study also aims to comparative study of the products of AnandRathi with some of major selected players in the Indian securities market. The comparative analysis is based on the empirical data collected from the Jaipur city.

12. LIMITATIONS OF THE STUDY The study aims to understand the Indian Securities Market in respect of BSE and NSE stock exchanges only. The workings of other stock exchanges are considering the same working style like BSE and NSE. The comparative study is confined only to a small segment of the entire population due to monetary and time constraints and hence the results are applicable only to the city of Jaipur. It is not always possible to evaluate companies under similar parameters since many companies deal with various businesses thus clubbing all the companies on the same parameters is not always possible.

13. RESEARCH METHODOLOGY

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Figure 1: Research methodology

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14. SOURCES OF DATA In the data collection method, I have collected both primary and secondary data to meet the objectives.

Primary Data

The primary data was collected by a survey based on the questionnaire for the comparative study to compare products of AnandRathi with some selected broker firms. This questionnaire was mainly formulated to target the investors and interest people in securities market. The number of respondents targeted was around 150 and the survey was confined to Jaipur city.

Secondary Data

The secondary data was collected directly from the companies and their websites and Internet surveys for the comparative study. Also a lot of similar research studies and journals have been referred to understand the Indian securities market.

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15. LITERATURE REVIEW

The Stock Market of India was set up in 1875. From that time onwards the Indian Stock market has grown in leaps and bounds, and has become a forceful and competent stock market in the continent. It has the same level of efficiency and organizational ability. The market caters to the huge population of India and gives them investment opportunities.

NSDL case study (2008): explained information technology revaluation in securities market. The findings are that from title based on Paper Securities to Securities in Electronic Form (dematerialization), One Single Account of investor holding all his securities, From Paper Based Title Transfer to Electronic Title Transfer.

Chatrath, Ramchander and Song (1996) examined the relationship between the Indian stock market and the stock markets of the U.S. and other developed countries using daily data for the period 1984 to 1992. They used the Bombay Stock Exchange National Index (BSENI) and the Dow Jones Industrial Average (DJIA) as representative indexes for the Indian and U.S. markets, respectively. They find that the Indian stock market had low correlations with the markets of the developed countries. Therefore, the Indian market offered diversification benefits for investors in the developed countries for the period 1984 to 1992.

Barry, Peavy III and Rodriguez (1998) examined the return characteristics of emerging stock markets along with returns to several U.S. market indexes. They conclude that investments in emerging markets increased in importance because many INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 21

investors from developed nations believe that markets in the developing countries have the potential for high returns along with increased diversification benefits. The authors find that the emerging markets do not consistently generate high returns. However, these markets continue to provide diversification benefits for investors from the developed countries. The authors find that the relative ranking of returns between developed and emerging stock markets largely depends on the time period. Therefore, optimal asset allocation between developed and emerging markets changes over time.

Arshanapalli and Kulkarni (2001) examined the relationship between the U.S. and the Indian stock markets. They explain that this relationship is important because of the transformation of the Indian economy to a more open economy over the decade of the nineties. The authors state that increased integration with developed nations is

beneficial to Indias economic prosperity, but greater integration with the world economy also makes the Indian economy more vulnerable to outside risk. Published studies that have examined calendar effects in the Indian stock market appear to be limited. Kaur (2004) reports that few studies have examined the day-of-the-week effect in the Indian stock market, and further notes the absence of studies that examine monthly seasonality in the Indian stock market. Kaur utilized two Indian stock indexes, the Bombay Stock Exchange (BSE) 30 index and the National Stock Exchange (NSE) S&P CNX Nifty stock index, to examine the day-of-the-week effect and the monthly effect. Sarma (2004) adds that very few studies have examined calendar effects during the post reform era in the Indian stock market. Sarma investigated the BSE 30, the BSE 100, and the BSE 200 stock indexes to detect the day-of-the-week effect. Utilizing Kruskal-Wallis test statistics, Sarma concluded that the Indian stock market exhibited INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 22

some seasonality in daily returns over the period January 1, 1996 to August 10, 2002. Some studies examine seasonality in the Indian stock market as part of a broader analysis of seasonality in several major emerging stock markets. For example, Fountas and Segredakis (2002) investigate They examined the monthly seasonal anomalies in eighteen major emerging equity markets, including the Indian stock market. monthly effect for the period January 1987 to December 1995. For the Indian stock market, they found August returns were significantly greater than April, May, October and November returns. Yakob, Beal and Delpachitra (2005) examined seasonal effects in ten Asian Pacific stock markets, including the Indian stock market, for the period January 2000 to March 2005. They state that this is a period of stability and is therefore ideal for examining seasonality as it was not influenced by the Asian financial crisis of the late nineties. Yakob, et al., concluded that the Indian stock market exhibited a month-of-theyear effect in that statistically significant negative returns were found in March and April whereas statistically significant positive returns were found in May, November and December. Of these five statistically significant monthly returns, November generated the highest positive returns whereas April generated the lowest negative returns.

Patel and Evans (2003) investigated seasonal patterns in the stock markets of the seven most industrialized (G7) nations. They examined seasonality for the period from January 1960 to December 2001, and found that, in all G7 countries, mean stock returns for December through May were significantly greater than mean returns for June to November. They further demonstrated that this pattern was not related to the January effect, and, unlike the January effect, INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 23

this pattern has become more prevalent in later years of their study. Keppler and Xue (2003) document seasonal price behavior for eighteen equity markets in developed countries over the period 1970 to 2001. The authors found that these markets generated Keppler and Xue refer to the substantially higher returns from November through April than over the months May through October. November- April sub-period as Good Months and the period MayOctober as Bad Months for stock market investing. Lucy and Whelan (2004) examined monthly and semi-annual behavior of the Irish stock market. In their investigation of half-year seasonality, they found returns from November to April were greater than returns for the six months May through October. This half-year effect was somewhat consistent for different sub-samples of their study.

16. CAPITAL MARKETS INTRODUCTION Markets exist to facilitate the purchase and sale of goods and services. The financial market exists to facilitate sale and purchase of financial instruments and comprises of two major markets, namely A. The capital market B. The money market The distinction between capital market and money market is that capital market mainly deals in medium and long-term investments (maturity more than a year) while the money market deals in short term investments (maturity upto a year). Capital market can be divided into two segments viz. A. Primary Market INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 24

B. Secondary Market The primary market is mainly used by issuers for raising fresh capital from the investors by making initial public offers or rights issues or offers for sale of equity or debt. The secondary market provides liquidity to these instruments, through trading and settlement on the stock exchanges. Capital market is, thus, important for raising funds for capital formation and investments and forms a very vital link for economic development of any country. The capital market provides a means for issuers to raise capital from investors (who have surplus money available from saving for investment). Thus, the savings normally flow from household sector to business or Government sector, which normally invest more than they save. A vibrant and efficient capital market is the most important parameter for evaluating health of any economy.

CAPITAL MARKET SEGMENTS

Figure 2: Capital market segments

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Primary Market: A market where the issuers access the prospective investors directly for funds required by them either for expansion or for meeting the working capital needs. This process is called disintermediation where the funds flow directly from investors to issuers.

Figure 3: Primary market structure

The other alternative for issuers is to access the financial institutions and banks for funds. This process is called intermediation where the money flows from investors to banks/ financial institutions and then to issuers. Primary market comprises of a market for new issues of shares and debentures, where investors apply directly to the issuer for allotment of shares/ debentures and pay application money to the issuer. Primary market is one where issuers contact directly to the public at large in search of capital and is distinguished from the secondary market, where investors buy/ sell listed shares / debentures on the stock exchange from / to new / existing investors. Primary market helps public limited companies as well as Government organizations to issue their securities to the new / existing shareholders by making a public issue / rights issue. Issuers increase capital by expanding their capital base. This enables them to finance their growth plans or meet their working capital requirements, etc. After the INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 26

public issue, the securities of the issuer are listed on a stock exchange(s) provided it complies with requirements prescribed by the stock exchange(s) in this regard. The securities, thereafter, become marketable. The issuers generally get their securities listed on one or more than one stock exchange. Listing of securities on more than one stock exchange, enhances liquidity of the securities and results in increased volume of trading. A formal public offer consists of an invitation to the public for subscription to the equity shares, preference shares or debentures has to be made by a company highlighting the details such as future prospects, financial viability and analyze the risk factors so that an investor can take an informed decision to make an investment. For this purpose, the company issues a prospectus in case of public issue and a letter of offer in case of rights issue, which is essentially made to its existing shareholders. This document is generally known as Offer document. It has the information about business of the company, promoters and business collaboration, management, the board of directors, cost of the project and the means of finance, status of the project, business prospects and profitability, the size of the issue, listing, tax benefits if any, and the names of underwriters and managers to the issue, etc. The issuers are, thus, required to make adequate disclosures in the offer documents to enable the investors to decide about the investment. Making public issue of securities is fraught with risk. There is always a possibility that the issue may not attract minimum subscription stipulated in the prospectus. The risk may be high or low depending upon promoters making the issue, the track record of the company, the size of the issue, the nature of project for which the issue is being made, the general economic conditions, etc. Issuers would like to free themselves of this worry and attend to their operations wholeheartedly if they could have someone else to worry on their behalf. For this purpose the companies approach underwriters who provide this service. Normally, whenever an existing company comes out with a further issue of securities, the existing holders have the first right to subscribe to the issue in proportion to their INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 27

existing holdings. Such an issue to the existing holders is called Rights issue. The price of the security before the entitlement of rights issue is known as the cum-rights price. The price after the entitlement of rights issue is known as the ex-rights price. The difference between the two is a measure of the market value of a right entitlement. An existing holder, besides subscribing to such an issue, can let his rights lapse, or renounce his rights in favour of another person (free, or for a consideration) by signing the renunciation form. The companies declare dividends, interim as well as final, generally from the profits after the tax. The dividend is declared on the face value or par value of a share, and not on its market price. A company may choose to capitalize part of its reserves by issuing bonus shares to existing shareholders in proportion to their holdings, to convert the reserves into equity. The management of the company may do this by transferring some amount from the reserves account to the share capital account by a mere book entry. Bonus shares are issued free of cost and the number of shareholders remains the same. Their proportionate holdings do not change. After an issue of bonus shares, the price of a companys share drops generally in proportion to the issue.

