CHAPTER-1

PROFILE OF THE COMPANY

1.1 NAME- INDIA INFOLINE LIMITED (IIFL)

Address- 71/3, Rama Rd, Moti Nagar, Delhi – 110015

Email- [email protected]

Website- www.indiainfoline.com

Contact no. - +91-22-40071000

+91-22-4 0609174

Corporate Office:

IIFL Center, B Wing Trade Centre Kamal Mills Compound, Off SenapatiBapatmarg, Lower

Parel, Mumbai – 400013

Geographical areas of IIFL:

 Singapore

 Dubai

 USA

 UK

 Geneva

 Honk Kong

 Mauritius

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1.2 NATURE OF THE ORGANIZATION

The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd (NSE:

INDIAINFO, BSE: 532636) and its subsidiaries, is one of India’s premier providers of

financial services .

IIFL offers advice and execution platform for the entire range of financial services covering

products ranging from Equities and derivatives, Commodities, Wealth management, Asset

management, Insurance, Fixed deposits, Loans, Investment Banking, Gold bonds and other

small savings instruments .

We have a presence in:

Equities our core offering, gives us a leading market share in both retail and institutional

segments. Over a million retail customers rely on our research, as do leading FIIs and MFs

that invest billions. .

Private Wealth Management services cater to over 2500 families who have trusted us with

close to Rs 25,000 crores ($ 5bn) of assets for advice.

Investment Banking services are for corporates looking to raise capital. Our forte is Equity

Capital Markets, where we have executed several marquee transactions. 

Credit & Finance focuses on secured mortgages and consumer loans. Our high quality loan

book of over Rs. 6,200 crores ($ 1.2bn) is backed by strong capital adequacy of

approximately 20% . 

IIFL Mutual Fund made an impressive beginning in FY12, with lowest charge Nifty ETF.

Other products include Fixed Maturity Plans.  

Life Insurance, Pension and other Financial Products, on open architecture complete our

product suite to help customers build a balanced portfolio. 

1.3 ORGANIZATION’S VISION AND MISSION

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(a) Vision- Our vision is to be the most respected company in the financial services space"

(b) Mission- To develop the India's largest yellow page network. In doing so, consumers will

be able to find a business or service with ease. Our goal is to deliver a simple to use

information resource which is both enjoyable and informative. Further, we are looking

forward to match the needs of the advertisers who require smart solutions to their business

essentials. Our Strength lies in our power to apply knowledge and expertise in Customer

satisfaction. It is not surprising to say that every day we generate business worth crores.

1.4 PRODUCT RANGE OF THE COMPANY:-

India Infoline Ltd. is a one-stop financial services shop, most respected for quality of its

advice, personalized service and cutting-edge technology. They provide a wide range of

financial products and services like equities, Insurances, commodities, Investments etc. They

can be broadly categorized into,

1) EQUITY

India Infoline provided the prospect of researched investing to its clients, which was

hitherto restricted only to the institutions. Research for the retail investor did not exist

prior to India Infoline. India Infoline leveraged technology to bring the convenience

of trading to the investor’s location of preference (residence or oce) through

computerized access. India Infoline made it possible for clients to view transaction

costs and ledger updates in real time.

2) COMMODITIES

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 IIFL offers commodities trading to its customers vide its membership of the MCX and

the NCDEX. Our domain knowledge and data based on in depth research of complex

paradigms of commodity kinetics, offers our customers a unique insight into

behavioral patterns of these markets. Our customers are ideally positioned to make

informed investment decisions with a high probability of success.

3) CREDIT & FINANCE

IIFL offers a wide array of secured loan products. Currently, secured loans (mortgage

loans, margin funding, loans against shares) comprise 94% of the loan book. The

Company has discontinued its unsecured products. It has robust credit processes and

collections mechanism resulting in overall NPAs of less than 1%. The Company has

deployed proprietary loan-processing software to enable stringent credit checks while

ensuring fast application processing. Recently the company has also launched Loans

against Gold.

4) INSURANCE

IIFL entered the insurance distribution business in 2000 as ICICI Prudential Life

Insurance Co. Ltd’s corporate agent. Later, it became an Insurance broker in October

2008 in line with its strategy to have an ‘open architecture’ model. The Company now

distributes products of major insurance companies through its subsidiary India

Infoline Insurance Brokers Ltd. Customers can choose from a wide bouquet of

products from several insurance companies including Max New York Life Insurance,

MetLife, Reliance Life Insurance, Bajaj Allianz Life, Birla Sunlife, Life Insurance

Corporation, Kotak Life Insurance and others.

5) WEALTH MANAGEMENT SERVICE

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 IIFL offers private wealth advisory services to high-net-worth individuals (HNI) and

corporate clients under the ‘IIFL Private Wealth’ brand. IIFL Private Wealth is

managed by a qualified team of MBAs from IIMs and premier institutes with relevant

industry experience. The team advises clients across asset classes like sovereign and

quasi-sovereign debt, corporate and collateralized debt, direct equity, ETFs and

mutual funds, third party PMS, derivative strategies, real estate and private equity. It

has developed innovative products structured on the fixed income side.

6) INVESTMENT BANKING

IIFL’s investment banking division was launched in 2006. The business leverages

upon its strength of research and placement capabilities of the institutional and retail

sales teams. Our experienced investment banking team possesses the skill-set to

manage all kinds of investment banking transactions. Our close interaction with

investors as well as corporates helps us understand and offer tailor-made solutions to

fulfill requirements.

The Company possesses strong placement capabilities across institutional, HNI and

retail investors. This makes it possible for the team to place large issues with marquee

investors.

In FY10, the team advised and managed more than 10 transactions including four

IPOs and four Qualified Institutions Placements.

1.5 SIZE (IN TERMS OF MANPOWER & TURNOVER) OF ORGANIZATION

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India Infoline Pvt. Ltd, present in around 8 countries  Its net sales was stood at Rs25.66bn.

Jul 25, 2012.14100 employees (at 31 March 2012).

1.6 COMPANY STRUCTURE

1.7 PRESENT LEADERSHIP

During Internship the interaction was with Mr. Praveen Sharma. He was the mentor

during the entire Internship of 6 weeks. By the entire module of summer training all

the interns were taught about the various lessons regarding Finance, Marketing &

Human Resource.

1.8 SOURCES OF DATA COLLECTION

PRIMARY DATA:

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The primary sources of data refer to the first-hand information Primary data is collected

during the survey with the help of Questionnaires. The popular ways to collect primary data

consist of surveys, interviews and focus groups, which shows that direct relationship between

potential customers and the companies. 

SECONDARY DATA:

Secondary data is one which already exists and is collected from the published sources.

The sources from which secondary data was collected are :

 Published reports

 Internet

 Books

CHAPTER-2

SWOT ANALYSIS OF THE COMPANY

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A SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is a helpful tool for

comparing and strategy planning for any business initiative.=

2.1 STRENGTHS & WEAKNESSES OF THE COMPANY

STRENGTHS:

 Customization

It understands the dreams, needs, aspirations, concerns and resources are unique and

this is reflected in every move they do for the sake of individual customer. This is the greatest

value it provide online trading products like Smart Invest and Smart Trade.

 Expertise

India Infoline Ltd brings within the customers reach their institutional expertise and the

ability to effectively combine an invaluable understanding of the financial markets, with an

intention of building a long-term partnership.

 One-stop-shop for all the investment needs

India Infoline Ltd gives all the types of services and products an individual investor

can dream and think off. All the financial products and services are under one-roof.

 Unbiased and objective advice

The teams of expert investment advisors customize plans to suit the needs of investors.

 Extensive research

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 India Infoline Ltd make sure that they are always accessible to customers through a

host of mediums. A customer can contact them either through website or through their

branches and channel partners of more than 300 offices across India.

 Brand image

India Infoline Ltd as such is a well-known brand in industry.

 Competitive pricing

It charges less brokerage compared to its competitors.

 Weaknesses:

Expensive products

Some of the products like Smart Trade are quite expensive. An annual charge for Smart

Trade is Rs. 3000.

 Tedious procedures

Tedious procedures and delays in processing the data and documents of new customers.

 Fund transfer

It has tie-ups with only 5 banks for online fund transfer, where as other competitors have

more tie-ups.

 Attrition

High attrition rates in trainees category.

 Unattractive offers

Some offers of the company like Advance Subscription Plan with a depositof Rs.50,000 to

avail low brokerage charges. The low brokerage charges will be effective for the clients for a

minimum turnover of Rs. 50 Crores p.a.

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2.2 OPPORTUNITIES & THREATS THAT THE COMPANY FACES.

OPPORTUNITIES:

 Indian economy seems to be out of recession. This is the right time for inventers to re-

enter the market. The company should adopt some strategies to increase the business

through existing clients.

 The increasing number of management graduates helps to get sales force at trainee

levels at less salaries or commission basis. It reduces the salaries and commissions

expenses of the company. The company can tie up with reputed B Schools for

trainees.

 Huge untapped market in rural areas, Tier2 and Tier 3 cities and towns of India can be

concentrated to increase the business.

 Many a banks are offering fund transfer services. The company can increase the tie-

ups for fund transfers at attract customers of different banks.

THREATS:

 Stiff competition from existing players in the market and there is also a threat of new

entrants. It has led to cut throat competition in terms of brokerage charges and

exposure.

 Increasing awareness of mutual funds and ULIPs created by Domestic Institutional

Investors has reduced the direct investment in to stock market to some extent. This

automatically reduces the business of stock brokers.

