A Summer Training Report On Training Undertaken at BONANZA PORTFOLIO LTD.

BIKANER Titled
INVESTMENT PATTERN OF CUSTOMERS OF BIKANER

Submitted in partial fulfilment for the Award of degree of

Master of Business Administration

YEAR 2011-2013

Submitted By Amit Singh Panwar MBA Part III

PREFACE
The MBA curriculum is designed in such a way that student gather maximum knowledge and get practical exposure to the corporate world in minimum possible time. The summer training is necessary for the partial fulfillment of MBA curriculum and it provides an opportunity to the students in understanding the industry with special emphasis on the development of skills in analyzing and interpreting practical problems through the application of management theories. The researcher had conducted summer training on: INVESTMENT PATTERN OF CUSTOMERS OF BIKANER In this training I have worked as management trainee to increase the number of clients of The company as well as promoting the product of the company and making people aware of the services given by:

BONANZA PORTFOLIO LTD. BIKANER

On the other hand I have also made a research that what is the attitudes and pattern of investment of people of Bikaner. The different approaches which people like are they conservative who like to invest maximum in debt (low risk low return) or aggressive who like to go for equity (high risk high return). I have also found out the detail about different investment option i.e. who are eligible, what type of tax benefits available, what are the current trends of return in that option etc. After all Investment decision making is all about Trade offs and risks and returns which cannot be completely eliminated but sure it can be diversified and minimized.

ACKNOWLEDGEMENT

It would be prudent to commence this report with an expression of gratitude towards all those who have played an indispensable role in the accomplishment of this project by providing their valuable guidance. I sincerely thank MR. DHARMENDRA KIRDOO (BRANCH MANAGER BONANZA PORTFOLIO LTD. BIKANER ) for availing me the opportunity to carry out my Summer Training Project at his esteemed office there by giving me a chance to look more closely into the field of my interest.

Amit Singh Panwar

EXECUTIVE SUMMARY
The following report is a part-fulfillment of the work done at. BONANZA PORTFOLIO LTD.
BIKANER as a management trainee. BONANZA Group is a well diversified financial services group

having businesses in stocks and commodities. Their services include equities, derivatives, portfolio management and depository services. The report is based on the project titled; INVESTMENT PATTERN OF CUSTOMERS IN BIKANER.

The main objective of the study:

To find out which are the fields where the people of BIKANER invest. Analysis of the investment options are available Where is UNICON standing in the investment market and its awareness among investors? Satisfaction level of investors.
To study investor perception and investment behaviour of capital market investors. To identify the problems faced by the while on market through Brokers. To study the investors satisfaction level for the various services provided by the broker relationship. To get a brief knowledge of trading system in securities.

Table of Contents
CHAPTER I : INTRODUCTION

1.1 INTRODUCTION TO THE INDIAN SECURITIES MARKET 1.2 INTRODUCTION TO THE COMPANY

CHAPTER II: STUDY PROFILE

2.1 TITLE OF THE STUDY 2.2 OBJECTIVES OF THE STUDY 2.3 SIGNIFICANCE OF THE STUDY 2.4 RESEARCH METHODOLOGY 2.5 SCOPE OF THE STUDY 2.6 LIMITATION OF THE STUDY

CHAPTER III: FACTS AND FINIDINGS

CHAPTER IV: ANALYSIS AND INTERPRETATION

CHAPTER V: CONCLUSION AND SUGGESTIONS

ANNEXURE BIBLIOGRAPHY

CHAPTER I

INTRODUCTION TO INDUSTRY

1.1 Overview

of Financial and Capital Markets :-

Financial system of an economy has a greater role in the development and growth of the economy, it provides for the monetary inputs as well as the desired direction for the growth of economy. Different constituents of the financial system are the facilitating agents as well as indicators of the growth and development of the economy.

A well developed financial system not even indicates towards the advancement in the economy but also provides an input for the development of the economy. Both the development of the economy and that of financial system are inter-dependent, hence growth of one will certainly influence the growth of another. INDIAN FINANCIAL SYSTEM:-The financial system can be defined as as a set of organizations, instruments, markets, services and methods of operations, procedures that are closely interrelated with each other. It intermediates between the flow of funds belonging to those who save a part of income and those who invest in productive assets. It mobilizes and usefully allocates scarce resources of a country. Indian Financial system consist ofa) b) c) d) Financial Markets Financial Institutions Financial Instruments Financial Services

Indian Financial System

Financial institution Financial Markets

1 .Money Market Capital Market
1. Regulatory Institutions. 2. Banking Institutions. 3. NBFCs 4. Development Financial Institutions 5. Mutual funds

Financial Instruments
1. Long Term Instruments. 2. Medium Term Instruments. 3. Short Term Instruments

Financial Services
1. Lease Financing 2. Factoring 3. Hire Purchase 4. Merchant Banking 5. Instalment Payment System 6. Forfeiting

1.1 Financial Markets:

Financial markets are called as the backbone of the economy because these provide monetary support and act as mobilizing agent for the growth of the economy. These are the markets in which money as well as monetary claims is traded in. The functioning and the status of these markets are the indicator of the growth of the economy. Someone has said it rightly that the growth of financial markets is the barometer of the growth of the economy. These markets have the following two components:-

1.1 .1 Money Market:It is the market in which liquid funds (cash) as well highly liquid securities are traded in for a very shorter duration or time period. The main participants in this market are banks and financial institutions. The banks deal in this market to fulfill their CRR and SLR requirements. However few corporate houses, insurance companies, mutual funds, provident fund trusts and nonbanking finance companies also play an active role in this market. This market provide liquidity support to banking system, at the same time the Central Bank of the Country Reserve Bank of India (RBI) uses this market to exercise monetary control in the economy and credit control in the country.

This market is further classified as: Call Money Market Market for Gilt-edged Securities Treasury Bills Dated Securities of Government Commercial Papers Market for Bills of Exchange

1.1.2 Capital Market:-

It is the market, which provides an opportunity for the companies to raise the funds directly form the investors, as well as, outstanding securities are bought and sold in this market. This market functions under the supervision of Securities and Exchange Board of India, the regulatory provisions regulating this market are derived from various laws like Securities and Contracts Regulation Act, Companies Act, SEBI Act, FEMA, etc. This market is divided into two segments: Primary Market Secondary Market ( Stock Market)

1.1.2.1 Primary Market:

It is the market, which provides a platform for new as well as old companies to raise the funds by issuing securities directly to ultimate investors. Thus market provides a bridge between savings and investments. Previously CCI (Controller of Capital Issues) used to control this market, at that time it has stringent norms and full control of CCI. In the year 1992 CCI was replaced by SEBI Act and in USA it is regulated by the provisions of SEC (Securities & Exchange Commission) speaks about regulation and not the control. Different securities through which companies can raise the fund may be like Equity shares Preference shares Debenture/ bonds

are issued to investors. The securities issued through a public issue must be listed on at least one stock exchange whose name is mentioned by the issuing company in its prospectus. Companies can issue different securities in the primary market by any or all of the following mechanism. A public limited company can issue these through all the mechanisms but a private limited company can issue the securities through private placement or rights issue.

Public Issue:

It is a system of issuing the securities by a public limited company, in this general

public is invited to subscribe towards the capital of the company. General public includes individual investors, institutional investors, mutual fund, NRIs, etc. The securities issued through a public issue must get listed on a stock exchange within 10 weeks from the closing of the issue. The stock exchange should be the one whose name has been specified by the company in its prospectus for the public issue. Under this shares can be issued by the company at par, at premium or at a discount, issued price is decided by the company itself. A company is required to complete all the regulatory formalities for bringing out its public issue as specified by SEBI.

Private Placement: It is a system of issuing securities in which mass media for inviting the public is not used, instead issuing company approaches the investors individually. This mode of raising capital is mainly used by the private limited companies, because, a private limited company can not invite general public through an advertisement for subscribing towards the capital of the company. However, public limited companies also use this mechanism of raising the capital. stock For example SHCIL is a public limited company it has issued its shares through private placement only, BIKAJI Foods Pvt. Ltd. is a private limited has also issued shares through this mode.

Rights Issue: Whenever, an existing company issues the shares to its existing shareholders on proportionate basis it is called as "Rights Issue". According to law ' a company should offer the securities only to its existing equity shareholders, whenever such securities are issued subsequently after the initial issue of equity issue, these can be issued to general public, only when existing shareholders decline to accept such offer." The subsequent issue of shares can be made to general public after a resolution to this effect has been passed under section 81 of companies act.

Public Issue through Book-building : System of book-building is a mechanism of issuing shares to general public in which company does not decided the final issued price of the securities, instead, pricing is done by inviting 'BIDS' from public. Decision of final issue price, acceptance of bids and

book running is done as per SEBI rules. In case of book-building different investors/bidders are classified as (a) Qualified Institutional Byers (QIB) (b) Non-individual buyers (c) Individual investors. In case the issuing company opts to issue securities through the book building route then as per SEBI guidelines, an issuing company can issue securities in the following manner: 100% of the net offer to the public through the book building route. 75% of the net offer to the public through the book building process and 25% through the fixed

price portion Buyout deals-: A company can issue the shares on OTCEI through the mechanism of buyout deals, which is as follows: Company negotiates with at least one dealer of the exchange to buy the complete issue at the

specified price. Buyout deal is with the intention that the dealer will sell these shares in the general market in

the future. Dealer will have no managerial control over the company. Dealer has the freedom to sell trough the exchange or directly to public

1.1.2.2 Stock Market/Secondary Market

It is a market in which out standing securities of the corporate houses and government are traded in, as per the rules of SCRA all the transactions in securities other than 'SPOT' transactions must be executed on a recognized stock exchange. Stock exchange is synonym of the secondary market.