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Table 2: Primary market activities

Secondary Market: In the secondary market the investors buy / sell securities through stock exchanges. Trading of securities on stock exchange results in exchange of money and securities between the investors. Secondary market provides liquidity to the securities on the exchange(s) and this activity commences subsequent to the original issue. For example, having subscribed to the securities of a company, if one wishes to sell the same, it can be done through the secondary market. Similarly one can also buy the securities of a company from the secondary market. A stock exchange is the single most important institution in the secondary market for providing a platform to the investors for buying and selling of securities through its members. In other words, the stock exchange is the place where already issued INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 29

securities of companies are bought and sold by investors. Thus, secondary market activity is different from the primary market in which the issuers issue securities directly to the investors. Traditionally, a stock exchange has been an association of its members or stock brokers, formed for the purpose of facilitating the buying and selling of securities by the public and institutions at large and regulating its day to day operations. Of late however, stock exchanges in India now operate with due recognition from Securities and Exchange Board of India (SEBI) / the Government of India under the Securities Contracts (Regulation) Act, 1956. The stock exchanges are either association of persons or are formed as companies. There are 24 recognized stock exchanges in India out of which one has not commenced its operations. Out of the 23 remaining stock exchanges, currently only on four stock exchanges, the trading volumes are recorded. Most of regional stock exchanges have formed subsidiary companies and obtained membership of Bombay Stock Exchange, (BSE) or National Stock Exchange (NSE) or both. Members of these stock exchanges are now working as sub-brokers of BSE / NSE brokers.

Securities listed on the stock exchange(s) have the following advantages: The stock exchange(s) provides a fair market place. It enhances liquidity. Their price is determined fairly. There is continuous reporting of their prices. Full information is available on the companies. Rights of investors are protected. Stockbroker is a member of the stock exchange and is licensed to buy or sell securities for his own or on behalf of his clients. He charges a commission (brokerage) to the clients on the gross value of the transactions done by them. However, some of the stockbrokers, apart from buying and selling of securities for their clients for a commission, offer facilities such as safekeeping clients shares and bonds, offering INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 30

investment advice, planning clients portfolio of investments, managing clients portfolio. There are experts who believe that by identifying and processing relevant information pertaining to financials of the companies "correctly" and quickly (as compared to the market as whole), they can predict the share price movement faster than the market and thus outperform the market. Such experts are known as fundamental analysts. These experts use the fundamental approach to security valuation, for estimating the fundamental price (or fundamental price-earnings multiple) of a security. Fundamental Analysis refers to scientific study of the basic factors, which determine a shares value. The fundamental analyst studies the industry and the companys sales, assets, liabilities, debt structure, earnings, products, market share; evaluates the companys management, compares the company with its competitors, and then estimates the shares intrinsic worth. The fundamental analysts tools are financial ratios arrived at by studying a companys balance sheet and profit and loss account over a number of years. Fundamental analysis is more effective in fulfilling long-term growth objectives of shares, rather than their short-term price fluctuations. Ratios of values obtained from a companys financial statements are used to study its health and the price of its securities. The most important among these are current ratio, price- earning (P/E) ratio, earnings to equity ratio, price-book value ratio, profit before tax to sales ratio, and quick ratio. Accounting figures, which help to arrive at these ratios, include book value, dividend, current yield, earning Per share (EPS), volatility, etc. Unlike the fundamental analysts, there are other experts who believe that largely the forces of demand and supply of securities determine the security prices, though the factors governing the demand and supply may themselves be both objective and subjective. They also believe that notwithstanding the day-to-day fluctuations, share prices move in a discernible pattern, and that these patterns last for long periods to be identified by them. Such analysts are called as Technical Analysts.

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Technical analysis is a method of prediction of share price movement based on a study of price graphs or charts on the assumption that share price trends are repetitive, and that since investor psychology follows certain pattern, what is seen to have happened before is likely to be repeated. The technical analyst is not concerned with the fundamental strength or weakness of a company or an industry; he studies investor and price behaviour. Bear Market A stock market operator who expects share prices to fall in the immediate future and keeps selling (with the intention to pick up the shares later at a lower price for actual delivery), causing selling pressure and lowering the prices further is called a "Bear. The term is derived from the attacking posture of the bear, pushing downwards. Bull Market A stock market operator who expects share prices
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to rise and keeps buying (to sell the shares later at higher price), causing buying pressure and increasing the prices further is called a Bull. The term is derived from the attacking posture of

the bull, pushing upwards. Stag is a person who subscribes to a new issue with the primary objective of selling at profits no sooner than he gets the allotment. Contract Note is a document given by the stockbroker to his clients giving particulars of the securities bought / sold, rate and date of transaction and the brokers commission. The broker sends the contract note after executing the clients order as an agreement. The contract note must be carefully preserved, as it is a primary documentary evidence of clients' transactions being executed by a member of a stock exchange. In case of any dispute between them, this can be used for the purpose of arbitration or filing claims / compensation against the member of the stock exchange who has executed the INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 32

transaction. It also serves as evidence to the income tax authorities in verification of computations of short-term or long-term capital gains or losses. Buying or selling of securities of a particular company with an expectation that the prices will increase or decrease in a span of short duration with an objective to generate income on account of such fluctuations in price is called Speculation. This is an activity in which a person assumes high risks, often without regard for the safety of his invested principal, to achieve capital gains in a short time. Investing in securities with the intention of holding them for long term for realizing appreciation in the value of the securities should be the aim of the investors who wish to derive benefits from holding investments for long term. Arbitrage means buying shares on one stock exchange at a lower rate and selling the same on other stock exchange at a higher rate.

Table 3: Secondary market activities 17. Investment Instruments Investment is a deployment of funds in one or more types of assets that will be held over a period of time. Various forms of investment are available to an investor. They cover bank deposits, term deposits, recurring deposits, company deposits, postal savings schemes, deposits with non-bank financial intermediaries, Government and corporate bonds, life insurance and provident funds, equity shares, mutual funds, tangible assets like gold, silver and jewellery, real estate and work of arts, etc. Capital market instruments can be broadly divided into two categories namely Debt, Equity and Hybrid instruments. Derivative Products like Futures, Options, Forward rate agreements and Swaps. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 33

Debt: Instruments that are issued by the issuers for borrowing monies from the investors with a defined tenure and mutually agreed terms and conditions for payment of interest and repayment
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of principal. Debt instruments are basically obligations

undertaken by the issuer of the instrument as regards certain future cash flows representing interest and principal, which the issuer would pay to the legal owner of the instrument. Debt instruments are of various types. The key terms that distinguish one debt instrument from another are as follows: Issuer of the instrument Face value of the instrument Interest rate and payment terms Repayment terms (and therefore maturity period / tenor) Security or collateral provided by the issuer Different kinds of money market instruments, which represent debt, are commercial papers (CP), certificates of deposit (CD), treasury bills (T-Bills), Govt. of India dated securities (GOISECs), etc.

Equity: Instruments that grant the investor a specified share of ownership of assets of a unit of lending. The bond or debenture holder gets an assured interest only for the period of holding and repayment of principal at the expiry thereof, while the shareholder is partowner of the issuer company and has invested in its future, with a corresponding share in its profit or loss. The loss is, however, limited to the value of the shares owned by him.

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Hybrids: Instruments that include features of both debt and equity, such as bonds with equity warrants e.g. convertible debentures and bonds. Derivatives: Derivative is defined as a contract or instrument, whose value is derived from the underlying asset, as it has no independent value. Underlying asset can be securities, commodities, bullion, currency, etc. The two derivative products traded on the Indian stock exchanges are Futures and Options.

Figure 4: Derivative market structure

Futures (Index and Stock): Futures are the standardized contracts in terms of quantity, delivery time and place for settlement on a pre-determined date in future. It is a legally binding agreement between a seller and a buyer, which requires the seller to deliver to the buyer, a specified quantity of security at a specified time in the future, at a specified price. Such contracts are traded on the exchanges. Options (Index and Stock): These are deferred delivery contracts that give the buyer the right, but not the obligation to buy or sell a specified security at a specified price on or before a specified future date. At present in India, both Futures and Options are cash INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 35

Fall
settled.

08

Physical Share 18. ORGANIZATION STRUCTURE

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Figure 5: Organizational structure

ANANDRATHI FINANCIAL SERVICES LTD.