 Changing economic scenario in India and changes in government policies will have

great impact on the revenue of this company

 Many investors burnt their figures during the bearish market conditions. It has turned

many a trading accounts inoperative.

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2.3 UNIQUE SELLING PROPOSITION OF THE ORGANIZATION

A unique selling proposition (USP) is a description of the qualities that are unique to a

particular product or service and that differentiate it in a way which will make

customers purchase it rather than its rivals. Philip Kotler says that the difficulty firms

have in creating functional uniqueness has made them “focus on having a unique

emotional selling proposition (an ESP) instead of a USP”. Uniqueness can be sought

in a number of ways:

 By offering the lowest price.

 By offering the highest quality.

 By being exclusive.

 By offering the best customer service.

 By offering the widest choice.

 By giving the best guarantee.

CHAPTER-3

FUNCTIONAL ANALYSIS OF THE COMPANY

3.1 FINANCE

Functions:

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The functions of the financial departments are interlinked with the functioning of practically

all other departments. The primary and essential functions of this department are:

 Sourcing of finance

 Tax planning

 Dividend decision making

 Reporting to management about financial problems.

 Communication with regulatory bodies.

 To provide information regarding financial condition of the organization.

3.2 HRM

Functions:

 Selecting high quality people with great ability and proper attitude.

 Recruiting large number of self-motivated people.

 Training & Development of people in various areas.

 Performance Appraisal

 Maintaining relationships

3.3 ADVISORY DEPARTMENT

Functions:

 Mutual fund advisory services division

 Portfolio Management Services (PMS) decision

 Insurance service division

 NRI service division

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  IPO Advisory and Distribution Service system

3.4 MARKETING AND SALES

Functions:

 CRM (customer relationship management) database management

 Competitive analysis to identify what other companies are doing in terms of pricing,

product offering, target consumers etc

 New product development

 Crisis marketing management

 Leveraging market opportunities

Chapter-4

Lessons learnt

4.1 Experience about the work in the Company

My experience in IIFL was good. My internship helps me in following aspects

 It enhanced my communication skills as we have to communicate with clients.

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 It helps me in experiencing actual work environment in an organization.

 It helps me in realizing, the importance of being punctual at work.

 It helped me in knowing that maintaining good relations with others in the

organization is important.

4.2 Practical knowledge gained during internship

My job at IIFL was to sell a career to people. It means I had to recruit financial advisors for

the company. The kind of people I was looking forward were:

 People above the age of 18 years

 Minimum qualification- plus 2, but we prefer people who have a graduate degree in

any field.

And the categories on which focused were:

 Young people: They are more willing to take risks and are likely to be interested in

investing.

 Business men: these are the people who have a lot of funds to invest.

 Housewives: as they are the home-makers and when they advice you how to manage

your funds then they are highly influential.

PROCEDURE:--

The whole procedure of my job is given in the form of a flow chart so that it is easy to

conceptualize the idea.

DATABASE

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 TAKE ONE FROM THESE DATA

MADE A TELEPHONE CALL

AND FIXED AN APPOINTMENT

GO TO THAT PERSON

TRY TO CONVINCE THEM

TOOK REFERANCE FROM THEM

GIVE THEM FORM AND ALL NECESSARY ELEMENTS

CLOSED THE CALL

4.3 Findings and Difficulties

(A). HOUSEWIVES:

The reason behind our approaching Housewives for a possible tie-up was their large

presence and interaction with a large number of customers. And IIFL believes that

housewives are the home makers, they manage their finances at home very well and when

they give financial advices to others then it has a better impact.

RESPONSE:

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The efforts to establish a tie-up in this segment had a mixed response. Most of them found it

interesting and good way of earning money. But few of them were reluctant as they believed

that it would be hectic.

PROBLEMS FACED:

Though there was much interest shown by the housewives, but it was vacation time and most

of them had their vacation plans and because of this they were not ready to join in the month

of June. Some of them said that they would prefer staying at home and some had a problem

of having small kids.

(B). Big Business Houses People:

The main criterion that led us to select this particular segment was that these people have

better understanding of finance and they know how to deal with people. In this our main

target was business people as the past records show that they do real good in this field. These

people find it easy to win the trust of the customer.

RESPONSE:

The initial response that we got from this particular sector was good. The people in this

segment seemed interested enough about knowing of the business proposal. The success ratio

in this segment was good.

PROBLEMS FACED:

People were not ready to attend training because of lack of time.

(C). SELF EMPLOYED:

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The main selection criterion of this sector was that these people have many good contacts.

They have a better understanding of customer’s behavior and their needs. These people try to

tap mostly the big corporate clients and they know how to make long-term relationship with

their customers.

RESPONSE:

The overall response of the entire sector did not seem to be positive enough.

PROBLEMS FACED:

IIFL provides full time training and these people didn’t have time to spend on full time

training.

RECOMMENDATIONS

1. IIFL needs to spend more on brand awareness, because while talking to people we

realized that they don’t even recognize the company.

2. There is a huge opportunity in the rural sector, so IIFL should expand its activities in

rural sector.

3. IIFL should use the method of newspaper advertisement as this will help them in

tapping the market that has remained untouched till now.

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 INTRODUCTION TO EQUITY MARKET

In financial markets, stock is the capital raised by a corporation through the

Issuance and distribution of shares. A person or organization which holds
shares of stocks is called a shareholder. The aggregate value of a
corporation's issued shares is its market capitalization. When one buys a
share of a company he becomes a shareholder in that company. Shares are
also known as Equities. Equities have the potential to increase in value over
time. It also provides the portfolio with the growth necessary to reach the
Long-term investment goals. Research studies have proved that the equities
have outperformed than most other forms of investments in the long term.
Equities are considered the most challenging and the rewarding, when
compared to other investment options.
Research studies have proved that investments in some shares with a longer
tenure of investment have yielded far superior returns than any other

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investment. However, this does not mean all equity investments would
guarantee similar high returns. Equities are high-risk investments. One needs
to study them carefully before investing. Since 1990 till date, Indian stock
market has returned about 17% to investors on an average in terms of
increase in share prices or capital appreciation annually. Besides that, on
average stocks have paid 1.5% dividend annually. Dividend is a percentage of
the face value of a share that a company returns to its shareholders from its
annual profits. Compared to most other forms of investments, investing in
equity shares offers the highest rate of return, if invested over a longer
duration.

The first company to issue shares of stock was the Dutch East India
Company, in 1602. The innovation of joint ownership made a great deal of
Europe's economic growth possible following the Middle Ages. The technique
of pooling capital to finance the building of ships, for example, made the
Netherlands a maritime superpower. Before adoption of the joint-stock
corporation, an expensive venture such as the building of a merchant ship
could only be undertaken by governments or by very wealthy individuals
or families.
Equity markets, the world over, grew at a great speed in the decade of the
nineties. After the bear markets of the late eighties, the world markets saw
one of the largest ever bull markets of more than ten years. The opening up of
Indian economy in the 1990's led to a series of financial sector reforms,
prominent being the capital market reforms.
The introduction of dematerialization of shares, leading to faster and cheaper
transactions and introduction of derivative products and compulsory rolling
settlement has followed subsequently. Despite a series of stock market scams
and crises beginning from 1992 Harshad Mehta's scam to the Ketan Parekh's
2001 scam, the Indian equity markets have transformed themselves from a
broker dominated market to a mass market. The introduction of online trading
has given a much-needed impetus to the Indian equity markets. However,
over the years, reforms in the equity markets have brought the country on par
with many developed markets on several counts. Today, India boasts of a
variety of products, including stock futures, an instrument launched only by
select markets.

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The introduction of rolling settlement is the latest step in the direction of
overhauling the stock market. The equity market of the country will most
likely be comparable with the world's most advanced secondary markets with
regard to international best practices. The market moved to compulsory
rolling settlement and now all settlements are executed on T+2 basis and
market is gearing up for moving to T+1settlement in 2004 while the Straight
Through Processing (STP) is in place from December 2002.
The importance of equity market is increasing. Rightly, realizing the
advantages of resource allocation through market, Government of India and
Reserve Bank of India have been pushing reforms in equity markets. Series of
steps are being taken to remove hurdles, increase market efficiency and to
make it attractive for the retail investors to take part in the equity market. It
may not be an exaggeration to say that the Indian markets are resourceful to
put themselves on par with the markets of the developed countries. The
Indian markets have assimilated in a relatively lesser time, many a
developments that took long time in the developed markets.

DEVELOPMENTS IN EQUITY MARKET

The Government of India has been trying to improve market efficiency, enhance transparency
and bring the Indian Equity Market up to international standards. Many reform measures
have been initiated in the 90s. The principal ones are the formation of Securities Exchange
Board of India (SEBI), repeal of the Capital Issues (Control) Act, 1947, introduction of
screen-based trading, shortening of trading cycle, demutualization of stock exchanges,
establishment of depositories disappearance of physical share certificates and better risk
management systems in stock exchanges.

The formation of Sebi was the first attempt towards integrated regulation of the securities
market. Sebi regulates all market intermediaries and has the powers to impose monetary
penalties for misconduct of any intermediary. One of the major stumbling blocks in fair
pricing of capital issues has been the Capital Issues (Control) Act, 1947. The issuers were
denied the opportunity to economically raise money from the capital market. This is now a
matter of the past thanks to the repeal of the Act itself. Sebi has also issued Disclosure and

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Investor Protection (DIP) guidelines to ensure fair prices for the investors, though however,
many issuers in the 90s could unfairly price their capital issues at the cost of the poor
common investors.