Meaning of Stock Exchange

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200 years ago. The earliest records of security dealings in India are meagre and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and cotton supply from United States of Europe was stopped; thus, the 'Share Mania' in India begun. The number of brokers increased to about 200 to 250. However, at the end of the American Civil War, in 1865, a disastrous slump began (for example, Bank of Bombay Share which had touched Rs 2850 could only be sold at Rs. 87). At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association" (which is alternatively known as " The Stock Exchange "). In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated.

"Stock exchange is a regulated market place, in which listed securities are bought and sold through the intervention of members (brokers) of stock exchange, by following a open system of two way quotation, the settlement of trades is done according to the bye-laws of stock exchange" . For a stock exchange to function it must have a recognition by Central Government under section 4 of SCRA 1956, otherwise it can not function in India .At present there are 23 ( twenty three) stock exchanges in India, majority of the transaction are executed on The Stock Exchange, Mumbai (BSE) and National Stock Exchange (NSE). All the trades executed on the floor of stock.

Apex bodies Regulating Financial Markets Reserve Bank of India: It is the apex bank, which regulates banking business in India. RBI performs its functions under the powers from RBI act 1934, according to the act it has two basic roles, i.e. banker of the government and banker of banks, apart from these it has the responsibility to control the money supply and credit functions of banks. RBI plays a major role of maintaining 'FISCAL DISCIPLINE' in the economy, as well as, regulating the banks to provide banking facilities in the country. To achieve its' objectives RBI discharges the functions like Issue of currency notes, Credit control, Banker of central government, Banker of banks, Issue of government securities, Open market operations and Controlling the flow of money in the economy, Regulation of banks and other financial institution, Foreign exchange control.

Securities & Exchange Board of India (SEBI): It is the regulatory body to regulate the activities in the capital market. SEBI has the responsibility to regulate both the segments of capital market i.e. primary market and secondary market. SEBI has been given the powers under SEBI Act 1992; it contains provisions to regulate both of these markets. Aim of SEBI is to bring in the concept of full disclosure and transparency in the capital market. It has the task of supervising and controlling the following institutions/intermediaries like Stock exchanges, Brokers/Members of stock exchange, Subbrokers, Merchant bankers, Registrar to issue, Transfer agent, Banker to issue, Investment institutions, Mutual funds, Portfolio manager and consultants, Underwriter, Foreign institutional investors, Depository, Other intermediaries of capital market Prior to SEBI Controller of Capital Issues (CCI) as the authority to regulate this market, at that time it was totally controlled regime, now it is free market concept. CCI had stringent control on the primary market activities like controlling timing of public issue, control over the issue price, control over the capital structure of companies.

CAPITAL MARKET REGULATOR IN INDIA:A high degree of regulation and supervision is needed in the capital market; the task of regulating the activities in the primary as well as secondary market was previously with the 'Controller of Capital Issues' (CCI), which was replaced by 'Securities & Exchange Board of India' SEBI in the year 1992. Detail about the functioning of both of these is as follow: 1. 2. Controller of Capital Issues (CCI) 'Securities & Exchange Board of India' SEBI

1.2.1.1 Controller of Capital Issues:CCI was working on the concept of exercising a control on the capital market activities with special emphasis on the primary market activities. It used to exercise strict control through the following system on the companies entering the primary market: Pricing of the issue Timing of the issue Capital structure of the company Permission for the issue

Pricing of the issue: It was mandatory for the companies to get the clearance from CCI regarding the fixation of issue price. Companies were not free to fix a price for their issue of securities; instead, it used to be decided by CCI. Companies could not charge the price, more than the price specified by CCI. Timing of the issue: CCI exercised strict control over the timing of the issue, which implied that CCI had the power to stop the companies from raising the capital form primary market. The purpose such control was to over crowd the market by too many issues at a time. Capital structure of the company: CCI Act provided for the strict adherence to the rules about the capital structure as specified in the act. All the companies were required to maintain a debt equity ratio not greater than 2:1. This influenced the capital structure of companies.

Permission for the issue: Every company which wanted to raise the capital through any type of issue of capital was required to take a prior permission from CCI. For this companies were required to apply to CCI and could come out with the issue of capital only after the permission of CCI. CCI used to carry out a thorough examination of the prospectus or offer document issued in lieu of prospectus. Reasons for the repeal of CCI The activities of CCI were like that of a controller, who did not give any freedom to companies about raising the capital. CCI did not do much about investor education and protection of the investors as a result of which Indian investors remained unaware about the developments and new practices in the capital market. CCI could not provide efficient yardsticks to bring Indian capital market, at par with the International market, therefore, it was repealed. Following were the drawbacks as a result of which it was repealed: Strict control on the issue pricing was a hindrance in introduction of free market concept, Restriction about the capital structure affected the growth of the companies, Intervention about the timing of the issue created difficulty in raising capital at the desired time, There was no provision about the transparency and fair dealings in the primary market, An inefficient and incomplete control over the secondary market, Capital market intermediaries were not regulated.

1.2.1.2 SEBI - Securities & Exchange Board of India

Securities & Exchange Board of India Act, 1992 The act was implemented in May 1992 and it replaced the old act CCI. SEBI act provides for the regulation through the concept of full disclosure and transparency in the capital market activities. It aims to regulate the following:

Primary market activities

Secondary market activities Intermediaries of capital market Companies Investors

Structural Changes in the Capital Market With the implementation of SEBI act several structural changes have taken place in the capital market activities, these are as follows-: a) Free pricing of issue: Free pricing means regulatory body will not decide about the issue price of the securities to be issued in the primary market, instead the issuing company to decide it. SEBI has provided a set of broad guidelines within which a company can decide about the issue price. It does not intervene about the premium charged by the companies; companies are free to charge the premium, so long as this can be justified to investors. b) Transparency & full disclosure: SEBI has made it mandatory for the companies to have complete disclosure in the prospectus and application form issued at the time of raising capital. Companies are required to disclose all the materialistic information, which might influence the decision of investors, companies are require to disclose the following-: Risk factor, if investment is made in the securities being offered, Background of the company, Background and holding of promoters in the company, Experience and affiliation of the directors, Past performance of the company, Expected performance of the company and its' estimates Justification of issue price Other relevant information, if any

The objective of this provision is to make the investors aware about the company before they make the investment in the company.

c) Shift from control to regulation: The mission of SEBI is not to exercise control but to regulate the activities by providing broad guidelines. After the implementation of SEBI act companies are not required to take permission for issue of securities, instead, prospectus or offer document is to be vetted by SEBI. Under vetting it evaluates, whether company has provided the full disclosure and maintained the standard of transparency or not, if not, then it is asked to incorporate changes in it. d) Regulation of stock market and its intermediaries: It has an objective to exercise regulation on the stock market activities by providing policy guidelines for the stock exchange and its intermediaries. After the implementation of this act every stock exchange is supervised and regulated by SEBI, it provides for the registration or brokers and sub-brokers with SEBI. The main purpose is to have transparency in the stock market dealings. It has the power to inspect and audit the activities of stock exchange and its' intermediaries. e) Regulation of primary market and its intermediaries: SEBI aims at bringing in transparency in the primary market activities also. To achieve this it provides for the registration of all the intermediaries of primary market with SEBI. The intermediaries like banker to issue, merchant banker, registrar to the issue, transfer agents, underwriters, brokers to issue, merchant bankers, etc can function only when they have a valid registration with SEBI. It has the powers to inspect and audit the activities of these intermediaries. f) Regulation of insider trading: Insider trading is an activity of buying and selling the securities to generate a profit by using price sensitive information, before such information is made public. An insider is a person/organization, who has an access to price sensitive information before such information is disclosed to general public. Being insider is not a crime or offence but using insider information directly of indirectly to generate profit is a crime. The adverse effect of insider trading is on the general investors, because such trading creates unwanted fluctuations in the share prices. SEBI has made rules and regulation to investigate the incidences of insider trading and for the identification of insiders. Act provides for a punishment, if insider trading takes place and it is proved. The action against the insider can be initiated on the basis of complain or by SEBI itself also.

g) Investor protection and education:

It has the responsibility of providing a safety net to protect

the interest of investors to protect them against the mall practices and frauds. Upon receiving a complain it initiates an inquiry. Generally following type of MALL PRACTICES are found in the stock market Price rigging influencing the prices of shares through artificial demand and supply. In this

certain interested parties like promoters, directors or other interested parties might do so to have gain from the increased prices. Insider trading - Insider is a person who has the privilege of having price sensitive

information about the company, much before it is made public. When such insider uses the information directly or indirectly for his benefit by buying or selling the shares it is called as insider trading. Due to such trading small investor is affected badly. unfair allotment of shares/debentures, delay in allotment/ refund, non-receipt of dividend or bonus, once these have been declared, delay in transfer of securities, delay in payment or delivery by broker, problems related to depository, problems related to mutual funds and portfolio management, any other problem related to capital market.

Apart from the investor protection SEBI organizes training camps to educate the investors about (a) functioning of stock market, (b) rules and regulation of capital market, etc. Main purpose of this is to bring Indian investors at par with the international investors.

Governing Laws in India:Two Acts mainly govern Securities Transactions in India at present-: 1. The Securities Contracts (Regulation) Act, 1956; and 2. The Securities & Exchange Board of India Act, 1992.

The paper based ownership and transfer of securities has been a major drawback of the Indian Securities Markets since it often results in delay in settlement and transfer of securities and also lead to "bad delivery", theft, forgery etc. The Depositories Act, 1996 was therefore enacted to pave the way of smooth and free transfer of securities. The other relevant laws, which affect the capital market, are: 1. The Depositories Act, 1996; 2. The Foreign Exchange Regulations Act, 1973; 3. Arbitration and Conciliation Act, 1996; 4. Companies Act, 1956; 5. Debt Recovery Act (Bank and Financial Institutions Recovery of Dues Act, 1993); 6. Banking Regulation Act; 7. Benami Prohibition Act; 8. Indian Penal Code; 9. Indian Evidence Act, 1872 and; 10. Indian Telegraph Act, 1885.