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OVERVIEW AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial services. The firm, founded in 1994 by Mr. AnandRathi, today
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has a pan India presence as well as an international presence through offices in Dubai and Bangkok. AR provides a breadth of

financial and advisory services including wealth investment insurance - all of which are supported by powerful research teams. The firms philosophy is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporates and Institutions. The firm has rapidly expanded its footprint to over 350 locations across India with international presence in Dubai, Hong Kong & New York. Founded by Mr. Anand Rathi and Mr. Pradeep Gupta, the group today employs over 2,500 professionals through out India and its international offices. AnandRathi has been named The Best Domestic Private Bank in India by Asiamoney in their Fifth Annual Private Banking Poll 2009. The firm has emerged a winner across all key segments in Asiamoneys largest survey of high net worth individuals in India. AnandRathi research expertise is at the core of the value proposition that offer to Clients. Research teams across the firm continuously track various markets and products. The aim is however common to go far deeper than others, to deliver incisive insights and ideas and be accountable for results. AR research processes incorporate quantitative areas well as qualitative analyses. This multi-pronged approach helps us to INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 38 management, corporate banking,

advisory, brokerage & distribution of equities, commodities, mutual funds and

provide superior risk- adjusted returns for our clients. AR analysts provide objective and decisive research that is designed to enable clients to make informed investment decisions. The team covers entire spectrum of financial markets from equities, fixed income, and commodities to currencies. They also cover the global markets, to give clients an unparalleled macro-view of the investment opportunities across the globe.

ANANDRATHI CORE STRENGTHS BREADTH OF SERVICES In line with its client-centric philosophy, the firm offers to its clients the entire spectrum off financial services ranging from brokerage services in equities and commodities, distribution of mutual funds, IPOs and insurance products, real estate, investment banking, merger and acquisitions, corporate finance and corporate advisory. Clients deal with a relationship manager who leverages and brings together the product specialists from across the firm to create an optimum solution to the client needs. IN-DEPTH RESEARCH AnandRathi research expertise is at the core of the value proposition that offer to Clients. Research teams across the firm continuously track various markets and products. The aim is however common to go far deeper than others, to deliver incisive insights and ideas and be accountable for results. MILESTONES 1994 Started activities in consulting and Institutional equity INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 39

sales with staff of 15. 1995 1997 1999 Lead managed first IPO and executed first M & A deal. 2001 2002 2003 Wealth Management assets cross Rs1500 crores. 2004 Retail Branch network expands across 100 locations within India. Commodities brokerage and real estate services introduced. Wealth Management assets cross Rs3000crores. Institutional equities business relaunched and senior research team put in place. Retail Branch network exceeds 50. Insurance broking launched. Launch of Wealth Management services in Dubai. Retail business expansion recommences with ownership model. Initiated Wealth Management Services. Introduced investment-banking businesses. Retail brokerage services launched. Set up a research desk and empanelled with major institutional investors.

2005 Retail Branch network expands across 130 locations within India. Real Estate Private Equity Fund Launched.

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2006 AR Middle East, WOS acquires membership of Dubai Gold & Commodity Exchange (DGCX). Ranked amongst South Asias top 5 wealth managers for the ultra-rich by Asia Money 2006 poll. Ranked 6th in FY2006 for All India Broker Performance in equity distribution in the High Networth Individuals (HNI) Category. Ranked 9th in the Retail Category having more than 5% market share 2007 2009 Anand Rathi has been Ranked as the #1 Private Bank - Domestic in India by Asiamoney Polls 2009 and Ranked as the #2 Private Bank - Overall in India by Asiamoney Polls 2009. Citigroup Venture Capital International picks up 19.9% equity stake. Retail customer base crosses 100 thousand. Establishes presence in over 350 locations. Completes its presence in all States across the country with offices at 300+ locations within India.

20. ANANDRATHI TEAM BOARD OF DIRECTORS INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 41

Anand Rathi | Founder & Chairman Prior to establishing his own company, Mr. Rathi headed Indian Rayon & Industries, as Senior President. He has held a series of responsible positions with the Birla group and was also instrumental in setting up of Birla Global Finance. In his 40 years of being in the corporate world, Mr. Rathi has held several key positions on various regulatory and professional boards, including, President, Bombay Stock Exchange (BSE), and Member, Central Council of Institute of Chartered Accountants (ICAI). As President of BSE, Mr. Rathi played a key role in the expansion plan of BOLT, the online trading system of the Exchange and setting up of the Trade Guarantee Fund. He was the moving force behind setting up of the Central Depository Services (India) Ltd. He is a gold medalist Chartered Accountant.

Pradeep Gupta | Co-founder & Vice chairman With over twenty years experience in the securities market. Cofounder and key driver of the Retail and Institutional Equities business of the group.

Amit Rathi | Managing Director A rank holder Chartered Accountant and an MBA from Leonard N. Stern School of Business, New York University joined the group in 1998. He was instrumental in establishing the groups private wealth management and investment banking businesses. Calling him a financial guru, the Times of India group, listed Amit in 2008 amongst the top 51 young Marwaris in India (under the age of 40).

P G Kakodkar | Director Former Chairman of State Bank of India. Director in Financial Technologies (India). Director in Sesa Goa Ltd. Director in SBI Funds Management Pvt Ltd & the Multi INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 42

Commodity Exchange of India Ltd and a M. A. in Economics.

Dr. S A Dave | Director Former Chairman Securities & Exchange Board of India (SEBI) and Deputy Director of the RBI. Former Chairman Unit Trust of India (UTI). Member of General Committees of Government of India & Financial Reforms and Chairman CMIE 1998 till date. And a M.A. (USA) with PhD in Economics. C D Arha | Director Formerly Secretary in the Union Ministry of Mines. Special Secretary & Additional Secretary in the Ministry of Coal. Resident Chief Information Commissioner AP (Right to Information Act). Commissioner Civil Supplies (AP). Chairman & MD, APSEC. With an M.A. (History) and diploma Management & Administration of Rural Development. Ajit Bhushan | Director Managing Director Citi Venture Capital London Over 17 years experience with Citi. Joined CVC international in 2001. Worked on Strategy and business development for Citibank in CEEMEA region and managed Cash Management Business for Citi in Poland and India. B Tech (IIT Delhi) and an MBA (IIM Ahmedabad).

21. ANANDRATHI PRIVATE WEALTH MANAGEMENT

CLIENT TESTIMONY ANANDRATHI have been ranked in 2009 as the #1 Private Bank Domestic and #2 Private Bank Overall BY OUR CLIENTS in an international poll conducted by Asiamoney magazine. AnandRathi INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 43

believe that this is testimony to the faith and trust that our clients have in our advisory and us. CLIENT-CENTRIC ETHOS AnandRathi belief is that there is a spark in every person that distinguishes him as an individual, and defines his aspirations and goals. A Wealth Management solution for every individual is therefore unique. Clients deserve a customized solution for managing wealth that is specific to needs and not a generic template based offering.

EVOLUTION OF WEALTH MANAGEMENT

Figure 6:Evolution of wealth management

STRONG RESEARCH CAPABILITIES AnandRathi Advisory process is rooted in the strength of research team, giving expertise across various asset classes. AnandRathi Economic Research team has been ranked among the top 20 in Asia by Institutional Investor and is one among the only 2 teams from India to feature in this list. ANANDRATHI PHILOSOPHY

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Wealth Management needs to be far more holistic than just investment advisory. AnandRathi believe that separation of advisory from product manufacturing is critical to offering a conflict-free and truly objective advice to Clients. AnandRathi therefore offer only third-party products and do not manufacture any in-house products. As an extension to this philosophy, AnandRathi do not hold any proprietary stake in the markets

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Figure 7: Protection, growth and distribution

PRODUCT OFFERING

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Figure 8:Product Offering

SERVICES OFFERING

Figure 9:Service Offering

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22. ANANDRATHI INVESTMENT BANKING OVERVIEW AnandRathi leading are a investment

bank focused on the middle-market in India and aim to provide a level expertise of service, and that is dedication

unmatched in the industry today. The firms core principles of integrity and dedication to the success of Clients are reflected in all that they do. AnandRathi offer our clients high-quality, unbiased advice. AnandRathi have assembled a group of talented and experienced professionals who are domain experts and have been recruited from a wide variety of leading global financial institutions. AnandRathis professionals concentrate on using their time and their intellectual capital to solve complex financial problems and executing specialized transactions for Clients. AnandRathi strive to offer clients more senior-level attention than may be available from many of the competitors.

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INDUSTRY COVERAGE Focusing on a select group of core industries, AnandRathis investment bankers gain deep sector knowledge and extensive transaction experience that allow generating relevant ideas that help your business maximize opportunities.

Figure 10: Industry Coverage

SERVICE OFFERING

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ADVISORY AnandRathis advisory business serves as an independent sounding board and advisor on every strategic, financial and operational issue clients face in the daily management of their businesses. AnandRathi view Clients as partners, which ultimately means that focus and dedication extends far beyond that of traditional investment banking advisory services and includes a commitment to senior level focus. Over the course of their careers, members of senior team have advised on over $30 billion in transactions. Exploring, evaluating and recommending financial and strategic alternatives Assessing potential acquirers and targets and providing valuation analyses. Negotiating and consummating transactions. Advising on transaction structuring, timing, pricing and potential financing. Providing Fairness opinions

Private Equity Extensive knowledge and coverage of the private equity community not just in India but around the world allows AnandRathi to bring strong proprietary investment ideas to financial sponsors and to optimize outcome through identifying highquality financial buyers for our middlemarket clients. AnandRathi has built a specialized practice in advising private equity firms that want to invest in India but do not have a presence here. Exploring value maximization strategies. Developing company positioning and all documentation for potential buyers. Developing buyers lists and managing all communications with potential buyers. Managing due diligence, data rooms, site visits and all buyer investigations. Evaluating bids and negotiating and executing final transactions and documentation.

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RE-STRUCTURING AnandRathi dedicated, experienced Corporate Restructuring team can assist debtors and creditors with restructuring leverage in a dynamic, global economy by drawing on our deep industry knowledge and broad network of commercial bankers, private equity leadership and hedge fund managers. Developing the comprehensive restructuring and reorganization plans and assisting in the court administered approval process. Advising on the ultimate structuring of a potential sale or recapitalization.