The introduction of Screen Based Trading Systems (SBTS) by NSE is a major development
in the capital market. This made the markets more efficient. The geographical barriers to
trade were dismantled resulting in increased trading volumes. This was possible due to the
great advancements in the area of information technology. SBTS electronically matches
orders cutting down time, cost and errors, and minimizing the chances of fraud. Very long
settlement cycle was another major hindrance in effecting deliveries in the equity market.
Often the securities were delivered after 30 days or more due to weekly/fortnightly
settlements and carry forward transactions. Sebi has enforced the discipline to compulsorily
settle trades in T+3 days since April 2002. This is slated to reduce to T+2 days from April
2003. All scrips are now under rolling settlement since December 2001.

The Equity Market is incomplete without products to manage risks in portfolio values. At
long last, derivatives trading appeared on Indian exchanges in June 2000. While the product
range in derivatives is still limited (futures and options on stocks and stock indices), it is
certainly a major step forward in broadening the financial markets. NSE was established as a
demutualized structure separating the roles of ownership, management and trading to
eliminate any conflict of interest among the stakeholders to improve market efficiency and to
focus on investor interest. Another notable development in the Indian equity market has been
the introduction of depositories to dematerialize the share certificates. This avoids physical
movement of certificates, bad deliveries and quicker transfer of ownership of shares.
Presently all actively traded shares are held, traded and settled in demat form. The setting up
of National Securities Clearing Corporation Ltd., (NSCCL) in April 1996 has been a major
development in managing counterparty risks in the equity market. This has helped in
increasing trading volumes since traders are now more confident about default-free
settlements. While most of the above measures have helped in reinforcing confidence in the
Indian equity market by providing more transparent and efficient buying, selling and transfer
of shares.

International Scenario:

Global integration, the widening and intensifying of links, between high-income and
developing countries, have accelerated over the years. Over the past few years, the financial

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markets have become increasingly global. The descriptive statistics of the major markets in
terms of daily returns is presented in (Table 1-3), which shows that the markets are
increasingly getting interlinked.

The stock markets worldwide have grown in size as well as depth over the years. As can

be observed from (Table 1-6), the turnover of all markets taken together have grown from

US $ 39.61 trillion in 2004 to US $ 67.91 trillion in 2006. It is significant to note that US

alone accounted for about 48.99 % of worldwide turnover in 2006. Despite having a large

number of companies listed on its exchanges, India accounted for a meager 0.94% in total

world turnover in 2006. The market capitalization of all listed companies taken together

on all markets stood at US $ 54.19 trillion in 2006 (US $ 43.68 trillion in 2005). The

share of US in worldwide market capitalization decreased from 38.85 % as at end-2004

to 35.84 % as at end 2006, while Indian listed companies accounted for 1.51% of total

market capitalization in 2006.

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According to the 'World Development Indicators 2007, World Bank' there has been an
increase in market capitalization as percentage of Gross Domestic Product (GDP) in
some of the major country groups. The increase, however, has not been uniform across
countries. The market capitalization as a percentage of GDP was the highest at 112.9%
for the high income countries as at end 2005 and lowest for middle income countries at
49.5%. Market capitalization as percentage of GDP in India stood at 68.6 % as at end
2005. The turnover ratio, which is a measure of liquidity, was 122.2 % for high-income
countries and 96.6 % for low-income countries. The total number of listed companies
stood at 28,733 for high-income countries, 11,141 for middle-income countries and 6,177
for low-income countries as at end 2006.

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 FUNDAMENTAL ANALYSIS

The investor while buying stock has the primary purpose of gain. If he invests for a short
Period of time it is speculative but when he holds it for a fairly long period of time the
Anticipation is that he would receive some return on his investment. Fundamental analysis is
a method of finding out the future price of a stock, which an investor wishes to buy. The
method for forecasting the future behaviour of investments and the rate of return on Them is
clearly through analyse of the broad economic forces in which they operate. The kind of
industry to which they belong and the analysis of the company's internal working through
statements like income statement, balance sheet and statement of changes of income.

ECONOMIC ANALYSIS
Investors are concerned with those forces in the economy, which affect the performance of
organizations in which they wish to participate, through purchase of stock. A study of the
economic forces would give an idea about future corporate earnings and the payment of
dividends and interest to investors. Some of the broad forces within which the factors of
investment operate are:

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1. POPULATION: -
Population gives an idea of the kind of labor force in a country. In some countries the
population growth has slowed down whereas in India and some other third world countries
there has been a population explosion. Population explosion will give demand for more
industries like hotels, residences, service industries like health, consumer demand like
refrigerators and cars. Likewise, investors should prefer to invest in industries, which have a
large amount of labor force because in the future such industries will bring better rates of
return.
2. RESEARCH AND TECHNOLOGICAL DEVELOPMENTS: -
The economic forces relating to investments would be depending on the amount of resources
spent by the government on the particular technological development affecting the future.
Broadly the investor should invest in those industries which are getting a large amount of
share in the funds of the development of the country. For example, in India in the present
context automobile industries and spaces technology are receiving a greater attention. These
may be areas, which the investor may consider for investments.
3. CAPITAL FORMATION: -
Another consideration of the investor should be the kind of investment that a company makes
in capital goods and the capital it invests in modernization and replacement of assets. A
particular industry or a particular company which an investor would like to invest can also be
viewed at with the help of the economic indicators such as the place, value and property
position of the industry, group to which it 110ngs and the year-to-year returns through
corporate profits.
4. NATURAL RESOURCES AND RAW MATERIALS: -
The natural resources are to a large extent responsible for a country's economic development
and overall improvement in the condition of corporate growth. In India, technological
discoveries recycling of materials, nuclear and solar energy and new synthetics should give
the investor an opportunity to invest in untapped or recently tapped resources which would
also produce higher investment opportunity.
INDUSTRIAL ANALYSIS
The industry has been defined as homogeneous groups of people doing a similar kind of
activity or similar work. In India, the broad classification of industry is made according to
stock exchange list, which is published. This gives a distinct classification to industry to
industry in different forms such as:
(A) Engineering,
(B) Banking and Insurance,
(C) Textiles,

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(D) Cement,
(E) Steel Mills and Alloys,
(F) Chemicals and Pharmaceuticals,
(G) Retail,
(H) Sugar,
(I) Information Technology,
(J) Automobiles and Ancillary,
(K) Telecommunications,
(L) FMCG,
(M)Miscellaneous.

Industry should also be evaluated or analyzed through its life cycle. Industry life cycle may
also be studied through the industrial life cycle state. There are generally three stages of an
industry. These stages are pioneering stage, expansion stage and stagnation stage.
1. THE PIONEERING STAGE: -
The industrial life cycle has a pioneering stage when the new inventions and technological
developments take place. During this time the investor will notice great increase in the
activity of the firm. Production will rise and in relation to production, there will be a great
demand for the product. At this stage, the profits are also very high as the technology is new.
Taking a look at the profit many new firms enter into the same field and ill; market becomes
competitive. The market competitive pressures keep on increasing with the en" of new-firms
and the prices keep on declining and then ultimately profits fall. At this stage all firms
compete with each other and only a few efficient firms are left to run the business and most
of the other firms are wiped out in the pioneering stage itself.
2. THE EXPANSION STAGE: -
The efficient firms, which have been in the market now, find that it is time to stabilize them.
Although competition is there, the, number of firms have gone down during ill pioneering
stage itself and there are a large number of firms left to run the business in the industry. This
is the time when each one has to show competitive strength and superiority. The investor will
find that this is the best time to make an investment. At the pioneering stage it was difficult to
find out which of the firm to invest in, but having waited for the stability period there has
been a dynamic selection process and a few of the large number of firms are left in the
industry. This is the period of security and safety and this is also called period of maturity for
the firm. This stage lasts from five years to fifty years of a firm depending on the potential
and productivity and policy to meet the change of competition and rapid change in buyer and
customer habit. After this stage develops the stage of stagnation or obsolescence.

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3. THE STAGNATION STAGE: -
During the stagnation stage the investor will find that although there is increase in sales of an
organization, this is not in relation to the profits earned by the company. Profits are also there
but the growth in the firm is lower than it was in the expansion stage. The industry finds that
it is at a loss of power and cannot expand. During most of the firms who have realized the
competitive nature of the industry and the arrival of the stagnation stage, begin to change
their course of action and start on a new venture should make a continuous evaluation of their
investments. In firms in which they have received profits for large number of years and have
reached stagnation they can plan to their investments and find better avenues in those firms
where the expansion stage has set in.