TRADING AT NSE
Trading on NSE is provided in the following two segments: Capital Market Segment Derivative Segment

1. CAPITAL MARKET SEGMENT:

The Trading on the NSEs capital market commenced on November 4, 1995 and has been witnessing a substantial growth over the years. The CM segment of NSE provides an efficient and transparent platform for trading of equity, preference shares, debentures, warrants, exchange traded funds as well as retail Government securities. National Exchange for Automated Trading (NEAT) is the trading system of NSE. 1.1 NEAT SYSTEM

NEAT facilitates a system on-line, fully automated, nationwide, anonymous, order driven, screenbased trading. In this system a member can punch into the computer quantities of securities and the prices at which he likes to transact and the transaction is executed as soon as it finds a matching sale for buy order for a counter party. The numerous advantages of the NEAT system are detailed out below: It electronically matches orders on a price/time priority and hence cuts down on time, cost and

risk of error, as well as on fraud resulting in improved operational efficiency. It allows faster incorporation of price sensitive information into prevailing prices, thus

increasing the informational efficiency of markets. It enables market participants to see the full market on real-time, making the market

transparent. It 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. It provides tremendous flexibility to the users in terms of kinds of orders that can be placed on

the system. It ensures full anonymity by accepting orders, big or small, from members without revealing their identity, thus providing equal access to everybody. The trading platform of the CM segment is accessed not only from the computer terminals

from the premises of brokers spread over about 192 cities, but also from the personal computers in the homes of investors through the Internet.

1.2

MARKET MECHANISM Buying And Selling Procedure Including Online

Trading System:An efficient market mechanism always provides for the smooth functioning of the stock exchange, it helps in the speedy settlement of trades to the satisfaction of all the parties. It has the components like (a) investors, (b) brokers, (c) stock exchange officials, (d) clearing house, (e) bye-laws and rules. All these components working in consonance help in achieving the objective of a stock exchange. To buy or sell the securities on the stock exchange following sequential activities take place: Placing an order

Execution of order (Including online trading system) Reporting of trade Confirmation Exchange between client and broker Clearing function Exchange between broker and client

Procedure of Executing Trades on Online Trading System Step One: Investor approaches brokers office and sees the current quotation as displayed on the computer system (traders workstation). System always displays best buy and best sell quotation for each share/debenture. The best buy quotation (price ) from among all the buying orders in the system is the one which has highest price, on the contrary to this the best selling quotation from among all the sales orders in the system is the one which has lowest price . Step Two: Clients order is entered by the broker on the computer system, which is communicated to the mainframe of the stock exchange. Background processing in the mainframe: System allows only one data set either to enter or exit out of the mainframe; every order entering the system is given a unique time and serial no., called as order number. All the orders are indexed in the system as per the price and time preference separately for buying and selling orders, in separate files. Step Three: System (mainframe) does the automatic matching of the orders, as soon as the price quotations are matched orders get converted into a trade. Generally there is no need to match the order quantities, if an order for purchase for 100 shares is there @ 67 and a sales order for 600 shares is @ 67 then 100 shares can be bought out of 600 and remaining 500 of the sales order will still remain in the order book, similar is also possible if purchase quantity is more than the sales quantity. Step Four: Upon automatic matching, trades are communicated to respective brokers immediately on the systems of the brokers.

Step Five: All the trades of a settlement are netted by the system scrip wise and broker wise and communicated to each broker on the system.

1.3 CLEARING AND SETTLEMENT

Clearing Function: The clearing function of the clearing corporation is designed to work out a) what members are due to deliver and b) what members are due to receive on the settlement date. Settlement is a two way process which involves transfer of funds and securities on the settlement date. learing function of the While NSE provides a platform for trading to its trading members, the National Securities Clearing Corporation Ltd. (NSCCL) determines the funds/securities obligations of the trading members and ensures that trading members meet their obligations. The core processes involved in clearing and settlement are: (a) Trade Recording: The key details about the trades are recorded to provide basis for settlement. These details are automatically recorded in the electronic trading system of the exchanges. (b) Trade Confirmation: The parties to a trade agree upon the terms of trade like security, quantity, price, and settlement date, but not the counterparty which is the NSCCL. The electronic system automatically generates confirmation by direct participants. (c) Determination of Obligation: The next step is determination of what counter-parties owe, and what counter-parties are due to receive on the settlement date. The NSCCL interposes itself as a central counterparty between the counterparties to trades and nets the positions so that a member has security wise net obligation to receive or deliver a security and has to either pay or receive funds. (d) Pay-in of Funds and Securities: The members bring in their funds/securities to the NSCCL. They make available required securities in designated accounts with the depositories by the prescribed pay-in time. The depositories move the securities available in the accounts of members to the account of the NSCCL. Likewise members with funds obligations make available required funds in the designated accounts with clearing banks by the prescribed pay-in time. The NSCCL sends electronic instructions to the clearing banks to debit members accounts to the extent of payment obligations. The banks process these instructions, debit accounts of members and credit accounts of the NSCCL.

(e) Pay-out of Funds and Securities: After processing for shortages of funds/securities and arranging for movement of funds from surplus banks to deficit banks through RBI clearing, the NSCCL sends electronic instructions to the depositories/clearing banks to release pay-out of securities/funds. The depositories and clearing banks debit accounts of the NSCCL and credit accounts of members. Settlement is complete upon release of pay-out of funds and securities to custodians/members. (f) Risk Management: A sound risk management system is integral to an efficient settlement system. The NSCCL ensures that trading members obligations are commensurate with their net worth. It has put in place a comprehensive risk management system, which is constantly monitored and upgraded to pre-empt market failures. It monitors the track record and performance of members and their net worth; undertakes online monitoring of members positions and exposure in the market collects margins from members and automatically disables members if the limits are breached. The risk management methods adopted by NSE have brought the Indian financial market in line with the international markets.

Settlement Schedule
At present it is rolling settlement with schedule as T + 2 which means the transaction of a particular trading day are to be settled after 2 days. Each days trades are settled on net basis. Trading use to take place from Monday to Friday in case of weekly settlement and in the next week these trades used to be settled on netting basis. In case of fortnightly settlement trading used to continue for a fortnight and then the trades of one fortnight used to be settled in the week after the fortnight on netting basis. Settlement used to be between brokers through the intervention of clearing house.

1.4 MARGIN SYSTEM

In the stock market there is uncertainty in the movement of share prices. During a day price fluctuates several time moving within the range of price band specified by the stock exchange. This price fluctuation creates an element of risk. So the margin money in turn is deposited by the broker to stock exchange and it is adjustable against the final obligation. In the cash market as well as derivatives market margin system is levied by considering VaR (Value at Risk) following two margins are levied -:

Initial/Exposure Margin Mark-to-Market Margin

It is the volatility of the share prices which influences the margin system, the volatility is an indicator of the movement of share prices in the past. It is different from price fluctuation, price fluctuation implies a change in the share prices, whereas volatility indicates how frequently and upto what range such price change occurs. Volatility is always referred with reference to the time period and the range of price fluctuation. A large price change in a shorter time span is interpreted as high volatility and vice-a-versa. Initial/Exposure Margin Stock exchange levies initial margin on the gross outstanding position of a broker, as broker does the transactions for his clients therefore he collects this initial margin amount from clients. Decision about the percentage of initial margin very much on the VaR calculation. This initial margin is levied to cover the amount of largest loss likely to be incurred in a time period of next one day on the gross outstanding position client id wise as well as on the transactions executed by broker in proprietor account. This initial margin is collected by the broker from his client at the time when client places an order this is done to cover most likely loss, if any at the time of confirmation of trade and nonacceptance or denial by the client. Mark-to-Market Margin (MTM) Stock exchange calculates MTM for every broker at the end of the trading session by considering client wise open position. It is also calculated for the open position executed in proprietor account. It is calculated by comparing transaction price with the closing price of the share for the day. When we consider example of purchase of 100 shares @ 1,000 per share on 11th January, 2008, now if at the end of the trading session on the same day price falls to Rs. 800 per share as closing price of the day .Here the buyer incurs a notional loss of Rs. 200 per share and this notional loss is called MTM ( Mark-toMarket) Loss. In practice this buyer is required to deposit this loss amount to his broker by the next day before the starting of the trading session on the next and likewise broker shall deposit the same amount to stock

exchange. Similarly MTM is calculated for sale transaction. MTM is to be deposited in addition to the initial margin. This notional loss is calculated for open position as well as on the squared up quantity to cover up the notional loss in the event of default by the client. 1.5 DEPOSITORY SYSTEM Recent Developments in the Stock Market In the recent past several changes have taken place in the Indian stock market one such change is the establishment of DEPOSITORY. Previously companies use to issue the securities in physical mode, i.e. shareholders used to get share certificates and in the same manner physical shares used to be delivered by the seller to purchaser in the secondary market transactions. Physical form of shareholding has certain drawbacks, to eliminate such drawbacks the concept of Depository has been introduced. Functioning of Depository-: In India there are two depositories, i.e. (a) National Securities Depository Limited (NSDL), (b) Central Depository Services Limited (CDSL). Both of these are in the government sector, as Indian rules do not provide for the setting up of private depositories. These function as follows: 1. For the existing companies/ issues 2. For the new issues

1. For the existing companies/issues: The company which has already issued the securities prior to the establishment of the depository are required to adopt the process of dematerialization for having depository services. The process of dematerialization and depository service is as follows: Shareholder is required to open an account with depository through a Depository Participant

(DP), such account is called as beneficiary account A depository has several DPs associated with it to facilitate the functioning of Depository. Beneficiary account holder will surrender his share certificate (only of the companies which are

covered by the depository under dematerialization) for dematerialization to DP.