CAPITAL MARKET AnandRathi is a leading underwriter of public offerings and private placements for middlemarket companies in India. AnandRathi is known for innovative financing solutions that support complex corporate strategies, as well as longstanding client relationships. AnandRathis Capital markets business seeks to leverage our operational expertise and world class institutional and retail distribution platforms to partner with existing owners and management to maximize value at the time of a public or secondary market offering. Over the course of their careers, members of our senior team have raised over $20 billion in equity and debt capital for companies around the world. Assessing a companys optimal capitalization and sources of incremental capital. Developing a target investor group and effectively positioning the companys story to the investor community. Preparing all investor materials and managing all communications with potential investors. Managing the due diligence process and all investor inquiries. Assisting with necessary documentation to expeditiously execute a successful capital rising. Assessing the most appropriate group of investors to assist the company in its longterm plan.

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23. ANANDRATHI INSTITUTIONAL EQUITY OVERVIEW AnandRathi Institutional Equities team has been providing India investment ideas and trading services to leading institutional investors from all over the world for the past 15 years. The 65 members team of some of the best analysts and sales talent in India forms a comprehensive institutional equities platform. The CEO, Ratnesh Kumar, who has over 15 years of experience in Indian equities, ably leads this team. The team underwent a transformation in early 2008 when senior people from leading global and domestic institutions joined and significantly grew AnandRathis institutional equity business footprint.

RESEARCH A 25 members research team, comprising 15 analysts (including sector specialists, macro economist, strategist) and 10 associates. Analysts profile Senior, well-regarded analysts from leading global/domestic firms have joined AnandRathis research team over the past 12 months. Most analysts have over 10 years of industry experience. The fundamental research team covers ~100 stocks and tracks a further 15. The overriding emphasis is on investment idea generation. A specialist technical and derivatives research team. A well-resourced team to enable custom research work for key clients and have stock coverage across large and mid caps.

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SALES, TRADING AND DERIVATIVES Anand Rathi Institutional sales team is one of the most experienced, with 9 country dedicated sales people having on an average India market experience in excess of 10 years. The cash sales trading and dealing team are experienced in handling large, complex institutional transactions for both FIIs and domestic institutions. The 15 members derivatives team is capable of structuring and handling large transactions in index/stock and F&O. CONFERENCES Anand Rathi team specializes in offering comprehensive corporate access to its key clients Analysts long-standing relationships as well as group relationships help in access to all leading companies. The firm organizes corporate road shows and periodic theme-based conferences at various locations.

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24. Companies Profiles

To compare products of AnandRathi Financial Services Ltd. with other competitors, I would like to describe the other companies profiles understand their values, their experiences and products.

I am comparing AnandRathi with some selected major companies like 1. 2. 3. 4. 5. 6. 7. 8. ANANDRATHI FINANCIAL SERVICES LTD. BONANZA PORTFOLIO LIMITED ANGEL BROKING LIMITED INDIABULLS SECURITIES LIMITED MOTILAL OSWAL SECURITIES LIMITED SHAREKHAN LIMITED INDIA INFOLINE LIMITED KARVY STOCK BROKING LIMITED Table 4: Companies for comparison

I compare various parameters rather than core products of companies like their INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 53

Numbers of terminals, Brokerage Rates, Diversification in India, Numbers of Branches and Franchises, and Numbers of employee etc.

For comparison of companies, I am referring research report done by Dun & Bradstreet India.

Indias Leading Equity Broking Houses 2009 is Dun and Bradstreet Indias (D&B India) tribute to the Indian broking community primarily operating into equity and derivative segments. D&B India compiled the initial database of broking firms from various sources, such as the internal D&B database and membership lists of Indias two prime stock exchanges, the NSE and the BSE. The information, contained in this book, pertains to the period as of Sep 08. However, in case of advertorials, the latest available figures of Mar 09 have been provided.

The information has been primarily sourced and compiled from questionnaires widely circulated and administered by D&B India. The questionnaire sought details on various aspects such as management, memberships, reach & access, size & strength, products & services, growth & consolidation plans and areas of focus and thrust in the future. Besides, information has also been collated from secondary sources such as the stock exchanges, annual reports of the broking firms and their respective websites. Every effort was made to ensure that companies respond to the questionnaire. However, in the eventuality that a company has not responded with critical data, such firms have not been included in the publication. This is to ensure that all information contained in this book is authenticated and accurate.

A total of 209 companies have been profiled in the publication. The total number of trading terminals, which includes NEAT, BOLT and CTCL licenses, was taken as the principal eligibility criterion for inclusion in the publication. Further as the cutINSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 54

off mark for inclusion, equity broking firms with total number of terminals equal to or more than 15 were considered for publication. Firms that were facing a suspension of trading activities from the regulators at the time of collection and analysis of data have been excluded.

The firms have been listed in the publication on various parameters such as number of terminals, regions, subbrokers, offices, employees and products & services offered. Terminal-wise listing is provided in the descending order of terminals, whereas other aspects of information such as number of sub-brokers, offices, employees and products & services are provided in an alphabetical manner for all the firms together. A standardised format has been used for reporting the information on the firms.

Each firm featured in the publication has been allotted its unique identification number, D-U-N-S number (Data Universal Numbering System). This will help readers locate and obtain full-fledged information reports on these companies from the Dun & Bradstreet database. The edition also includes the section Waiting in the Wings which contains brief information on companies that do not satisfy the eligibility criteria of the current edition, but are emerging and could be a part of the next one.

The editorial team is confident that Indias Leading Equity Broking Houses 2009 will prove to be resourceful and would appreciate if readers would keep D&B India regularly updated regarding any changes in their companies, as and when it occurs. We would be pleased to receive your invaluable feedback and suggestions, which we can incorporate in the next edition.

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25. COMPARATIVE ANALYSIS OF SECONDARY DATA INTRODUCTION: In secondary data

analysis, I compare some parameters of


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AnandRathi

with

some

selected

major

players of broking firms in India. In this report secondary data entirely depend upon data provided on Internet. However I tried my best to choose best source on Internet. Most of data are collected from a survey done by Dun & Bradstreet India. The publication Indias Leading Equity Broking Houses 2007 profiles 210 broking firms, providing services primarily in the area of equity markets. Dun & Bradstreet India compiled the initial database of equity firms from various sources, such as the internal D&B database; membership lists of the Indias two nationwide exchanges namely the National Stock Exchange and the Bombay Stock Exchange Ltd.

Parameters: Parameters for the comparison are mentioned as: Account Opening Fee Annual Maintenance Charges Brokerages Rate Flexible Offline Plans Flexible Online Plans Pay-in/ Pay-out Facility

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Software and WebID Charges Cross Sales Products Free Tips and Research Report Total Terminals Number of Branches Number of Cities Number of Sub-Brokers Number of Employees

Important notes about given parameters: 1. The information about Account opening fee and Annual Maintenance Charge may differ from actual information. 2. Brokerage Rate is negotiable, so it may also differ source to source. Here I tried to provide highest brokerage rate of firm. 3. Flexible Online/Offline plans means that company has various plans for customer according margin money and brokerage. 4. Pay-in/Pay-out means firm has tie up with some banks for clearing transaction money. 5. Cross Sale products may be insurance product, mutual funds or any other investment instruments. 6. The information about Total Terminals, Number of Branches, Number of Cities, Number of Sub-Brokers and Number of Employees, is taken from survey done by Dun & Bradstreet India, in 2009.

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Table 5: Companies for AnandRathi Financial Services Ltd with other broking firms S.NO 1. 2. 3. 4. 5. 6. 7. 8. PARTICULARS Account Opening Charges Annual Maintenance Charges Brokerages Rate Flexible Offline Plans Flexible Online Plans Software and WebID Charges Cross Sales Products Pay-in/Pay-out Facility AR M BO L AB H IB H MO H SK H II H KB M

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9. 10 . 11 . 12 . 13 . 14 .

Free Tips and Research Report Number of Employees

3421

453

1610

5919 2

1686

1582

NA

3311

Number of Branches

800

1050

141

237

1533

834

886

448

Number of Cities

283
558

350

401

72

487

272

360

381

Number of Sub-Brokers

816

3277 1232

3 185

1757

431

261 198

230

Total Terminals

4134

4373 2 7

8629

5679 2

3119

NOTE: AR: ANANDRATHI FINANCIAL SERVICES LTD. BO: BONANZA PORTFOLIO LIMITED AB: ANGEL BROKING LIMITED IB: INDIABULLS SECURITIES LIMITED MO: MOTILAL OSWAL SECURITIES LIMITED SK: SHAREKHAN LIMITED II: INDIA INFOLINE LIMITED KB: KARVY STOCK BROKING LIMITED NA: NOT AVIALABLE H: HIGH M: MIDDLE L: LOW

26. SWOT ANALYSIS OF ANANDRATHI FINANCIAL SERVICES LTD. 1. STRENGTHS a. Lower brokerage rates b. Less charges on accounts c. Good customer faiths INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 67

d. Better Online flexible plans e. Good number of employees f. Good number of branches g. Good number of terminals 2. WEAKNESSESS a. Small diversification b. Few offline flexible plans c. Less pay-in/pay-out banks d. Few good promotions e. Less tie-ups f. Less educational and awareness activities g. Less foreign investors attraction plans 3. OPPORTUNITIES a. Has local support in Rajasthan b. Growing India stock market opportunities c. Growing International financial market 4. THREATS a. High competition by major players in Indian Broking industry b. Unpredictable Indian stock market and international financial market c. Industry depends upon only stock market d. Banking industries in stock market e. Company is new to the market

27. COMPARATIVE ANALYSIS OF PRIMARY DATA

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INTRODUCTION I have done a survey in Jaipur city to study the customers interest towards Investment and Securities Market. The primary data was collected through questionnaires. This questionnaire is mainly formulated to target the investors and interested customers in securities market. And see their perceptions and awareness of various investment options available.