COMPANY ANALYSIS
Company analysis is a study of the variables that influence the future of a firm both
qualitatively and quantitatively. It is a method of assessing the competitive position of a firm
earning and profitability, the efficiency with which it operates its financial position and its
ful1l with respect to the earning of its shareholders. The fundamental nature of this analysis is
that each share of a company has an intrinsic value, which is dependent on the company's
financial performance, quality of management and record of its earnings and dividend. They
believe that the market price of share in a period of time will move towards its intrinsic value.
If the market price of a share is lower than the intrinsic value, as evaluated by the
fundamental analysis, then the share is supposed to be undervalued and it should be
purchased but if the current market price shows that it is more than intrinsic value then
according to the theory the share should be sold. This basic approach is analyzed through the
financial statements of an organization. The basic financial statements, which are required as
tools of the fundamental analyst, are the income statement, the balance sheet, and the
statement of changes in financial position. These statements are useful for investors, creditors
as well as internal management of a firm and on the basis these statements the future course
of action may be taken by the investors of the firm. While evaluating a company, its
statement must be carefully judged to find out that they are:

(a) Correct
(b) Complete
(c) Consistent
(d) Comparable

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TECHNICAL ANALYSIS
Technical analysis is simply the study of prices as reflected on price charts. Technical
analysis assumes that current prices should represent all known information about the
markets. Prices not only reflect intrinsic facts, they also represent human emotion and the
pervasive mass psychology and mood of the moment. Prices are, in the end, a function of
supply and demand. However, on a moment to moment basis, human emotions…fear, greed,
panic, hysteria, elation, etc. also dramatically affect prices. Markets may move based upon
people‘s expectations, not necessarily facts. A market "technician" attempts to disregard the
emotional component of trading by making his decisions based upon chart formations,
assuming that prices reflect both facts and emotion. Analysts use their technical research to
decide whether the current market is a BULL MARKET or a BEAR MARKET.
1. STOCK CHARTS
A stock chart is a simple two-axis (X-Y) plotted graph of price and time. Each individual
equity, market and index listed on a public exchange has a chart that illustrates this
movement of price over time. Individual data plots for charts can be made using the
CLOSING price for each day. The plots are connected together in a single line, creating the
graph. Also, a combination of the OPENING, CLOSING, HIGH and/or LOW prices for that
market session can be used for the data plots. This second type of data is called a PRICE
BAR. Individual price bars are then overlaid onto the graph, creating a dense visual display
of stock movement. Stock charts can be drawn in two different ways. An ARITHMETIC
chart has equal vertical distances between each unit of price. A LOGARITHMIC chart is a
percentage growth chart.
2. TRENDS

The stock chart is used to identify the current trend. A trend reflects the average rate of
change in a stock's price over time. Trends exist in all time frames and all markets. Trends
can be classified in three ways: UP, DOWN or RANGEBOUND. In an uptrend, a stock
rallies often with intermediate periods of consolidation or movement against the trend. In
doing so, it draws a series of higher highs and higher lows on the stock chart. In an

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Uptrend, there will be a POSITIVE rate of price change over time. In a downtrend, a
stock declines often with intermediate periods of consolidation or movement against the
trend. In doing so, it draws a series of lower highs and lower lows on the stock chart. In a
downtrend, there will be a NEGATIVE rate of price change over time. Range bound price
swings back and forth for long periods between easily seen upper and lower limits. There is
no apparent direction to the price movement on the stock chart and there will be LITTLE or
NO rate of price change.
Trends tend to persist over time. A stock in an uptrend will continue to rise until some change
in value or a condition occurs. Declining stocks will continue to fall until some change in
value or conditions occur. Chart readers try to locate TOPS and BOTTOMS, which are those
points where a rally or a decline ends. Taking a position near a top or a bottom can be very
profitable. Trends can be measured using TRENDLINES. Very often a straight line can be
drawn UNDER three or more pullbacks from rallies or OVER pullbacks from declines. When
price bars then return to that trend line, they tend to find SUPPORT or RESISTANCE and
bounce off the line in the opposite direction.
3. VOLUME
Volume measures the participation of the crowd. Stock charts display volume through
individual HISTOGRAMS below the price pane. Often these will show green
bars for up days and red bars for down days. Investors and traders can measure
buying and selling interest by watching how many up or down days in a row occur and
how their volume compares with days in which price moves in the opposite direction. Stocks
that are bought with greater interest than sold are said to be under ACCUMULATION.
Stocks that are sold with great interest than bought are said to be under DISTRIBUTION.
Accumulation and distribution often LEAD price movement. In other words, stocks under
accumulation often will rise sometime after the buying begins. Alternatively, stocks under
distribution will often fall sometime after selling begins. It takes volume for a stock to rise
but it can fall of its own weight. Rallies require the enthusiastic participation of the crowd.
When a rally runs out of new participants, a stock can easily fall. Investors and traders use
indicators such as ON BALANCE VOLUME to see whether participation is lagging (behind)
or leading (ahead) the price action. Stocks trade daily with an average volume that determines
their LIQUIDITY. Liquid stocks are very easy for traders to buy and sell. Liquid stocks
require very high SPREADS (transaction costs) to buy or sell and often cannot be eliminated
quickly from a portfolio. Stock chart analysis does not work well on illiquid stocks.
4. MOVING AVERAGES
The most popular technical indicator for studying stock charts is the MOVING AVERAGE.

31
This versatile tool has many important uses for investors and traders. Take the sum of any
number of previous CLOSE prices and then divide it by that same number. This creates an
average price for that stock in that period of time. A moving average can be displayed by re-
computing this result daily and plotting it in the same graphic pane as the price bars. Moving
averages LAG price. In other words, if price starts to move sharply upward or downward, it
will take some time for the moving average to "catch up". Plotting moving averages in stock
charts reveals how well current price is behaving as compared to the past. The power of the
moving average line comes from its direct interaction with the price bars. Current price will
always be above or below any moving average computation. When it is above, conditions are
"bullish". When below, conditions are "bearish". Additionally, moving averages will slope
upward or downward over time. This adds another visual dimension to a stock analysis.
Moving averages define STOCK TRENDS. They can be computed for any period of time.
Investors and traders find them most helpful when they provide input about the SHORT-
TERM, INTERMEDIATE and LONG-TERM trends. For this reason, using multiple moving
averages that reflect these characteristics assist important decision making. Commons
moving average settings for daily stock charts are 20 days for short- term, 50 days for
intermediate and 200 days for long-term. One of the most common buy or sell signals in all
chart analysis is the MOVING AVERAGE CROSSOVER. These occur when two moving
averages representing different trends. For example, when a short-term average crosses
BELOW a long-term one, a SELL signal is generated. Conversely, when a short-term crosses
ABOVE the long-term, a BUY signal is generated. Moving averages can be "speeded up"
through the application of further math calculations. Common averages are known as
SIMPLE or SMA. These tend to be very slow. By giving more weight to the current changes
in price rather than those many bars ago, a faster EXPONENTIAL or EMA moving average
can be created. Many technicians favor the EMA over the SMA. Fortunately all common
stock chart programs, online and offline do the difficult moving average calculations but plot
price perfectly.
6. SUPPORT AND RESISTANCE
The concept of SUPPORT AND RESISTANCE is essential to understanding and
interpreting stock charts. Just as a ball bounces when it hits the floor or drops after being
thrown to the ceiling, support and resistance defines natural boundaries for rising and falling
prices. Buyers and sellers are constantly in battle mode. Support defines that level where
buyers are strong enough to keep price from falling further. Resistance defines that level
where sellers are too strong to allow price to rise further. Support and resistance play
different roles in uptrends and downtrends. In an uptrend, support is where a pullback from a

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rally should end. In a downtrend, resistance is where a pullback from a decline should end.
Support and resistance are created because price has memory. Those prices where significant
buyers or sellers entered the market in the past will tend to generate a similar mix of
participants when price again returns to that level.
When price pushes above resistance, it becomes a new support level. When price falls below
support, that level becomes resistance. When a level of support or resistance is penetrated,
price tends to thrust forward sharply as the crowd notices the BREAKOUT and jumps in to
buy or sell. When a level is penetrated but does not attract a crowd of buyers or sellers, it
often falls back below the old support or resistance. This failure is known as a FALSE
BREAKOUT. Support and resistance come in all varieties and strengths. They most often
manifest as horizontal price levels. But trend lines at various angles represent support and
resistance as well. The length of time that a support or resistance level exists determines the
strength or weakness of that level. The strength or weakness determines how much buying or
selling interest will be required to break the level. Also, the greater volume traded at any
level, the stronger that level will be. Support and resistance exist in all time frames and all
markets. Levels in longer time frames are stronger than those in shorter time frames. The
ideas of Charles Dow, the first editor of the Wall Street Journal, form the basis of technical
analysis today. The behaviour patterns that he observed apply to markets throughout the
world.

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 PRIMARY MARKET

Primary market is the place where issuers create and issue equity, debt or hybrid instruments for
subscription by the public; the secondary market enables the holders of securities to trade them.
Primary market is a market for raising fresh capital in the form of shares. Public limited
companies that are desirous of raising capital funds through the issue of securities approach this
market. The public limited and government companies are the issuers and individuals, institutions
and mutual funds are the investors in this market. The primary market allows for the formation of
capital in the country and the accelerated industrial and economic development.

Everywhere in the world capital markets have originated as the new issues markets. Once
industrial companies are set up in a big number and with them a considerable volume of
business comes into existence a market for outstanding issues develops. In the absence of
secondary market or the stock exchange, the capital market will be paralyzed. This is on
account of the reason that the business enterprises borrow money from the capital market for
a very long period but the investors or savers whose savings are canalized through the capital
market generally wish to invest only for a short period. Existence of the stock exchange
provides a medium through which these two ends can be reconciled. It enables the investors
to sell their shares for money whenever they wish to do so. Thus, the business enterprises
keep the possession of permanent capital; the shares can keep on changing hands.

In order to sell securities, the company has to fulfill various requirements and decide upon the
appropriate timing and method of issue. It is quite normal to obtain the assistance of
underwriters, merchant banks or special agencies to look after these aspects.