DP after completing the necessary process and completing DRF form in triplicate will send the

certificates to company under intimation to Depository. Company, after verification, will dematerialize the shares and intimate the Depository about the

shareholding of the concerned shareholder. Depository will update its records and give the credit to beneficiary account holder. DP has the obligation to issue a holding statement to its beneficiary account holders on a

regular interval as specified by the Depository. DP also provides a cheque book to every beneficiary account holder. Whenever, securities are sold by the account holder he will issue a cheque to deliver the

securities. The subsequent purchaser is required to have a depository account, and the cheque received

from seller will be deposited in the account of purchaser through DP. Upon receiving the cheque, Depository will verify the details and execute the transfer of

shareholding electronically, i.e. sellers account is debited and buyers account is credited. Company receives the detail of its shareholders from Depository on regular basis.

2. For New Issues: A company which issues the shares through public issue and wants to have the shares in dematerialized form (at present dematerialization is compulsory for all the new issues) is required to follow the following steps : The applicant for shares should have a beneficiary account Depository account number is to be quoted in the application form for the issue. As soon as, company finalizes the allotment of securities, company intimates the Depository

about the success applicants who have been allotted the securities.

Depository credits the account of the respective applicants. Company does not issue the share certificates to shareholders; only intimation is sent to them

about the allotment. Execution of Transfer for Stock Market Transactions : As soon as, an investor has sold the

securities through a broker, following sequence of activities takes place : Seller delivers to broker, duly filled in cheque of his depository account, more than one shares/debentures can be entered in one cheque .Broker deposits the cheque with his DP for transferring the securities from the account of seller to brokers pool account. Every broker has a pool account, this is used to settle, settlement related obligation of broker with the clearing house. This account has two sections IN SUB A/C is to receive the securities purchased by the broker and OUT SUB A/C is used to deliver the securities sold by the broker. On the pay-in-day, clearing house takes the securities out of the out sub a/c automatically, similarly on the pay-in-day, it sends the securities automatically to the in sub a/c of the pool account .Once broker has received the securities in his pool a/c (in sub a/c), he transfers these to the beneficiary account of respective clients for whom these were purchased.

System of Auction-: In case of default by the seller in any of the market segments exchange initiates buy-in auction to purchase the shares on the behalf of defaulting broker. Loss or profit arising on account of auction is debited/credited to defaulting broker. The defaulter is penalized by a penal interest, penalty and reprimand. A continuous default might lead to suspension of trading for defaulting member. 2. DERIVATIVES

Derivatives are the instruments, the value of which depends upon the underlying asset on which it is created. These underlying assets may be a commodity, currency, securities (shares and debentures) or index. The most common derivatives are Option Contracts Future Contracts Forward Contracts Swaps.

(a) Forward Contract: - A forward contract is an agreement to buy or sell an asset on a specified date for a specified price. One of the parties to the contract assumes a long position and agrees to buy the underlying asset on a certain specified future date for a certain specified price. The other party assumes a short position and agrees to sell the asset on the same date for the same price. Other contract details like delivery date, price and quantity are negotiated bilaterally by the parties to the contract. The forward contracts are normally traded outside the exchanges. The salient features of forward contracts are: They are bilateral contracts and hence exposed to counter party risk. Each contract is custom designed, and hence is unique in terms of contract size, expiration

date and the asset type and quality. The contract price is generally not available in public domain. On the expiration date, the contract has to be settled by delivery of the asset. If the party wishes to reverse the contract, it has to compulsorily go to the same counter-party,

which often results in high prices being charged. Limitation of forward markets Forward markets world-wide are afflicted by several problems: Lack of centralization of trading. Illiquidity. Counterparty risk.

In the first two of these, the basic problem is that of too much flexibility and generality. Counterparty risk arises from the possibility of default by any one party to the transaction. When one of the two sides to the transaction declares bankruptcy, the other suffers. Even when forward markets trade standardized contracts, and hence avoid the problem of illiquidity, still the counterparty risk remains a very serious issue. (b) Future Contract: - A futures contract is an agreement between two parties to buy or sell an asset at a certain time in the future at a certain price. But unlike forward contracts, the futures contracts are standardized and exchange traded. To facilitate liquidity in the futures contracts, the exchange specifies certain standard features of the contract. It is a standardized contract with standard underlying instrument, a standard quantity and quality of the underlying instrument that can be delivered, and a standard timing of such settlement. A futures contract may be offset prior to maturity by entering into an equal and opposite transaction. The standardized items in a futures contract are: Quantity of the underlying Quality of the underlying The date and the month of delivery The units of price quotation and minimum price change Location of settlement

Future Terminology Spot price: The price at which an asset trades in the spot market. Futures price: The price at which the futures contract trades in the futures market. Contract cycle: The period over which a contract trades. The index futures contracts on the

NSE have one- month, two months and three months expiry cycles which expire on the last Thursday of the month. Expiry date: It is the date specified in the futures contract. This is the last day on which the

contract will be traded, at the end of which it will cease to exist.

Contract size: The amount of asset that has to be delivered under one contract. Also called as

lot size. Basis: Basis can be defined as the futures price minus the spot price. There will be a different

basis for each delivery month for each contract. In a normal market, basis will be positive. This reflects that futures prices normally exceed spot prices. Cost of carry: The relationship between futures prices and spot prices can be summarized in

terms of what is known as the cost of carry. This measures the storage cost plus the interest that is paid to finance the asset less the income earned on the asset. Initial margin: The amount that must be deposited in the margin account at the time a futures

contract is first entered into is known as initial margin. Marking-to-market: In the futures market, at the end of each trading day, the margin account

is adjusted to reflect the investor's gain or loss depending upon the futures closing price. This is called marking-to-market. Maintenance margin: This is somewhat lower than the initial margin. This is set to ensure that

the balance in the margin account never becomes negative. If the balance in the margin account falls below the maintenance margin, the investor receives a margin call and is expected to top up the margin account to the initial margin level before trading commences on the next day. Table 2.1 Distinction between Futures and Forwards Futures Trade on an organized exchange Standardized contract terms More liquid Requires margin payments Follows daily settlement Forwards OTC in nature Customised contract terms Less liquid No margin payment Settlement at end of period

(c) Option Contracts: - Options are fundamentally different from forward and futures contracts. An option gives the holder of the option the right to do something. The holder does not have to exercise this right. In contrast, in a forward or futures contract, the two parties have committed themselves to doing something. Whereas it costs nothing (except margin requirements) to enter into a futures contract, the purchase of an option requires an up-front payment. Option Terminology Index options: These options have the index as the underlying. Some options are European

while others are American. Like index futures contracts, index options contracts are also cash settled. Stock options: Stock options are options on individual stocks. Options currently trade on over

500 stocks in the United States. A contract gives the holder the right to buy or sell shares at the specified price. Buyer of an option: The buyer of an option is the one who by paying the option premium buys

the right but not the obligation to exercise his option on the seller/writer. Writer of an option: The writer of a call/put option is the one who receives the option

premium and is thereby obliged to sell/buy the asset if the buyer exercises on him.

There are two basic types of options, call options and put options. Call option: A call option gives the holder the right but not the obligation to buy an asset by a

certain date for a certain price. Put option: A put option gives the holder the right but not the obligation to sell an asset by a

certain date for a certain price. Option price/premium: Option price is the price which the option buyer pays to the option

seller. It is also referred to as the option premium. Expiration date: The date specified in the options contract is known as the expiration date, the

exercise date, the strike date or the maturity.

Strike price: The price specified in the options contract is known as the strike price or the

exercise price. American options: American options are options that can be exercised at any time upto the

expiration date. Most exchange-traded options are American. European options: European options are options that can be exercised only on the expiration

date itself. European options are easier to analyze than American options, and properties of an American option are frequently deduced from those of its European counterpart. In-the-money option: An in-the-money (ITM) option is an option that would lead to a positive

cash flow to the holder if it were exercised immediately. A call option on the index is said to be in-themoney when the current index stands at a level higher than the strike price (i.e. spot price >strike price). If the index is much higher than the strike price, the call is said to be deep ITM. In the case of a put, the put is ITM if the index is below the strike price. At-the-money option: An at-the-money (ATM) option is an option that would lead to zero

cash flow if it were exercised immediately. An option on the index is at-the-money when the current index equals the strike price (i.e. spot price = strike price).

Out-of-the-money option: An out-of-the-money (OTM) option is an option that would lead to

a negative cash flow if it were exercised immediately. A call option on the index is out-of-the-money when the current index stands at a level which is less than the strike price (i.e. spot price < strike price). If the index is much lower than the strike price, the call is said to be deep OTM. In the case of a put, the put is OTM if the index is above the strike price. Time value of an option: The time value of an option is the difference between its premium

and its intrinsic value. Both calls and puts have time value. An option that is OTM or ATM has only time value. Usually, the maximum time value exists when the option is ATM. The longer the time to expiration, the greater is an option's time value, all else equal. At expiration, an option should have no time value.

Table 2.2 Distinction between futures and options Futures Exchange traded, with novation Exchange defines the product Price is zero, strike price moves Price is zero Linear payoff Both long and short at risk Options Same as futures. Same as futures. Strike price is fixed, price moves. Price is always positive. Nonlinear payoff. Only short at risk.