Figure 11: Aims of Questionnaire

The sample size of the survey was 150. The sample of respondents was carefully selected covering people in all age groups and with different backgrounds and occupations. The analysis of these questionnaires gives us an insight about the mindset of people regarding various investments.

I have also used various statistical methods and factor analysis in SPSS to extract the prominent factors influencing the investments decisions of the customers.

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ANALYSIS OF PRIMARY DATA 1. Age Group Analysis Age Group (31-50) has most participation in securities market. Young Group (18-30) is also interested in securities market.

2.Occupation Analysis Businesspersons are most interested in investment. Government and Private services persons are also interested.

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3.Investment Decision Analysis Most of investors are take own decision for investment. Family opinions are most important for investors.

4.Investment Interest Analysis Good Return is strong reason for investment. Wealth Creation and Tax Saving also influence investors.

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5.Investment Options Analysis Stocks and Insurances products are most preferred by investors. Investors take also interest in Govt. Securities/Bonds and Mutual Fund.

6.Awareness of AnandRathi AnandRathi is known firm in Jaipur.

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7. AnandRathi Features Analysis Flexible plans are core strength of AnandRathi. Investors prefer lower brokerage rate and good online services.

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28. MERITS AND DEMERITS OF ANANDRATHI FINANCIAL SERVICES LTD.

After the complete analysis of primary and secondary data, I find the following merits and demerits of AnandRathi Financial Services Ltd. Findings are completely based on data provided, but I have tried my best here to point out some major ones.

MERITS 1. I compared to the other selected broker firm with AnandRathi, I find that AnandRathi gives a minimum brokerage rate for Equity, Derivatives and commodity trading.

2. AnandRathi provides free Software and WebID for online trading customers. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 74

The software has unique feature that it shows all trading sectors like equity, derivative, and commodity on single screen. Software shows unlimited scripts on screen, where else WebID shows only ten segments of 30 scripts.

3. AnandRathi provides various advantages plans for online trading. Customer can choose suitable plan for own on the basis of margin money and brokerage rate.

4. AnandRathi provides better depositary services than other broker firm with lower AMC (Annual Maintenance Charges).

5. AnandRathis online customers can trade on phone when they are unable to trade online. Customer can call market time on toll free number.

6. AnandRathi Financial Services Ltd. has tie up with Axis Bank, ICICI Bank, and HDFC bank. That provides easy online money transfer to saving a/c to trading a/c and vice versa with out any extra cost.

7. AnandRathi provides market tips on customers mobiles and emails. It also provides market research papers every evening after market closing that summarized whole day trading fluctuation sector wise.

8. AnandRathi gives friendly environment and easy processing system to their customers that help to create relationship with customers.

9. AnandRathi diversify itself through cross sell. It sell insurance of HDFC bank and it also work as advisory for various firms in initial public offers.

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10. Mr. Anand Rathi belongs to Rajasthan, so AnandRathi get good local support from Rajasthan.

DEMERITS 1. AnandRathi has a limited presence right now so most of the people know nothing about the company.

2. AnandRathis offline products are limited and not flexible that can decrease their offline customer.

3. WebID (online product) provides limited scripts at a time. Customer can see 10 segments of 30 scripts at a time.

4. AnandRathi does not good advertise itself. So its having fewer customers than its competitors.

5. AnandRathi started in 1994. So it is not very old company. Its competitors are old and more experience in the securities market. It is not too much diversify in locations and services.

29. FINDINGS The finding of report are given as 1. India is one of the oldest stock markets in the world with a strong

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 76

presence of domestic and local intermediation. Stock markets in India surged over a decade on back of a wide range of economic reforms, liberalization of financial markets buoyed by greater freedom and flexibility.

2.

The market capitalization of BSE was up by 37.23% from Rs.

3,545,041.0 cr as on December 2007 to Rs. 4,865,044.91 cr as on May 2009. The market capitalization of NSE was up by 35.55% from Rs. 3,367,350.0 cr as on December 2007 to Rs. 4,564,572.18 cr as on May 2009.

3.

Business has been exceptionally good in primary and secondary

markets, in the equities and derivatives segments across both the national level stock exchanges. Indias combined turnover in NSE and BSE in the equity segment which was around Rs. 2,901,471 cr in the year 2006-2007 has grown 1.33 times to Rs. 3,852,097 cr in the year 2008-2009, despite the market fallen by approximately ~50% in the same year. The derivate segment during the same period has gone up by 1.50 times to Rs. 11,010,482 cr.

4.

AnandRathi is a new company to the stock market. It is in growth

stage and attracting more customers into stock market.

5.

Key strength of AnandRathi is its customer relationship, Lower

brokerage rates, Less charges on accounts, Good customer faiths, Better Online flexible plans , Good number of employees, Good number of branches and Good number of terminals

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 77

6.

Some weaknesses of company are Small diversification, few offline

flexible plans, less pay-in/pay-out banks, few good promotions, Less tieups, Less educational and awareness activities and Less foreign investors attraction. Plans.

7.

Opportunities, for the company, are Has local support in Rajasthan,

Growing India stock market opportunities and Growing International financial market.

8.

Some threats are High competition by major players in Indian

Broking industry, Unpredictable Indian stock market and international financial market, Industry depends upon only stock market, Banking industries in stock market, Company is new to the market

9.

Jaipur city has good crowd of investors. It is potential market for the

company.

10.

Growing market can attract more and more investors to the

company.

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 78

30. RECOMMENDATIONS

1.AnandRathi has to improve its distribution network, as its reach to an investor, is very limited. Also the number of employees working for the company is very less right now when compared to the other companies.

2.The company should constantly come out with innovative products, as the competition is very tough with around major companies fighting hard for the market share.

Some new innovative ideas have been suggested below. a. Family Plans Under Family Plan, a customer can open two or more account for the family members at a time with cost of single account and lower brokerage. b. Chain System Plan Under Chain System Plan, an existing customer can get some relief in brokerage when he will open five other account of anybody. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 79

c. Boutique brokerage Plan Under the Boutique Plan, company often does not charge Brokerage. Instead taking brokerage, company takes a percentage of any profits generated by customers. d. Trial Plan Under Trail Plan, to promote new customers, company can offer a trail plan in which there are zero brokerage charges for 15 days. e. Accounts Plans Cash Account Plan: under this plan, customer can get relief in settlement time period in context of interest charges. Margin Account Plan: under this plan, a customer can get higher trading limit from company. Discretionary Account Plan: under this plan, broker or financial adviser the right to buy and sell stock without notifying you. NOTE: Given recommendations are just ideas for the company. The company can alter these ideas according their policies. Explanation of ideas is not mentioned in the report. Aims of recommendation are to increase customers for the company and attract new customers for the stock market.

3.As the company is a new company it has to really work hard to get itself promoted. The company could start sponsoring major events and conduct talk shows and seminars to get noticed. There are many people in India who still do not know about the concept of Share Market. The company could take this INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 80

as an opportunity by trying to create awareness.

4. The company could start using star personalities for their endorsements like Tiger Wood is Brand Ambassador of Accenture Ltd. (USA).

5.The company should come out with some really outstanding and out of the world advertisements like the ones Vodafone has released recently which people find it hard to forget soon.

6.The company should first promote the brand AnandRathi and create a positive impression in the minds of the people. In todays world it is really tough for the customer to choose from among a vast list of insurance companies as almost all of them offer the same plans .So the company has to be a bit different from others in order to stand apart.

31. MY EXPERIENCES AND LEARNINGS

My SIP at AnandRathi financial Services Ltd, Jaipur has been an extremely enriching one. My SIP was divided into two main parts. First part covers Securities Market of India in context of BSE and NSE. And second part includes comparative study of AnandRathi financial Services Ltd, Jaipur with some major players in broking industry in India. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 81

Since the company is a new company in comparison with competitors, Apart from the financial study, I done marketing research on comparative study for the company. The survey had done in Jaipur city to analysis customers perception towards investment in share market.

Working at AnandRathi Financial Services Ltd is divided into four major departments. I worked in all departments and understood their importance and operations.

Figure 12: Departments in AnandRathi

The Learning, I gained during my SIP are mentioned below:

I gained a broader perspective about various investment opportunities and the INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 82

risk involved in securities market.

I learnt about segments of securities market and their functions. I gained knowledge about IPO distribution in primary market and trading in equity, commodity and derivatives.

I came to know about the various technicalities about the Indian broking industry.

Interactions with customers during surveys and sales helped me enhance my marketing skills.

Through this research I enriched my knowledge on various competitive marketing strategies adopted b different companies to survive in a highly competitive market.

I got my first experience in company. And came to know about working of broker firm, work of dealer, work of relationship manager. I learnt about organization structure, hierarchy of works

I learnt in a more detailed way about the nature of work existing in the broking industry, the kind of deadlines they have to meet, the kind of pressure and levels of stress, which they work under, and the kind of recognitions given to them after they meet or exceed their targets.

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 83

32. CONCLUSION Here I conclude that the summer internship program, done in AnandRathi Financial Services ltd, Jaipur, for partial fulfillment of the MBA program in IMS Ghaziabad has been completed successfully.