METHODS OF MARKETING IN PRIMARYMARKET

1. PUBLIC ISSUE: -
A public limited company can raise the amount of capital by selling its shares to the public.
Therefore, it is called public issue of shares or debentures. For this purpose it has to prepare a
'Prospectus'. A prospectus is a document that contains information relating to the company
such as name, address, registered office and names and addresses of company promoters,
managers, Managing Director, directors, company secretary, legal advisors, auditors and

31
bankers. It also includes the details about project, plant location, technology, collaboration,
products, export obligations etc. The company has to appoint brokers and underwriters to sell
the minimum number of shares and it has to fix the date of opening and closing of
subscription list.
The new issue of shares or debentures of a company are offered for exclusive subscription of
general public. The prospectus should be approved by SEBI. A minimum of 49 per cent of
the amount of the issue at a time is to be offered to public. The company makes a direct offer
to the general public to subscribe the securities of a stated price. The securities may be issued
at par, at discount or at a premium. An existing company may sell the shares at a premium.
There is no practice of selling shares at a discount in India. Public issue is a popular method
of raising capital. It provides wide distribution of ownership securities. It also promotes
confidence of investors through transparency and non-discriminatory basis of allotment. It
satisfies compliance with the legal requirements. However, the issue of securities through
prospects is time consuming because there are various formalities to be completed by the
company. The cost of raising capital is also very high due to underwriting, commission,
brokerage, publicity, legal, and other administrative costs.
2. PRIVATE PLACEMENT: -
A Company makes the offer of sale to individuals and institutions privately without the issue
of a prospectus. This saves the cost of issue of securities. The securities are placed at higher
prices to individuals and institutions. Institutional investors play a very important role in the
private placement. This has become popular in recent days. This method is less expensive and
time saving. The company has to complete a very few formalities. It is suitable for small
companies as well as new companies. This method can be used when the stock market is bull.
However, the private placement helps to concentrate securities in the few hands. They can
create artificial scarcity and increase the prices of shares temporarily and then sell the shares
in the stock market and mislead the common and small investors. This method also deprives
the common investors of an opportunity to subscribe to the issue of shares.
3. OFFER FOR SALE: -
A Company sells the securities through the intermediaries such as issue houses, and
stockbrokers. This is known as an offer for sale method. Initially, the company makes an
offer for sale of its securities to the intermediaries stating the price and other terms and
conditions. The intermediaries can make negotiations with the company and finally accept
the offer and buy the shares from the company. Then these securities or shares are re-sold to
the general investors in the stock market normally at a higher price in order to get profit. The
intermediaries have to bear the expenses of this issue. The object of this issue is to save the
time, cost and get rid of complicated procedure involved in the marketing of securities. The

31
issues can also be underwritten in order to ensure full subscription of the issue. The general
public get the shares at a higher price the middlemen are more benefited in this process.
4. BOUGHT OUT DEALS: -
A Company makes an outright sale of equity shares to a single sponsor or the lead sponsor
and such deals are known as bought out deals. There are three parties involved in the bought
out deals. The promoters of the company, sponsors and co-sponsors, sponsors are merchant
bankers and co-sponsors are the investors. There is an agreement in which an outright sale of
a chunk of equity shares is made to a single sponsor or the lead sponsor. The sale price is
finalized through negotiations between the issuing company and the purchasers. It is
influenced by various factors such as project evaluation, reputation of the promoters, current
market sentiments etc. Bought out deals are in the nature of fund-based activity where the
funds of the merchant bankers are locked in for at least for a minimum period. These shares
are sold at over the Counter Exchange of India or at a recognized stock exchange. Listing
takes place when the company gets profits and performs well. The investor-sponsors make
profits because the shares are listed at higher price.
5. INITIAL PUBLIC OFFER: -
When a company makes public issue of shares for the first time, it is called Initial Public
Offer. The securities are sold through the issue of prospectus to successful applicants on the
basis of their demand. The company has to appoint underwriters in order to guarantee the
minimum subscription. An underwriter is generally an investment banking company. The
underwriter agrees to pay the company a certain price and buy a minimum number of shares,
if they are not subscribed by the public. The underwriter charges some commission for this
work. He can sell these shares in the market afterwards and make profit. There may be two or
more underwriters in case of large issue.
The company has to issue a prospectus giving full information about the company and the
issue. It has to issue share application forms through the brokers and underwriters. The
brokers collect orders from their clients and place orders with the company. The company
then makes the allotment of shares with the help of stock exchange. The share certificate are
delivered to the investors or credited to their demat accounts through the depository. This
method saves time and avoids complicated procedure of issue of shares.
With more and more companies coming out with tempting IPO or additional offers, there is
greater need to exert caution and pick the best IPO investments. Following four critical
factors should be studied in an IPO offer document, before making an IPO investment:
Promoter, Performance, Prospects and Price.

6. RIGHT ISSUE: -

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When an existing company issues shares to its existing shareholders in proportion to the
number of shares held by them, it is known as Rights Issue. Rights issue is obligatory for a
company where increase in subscribed capital is necessary after two years of its formation or
after one year of its first issue of shares, whichever is earlier.

SEBI has issued guidelines for issue of right shares. Accordingly, only a listed company can
make right issue. Rights issue can be made only in respect of fully paid up shares. No
reservation is allowed for rights issue of fully or partly convertible debentures. The company
has to make announcement of rights issue and once the announcement is made it cannot be
withdrawn. The company has to make the appointment Registrar but underwriting is optional.
It has also to appoint category I Merchant Bankers holding a certificate of registration issued
by SEBI. Letter of offer should contain disclosures as per SEBI requirements. The rights
issue should be open for minimum period of 30 days, and maximum up to 60 days. The
company has to make an agreement with the depository for materialization of securities to be
issued in demat form. A minimum subscription of 90 per cent of the issue should be received.
A no complaints certificate is to be filed by the Lead Merchant Banker with the SEBI after 21
days from the date of issue of offer document.
7. BONUS ISSUE: -
Bonus shares are the shares allotted by capitalization of the reserves or surplus of a company.
Issue of bonus shares results in conversion of the company's profits or reserves into share
capital. Therefore, it is capitalization of company's reserves. Bonus shares are issued to the
equity shareholders in proportion to their holdings of the equity share capital of the company.
Issue of bonus shares does not affect the total capital structure of the company. It is simply a
capitalization of that portion of shareholders equity which is represented by reserves and
surplus. The issues of bonus shares are issued subject to certain rules and regulations. Issue of
bonus shares reduces the market price of the company's shares and keeps it within the reach
of ordinary investors. The company can retain earnings and satisfy the desire of the
shareholders to receive dividend. Issue of bonus shares is generally an indication of higher
future profits. Receipt of bonus shares as compared to cash dividend generally results in tax
advantage to the shareholder.
SECONDARY MARKET

A market, which deals in securities that have been already issued by companies, is called as
secondary market. It is also known as stock market. It is the base upon which the primary
market is depending. For the efficient growth of the primary market a sound secondary

31
market is an essential requirement. The secondary market offers an important facility of
transfer of securities activities of securities.

Secondary market essentially comprises of stock exchanges, which provide platform for
purchase and sale of securities by investors. In India, apart from the Regional Stock
Exchanges established in different centers, there are exchanges like the National Stock
Exchange (NSE), who provide nation-wide trading facilities with terminals all over the
country. The trading platform of stock exchanges is accessible only through brokers and
trading of securities is confined only to stock exchanges.

The activities of buying and selling of securities in a market are carried out through the
mechanism of stock exchange. There are at present 24 Stock Exchanges in India,
recognized by the government. The first organized stock exchange was established in
India at Bombay in 1887. When the Securities Contracts (Regulation) Act was passed in
1956, only 7 stock exchanges were recognized. There are three important stock exchanges in
Bombay namely the Bombay Stock Exchange, National Stock Exchange and over the
Counter Exchange of India. There has been a substantial growth of capital market in India
during the last 25 years.
Corporate Securities - There are 23 exchanges in the country, which offer screen based
trading system. The trading system is connected using the VSAT technology from over
357 cities. There were 9,368 trading members registered with SEBI as at end March 2004
(Table 1-10).
The market capitalization has grown over the period indicating more companies using the
trading platform of the stock exchange. The all India market capitalization is estimated at
Rs. 13,187,953 million at the end of March 2004. The market capitalization ratio defined
as the value of listed stocks divided by GDP is used as a measure of stock market size. It
is of economic significance since market is positively correlated with the ability to mobilize
capital and diversify risk. It increased sharply to 52.3% in 2003-04 against 28.5% in the
previous year. The trading volumes on exchanges have been witnessing phenomenal growth
over the past decade. The trading volume, which peaked at Rs.28,809,900 million in 2000-01,
fell substantially to Rs. 9,689,093 million in 2002-03. However, the year 2003-04 saw a
turnaround in the total trading volumes on the exchanges. It registered a volume of Rs.
16,204,977 million. The turnover ratio, which reflects the volume of trading in relation to the
size of the market, has been increasing by leaps and bounds after the advent of screen based
trading system by the NSE. The turnover ratio for the year 2003-04 accounted at 122.9%. The

31
relative importance of various stock exchanges in the market has undergone dramatic change
during this decade.
The increase in turnover took place mostly at the big exchanges. The NSE yet again
registered as the market leader with more 85% of total turnover (volumes on all segments) in
2003-04. Top 5 stock exchanges accounted for 99.88% of turnover, while the rest 18
exchange for less than 0.12% during 2003-04 .About ten exchanges reported nil trading
volume during the year.
The movement of the S&P CNX Nifty, the most widely used indicator of the market, is
presented in Chart 1-1. The index movement has been responding to changes in the
government‘s economic policies, the increase in FIIs inflows, etc. However, the year 2003-04
witnessed a favorable movement in the Nifty, wherein it registered its all-time high in
January 2004 of 2014.65. The point-to-point return of Nifty was 80.14% for 2003-04.