(d) Swaps: Swaps are private agreements between two parties to exchange cash flows in the future according to a prearranged formula. They can be regarded as portfolios of forward contracts. The two commonly used swaps are: Interest rate swaps: These entail swapping only the interest related cash flows between the

parties in the same currency. Currency swaps: These entail swapping both principal and interest between the parties, with

the cash flows in one direction being in a different currency than those in the opposite direction. 2.1 FUTURE & OPTION TRADING SYSTEM The futures & options trading system of NSE, called NEAT-F&O trading system, provides a fully automated screen-based trading for Index futures & options and Stock futures & options on a nationwide basis as well as an online monitoring and surveillance mechanism. It supports an order driven market and provides complete transparency of trading operations. It is similar to that of trading of equities in the cash market segment. The software for the F&O market has been developed to facilitate efficient and transparent trading in futures and options instruments. Keeping in view the familiarity of trading members with the current capital market trading system, modifications have been performed in the existing capital market trading system so as to make it suitable for trading futures and options. Entities in the trading system

There are four entities in the trading system. Trading members, clearing members, professional clearing members and participants: 1) Trading members: Trading members are members of NSE. They can trade either on their own account or on behalf of their clients including participants. The exchange assigns a trading member ID to each trading member. Each trading member can have more than one user. The number of users allowed for each trading member is notified by the exchange from time to time. Each user of a trading member must be registered with the exchange and is assigned a unique user ID. The unique trading member ID functions as a reference for all orders/trades of different users. This ID is common for all users of a particular trading member. It is the responsibility of the trading member to maintain adequate control over persons having access to the firms User IDs. 2) Clearing members: Clearing members are members of NSCCL. They carry out risk management activities and confirmation/inquiry of trades through the trading system. 3) Professional clearing members: A professional clearing members is a clearing member who is not a trading member. Typically, banks and custodians become professional clearing members and clear and settle for their trading members. 4) Participants: A participant is a client of trading members like financial institutions. These clients may trade through multiple trading members but settle through a single clearing member. 2.2 CLEARING AND SETTLEMENT National Securities Clearing Corporation Limited (NSCCL) is the clearing and settlement agency for all deals executed on the Derivatives (Futures & Options) segment. NSCCL acts as legal counter-party to all deals on NSE's F&O segment and guarantees settlement.

2.2.1 Clearing Mechanism

A Clearing Member's open position is arrived by aggregating the open position of all the Trading Members (TM) and all custodial participants clearing through him. A TM's open position in turn includes his proprietary open position and clients open positions.

Proprietary / Clients Open Position: While entering orders on the trading system, TMs are

required to identify them as proprietary (if they are own trades) or client (if entered on behalf of clients) through 'Pro / Cli' indicator provided in the order entry screen. The proprietary positions are calculated on net basis (buy - sell) and client positions are calculated on gross of net positions of each client i.e., a buy trade is off-set by a sell trade and a sell trade is off-set by a buy trade. Open Position: Open position for the proprietary positions are calculated separately from

client position.

2.2.2 Settlement Mechanism

2.2.2.1 Futures Contracts on Index or Individual Securities Daily Mark-to-Market Settlement: - The position in the futures contracts for each member is marked-to-market to the daily settlement price of the futures contracts at the end of each trade day. The profits/ losses are computed as the difference between the trade price or the previous days settlement price, as the case may be, and the current days settlement price. The CMs who have suffered a loss are required to pay the mark-to-market loss amount to NSCCL which is passed on to the members who have made a profit. This is known as daily mark-to-market settlement. Theoretical daily settlement price for unexpired futures contracts, which are not traded during the last half an hour on a day, is currently the price computed as per the formula detailed below: F = S * e ^ rt Where: F = theoretical futures price S = value of the underlying index r = rate of interest (MIBOR) t = time to expiration CMs are responsible to collect and settle the daily mark to market profits / losses incurred by the TMs and their clients clearing and settling through them. The pay-in and pay-out of the mark-to-market

settlement is on T+1 days (T = Trade day). The mark to market losses or profits are directly debited or credited to the CMs clearing bank account. Option to settle Daily MTM on T+0 day:-Clearing members may opt to pay daily mark to market settlement on a T+0 basis. The option can be exercised once in a quarter (Jan-March, Apr-June, Jul-Sep & Oct-Dec). The option once exercised shall remain irrevocable during that quarter. Clearing members who wish to opt to pay daily mark to market settlement on T+0 basis shall intimate the Clearing Corporation as per the format specified in specified format. Final Settlement:-On the expiry of the futures contracts, NSCCL marks all positions of a CM to the final settlement price and the resulting profit / loss is settled in cash. The final settlement of the futures contracts is similar to the daily settlement process except for the method of computation of final settlement price. The final settlement profit / loss is computed as the difference between trade price or the previous days settlement price, as the case may be, and the final settlement price of the relevant futures contract. Final settlement loss/ profit amount is debited/ credited to the relevant CMs clearing bank account on T+1 day (T= expiry day). 2.2.2.2 Options Contracts on Index or Individual Securities Daily Premium Settlement:-Premium settlement is cash settled and settlement style is premium style. The premium payable position and premium receivable positions are netted across all option contracts for each CM at the client level to determine the net premium payable or receivable amount, at the end of each day. The CMs who have a premium payable positions are required to pay the premium amount to NSCCL which is in turn passed on to the members who have a premium receivable position. This is known as daily premium settlement. CMs are responsible to collect and settle for the premium amounts from the TMs and their clients clearing and settling through them. The pay-in and pay-out of the premium settlement is on T+1 day (T = Trade day). The premium payable amount and premium receivable amount are directly debited or credited to the CMs clearing bank account.

Interim Exercise Settlement for Options on Individual Securities: - Interim exercise settlement for Option contracts on Individual Securities is effected for valid exercised option positions at in-themoney strike prices, at the close of the trading hours, on the day of exercise. Valid exercised option contracts are assigned to short positions in option contracts with the same series, on a random basis. The interim exercise settlement value is the difference between the strike price and the settlement price of the relevant option contract. Exercise settlement value is debited/ credited to the relevant CMs clearing bank account on T+1 day (T= exercise date). Final Exercise Settlement: - Final Exercise settlement is effected for option positions at in-the-money strike prices existing at the close of trading hours, on the expiration day of an option contract. Long positions at in-the money strike prices are automatically assigned to short positions in option contracts with the same series, on a random basis.

For index options contracts, exercise style is European style, while for options contracts on individual securities, exercise style is American style. Final Exercise is Automatic on expiry of the option contracts. Option contracts, which have been exercised, shall be assigned and allocated to Clearing Members at the client level. Exercise settlement is cash settled by debiting/ crediting of the clearing accounts of the relevant Clearing Members with the respective Clearing Bank. Final settlement loss/ profit amount for option contracts on Index is debited/ credited to the relevant CMs clearing bank account on T+1 day (T = expiry day). Final settlement loss/ profit amount for option contracts on Individual Securities is debited/ credited to the relevant CMs clearing bank account on T+1 day (T = expiry day). Open positions, in option contracts, cease to exist after their expiration day. The pay-in / pay-out of funds for a CM on a day is the net amount across settlements and all TMs/ clients, in F&O Segment.

CHAPTER 2

Company profile

COMPANY PROFILE

Company Profile
Head office (Delhi) 2/2-A, 1ST Floor, Laxmi insurance Building, Asaf Ali Road, Cama Industrial Estate New Delhi -110002 Walbhat road, Behind the hub, Goregaon(east) Mumbai-400063 Bonanza House, plot no.M-2, Corporate office (Mumbai)

Registered office (Delhi) 4353/4C,Madan Mohan Street, Ansari Road, Drayman, New Delhi-110002

Regional office Raj. (Jaipur) 410-413,4th floor, Silver Square, Near Raj MandirCinema, Bhagwandas Road, Jaipur-01

Bonanza, a leading financial services &brokerage house working diligentlysince 1994 can be describe in a single word as a financial powerhouse. With acknowledged industry leadership in execution and clearing services on exchange traded derivatives and cash market products, bonanza has spread its trustworthy tentacles all over the country with more than 1050 outlets spread across 350 cities.

It provides an extensive range of services in equity, commodities, currency derivatives, wealth management, distribution of third party product, etc. Being at par with the modern tech-savvy world, bonanza makes an integrated and an innovative use of technology. It also enables its clients to trade online as well as offline the strategic tie-ups with he latest technology partners has earned bonanza a prestigious place as one of the top brokerage houses in the country. Client-focused philosophy backed by membership of all principal Indian stock and commodity exchange makes bonanza stand apart from competitor as a preferred services provider in the industry for value-based services

Bonanza Product and Service

Bonanzas service encompasses the spectrum of wealth creation, management and preservation. Bonanza offers a wide range of product and services to help client reach their financial goal.

SA E V Sa g& d p e t m etsh rt vin e osit d o e o t rm as re u e e c h q iremnt fo yo r u IN EST V M d t lo g t rm e iumo n e in st e tw ic p vid s ve mn h h ro e in om & a a g wh c e c pit l ro t

PRO TECT In ra c t atp vid su n e h ro es p t ct n t yo r life roe io o u

Prime Brokerage Services:

Equity and equity derivatives -Trading Platform offers online Equity & Equity Derivatives trading facilities for investors. This high-end, efficiently integrated application makes trading convenient, quick and hassle free. -Added advantages - Having access to resources like research charts, advice, live quotes online assistance - to take well-versed decisions. Trading through our branch network or phone available, by simply registering with us.

Commodity Derivatives

We offer access to future trading via multiple exchanges in wide-ranging commodities agricultural commodities, base metals, energy and precious metals. We also provide investment opportunities in gulf commodities futures and currency market. Currency Derivatives

Known as being predecessors in contributing to unique financial products, we have now added to our stable - currency Derivative. This service, we provide both offline and online.

Asset Management:

Portfolio Management Services (PMS)

Our team of portfolio managers design portfolios to suit every customers needs. Constantly scrutinizing the developments in market and moving stocks, we aim for maximum capitalization. We suggest the most appropriate product to customers, based on factors like their investment spheres, return expectation and risk tolerance. Our experience, expertise and research helps us give our customers investments the best upshots. Advisory

Bonanza guides and supports its clients to re-structure and streamline their portfolios based on changing market conditions and client objectives.