I would like to conclude my summer internship as follow. 1. Survey done with interest of AnandRathi Financial Services ltd, Jaipur has been conducted successfully and results are discussed above. 2. The experience gained during the internship has sharpened my marketing and financial skills and given me a great on the field experience. 3. The Indian Broking industry is now in a most exciting phase and is likely to grow at a much faster rate compared with many other sectors. 4. The Indian broking industry is reasonably large and fragmented with 9,000 odd brokers in the cash segment and around 24,000 sub-brokers. The market share of the top ten brokers in India has remained largely stagnant in the past four years. The top five brokers in India still control around 1516% of the market share. 5. AnandRathi Financial Services Ltd. is a growing company in Indian Broking Industries.

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 84

33. ANNEXURE - I (QUESTIONNAIRE) (This questionnaire is only of the sake of some research work being done on Broker firms. Confidentiality would be maintained.) Name: _________________________________________________________ Contact no: _____________________________________________________ Gender: Age Group: 18-30 Qualification: Post Graduate Occupation: Government Service Private Company Businessman Self Employed Graduate 12th < 12th 31-40 41-50 >50 Male Female

Your income range (per annum): Below 150000 350000-450000 150000-250000 More than 450000 250000-350000

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 85

Your savings per year: Below 10000 50000-100000 10000-25000 More than 100000 25000-50000

You would prefer investment? * Yes No I have investments already

* (If no, stop here) What do you consider while making an investment decision? Familys opinion Your own decision Your opinion about investment: Tax Saving Better future after retirement Good returns Wealth creation Friends advice Brokers advice

Any other (please specify) ___________

Any other (please specify) ___________ Preferably you would like to invest in: Mutual funds Govt. Bonds & Securities How frequently do you invest? Once a year More than 3 times a year 2-3 times a year Not investing Not interested Stocks and Shares Insurance products

Any other (please specify) ___________

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 86

You would prefer investment in Securities Market? * Yes * (If no, stop here) No I have investments already

Do you have Demat a/c and Trading a/c? No At AnandRathi Financial Services Ltd. I have Demat a/c and Trading a/c at (please specify firm)_____________

Do you know about AnandRathi Financial Services Ltd? Yes No

If Yes, Specify source of information________________________________ Would you like to open Demat a/c and Trading a/c?A At AnandRathi Financial Services Ltd. NO Other (Please Specify why?)______________________________________ What is your turnover? (Annually) 100000 500000-1000000 100000-500000 above 1000000

If you know or have Demat a/c and Trading a/c at AnandRathi Financial Services Ltd, which features, you like most?

S.No. 1. Nearest Branch

Particulars

Yes/No

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 87

2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Friendly Environment Good Offline Services Good Online Services Good Software and WebID Services Flexible Plans Broker Responds Lower Brokerage Rate Good Depositary Services Good Tips and Research Reports Good Cross Sell Products Table 6: Features of AnandRathi Financial Services Ltd

Would you like to give valuable suggestion___________________________ ___________________________________________________________________ Would you like to refer somebody__________________________________ (If yes, please specify) Name_________________________________________________________ Phone No.________________________Address_______________________

********* THANK YOU FOR YOUR VALUABLE TIME ********

34. REFERENCES 1. Bala Arshanapalli and Mukun S. Kulkarni, Interrelationship between Indian and US Stock Markets, Journal of Management Research, Volume 1, Number 3, May-August 2001, pp. 141-148. 2. Bombay Stock Exchange Website, www.bseindia.com 3. Christopher B. Barry, John W. Peavy III, and Mauricio Rodriguez, Performance Characteristics of Emerging Capital Markets, Financial Analysts Journal, January/February 1998, pp. 72-80. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 88

4.

Arjun Chatrath, Sanjay Ramchander, and Frank Song, Benefits from Portfolio Diversification into the Indian Equity Market, American Business Review, January 1996, pp. 1-10.

5.

John Echeverri-Gent, Financial Globalization and Indias Equity Market Reforms, India Review, Volume 3, Number 4, October 2004, pp. 306-332.

6. 7.

Federal Reserve Website, www.research.stlouisfed.org Jayen B. Patel, Inter-Temporal Relationship Between the U.S. stock market and the Emerging Markets of Asia, Journal of Business and Economics Research, Volume 1, Number 10, October 2003, pp. 1-6.

8.

B. S. Bodla and Kiran Jindal, Seasonal Anomalies in Stock Returns: Evidence from India and the US, Decision, Volume 33, Number 1, January-June 2006.

9.

Stilianos Fountas and Konstantinos N. Segredakis, Emerging stock markets return seasonalities: the January effect and the tax-loss selling hypothesis, Applied Financial Economics, Volume 12, 2002, pp. 291-299.

10.

Roger Ignatius, The Bombay Stock Exchange: Seasonalities and

Investment Opportunities, Managerial Finance, Volume 24, Number 3, 1998, pp. 52-58. International Business & Economics Research Journal March 2008 Volume 7, Number 3 11. Harvinder Kaur, Time Varying Volatility in the Indian Stock Market,

Vikalpa, Volume 29, Number 4, October-December 2004, pp. 25-42. 12. Michael Keppler and Xing Hong Xue, The Seasonal Price Behavior

of Global Equity Markets, The Journal of Investing, Winter 2003, pp. 49-53. 13. National Stock Exchange Website, www.nseindia.com INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 89

14.

Jayen B. Patel, Diversification in an Emerging Market: A Closer

Look at the Indian Stock Market, International Business and Economics Research Journal, Volume 5, Number 1, January 2006, pp. 55-64. 15. Jayen B. Patel, Inter-Temporal Relationship Between the U.S. Stock

Market and the Emerging Markets of Asia, Journal of Business and Economics Research, Volume 1, Number 10, October 2003, pp. 1-6. 16. Jayen B. Patel and Dorla A. Evans, Seasonal Stock Return Patterns in

the Seven Industrialized Nations, The Journal of Applied Business Research, Volume 19, Number 3, Summer 2003, pp. 111-120. 17. S. N. Sarma, Stock Market Seasonality in an Emerging Market, Vikalpa,

Volume 29, Number 3, July- September 2004, pp. 35-41. 18. Noor Azuddin Yakob, Diana Beal and Sarath Delpachitra, Seasonality

in the Asia Pacific Stock Markets, Journal of Asset Management, Volume 6, Number 4, 2005, pp. 298-318.

35. WEBID 1.

http://www.dnb.co.in/EquityBroking/default.asp 2. http://www.bseindia.com/ 3. http://www.nseindia.com/ 4. http://www.rathionline.com/ INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 90

5. http://www.rathi.com/ 6. http://www.sebi.gov.in/bulletin/bull-may2010.pdf 7. http://www.sebi.gov.in/investor/handbook2009.pdf 8. http://www.sebi.gov.in/commreport/clientreg.pdf 9. http://www.sebi.gov.in/annualreport/0809/annualrep08-09.pdf 10. 11. 12. 13. http://www.sebi.gov.in/bulletin/glossary.pdf http://www.sebi.gov.in/chairmanspeech/chsp4.pdf http://investor.sebi.gov.in/faq/pubissuefaq.pdf http://investor.sebi.gov.in/faq/Secondary%20Market.html

14. http://investor.sebi.gov.in/downloadable %20Documents/reading%20mat-eng.PDF 15. http://www.pwc.com/in/en/pressreleases/Enhanced_governance.jhtml

36. BIBILOGHAPHY 1. Brealey, Richard and Stewart C. Meyers. 2000. Principles of Corporate Finance, 6th Edition. Irwin, McGraw-Hill.

INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 91

2. Copeland, T. and J.F. Weston. 1988. Financial Theory and Corporate Policy. Addison-Wesley. 3. Garbade, Kenneth. 1982. Securities Markets. McGraw-Hill. 4. Van Horne, James C. 1978. Financial Market Rates and Flows. Prentice-Hall. Englewood Cliffs, NJ. 5. Sharpe, William. 1970. Portfolio Theory and Capital Markets. McGraw-Hill. 6. Veale, Stuart R. 2000. Stocks, Bonds, Options and Futures. Prentice Hall Press New York Institute of Finance. 7. Dalton, John M. 1988. How The Stock Market Works, 2nd Edition. Prentice Hall Press. New York Institute of Finance. 8. Hull, John C. 1993. Options, Futures and other Derivative Securities, 2nd Edition. Prentice-Hall. Englewood Cliffs, New Jersey. 9. khan, Jain.2008. Financial Management, 5th Edition, Tata McGraw-hill.