Government Securities - The trading in government securities exceeded the combined

trading in equity segments of all the exchanges in the country during 2003-04. The aggregate
trading in central and state government dated securities, including treasury bills, increased by
manifold over a period of time. During 2003-04 it reached a level of Rs. 26,792,090 million.
The share of WDM segment of NSE in total turnover for government securities decreased
marginally from 52% in 2002-03 to 47.6% in 2003-04. However, the share of WDM segment
of NSE in the total of Non-repo government securities increased marginally from 74.01% in
2002-03 to 74.89% in 2003-04.

REASONS FOR TRANSITING IN SECONDARY MARKET

There are two main reasons why individuals transact in the secondary market:
1. INFORMATION MOTIVATED REASONS: -
Information motivated investors believe that they have superior information about a
particular security than other market participants. This information leads them to believe that
the security is not being correctly priced by the market. If the information is good, this
suggests that the security is currently under-priced, and investors with access to such
information will want to buy the security. On the other hand, if the information is bad, the
security will be currently overpriced and such investors will want to sell their holdings of the
security.
2. LIQUIDITY MOTIVATED REASONS: -
Liquidity motivated investors, on the other hand, transact in the secondary market because
they are currently in a position of either excess or insufficient liquidity. Investors with surplus

31
cash holdings (e.g., as a result of an inheritance) will buy securities, where as investors with
insufficient cash (e.g., to purchase a Car) will sell securities.
FUNCTION OF THE SECONDARY MARKET
1. To facilitate liquidity and marketability of the outstanding equity and debt instruments.
2. To contribute to economic growth through allocation of funds to the most efficient channel
through the process of disinvestments to reinvestment.
3. To provide instant valuation of securities caused by changes in the internal environment
(that is, company-wide and industry wide factors). Such valuation facilitates the measurement
of the cost of capital and the rate of return of the economic entities at the micro level.
4. To ensure a measure of safety and fair dealing to protect investors‘ interest. To induce
companies to improve performance since the market price at the stock exchanges reflects the
performance and this market price is readily available to investors.

INTERMEDARIES IN SECONDARY MARKET: -

1. STOCK BROKER: -
A Stock Broker plays a very important role in the secondary market helping both the seller
and the buyer of the securities to enter in to a transaction. The buyer and seller may be either
a broker or a client. A broker is an intermediary who arranges to buy and sell securities on
behalf of clients (the buyer and the seller). They get commission on these transactions. About
one fourth of the members of the stock exchange are specialist known as market makers.
According to Rule 2 (e) of SEBI (Stock-Brokers and Sub-Brokers) Rules, 1992, a
stockbroker means a member of a recognized stock exchange. No stockbroker is allowed to
buy, sell or deal in securities, unless he or she holds a certificate of registration granted by
SEBI. A stockbroker shall not buy, sell, and deal in securities , unless he holds a certificate
granted by SEBI.
2. SUB BROKERS: -
A sub-broker is a person who intermediates between investors and stockbrokers. He acts on
behalf of a stockbroker as an agent or otherwise for assisting the investors for buying, selling or
dealing in securities through such stockbroker. No sub-broker is allowed to buy, sell, or deal in
securities, unless he or she holds a certificate of registration granted by SEBI. A sub-broker may
take the form of a sole proprietorship, a partnership firm or a company. Stockbrokers of the
recognized stock exchanges are permitted to transact with sub-brokers. He is also known as
Remiseres.
3. CUSTODIAN: -

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Custodian of Securities means any person who carries on or proposes to carry on the business of
providing custodial services. Custodial Services in relation to securities means safekeeping of
securities of a client and providing services incidental thereto, and includes-
1. Maintaining accounts of securities of a client;
2. Collecting the benefits or rights accruing to the client in respect of securities;
3. Keeping the client informed of the actions taken or to be taken by the issuer of securities,
having a bearing on the benefits or rights accruing to the client; and
4. Maintaining and reconciling records of the services.

4. JOBBER: -
A jobber is a specialist and independent dealer in securities. A jobber has to give two quotations
as a dealer in securities. He gives lower quotation for buying and higher quotation for selling the
securities. Jobber deals only with the brokers and not with the investors. His margin is fixed by
competition among themselves as dealers. The margin is narrow when there is keen competition.
Every year, a member of the stock exchange has to decide and declare in advance whether he
proposes to act as a jobber or a broker. Each jobber specializes in a certain group of securities. He
ensures that the transactions are carried out smoothly and promptly. The double quotation of
jobber assures fair-trading to investors.
5. ODD LOT DEALER: -
These are specialists who handle the odd lots. The standard trading unit for listed stock is called
lot‘. The shares are normally traded in the lots of 5, 50, 100 etc. However, the minimum lot has
become 1 due to dematerialization. But all the listed stocks are not compulsorily in the demat
form. Odd lot dealers buy odd lots, which other members wish to sell for their customers and sell
odd lots which others, want to buy. The price of odd lots is determined by the round lot
transactions. The odd lot dealer earns his profit on the difference between the purchase and sales
price.
6. ARBITRAGEUR: -
An arbitrageur is a specialist in dealing with securities in different stock exchange centers at the
same time. He makes the profit by difference in the prices prevailing in different centers of
market activity. He carries out these transactions with a good communication system and
telephonic and tele-printer facility. He should have ability to get the prices from different centers
before other members trading in the stock market.
7. SECURITY DEALER: -
The members who purchase and sale government securities on the stock exchange are known as
Security Dealers. Each transaction has to be separately negotiated. The dealers should have
information about the several kinds of government securities. They take risk in ready purchase
and sale of securities for current requirements. Their role is restricted by the participation of LIC
and Commercial Banks.

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8. DEPOSITORIES: -
A depository is an entity where the securities of an investor are held in electronic form. The
person who holds a demat account is a beneficiary owner. In case of a joint account, the account
holders will be beneficiary holders of that joint account. Depositories help in the settlement of the
dematerialized securities. Each custodian/clearing member is required to maintain a clearing pool
account with the depositories. He is required to make available the required securities in the
designated account on settlement day.
9. PORTFOLIO MANAGERS: -
A Portfolio Manager is a professional with experience and expertise in the field. He studies the
market and adjusts the investment mix for his client on a continuing basis to ensure safety of
investment and reasonable returns there from. Any person who pursuant to a contract or
arrangement with a client, advises or directs or undertakes on behalf of the client whether as a
discretionary portfolio manager or otherwise the management or administration of a portfolio of
securities or the funds of the client, as the case may be is a portfolio manager.
10. STOCK EXCHANGES: -
A stock exchange or securities exchange is a marketplace where stocks offered for sale are listed
and exchanged. Typically, the exchange is made up of a Board of Governors generally selected
by the members, which is chosen to represent the interests of seat holders. The Board then
employees an executive officer, to manage the Exchange. The Exchange usually assigns a
number of seats to brokers.

TRADING

The act of buying and selling of securities on a stock exchange is known as Stock Exchange
Trading. Jobbers and brokers are the two categories of dealers in the stock exchange. A
jobber is a dealer in securities while a broker is an agent or seller of securities. Every year a
member has to decide and declare in advance whether he proposes to act as a jobber or a
broker. A jobber gives two quotations as a dealer in securities, lower quotation for buying
and higher one for selling. The difference between the two quotations is his remuneration.
This system enables specialization in the dealings and each jobber specializes in a certain
group of securities. It also ensures smooth and prompt execution of transactions. The double
quotation of a jobber assures fair-trading in the market. A broker is merely an agent to buy or

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sell on behalf of his clients. He is a generalist. Broker has to negotiate terms and conditions
of sale or purchase and safeguard his client's interest. He gets commission from his clients‘,
that is fixed by the stock exchange.
DEMAT

Demat is ―dematerialization‖ on shares. Dematerialization is a process by which the shares,

debentures etc in the physical form get converted into the electronic form and are stored in
the computers by the depository. Earlier there used to be the hectic procedure of physical
delivery of shares. Dematerialization is a unique process of trading the shares in the
electronic form rather then the vulnerability of the physical delivery of the shares.
The introduction of NEAT and BOLT has increased the reach of capital market manifolds.
The increase in number of investors participating in the capital market has increased the
probability of being hit by a bad delivery. The cost and time spent by the brokers for
rectification of these bad deliveries tends to be higher. In this technological world things are
needed to move at a faster pace, and with the introduction of dematerialization process the
stock exchange has expanded its business at a tremendous speed.
ADVANTAGES OF DEMAT: -
1. Easy liquidity
2. Trading in demat segment benefits elimination of bad deliveries and all risks associated
with physical certificate such as loss, theft, mutilation, forgery, etc
3. You can also expect a lower interest charge for loans taken against demat shares as
compared to the interest for loan against physical shares. This could result in a saving of
about 0.25% to 1.5%.
4. In case of transfer of electronic shares, you save 0.5% in stamp duty.
5. You also avoid the cost of courier/ notarization/ the need for further follow-up with your
broker for shares returned for company objection
KNOW-HOW OF THE DEMAT ACCOUNT: -
A person need to have a Demat Account in banks possessing demat units (depository
participants services), so that, if he is buying the shares, shares will be directly transferred
into his A/c by the broker after the payment, and if he is selling the shares, the shares will
directly be transferred to the brokers A/c and he will get the payment after the scripts have
reached on the counter side.
For this, an investor needs to submit his DP Id (depository participant‘s Id), DP name and
Client Id to his broker. This DP Id is the bank‘s Id, DP name is the bank‘s name, and Client
Id is the number given by the bank to the person who opens a demat A/c. A depository
transfers securities as per the investor's instructions without actually handling securities,