Depository Services:
-Bonanza is a depository participant with NSDL and CDSL. -We provide an array of Depository Services to make share transactions quicker, easier and cheaper for both Equity and Commodity.

Distribution:

Insurance

-Bonanza offers insurance products in Life and General Insurance.

-Our IRDA certified advisors offer prudent advice on policy selection and assists through the claim redressal process. -Our advisory team matches the insurance products to financial profiles of customers to offer the best solution options, maintaining transparency and professionalism.

Mutual Funds

-Bonanza is one of the largest distributors of mutual fund in India. -With the help of our in-depth research across categories covering 20 parameters and our expertise, we guide our clients to take appropriate investment decisions. -Keeping in mind customers' budgets, needs and securities, our AMFI certified investment advisors offer the best deals.

Initial Public Offer (IPO)

-We offer our customers online investment access for Public offerings. -In-depth research advice for the forthcoming IPOs.

Bonanzas Affiliations
Equity National Stock Exchange of India Ltd. (NSEIL) The Bombay Stock Exchange Ltd. (BSE) OTC Exchange of India Ltd (OTCEIL)

Commodities Multi Commodity Exchange (MCX) National Commodity and Derivatives Exchange Ltd (NCDEX)

 Currency

Dubai Gold Commodities Exchange (DGCX) National Multi Commodity Exchange (NMCE)

National Stock Exchange of India Ltd. The Bombay Stock Exchange Ltd. (BSE) MCX-SX Ltd.

Depository participant with CDSL and NSDL

Bonanzas Strengths
March 2009) Investors. Bonanza has a young dynamic team of 1900 professionals. Strong infrastructure supporting over 3000 trading terminal supporting 24x7 service and support via our federal support system. Bonanza has more than 2 lakh clients comprising of Corporate Financial Institution Investors, Mutual Funds, High Net-worth Individuals and Retail Bonanza has over 1050 outlets in more than 350 cities in India. (as on

more than 350 VSAT's to support geographic reach and servicing capabilities.

Bonanzas Pillars: Management Team

Meet the minds behind the corporation Bonanza - the Directors who are leading this gigantic force.

S.P. Goel

The Founder Director of Bonanza who has been instrumental in chartering critical and strategic initiatives. With an experience of 25 years in the finance business, Mr. Goel has also been appointed as the director of the OTC Exchange of India. He represents NSEIL for the SEBI constituted Dr. J R Verma Advisory committee for the development of the derivatives market in India. He started his career as a CA in 1987 and soon after he embodied several prominent committees on settlement issues (COSI), a policy generating body at the NSE of India Ltd and Dispute Resolution Committee (DRC) of National Stock Exchange Clearing Corporation Limited (NSCCL).

Shivkumar Goel Being the Founder Director of Bonanza, he has been handling IT & risk initiatives since inception. Formerly, designated as the CEO of SRF Finance Limited, Delhi; Mr. Shivkumar Goel had also spearheaded the IT committee of the DELHI Stock Exchange. A CA & CS with more than 30 years of experience, he recently was nominated as the executive committee member of Depository Participants Association of India. He is currently a functional member with Association of National Exchanges Members of India - NR S.K. Goel

Has been Bonanzas Founder Director and a prominent CA for more than 35 years now. Being actively involved in managing the Business initiatives and Accounting across India; Mr. S.K.Goel has been mainly heading Bonanzas northern and eastern zone. He was formerly with the Modis & OSWALS - one of the leading manufacturing companies, in addition to being empanelled with various major banks as their Internal Auditor. Vishnu Kumar Agarwal The Founder Director of Bonanza with over 30 years of experience; Mr. Vishnu has proficiently taken charge of Administration, Real Estate Investments and Initiatives for all the group companies of Bonanza.

Anand Prakash Goel He has been playing a pivotal role as Bonanzas Founder Director by resourcefully managing Taxation, Compliance and DP. A qualified CA with more than 30 years of experience in his stride, he has undertaken audits for leading banks across India. Saurabh Shukla He plays a pivotal role as the Group COO and one of the Directors of Bonanza Commodity Brokers Ltd. He has been actively involved in varied key strategic functions and management of retail business. Previously, designated as Head of Marketing for the Refco Group, he has also worked for Merchant and Investment Banking and Corporate Finance. He was also ardently involved in developing and servicing corporate / institutional customers at Blue Blends Finance Ltd. and Natsons Pvt. Ltd.

Bonanzas Vision

To be one of the most trusted and globally reputed financial Distribution companies.

Bonanza Values
Transparency Honesty is our forte. We believe in dealing on thoroughly ethical grounds, being fair and transparent with our customers We recognize and appreciate efforts put in by our employees. And we, as a matter of fact, reward and distinguish each one of them, ceaselessly. Solidarity We believe in sharing a forthright and respectful relationship with our business partners and employees. We consider them both as our team associates, who work together. Succeed together. Started at zero Its biggest strength is that it started its business with a zero level, merely as sub broker then taken the self trading membership, hence it understand the needs of its clients and business partners very well. Integrated and transparent services It values integrity and transparency in clients transaction and providing the best value for money to its clients. Value of client service Its dedicated relationship managers are trained to provide excellent services and complete satisfaction to all their clients, strongly believes that success is only the end result of clients growth. All the service is one umbrella

All the memberships are in one company name, no hassle of account transfer, deliveries adjustments, and buy stock in one exchange and sale in another, get arbitrage opportunities. Accurate and timely research It is always endeavored to provide timely research based advice to its clients, its research team comprises of experienced fundamentals and technical analysis, sector specialist and derivatives strategist, who are constantly looking for new trading and investment opportunities. Wide range of services:It is offering Sock broking, Investment Advisory Services, Depository Services, Commodities Trading, Portfolio Management, IPO & Mutual Fund Distribution etc. to its esteemed clients. 24*7 online back office software Web enabled centralized back office software installed at head office, having direct access to all branches. Business associates, sub broker and client to have online information about their transaction, account derivatives, open position and so many things live updated. Its all client can obtain up to date information online at click of a button on their desktop PC.

Bonanzas growth:
Clientele growth

After spreading our wings across varied segments, we are now growing in all direction with more than 2 lakh clients under the banner.

Bonanza Research Desk

Bonanza Research desk has a dedicated team of research analysts and experts that have an in-depth knowledge of the market place. They offer value perspectives, focus on opportunities for investment and growth and endeavor to reduce risk potential. It's premium advisory services are based on technical and fundamental views and strategies. Equity - SMS alert - Daily market strategy - Weekly market strategy - Monthly market strategy - 'Equity talk' - Daily derivative strategy

Commodity

- SMS alert
- Daily report - Weekly report - Monthly report: Commodity Review

Mutual funds - Daily Performance Sheet - Weekly Mutual Fund Report 'The Edge' - Monthly free News Letter 'The Perspective'

Regular updates on products, performance and new launches.

Currency Derivatives -Daily Forex Insight report

Bonanzas Technology
--Single VSAT Connectivity for NSE/BSE/F&O/NCDEX /MCX/MCX-SX through Virtual Private Network (VPN) Other connectivity links to branches through Leased Lines, ISDN, Radio Frequency and Broadband. --High Speed and Streaming live quote access via Internet for NCDEX/MCX/MCX-SX for branches and retail clients. --Internet based Depository access (Speed-e/Easiest) to offer DP services to Retail investors. --24x7 online access to a centralized support structure for all products offerings.

Bonanzas Achievement
Top Equity Broking House in terms of branch expansion for 2010 3rd in terms of Number of Trading Accounts for 2008 6th in terms of Trading terminals in for two consecutive years

2007- 2008

CHAPTER 3

RESEARCH METHODOLOGY

Research Methodology-:
1. Type of research
Hypothesis testing research

2. Research Method -

Research was descriptive in nature

3. Research Objective -

To study investment pattern of customers of Bikaner.

4. Research design

# Sampling Design - : a. Universe -: c. Sampling size -: Indian stock market.

Total sample size was 1600.

5. Method of Data Collection

Data was collected from different places of the Bikaner by direct Asking and answering them at canopy Secondary data is

Collected from various websites, magazines, journals etc.

6. Analysis of Data

Tabulation of collected data is done.

7. Duration of project-:

45 Days

INTODUCTION TO THE SUBJECT WHY SHOULD YOU INVEST?

For safety
Life is notorious for its unpredictability. Every human being will have ups and downs. If you save (and invest) you will be better prepared for a rainy day. Unforeseen events can be an ailment requiring expensive treatment or repairs and maintenance to your dream house or running the household when you might be out job (hopefully not, but by the way India is globalizing "pink slips" are becoming more common).

For "Event" Related Expenditure

The "planned" expenditure for standard events in our lives like children's education, a marriage in the family, and nowadays holidays abroad (an increasing trend).

Guard Against Inflation

All of us have heard stories from grandparents that in their times "one rupee" could buy the entire bazaar and still have some change to tip the rickshaw wallah. What this implies is that the moneys purchasing power continues has fallen due to inflation. Therefore to beat inflation should be an objective of any investor. You have to invest judiciously so that not only you guard against inflation but also beat it.

Surplus Money
At times your earnings will be significantly higher than what you can really enjoy spending. Why not invest it and allow it to earn on its own? Your hard earned money can earn on it own with much ease.

ONLINE SHARE TRADING

Under this type of trading, the trading is done by the investor himself through the internet using the Trading Software or web based platform provided to him by his broker.

PARTIES INVOLVED IN ONLINE SHARE TRADING

BSE & NSE NSDL (National Securities Depositories Limited) Depository Participants Brokers Clients Basic terms related to trading

PRIMARY MARKET: This is the first market where a newly issued security is offered e.g. IPO.