37. GLOSSARY

Numbers INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 92

5 52-Week High/Low: The highest and lowest price at which a stock traded in the past 12 months, or 52 weeks. A Absolute Return: The return that an asset achieves over a period of time. This measure simply looks at the appreciation or depreciation (expressed as a percentage) that an asset - usually a stock or a mutual fund - faces over a period of time. Absolute return differs from relative return because it is concerned with the return of the asset being looked at and does not compare it to any other measure. Actual Return: The actual gain or loss of an investor. Acquisition: When one company purchases a majority interest in the acquired. Allotment: The number of shares allotted to a participant in IPO against the actual number of securities he had applied for. American Depository Receipt (ADR): A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. American Depository Share (ADS): A share issued under deposit agreement that represents an underlying security in the issuer's home country. The terms American depositary receipt (ADR) and American depositary share (ADS) are often thought to mean the same thing. However, an ADS is the actual share trading, while an ADR represents a bundle of ADSs. Analyst: A financial professional who has expertise in evaluating investments and puts together buy, sell and hold recommendations on securities. Also known as a "financial analyst" or a "security analyst". Annual General Meeting (AGM): A mandatory yearly meeting of shareholders that allows stakeholders to stay informed and involved with company decisions and workings. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 93

Annual Report: A company's annual statement of financial operations. Annual reports include a balance sheet, income statement, auditor's report, and a description of the company's operations. Annuity: A financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years. Arbitrage: The difference between price of a security in two different exchanges. The difference can be used to make profits by persons holding a security to sell the same at an exchange where its price is high and buy it at an exchange where it is available at a lower price. Ask: The price a seller is willing to accept for a share, also known as the offer price. A Ask Size: The number of shares a seller is selling at a quoted ask price. A Asset Allocation: The process of dividing a portfolio among major asset categories such as bonds, stocks or cash. The purpose of asset allocation is to reduce risk by diversifying the portfolio. A Asset Allocation Fund: A mutual fund that splits its investment assets among stocks, bonds and other investment vehicles in an attempt to provide a consistent return for the investor. A Average Annual Growth Rate: The average increase in the value of a portfolio over the period of a year. Average Annual Return: The historical return of a mutual fund. Average Return: The simple average of a series of returns generated over a period of time. B Back door listing: A strategy of going public used by a company that fails to meet the criteria for listing on a stock exchange. To get onto the exchange, the company INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 94

desiring to go public acquires an already listed company. Bad Debt: A debt that is not collectible and therefore worthless to the creditor. The company as an expense will write off this debt, once considered being bad. B Balance Sheet: A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. Balanced Fund: A mutual fund that invests its assets into the money market, bonds, preferred stock, and common stock with the intention to provide both growth and income. Bankruptcy: The state of a person or firm unable to repay debts. Bar Chart: A style of chart used by some technical analysts, the top of the vertical line indicates the highest price a security traded at during the day, and the bottom represents the lowest price. The closing price is displayed on the right side of the bar, and the opening price is shown on the left side of the bar. A single bar like the one below represents one day of trading. Basis Point: A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly used for calculating changes in interest rates, equity indexes and the yield of a fixed-income security. B Bear Market: A market condition in which the prices of shares are falling or are expected to fall. Best Ask: The lowest quoted ask price for a particular share among those offered from competing market makers. Best Bid: The highest quoted bid for a particular share among all those offered by competing market makers. Blue Chip: A nationally recognized, well-established and financially sound company. Bond: A debt investment with which the investor loans money to an entity (company INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 95

or government) that borrows the funds for a defined period of time at a specified interest rate B Book Building: The process by which an underwriter attempts to determine at what price to offer an IPO based on demand from institutional investors. Book Closure: A company's announcement of a dividend or bonus to investors. Book Value: The net asset value of a company, calculated by total assets minus intangible assets (patents, goodwill) and liabilities. Boom: A period of time during which sales or business activity increases rapidly. B Bottom: The lowest point or price reached by a financial security, commodity, index or economic cycle in a given time period, which is followed by a steady increase. B Bottom Fisher: An investor who looks for bargains among stocks whose prices has recently dropped dramatically. The investor believes that the recent price drop is temporary and a recovery is soon to follow. Bottom Line: Refers to a company's net earnings. Breakout: A price movement through an identified level of support or resistance, which is usually followed by heavy volume and increased volatility. Traders will buy the underlying asset when the price breaks above a level of resistance and sell when it breaks below support. Broker: An individual or firm that charges a fee or commission for executing buy and sell orders submitted by an investor. B Brokerage Account: An arrangement between an investor and a licensed brokerage firm that allows the investor to deposit funds with the firm and place investment orders through the brokerage, which then carries out the transactions on the investor's behalf. Bubble: A surge in equity prices, often more than warranted by the fundamentals and usually in a particular sector, followed by a drastic drop in prices as a massive selloff occurs. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 96

Bull Market: A financial market of a certain group of shares in which prices are rising or are expected to rise. Bullion: Gold and silver that is officially recognized as high quality (at least 99.5% pure), and is in the form of bars rather than coins. Buy: A recommendation to purchase a specific security. B Buy and Hold: A passive investment strategy in which an investor buys stocks and holds them for a long period of time, regardless of fluctuations in the market. Buy Back: The buying back of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies will buyback shares either to increase the value of shares still available (reducing supply), or to eliminate any threats by shareholders who may be looking for a controlling stake. C CAGR: The year-over-year growth rate of an investment over a specified period of time. It's an imaginary number that describes the rate at which an investment would have grown if it grew at a steady rate Capital Gain: An increase in the value of a capital asset (investment or real estate) that gives it a higher worth than the purchase price. The gain is not realized until the asset is sold. Capital Gains Tax: A type of tax levied on capital gains incurred by individuals and corporations. Capital gains are the profits that an investor realizes when he or she sells the capital asset for a price that is higher than the purchase price. Cash Flow Statement: This document provides aggregate data regarding all cash inflows a company receives from both its ongoing operations and external investment sources, as well as all cash outflows that pay for business activities and investments during a given quarter. Choppy Market: A stock market condition whereby prices swing up and down considerably but with no resulting overall price movement in either direction. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 97

Closely Held Shares: The shares held by individuals closely related to a company. Closing Price: The final price at which a security is traded on a given trading day. Commodity: A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often used as inputs in the production of other goods or services. Commodity Index: An index that tracks a basket of commodities to measure their performance. Common Shareholder: An individual, business or institution that holds common shares in a company, giving the holder an ownership stake in the company. This will also give the holder the right to vote on corporate issues such as board elections and corporate policy, along with the right to any common dividend payments. Consensus Estimate: A figure based on the combined estimates of the analysts covering a public company. Generally, analysts give a consensus for a company's earnings per share and revenue; these figures are most often made for the quarter, fiscal year and next fiscal year. Correction: Corrections are generally temporary price declines, interrupting an uptrend in the market or asset. Crash: A major decline in a financial market. D Demat - Dematerialization: The move from physical certificates to electronic book keeping. Dalal Street: A term that refers to the Bombay Stock Exchange, the major stock exchange in India. The street is home not only the Bombay Stock Exchange but also a large number of other financial institutions. Day Trader: A stock trader who holds positions for a very short time (from minutes to hours) and makes numerous trades each day. Most trades are entered and closed out within the same day. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 98

De-merger: A corporate strategy to sell off subsidiaries or divisions of a company. Debenture: A type of debt instrument that is not secured by physical asset or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Debt: An amount of money borrowed and owed by one party to another. Debt Fund: An investment pool, such as a mutual fund or ETF, in which core holdings are fixed income investments. The fee ratios on debt funds are lower, on average, than equity funds because the overall management costs are lower. Deflation: A general decline in prices, often caused by a reduction in the supply of money or credit. It is the opposite of inflation. Delisting: The removal of a listed security from the exchange on which it trades. Derivative: A security whose price is dependent upon or derived from one or more underlying assets. The derivative is a contract between two or more parties. Its value is determined by fluctuations in the underlying asset like commodities, bonds, stocks, etc Disinvestment: The action of an organization or government selling or liquidating an asset or subsidiary. Diversification: A risk-management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique contends that a portfolio of different kinds of investments will, on average, yield higher returns and pose a lower risk than any individual investment found within the portfolio. Dividend: Distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. Downgrade: A negative change in the rating of a security. Due Diligence DD: An investigation or audit of a potential investment. E INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 99

EBITDA: Earnings Before Interest, Taxes, Depreciation and Amortization E (EBITDA) is a good metric to evaluate profitability EPS: Earnings Per Share (EPS) is the earning on each share of a company ESOP: Employee Stock Ownership Plan. A qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the sponsoring employer. Earnings Estimate: An analyst's estimate for a company's future quarterly or annual earnings. Earnings Surprise: When the earnings reported in a company's quarterly or annual reports are above or below analysts' earnings estimates. Equity Fund: A mutual fund that invests in a broad, well-diversified group of stocks. Ex-Dividend: The trading of shares when a declared dividend belongs to the seller rather than the buyer. Exponential Moving Average EMA: A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data. F FCCB: Foreign Currency Convertible Bond. A type of convertible bond issued in a currency different than the issuer's domestic currency. FDI: Foreign Direct Investment. An investment abroad, usually where the company being invested in is controlled by the foreign corporation. FII: Foreign Institutional Investor. An investor or investment fund that is from or registered in a country outside of the one in which it is currently investing. Face Value: The nominal value of a security stated by the issuer. For shares, it is the original cost of the share shown on the certificate. Financial Porn: A slang term used to describe sensationalist reports of financial news and products causing irrational buying that can be detrimental to investors' financial health. Fiscal Year: Any 12-month period that a company uses for accounting purposes. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 100