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through the electronic mode. The DP will maintain the account balances of securities bought
and sold by the investor from time to time. The DP will also give the investor a statement of
holdings, which is similar to a passbook. Basically the holding of a Demat Account is similar
to holding a Current Account in the bank.
TRADING PROCEDURE: -
NSE was the first stock exchange in the country to provide nation-wide, anonymous, order
driven, screen-based trading system, known as the National Exchange for Automated Trading
(NEAT) system. The member inputs, in the NEAT system, the details of his order such as the
quantities and prices of securities at which he desires to transact. The transaction is executed
as soon as it finds a matching sale or buys order from a counter party. All the orders are
electronically matched on a price/time priority basis. This has resulted in a considerable
reduction in time spent, cost and risk of error, as well as frauds, resulting in improved
operational efficiency. It allows for faster incorporation of price sensitive information into
prevailing prices, as the market participants can see the full market on real time basis. This
increases informational efficiency and makes the market more transparent. Further, the
system allows a large number of participants, irrespective of their geographical locations, to
trade with one another simultaneously, improving the depth and liquidity of the market. A
single consolidated order book for each stock displays, on a real time basis, buy and sell
orders originating from all over the country. The book stores only limit orders, which are
orders to buy or sell shares at a stated quantity and stated price, are executed only if the price
quantity conditions match. Thus, the NEAT system provides an Open Electronic
Consolidated Limit Order Book (OECLOB), which ensures full anonymity by accepting
orders, big or small, from members without revealing their identity. Thus, provides equal
access to all the investors. A perfect audit trail, which helps to resolve disputes by logging in
the trade execution process in entirety, is also provided. The trading platform of the CM
segment of NSE is accessed not only from the computer terminals, but also from the personal
computers of the investors through the Internet and from the hand-held devices through
WAP. SEBI has allowed the use of internet as an order routing system for communicating
investors‘ orders to the exchanges through the registered brokers. These brokers should
obtain the permission from their respective stock exchanges. In February 2000, NSE became
the first exchange in the country to provide web-based access to investors to trade directly on
the Exchange followed by BSE in March 2001. The orders originating from the PCs of
investors are routed through the internet to the trading terminals of the designated brokers
with whom they have relations and further to the exchange. After these orders are matched,
the transaction is executed and the investors get the confirmation directly on their PCs. SEBI
has also allowed trading through wireless medium or Wireless Application Protocol (WAP)

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platform. NSE is the only exchange to provide access to its order book through the hand held
devices, which use WAP technology. This particularly helps those retail investors, who are
mobile and want to trade from any place.

The following are the steps involved in the trading of securities at a stock
exchange:

1. PLACING ORDER: -
An order is to be placed by an investor with the broker either to buy or sale of certain number
of securities at a certain specified price. An order can be placed by telegram, telephone, telex/
fax, and letter or in person. There are different types of orders. When in the order the client
places a limit on the price of the security it is called limit order. Where the order is to be
executed by the broker at the best price, such an order is called 'Best Rate Order'. When the
client does not fix any price limit or time limit on the execution of the order and relies on the
judgement of the broker is called 'Open Order'.
2. TRADE EXECUTION: -
The broker has to execute the order placed by his client during the trading hours. The order is
executed as per requirements of the client. The broker may negotiate with other parties in
order to execute the orders.
3. CONTRACT NOTE: -
When the order is executed, the broker prepares a contract note. It is the basis of the
transaction. Particulars such as price, quantity of securities, date of transaction, names of the
parties, brokerage etc. are entered in the contract note.
4. DELIVERIES AND CLEARING: -
Delivery of shares takes place through the instrument known as transfer deed. The transfer
deed is signed by the transferor (seller) and is authenticated by a witness. It contains the
details of the transferee, stamp of the selling broker, etc. Delivery and payment may be
completed after 14 days as specified at the time of negotiation. Delivery and clearing of
security takes place through a clearance house.
5. SETTLEMENT: -
The procedure adopted for the settlement of transactions varies depending upon the kind of
securities. On the date of settlement cheques/ drafts and securities are exchanged as per the
delivery order. The clearinghouse makes the payment and delivers the security certificates to
the members on the payout day. Each broker settles the account with every client by taking
delivery or giving delivery of securities certificates and receipts or payment of cheques.
ONLINE TRADING: -

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Online trading in shares and securities has already been started in India. It has been made
possible due to introduction of demat. ICICI Web Trade, HDFC Securities, Stock Holding
Corporation of India and many other institutions have started the online trading system. The
investors can carry out buying and selling of securities while sitting in the house or office.
Internet connection is required for this purpose. The investors have to open an account with
these institutions that provide online trading. There are three accounts opened into one place,
Demat Account, Bank Account and Online Trading Account. A password is given to each
investor who is secret. Investors can carry out buying and selling securities at BSE and NSE
during normal trading hours. The settlement is done automatically with the program of the
computer. Margin Trading, Options and Futures Trading are also possible in this method.

HOW TO TRADE ONLINE: -

1. Log on to the Broker's website.
2. Register yourself as a client.
3. Fill in the client broker agreement on stamp paper.

4. Log on the broker's site using secure user ID and password.

5. The market watch page shows real time data.
6. Trade shares directly by entering the symbol of securities.
7. The broker's server will check the limit on-line and the demat account for the number
of shares execute the trade.
8. Usually the order is executive in about 20 seconds and you get the confirmation.
9. The broker will send one e-mail confirmation and printed contract by mail.
10. On the settlement day the demat and bank accounts will automatically get debited and
credited.
BENEFITS OF ONLINE TRADING: -
Online trading offers the investors the following benefits:
1. REACH: -
The reach of online trading spans to all areas where internet connectivity is available.
2. EMPOWERMENT: -
Since all decision-making is with the investor, with sufficient and relevant information on his
stocks, the investor is empowered to take decisions based on his own judgment.
3. CONVENIENCE: -
The share broking account integrates with the investors banking, broking and the share depository
accounts. This enables the investor to trade in shares without going through the hassles of
tracking settlement cycles, writing cheques and transfer instructions, and chasing brokers for
refund cheques.

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4. SPEED: -
The speed of executing the transaction is more as compared to a phone-based trade.
5. CONTROL: -
With online trading, the investor can be assured of the execution of the transaction placed,
thereby having complete control over the trades.
SETTLEMENT: -
The clearing and settlement mechanism in Indian securities market has witnessed significant
changes and several innovations during the last decade. These include use of the state-of-art
information technology, emergence of clearing corporations to assume counterparty risk, shorter
settlement cycle, dematerialization and electronic transfer of securities, fine-tuned risk
management system, etc., though many of these are yet to permeate the whole market. In order to
bring settlement efficiency and reduce settlement risk, in 1989, the group of 30 had recommended
that all secondary markets across the globe should adopt a rolling settlement cycle on T+3 basis
by 1992, i.e., the trades should be settled by delivery of securities and payment of monies within
three business days after the trade day. But in India, due to multiple problems faced by the
secondary market like the open outcry system, wide geographical coverage, settlement of
securities in physical form, inadequate banking and depository infrastructure, India could not
implement the G30recommendations within the stipulated time frame. In 1999, rolling
settlements were introduced in select scrips on a T+5 basis, which had got an effect from
December 2001. After successful implementation of rolling settlement on T+5 basis, SEBI
moved the settlement to T+3 basis with effect from April 2002. To carry the reforms further in
this area, the Indian equity market has reduced the settlement cycle to T+2 basis w.e.f. 1 st April,
2003. The main advantage of this T+1 settlement cycle is that as the trades spread across all
trading days, this reduces undue concentration of payment of monies and delivery of securities on
a single day. As the settlement is spread across evenly, it results in efficiency utilization of
infrastructure and system capacity. In addition, trades are guaranteed by the National Clearing
Corporation. India Ltd. (NSCCL), and Bank of India Shareholding Ltd. (BOISL), Clearing
Corporation Houses of NSE and BSE respectively.

The main functions of Clearing Corporation are to work out:

(a) What counterparties owe and
(b) Why counterparties are due to receive on the settlement date.

Furthermore, each exchange has a Settlement Guarantee Fund to meet with any unpredictable
situation. The Clearing Corporation of the exchanges assumes the counterparty risk of each
member and guarantees settlement through a fine-tuned risk management system and an
innovative method of online position monitoring. It also ensures the financial settlement of trades

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on the appointed day and time irrespective of default by members to deliver the required funds
and/or securities with the help of a settlement guarantee fund.