IPO (Initial public offer): A companys first sale of stock to the public. PRICING OF IPO:

1. 2.

FIXED PRICE IPO: The offer in the primary market, where the price of security is fixed. BOOK BUILDING OFFER: There will be a price band with a lower price and higher price. The

customer has to select the price at what he wants to apply for IPO. SECONDARY MARKET: Trading of stocks is done only in the secondary market. Shares issued in the primary market are listed on the secondary market where the stocks are available for trading in the stock market.

LISTING: Listing means admission of securities for trading on a recognized stock exchange.

ROLLING SETTLEMENT: Rolling settlement is the time period for settling of the obligation. At NSE & BSE both trades are settled on rolling settlement basis. Rolling settlement = t+2 basis i.e. t is trading day + 2 working days.

MARKET CAPITALIZATION: Market capitalization of a company is the current market price of a share multiplied by total number of outstanding shares- large cap, mid cap, small cap.

BSE SENSEX: The SENSEX, short form of the BSE- sensitive Index, is a Market Capitalization Weighted index of 30 stocks representing a sample of large, well established and financially sound companies.

CLOSING PRICE CALCULATION OF BSE: The closing price is computed taking weighted average of all the trades on SENSEX constituents in the last 15 minutes of trading session.

CLOSING PRICE CALCULATION OF NSE: S&P CNX Nifty or Nifty 50 stock index accounting for 24 sectors. The nifty closing prices are calculated by taking the last half an hour weighted average closing prices of the constituents of the index.

PAY-IN & PAYOUT: Pay-in day is the day on which the securities or funds are delivered/paid by the customer to the exchange. Payout is the day on which securities and funds are delivered/paid to the client by the clearinghouse of the exchange.

DEPOSITORY: like a bank where securities/shares are held in the electronic form (NSDL- National securities depository limited/ CDSL- Central depository services limited) Depository participant- Investors avail services of a depository through depository participants.

CORRECTION: Temporary reversal of trend in share prices. This could be a reaction (a decrease following a consistent rise in prices) or a rally (an increase following a consistent fall in prices)

FLOATING STOCK: The fraction of the paid-up equity capital of a company, which participates in day-today trading. E.g. 30% of equity capital held by promoters, another 30% held by financial institutions and balance 40% by the public.

CIRCUIT FILTER: Circuit filter is a mechanism by which exchanges temporarily suspend the trading in a security when its prices rise too high or too low. (Band of 2%, 5%, 10% and 20% depending on the security)

COOLING OFF PERIOD: when the trading is suspended on any particular security that time period is called cooling off period, the time period of suspension of trade is half an hour.

VARIOUS INVESTMENT OPTIONS

I have analyzed various investment options like Equity Shares Derivatives Commodity Insurance

EQUITY MARKET
Equity share represent ownership in a corporation. Each stock is a share of ownership. The more shares you own, the greater your ownership. When the corporation earns a profit, some of the profit may be passed on to you in the form of dividends. When a stock grows in value, you can sell it and make a profit (a capital gain). Over the long run, stocks have outperformed every other type of investment. They have also kept ahead of inflation. This is because the returns on stocks are not fixed, as the returns of many other investments are. Stocks have unlimited earning capacity.

Short-term speculators and long-term investors favor stock investments. Short-term speculators try to take advantage of the short-term volatility of stock prices to "buy low" and "sell high." Long-term investors ignore the daily fluctuations to take advantage of the potentially higher long-term returns experienced in the stock market. Long-term investors may also enjoy dividends paid by successful companies in which they invest.

Investment Objective
Shares are meant to be long-term investments. Three golden rules for investment in equity - Diversify, Average out & most importantly stay invested. Shares do generate income from dividend as well as capital appreciation and have a strong potential to increase value of investment. But shares are risky -share prices are affected by factors beyond anyone's control and hence one needs to have an appetite for that kind of risk. If the company earns good profits and pays dividends regularly, shares are ideal for income purposes. But not all good companies regularly pay dividends as they may chose to employ the profits for investments and growth purposes. They do provide for some protection although share prices have no relation to inflation. The price may crash or rise far beyond the inflation rate. Shares being what they are, it depends on the company whose shares you own. Keeping this in mind, you can pledge them with a bank for raising a loan. The banks have their list of approved shares that they accept as a security. Generally, shares of well-known and respectable companies are accepted as security.

Risk Considerations
High risk and zero assurance. Forget the original amount invested. The money is given back only according to the prices dictated by the stock market, which depends purely on the market forces of demand and supply. Also, in case the company goes in for liquidation, the money will be returned only after company has paid off all its liabilities, i.e., if there is any money left with it by then. But then, it is the potential appreciation of investment that attracts people to shares. Share prices can be affected by just about anything going on in the world. Investment decisions depend on the outlook of the investor.

Buying, Selling, and Holding

Shares can be purchased directly when a company issues them through an Initial Public Offering (IPO) or from the stock market through a stockbroker. The stockbroker charges a small percentage of transaction as commission, or brokerage, to execute investors orders of purchase or sale. The most popular bourses in India are the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Shares can be bought and sold in the secondary market, also called the stock exchange. In fact, the sole purpose for the existence of the stock markets is trading in shares. Shares are the most liquid financial instruments as long as there is a buyer for your shares on the stock exchange. Most shares belonging to the A Group on the BSE are among the most liquid. However, shares of some companies may not witness any trading for many days altogether. In such a case, shares will not sell. So, the liquidity factor varies to a large extent. Shares can be held in either physical or dematerialized (demat) form. In the demat form, instead of your holding physical share certificates, they are credited to your demat account with a depository participant. It is very much like holding cash at a bank. Some shares have come under the compulsory demat holding list, the list for which is available on the SEBI Websites: www.sebi.com or www.sebi.gov.nic.in. In fact, holding shares in demat form is much more convenient as it eliminates the issue of bad delivery, and also makes the delivery process quicker and easy to manage.

Tax Implications
While dividend is not taxable at the hands of the investor, capital gains are. When you sell your shares at a profit, it attracts a capital gains tax. Gains realized within one year of purchase of shares come under the shortterm capital gains tax, and are included in gross taxable income. If the duration is more than one year, it attracts long-term capital gains tax. The rate is 20 per cent with indexation benefit, or a flat 10 per cent. However, capital gains tax can be saved if the gains are invested in an IPO of a company with a lock-in period of 1 year. Alternatively, they can also be invested in capital gains bonds of the NHAI, NABARD, or Rural

Electrification Corporation (REC). However, listed shares acquired after March 1, 2003, will not be subject to long-term capital gains tax. The BSE Sensex is the most popular index that tracks the movements of shares of 30 blue-chip companies on a weighted average basis. The rise and fall in the value of the Sensex, measured in points, broadly indicates the price-movement of the value of shares.

WHAT ARE DERIVATIVES?

The term "Derivative" indicates that it has no independent value, i.e. its value is entirely "derived" from the value of the underlying asset. The underlying asset can be securities, commodities, bullion, currency, live stock or anything else. In other words, Derivative means a forward, future, option or any other hybrid contract of pre determined fixed duration, linked for the purpose of contract fulfillment to the value of a specified real or financial asset or to an index of securities. With Securities Laws (Second Amendment) Act, 1999, Derivatives has been included in the definition of Securities. The term Derivative has been defined in Securities Contracts (Regulations) Act, as:A Derivative includes: A security derived from a debt instrument, share, loan, whether secured or unsecured, risk instrument

or contract for differences or any other form of security; A contract which derives its value from the prices, or index of prices, of underlying securities;

What is a Futures Contract? Futures Contract means a legally binding agreement to buy or sell the underlying security on a future date. Future contracts are the organized/standardized contracts in terms of quantity, quality (in case of commodities), delivery time and place for settlement on any date in future. The contract expires on a prespecified date which is called the expiry date of the contract. On expiry, futures can be settled by delivery of the underlying asset or cash. Cash settlement enables the settlement of obligations arising out of the future/option contract in cash. What is an Option contract?

Options Contract is a type of Derivatives Contract, which gives the buyer/holder of the contract the right (but not the obligation) to buy/sell the underlying asset at a predetermined price within or at end of a specified period. The buyer / holder of the option purchase the right from the seller/writer for a consideration which is called the premium. The seller/writer of an option is obligated to settle the option as per the terms of the contract when the buyer/holder exercises his right. The underlying asset could include securities, an index of prices of securities etc. Under Securities Contracts (Regulations) Act, 1956 options on securities has been defined as "option in securities" means a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell, securities in future, and includes a teji, a mandi, a teji mandi, a galli, a put, a call or a put and call in securities; An Option to buy is called Call option and option to sell is called Put option. Further, if an option that is exercisable on or before the expiry date is called American option and one that is exercisable only on expiry date, is called European option. The price at which the option is to be exercised is called Strike price or Exercise price. Therefore, in the case of American options the buyer has the right to exercise the option at anytime on or before the expiry date. This request for exercise is submitted to the Exchange, which randomly assigns the exercise request to the sellers of the options, who are obligated to settle the terms of the contract within a specified time frame.

As in the case of futures contracts, option contracts can be also be settled by delivery of the underlying asset or cash. However, unlike futures cash settlement in option contract entails paying/receiving the difference between the strike price/exercise price and the price of the underlying asset either at the time of expiry of the contract or at the time of exercise / assignment of the option contract.

What are Index Futures and Index Option Contracts?