Fully Paid Shares: Shares issued in which no more money is required to be paid to the company by shareholders on the value of the shares. Fund Of Funds: A mutual fund that invests in other mutual funds. Fundamental Analysis: Fundamental analysis is to produce a value that an investor can compare with the security's current price in hopes of figuring out what sort of position to take on that stock. Futures: A financial contract obligating the buyer to purchase an asset (or a seller to sell an asset) at a predetermined date and price. G GAAP: Generally Accepted Accounting Principles. The common set of accounting principles, standards and procedures that companies use to compile their financial statements. GDP: The forfeited output of a country's economy. GDR: Global Depositary Receipt. A bank certificate issued in more than one country for shares in a foreign company. A foreign branch of an international bank holds the shares. Gilt Fund: A mutual fund that invests in several different types of medium and longterm government securities in addition to top quality corporate debt. Going Public: The processes of selling shares that were formerly privately held to new investors for the first time. Also known as Initial public offering (IPO). Green Field Investment: A form of foreign direct investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. Greenshoe Option: A provision contained in an underwriting agreement that gives the underwriter the right to sell investors more shares than originally planned by the issuer. Growth Fund: A diversified portfolio of stocks that has capital appreciation as its INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 101

primary goal, and thereby invests in companies that reinvest their earnings into expansion, acquisitions, and/or research and development. Guidance: Information that a company provides as an indication or estimate of their future earnings. H Haircut: The difference between prices at which a market maker can buy and sell a security. Hammering: The rapid and concentrated sale of a stock thought to be overvalued by the market. Hedge: Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. Hedge Fund: An aggressively managed portfolio of investments that uses advanced investment strategies such as leverage, long, short and derivative positions in both domestic and international markets with the goal of generating high returns. Holding Period: In a long position, holding period refers to the time between an asset's purchase and its sale. In a short sale, the length of time for which the short position is held. I Initial Public Offering -IPO: The first sale of stock by a private company to the public. Iceberg Order: A large single order that has been divided into smaller lots, usually by the use of an automated program, for the purpose of hiding the actual order quantity. In And Out: The purchase and sale of a security within a short period of time, usually on the same day. Income Fund: A mutual fund that seeks to provide stable current income by INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 102

investing in securities that pays interest or dividends. Index: A statistical measure of change in an economy or a securities market. In the case of financial markets, an index is essentially an imaginary portfolio of securities representing a particular market or a portion of it. Index Fund: A portfolio of investments that is weighted the same as a stockexchange index in order to mirror its performance. Inflation: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. Inorganic Growth: A growth in the operations of a business that arises from mergers or takeovers, rather than an increase in the companies own business activity. Insider Information: Material information about a company's activities that has not been disclosed to the public. Insider Trading: The buying or selling of a security by someone who has access to material, nonpublic information about the security. Insider trading can be illegal or legal depending on when the insider makes the trade. It is illegal when the material information is still nonpublic. Institutional Investor: A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. Interim Dividend: A dividend payment made before a company's AGM and final financial statements. IPO Lock-Up: A contractual caveat referring to a period of time after a company has initially gone public, usually between 90 to 180 days. During these initial days of trading, company insiders or those holding majority stakes in the company are forbidden to sell any of their shares. J Joint Venture: Two companies joining together to start a new entity, keeping the INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 103

current entities untouched to start a business. K Key Performance Indicators - KPI: A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. L Limit Order: An order placed with a brokerage to buy or sell a set number of shares at a specified price or better. Liquidity: The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Long Term: Holding an asset for an extended period of time. Depending on the type of security, a long-term asset can be held for as little as one year or for as long as 15 years or more. Losing Your Shirt: In the investment world, this expression is used to describe a very bad investment that causes an investor to lose everything he or she has invested. M M&A -Mergers And Acquisitions: A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another with no new company being formed. Margin: Borrowed money that is used to purchase securities. Margin Call: A broker's demand on an investor using margin to deposit additional money or securities so that the margin account is brought up to the minimum maintenance margin. Market Order: An order to buy or sell a stock immediately at the best available current price. Market Perform: Market perform is a neutral assessment of a stock and is either strongly positive or negative. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 104

Market Timing: The act of attempting to predict the future direction of the market, typically through the use of technical indicators or economic data. Market Value: The current quoted price at which investors buy or sell a share of common stock or a bond at a given time. Also known as "market price". Maturity Date: The date on which the principal amount of a note, draft, acceptance bond or other debt instrument becomes due and is repaid to the investor and interest payments stop. Medium Term: An intermediate period of time to hold an asset. Mid Cap: Companies having a market capitalization between Rs 500 crore and Rs 1,000 crore Monetary Policy: The actions of a reserve bank of India, that determine the size and rate of growth of the money supply, which in turn affects interest rates. Money Market: The securities market dealing in short-term debt and monetary instruments. Mutual Fund: A security that gives small investors access to a well-diversified portfolio of equities, bonds and other securities. Each shareholder participates in the gain or loss of the fund. Units are issued and can be redeemed as needed. N NAV - Net Asset Value: The total value of the fund's portfolio less liabilities. O Offering Price: The price at which publicly issued securities are made available for purchase. One Night Stand Investment: Buying a security with the intention of holding it for the long term, but subsequently panicking and selling it the following day. Online Trading: The act of placing buy/sell orders for financial securities and/or currencies with the use of a brokerage's internet-based proprietary trading platforms. Open End Fund: A type of mutual fund where there are no restrictions on the INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 105

amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open-end funds also buy back shares when investors wish to sell. Open Offer: A secondary market offering that is similar to a rights issue in which a

shareholder is given the opportunity to purchase stock at a price that is lower than the current market price. Organic Growth: The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Oversubscribed: A situation in which the demand for an initial public offering of securities exceeds the number of shares issued. P P/E Ratio - Price-Earnings Ratio: PE ratio or PE multiples is the ratio arrived by dividing Current market Price by Earnings per share of that stock. Par Value: The face value of a bond. Pension Fund: A fund established by an employer to facilitate and organize the investment of employees' retirement funds contributed by the employer

and employees. Poop And Scoop: A highly illegal practice occurring mainly on the Internet. A small group of informed people attempts to push down a stock by spreading false information and rumors. If they are successful, they can purchase the stock at bargain prices. Portfolio: The group of assets - such as stocks, bonds and mutual - held by an investor. Preferred Stock: A class of ownership in a corporation that has a higher claim on the assets and earnings than common stock. Premium: The difference between the higher prices paid for a fixed-income security INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 106

and the security's face amount at issue. Price Target: A projected price level as stated by an investment analyst or advisor. Private Company: A company whose ownership is private. Pro-Rata: Used to describe a proportionate allocation. Profit Taking: The action of selling stock to cash in on a sharp rise. This action pushes prices down temporarily. Public Company: A company that has issued securities through an initial public offering and which are traded on at least one stock exchange. Public Offering: The sale of equity shares or other financial instruments by an organization to the public in order to raise funds for business expansion and investment. Pump And Dump: A scheme attempting to boost the price of a stock through recommendations based exaggerated statements. Q QOQ - Quarter on Quarter: A measuring technique that calculates the change between one financial quarter and the previous financial quarter. This is similar to the year over year measure, which compares the quarter of one year (Q1 2007) to the same quarter of the previous year (Q1 2006). Quarterly Earnings Report: A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net income, earnings per share, earnings from continuing operations and net sales. R Rally: A period of sustained increases in the prices of stocks or indexes. Record Date: The date established by an issuer of a security for the purpose of determining the holders who are entitled to receive a dividend, rights or bonus. Redemption: The return of an investor's principal in a security, such as a stock, bond, INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 107 on false, misleading, or greatly

or mutual fund. Registrar: An institution or organization that is responsible for keeping records of bondholders and shareholders. Resistance: The price at which a stock or market can trade, but which it cannot exceed, for a certain period of time. Rights Offering (Issue): Issuing rights to a company's existing shareholders to buy a proportional number of additional securities at a given price (usually at a discount) within a fixed period. S SEBI - Securities And Exchange Board Of India: The regulatory body for the investment market in India. Saturday Night Special: A slang term used to refer to a surprise takeover attempt. Sector Fund: An investment fund that makes investments solely in businesses that operate in a particular industry or sector of the economy. Sensex: An abbreviation of the Bombay Exchange Sensitive Index (Sensex) - the benchmark index of the Bombay Stock Exchange (BSE). It is composed of 30 of the largest and most actively traded stocks on the BSE. Settlement Date: The date by which an executed security trade must be settled. That is, the date by which a buyer must pay for the securities delivered by the seller. Share Capital: Funds rose by issuing shares in return for cash or other considerations. Shareholder: Any person, company, or other institution that owns at least 1 share in a company. Shares: A unit of ownership interest in a corporation or financial asset. The two main types of shares are common shares and preferred shares. Short Sale: A market transaction in which an investor sells borrowed securities in anticipation of a price decline and is required to return an equal amount of shares at INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 108

some point in the future. Short Term: Holding an asset for short period of time. Simple Moving Average SMA: A simple, or arithmetic, moving average that is

calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Small Cap: Refers to stocks with a relatively small market capitalization. It is a company with a market capitalization less than Rs 500 crore. Spinoff: The creation of an independent company through the sale or distribution of new shares of an existing business/division of a parent company. Stop-Limit Order: An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Stop-Loss Order: An order placed with a broker to sell a security when it reaches

a certain price. It is designed to limit an investor's loss on a security position. Support: The price level, which, historically, a stock has had difficulty falling below. T Takeover: A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the acquiring company will make an offer for the outstanding shares. Technical Analysis: A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity. Technical Rally: An upward movement in a security's price following a declining

trend. The movement is caused by technical as opposed to fundamental factors affecting sentiment. Tick: The minimum upward or downward movement in the price of a security. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 109

Top Line: A reference to the gross sales or revenues of a company. Trailing EPS: The sum of a company's earnings per share for the previous four quarters. U Underperform: An analyst recommendation that means a stock is expected to do slightly worse than the market return. Undersubscribed: A situation in which the demand for an initial public offering of securities is less than the number of shares issued. Upgrade: A positive change in the rating of a security. V Valuation: The process of determining the current worth of an asset or company. Vested Interest: A financial or personal stake one entity has in an asset, security, or transaction. Volatility: Volatility refers to the amount of changes in a security's value. W Warrant: A derivative security that gives the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Write-Off: A reduction in the value of an asset or earnings by the amount of an expense or loss. X XD - Ex- Dividend: Buying the shares trading in XD will not entitle you for the dividend which is already declared but not yet been issued. Y YOY - Year Over Year: A method of evaluating two or more measured events that compares the results of measurement at one time period with those from another time period, on an annualized basis. INSTITUTE OF MANAGEMENT STUDIES, GHAZIABAD 110 uncertainty or risk about the size of

Yield: Yield is the annual rate of return for any investment and is expressed as a percentage. Z Zero Dividend Preferences: Zero dividend preference shares are Preference shares, which receive no dividends throughout their lives.

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