2007 A YEAR TO REMEMBER

Year 2007 started on a strong note, but is ending on a mixed note. The US subprime crisis is
far from over, and can drag the US economy into recession. Crude prices have surged, so
have many agri and other commodity prices at a time when the global economy is none to
strong. This will definitely have an impact on India, particularly on its export prospects.
Fortunately, India is more of an internal-consumption-driven economy. In the past few years,
the cream of growth has been investment-driven, too. These factors provide strong support
for sustained acceleration in the domestic economy. The US Federal Reserve has cut rates
thrice. This has led to a surge in forex inflows into emerging markets like India and into
commodities. Domestic inflation has moderated and is below 4%. Also, interest rates have
already peaked. If they fall steeper from the current levels, it could revive the auto sector and
boost the profitability of the banking sector, particularly PSU banks, through surge in
investment income. The surge on the Indian stock markets was powered by foreign
institutional investors (FIIs). Inflows from FIIs stood at US$ 17 billion in 2007. A majority of
this was received in the later part of the year. The main reason was the cutting of rates by the
US Federal Reserve. With the US market heading for a recession and the global economy for
a slowdown, will foreign portfolio investment decline, remain consistent or surge? With large
global investment banking entities reporting poor results of late, FII inflows are bound to

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reduce from such entities for now. India is also witnessing one of the lengthiest capital
expenditure cycles, which shows no signs of easing. This experience has helped the domestic
players to strengthen their overseas businesses as well. 2008 has begun with a bang. And
how! The Bombay Stock Exchange (BSE) Sensitive Index (Sensex) shaved off 3,222.1 points
in six consecutive trading sessions between 14 and 21 January 2008. Though the fall was
continuous on each of these days, 21 January turned to be a typical Black Monday as the
market went down intra-day by 2,062.2 points, finally closing with 1,408.35 points off. The
carnage was not unique to India but was spread across the globe. In the year to 21 January
2008, only three of the 52 global equity markets gave positive returns in dollar terms,
according to the Broad Market Index provided by Standard & Poor‘s/Citigroup Global Equity
Indices. These were Morocco, Jordan and Nigeria. On the other extreme, six markets —
Luxembourg, Norway, Poland, Brazil, Iceland and Turkey — witnessed over 20% fall.
Thirty- seven markets had a double-digit dip, while six markets witnessed single-digit
decline. India lost 16.2% in dollar terms in this period. It is becoming increasingly clear that
the global economy is set to slow down. Sub-prime crisis is just a symptom of the
weaknesses in the US economy. A US recession will slow down the global economy due to
its global linkages.
Starting the December 2007 quarter at a level of 17,291 points, the BSE Sensex kept on rising
(with many corrections) throughout the quarter and was up over 17% at the end of the
quarter. When the December 2007 quarter results started pouring in, the index shot up to a
historic high of 21,207 points on 10 January 2008 and then crashed like a pack of card on
fears of a US recession and huge write-offs by almost all global banks and financial
institutions on account of defaults in the sub-prime mortgage market. This took a heavy toll
on the Indian markets also. After closing at a historical high of 20,873.33 on 8 January 2008,
the BSE Sensex tumbled by over 29% to 14,809.49 on 17 March 2008. Fortunately, there was
a relief rally, which talked up the Sensex past the 16,000 levels to 16,371.29 on 28 March
2008. Still the market is nearly 22% lower from its peak. There was sustained and heavy
selling by foreign institutional investors (FIIs) in January 2007 as well as in February till
date. From excessive inflows, the markets are now suffering from excessive FII selling.
Nevertheless, the Indian markets have managed to fare much better compared with other
markets on good inflows from domestic institutional investors.

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 CONCLUSION

Equity capital is a high risk-high reward, permanent source of long term finance for corporate
enterprises and short term earning for shareholders. The investors, who desire to share the
risk, return and control associated with ownership of companies would invest in equity
capital. Today, the Indian Equity Market is one of the most technologically developed in the
world and is on par with other developed markets abroad. The introduction of on-line Trading
system, dematerialization, ban of the badla system, and introduction of rolling Settlements
have facilitated quick trading and settlements which lead to larger volumes. The setting up of
the National Stock Exchange of India Limited has revolutionized the Face of the stock
market. NSE is the only stock exchange which covers majority equity Investments every day.
Also equity capital market encourages capital formation in the country. The specific factor,
which influences equity market, is the investor‘s sentiment towards the stock market as a
whole. So investor first has to analyse and invest and not speculate in shares. The
introduction of online trading has given a much-needed impetus to the Indian equity markets.
In this technological world things are needed to move at a faster pace, and with the
introduction of METHODS OF MARKETING SECURITIES IN THE
EQUITY MARKET, the stock exchange has expanded its business at a tremendous
speed. According to economic times, the research states the major reason behind the
irregularities of market (up and down in sale and purchase, price of share) is mainly because
of FORECASTING MIND SET OF EQUITY INVESTORS. So, the stock exchanges must
disregards the emotional component of trading by making investors decisions based upon
chart formations, assuming that prices reflect both facts and emotion. And also by creating

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the awareness of fundamental analysis (Fundamental analysis is a method of finding out the
future price of a stock, which an investor wishes to buy) among the investors to avoid the
irregularities while trading. So to increase the volume of equity investment, the stock
exchanges should strive to increase transparency, strictly enforce corporate governance
norms, provide more value-added services to investors, and take steps to increase investor
confidence. These stock exchanges will have to plan strategic tie-ups with their foreign
counterparts to get an international platform. A developed and vibrant secondary market can
be an engine for the revival and growth of the primary market. So, to encourage Indian
investment and face international competition every Indian stock exchange has to stress on
innovation and sustained investment in technology to remain ahead.

BIBLIOGRAPHY

Books Referred:
1. Investment Management-Preeti Singh
2. Indian Financial Market-T R Venkatesh
3. Financial Market-P K Bandgar
4. Merchant Banking & Financial Services-Anil Agashe.

Magazines:
1. Business Today
2. India Today
3. Business World

Websites:
1. www.nseindia.com
2. www.indiainfoline.com
3. www.hdfcsec.com
4. www.equitymaster.com
5. www.bseindia.com
6. www.sebi.gov.in
7. www.financialexpress.com

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 ANNEXURE

GLOSSARY

Terms and Definitions related to Commodity Market: -

 Accruals:- Commodities on hand ready for shipment, storage and manufacture

 Arbitragers: - Arbitragers are interested in making purchase and sale in different

markets at the same time to profit from price discrepancy between the two markets.

 At the Market: - An order to buy or sell at the best price possible at the time an order

reaches the trading pit.

 Basis: - Basis is the difference between the cash price of an asset andfutures price of

the underlying asset. Basis can be negative or positive depending on the prices

prevailing in the cash and futures.

 Basis grade: - Specific grade or grades named in the exchanges future contract. The

other grades deliverable are subject to price of underlying futures

 Bear: - A person who expects prices to go lower.

 Bid: - A bid subject to immediate acceptance made on the floor of exchange to buy a

definite number of futures contracts at a specific price.

 Breaking: - A quick decline in price.

 Bulging: - A quick increase in price.

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 Bull: - A person who expects prices to go higher.

 Buy on Close: - To buy at the end of trading session at the price within the closing

range.

 Buy on opening: - To buy at the beginning of trading session at a price within the

opening range.

 Call: - An option that gives the buyer the right to a long position in the underlying

futures at a specific price, the call writer (seller)may be assigned a short position in

the underlying futures if the buyer exercises the call.

 Cash commodity: - The actual physical product on which a futures contract is based.

This product can include agricultural commodities, financial instruments and the cash

equivalent of index futures.

 Close: - The period at the end of trading session officially designated by exchange

during which all transactions are considered made “at the close”.

 Closing price: - The price (or price range) recorded during the period designated by

the exchange as the official close.

 Commission house: - A concern that buys and sells actual commodities or futures

contract for the accounts of customers.

 Consumption Commodity: - Consumption commodities are held mainly for

consumption purpose. E.g. Oil, steel

 Cover: - The cancellation of the short position in any futures contract buys the

purchase of an equal quantity of the same futures contract.

 Cross hedge: - When a cash commodity is hedged by using futures contract of other

commodity.

 Day orders: - Orders at a limited price which are understood to be good for the day

unless expressly designated as an open order or “good till canceled” order.

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 Delivery: - The tender and receipt of actual commodity, or in case of agriculture

commodities, warehouse receipts covering such commodity, in settlement of futures

contract. Some contracts settle in cash (cash delivery). In which case open positions

are marked to market on last day of contract based on cash market close.

 Delivery month: - Specified month within which delivery may be made under the

terms of futures contract.

 Delivery notice: - A notice for a clearing member’s intention to deliver a stated

quantity of commodity in settlement of a short futures position.

 Derivatives: - These are financial contracts, which derive their value from an

underlying asset. (Underlying assets can be equity, commodity, foreign exchange,

interest rates, real estate or any other asset.) Four types of derivatives are trades

forward, futures, options and swaps. Derivatives can be traded either in an exchange

or over the counter.

 Differentials: - The premium paid for grades batter than the basis grade and the

discounts allowed for the grades. These differentials are fixed by the contract terms on

most exchanges.

 Exchange: - Central market place for buyers and sellers. Standardized contracts

ensure that the prices mean the same to everyone in the market. The prices in an

exchange are determined in the form of a continuous auction by members who are

acting on behalf of their clients, companies or themselves.

Forward contract: - It is an agreement between two parties to buy or sell an asset at a

future date for price agreed upon while signing agreement. Forward contract is not traded

on an exchange

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