Futures contract based on an index i.e. the underlying asset is the index, are known as Index Futures Contracts. For example, futures contract on NIFTY Index and BSE-30 Index. These contracts derive their value from the value of the underlying index. Similarly, the options contracts, which are based on some index, are known as index options contract. However, unlike Index Futures, the buyer of Index Option Contracts has only the right but not the obligation to buy / sell the underlying index on expiry. Index Option Contracts are generally European Style options i.e. they can be exercised / assigned only on the expiry date. An index in turn derives its value from the prices of securities that constitute the index and is created to represent the sentiments of the market as a whole or of a particular sector of the economy. Indices that represent the whole market are broad based indices and those that represent a particular sector are sectoral indices. In the beginning futures and options were permitted only on S&P Nifty and BSE Sensex. Subsequently, sectoral indices were also permitted for derivatives trading subject to fulfilling the eligibility criteria. Derivative contracts may be permitted on an index if 80% of the index constituents are individually eligible for derivatives trading. However, no single ineligible stock in the index shall have a weightage of more than 5% in the index. The index is required to fulfill the eligibility criteria even after derivatives trading on the index have begun. If the index does not fulfill the criteria for 3 consecutive months, then derivative contracts on such index would be discontinued. By its very nature, index cannot be delivered on maturity of the Index futures or Index option contracts therefore, these contracts are essentially cash settled on Expiry.

The participants:

Hedgers use futures or options markets to reduce or eliminate the risk associated with price of an asset. Speculators use futures and options contracts to get extra leverage in betting on future movements in the price of an asset. They can increase both the potential gains and potential losses by usage of derivatives in a speculative venture.

 Arbitrageurs are in business to take advantage of a discrepancy between prices in two different markets. If, for example, they see the futures price of an asset getting out of line with the cash price, they will take offsetting positions in the two markets to lock in a profit. The need for a derivatives market The derivatives market performs a number of economic functions: 1. They help in transferring risks from risk averse people to risk oriented people. 2. They help in the discovery of future as well as current prices. 3. They catalyze entrepreneurial activity. 4. They increase the volume traded in markets because of participation of risk averse people in greater numbers. 5. They increase savings and investment in the long run. Derivatives Instruments Traded In India In the exchange-traded market, the biggest success story has been derivatives on equity products. Index futures were introduced in June 2000, followed by index options in June 2001, and options and futures on individual securities in July 2001 and November 2001, respectively. As of 2005, the NSE trades futures and options on 118 individual stocks and 3 stock indices. All these derivative contracts are settled by cash payment and do not involve physical delivery of the underlying product (which may be costly). Derivatives on stock indexes and individual stocks have grown rapidly since inception. In particular, single stock futures have become hugely popular; accounting for about half of NSEs traded value in October 2005. In fact, NSE has the highest volume (i.e. number of contracts traded) in the single stock futures globally; enabling it to rank 16 among world exchanges in the first half of 2005. Single stock options are less popular than futures. Index futures are increasingly popular, and accounted for close to 40% of traded value in October 2005. Exchange-Traded and over-the-counter Derivative Instruments OTC (over-the-counter) contracts, such as forwards and swaps, are bilaterally negotiated between two parties. The terms of an OTC contract are flexible, and are often customized to fit the specific requirements of the user. OTC contracts have substantial credit risk, which is the risk that the counterparty that owes money defaults on the payment. In India, OTC derivatives are generally prohibited with some exceptions: those that

are specifically allowed by the Reserve Bank of India (RBI) or, in the case of commodities (which are regulated by the Forward Markets Commission), those that trade informally in havala or forwards markets. An exchange-traded contract, such as a futures contract, has a standardized format that specifies the underlying asset to be delivered, the size of the contract, and the logistics of delivery. They trade on organized exchanges with prices determined by the interaction of many buyers and sellers. In India, two exchanges offer derivatives trading: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). However, NSE now accounts for virtually all exchange-traded derivatives in India, accounting for more than 99% of volume in 2003-2004. Contract performance is guaranteed by a clearinghouse, which is a wholly owned subsidiary of the NSE.4 Margin requirements and daily marking-to-market of futures positions substantially reduce the credit risk of exchange-traded contracts, relative to OTC contracts. Uses Of Derivatives Derivatives may be traded for a variety of reasons. A derivative enables a trader to hedge some preexisting risk by taking positions in derivatives markets that offset potential losses in the underlying or spot market. In India, most derivatives users describe themselves as hedgers (FitchRatings, 2004) and Indian laws generally require that derivatives be used for hedging purposes only. Another motive for derivatives trading is speculation (i.e. taking positions to profit from anticipated price movements). In practice, it may be difficult to distinguish whether a particular trade was for hedging or speculation, and active markets require the participation of both hedgers and speculators. A third type of trader, called arbitrageurs, profit from discrepancies in the relationship of spot and derivatives prices, and thereby help to keep markets efficient. Jogani and Fernandes (2003) describe Indias long history in arbitrage trading, with line operators and traders arbitraging prices between exchanges located in different cities, and between two exchanges in the same city. Their study of Indian equity derivatives markets in 2002 indicates that markets were inefficient at that time. They argue that lack of knowledge; market frictions and regulatory impediments have led to low levels of capital employed in arbitrage trading in India. However, more recent evidence suggests that the efficiency of Indian equity derivatives markets may have improved What is minimum contract size? The Standing Committee on Finance, a Parliamentary Committee, at the time of recommending amendment to Securities Contract (Regulation) Act, 1956 had recommended that the minimum contract size of derivative contracts traded in the Indian Markets should be pegged not below Rs.2 Lakhs. Based on this recommendation

SEBI has specified that the value of a derivative contract should not be less than Rs. 2 Lakh at the time of introducing the contract in the market. In February 2004, the Exchanges were advised to re-align the contracts sizes of existing derivative contracts to Rs.2 Lakhs. Subsequently, the Exchanges were authorized to align the contracts sizes as and when required in line with the methodology prescribed by SEBI. What is the lot size of a contract? Lot size refers to number of underlying securities in one contract. The lot size is determined keeping in mind the minimum contract size requirement at the time of introduction of derivative contracts on a particular underlying. For example, if shares of XYZ Ltd are quoted at Rs.1000 each and the minimum contract size is Rs.2 lacs, then the lot size for that particular scripts stands to be 200000/1000 = 200 shares i.e. one contract in XYZ Ltd. covers 200 shares. What is the margining system in the derivative markets? Two type of margins have been specified Initial Margin - Based on 99% VaR and worst-case loss over a specified horizon, which depends on the time in which Mark to Market margin is collected. Mark to Market Margin (MTM) - collected in cash for all Futures contracts and adjusted against the available Liquid Networth for option positions. In the case of Futures Contracts MTM may be considered as Mark to Market Settlement.

Factors driving the growth of financial derivatives 1. Increased volatility in asset prices in financial markets, 2. Increased integration of national financial markets with the international markets, 3. Marked improvement in communication facilities and sharp decline in their costs, 4. Development of more sophisticated risk management tools, providing economic agents a wider choice of risk management strategies, and 5. Innovations in the derivatives markets, which optimally combine the risks and returns over a large number of financial assets leading to higher returns, reduced risk as well as individual financial assets. transactions costs as compared to

Risks Involved In Trading In Derivatives Contracts

Effect of "Leverage" or "Gearing" The amount of margin is small relative to the value of the derivatives contract so the transactions are 'leveraged' or 'geared'. Derivatives trading, which is conducted with a relatively small amount of margin, provides the possibility of great profit or loss in comparison with the principal investment amount. But transactions in derivatives carry a high degree of risk. You should therefore completely understand the following statements before actually trading in derivatives trading and also trade with caution while taking into account one's circumstances, financial resources, etc. If the prices move against you, you may lose a part of or whole margin equivalent to the principal investment amount in a relatively short period of time. Moreover, the loss may exceed the original margin amount.

A. Futures trading involves daily settlement of all positions. Every day the open positions are marked to market based on the closing level of the index. If the index has moved against you, you will be required to deposit the amount of loss (notional) resulting from such movement. This margin will have to be paid within a stipulated time frame, generally before commencement of trading next day.

B. If you fail to deposit the additional margin by the deadline or if an outstanding debt occurs in your account, the Member of the Exchange may liquidate a part of or the whole position or substitute commodities. In this case, you will be liable for any losses incurred due to such Close Outs. C. Under certain market conditions, a Client may find it difficult or impossible to execute transactions. For example, this situation can occur due to factors such as illiquidity i.e. when there are insufficient bids or offers or suspension of trading due to price limit or circuit breakers etc. D. In order to maintain market stability, the following steps may be adopted: changes in the margin rate, increases in the cash margin rate or others. These new measures may be applied to the existing open interests. In such conditions, you will be required to put up additional margins or reduce your positions. E. You must ask your Member of the Exchange to provide the full details of the derivatives contracts you plan to trade i.e. the contract specifications and the associated obligations. Gold/Silver Introduction: Gold

India is the largest consumer of gold in the world. Enactment of Gold Control Act in 1962 foreboded gold trade in any form, which continued for almost 30 years. Liberalization in 1991 saw efforts to slowly revive the gold market in the country, in sync with the other sectors of economy. The increasing gold trade deserves an efficient bullion exchange in India, for which there is a need to develop an efficient spot and forwards market, sufficient liquidity, regular, safe and cheap supply system with good delivery standards are some of the prerequisites for smooth functioning of a bullion exchange. The recent decision of the International Monetary Fund & other central bankers against selling gold for the next five years signifies the faith placed in this metal by the leading economies of the world. Gold will continue to play a decisive role in world economy in Indian Gold Market

India was the worlds largest gold market with Mumbai as the main trading center prior to 1962. The government enacted the Gold Control Act in 1962 prohibiting the citizens of India from holding pure gold bars and coins due to loss of gold reserves during the Indo-China war in 1962. Only licensed dealers were allowed to deal in pure gold bars and coins. It was this legislation, which killed the official gold market and a large unofficial market for gold sprung up dealing in cash only. Gold supply primarily comes from mine production, official sector sales of global central banks, old gold scrap and net disinvestments of invested gold. Out of the total supply of 3870 tons last year, 66% was from mine production, 20 % from old gold scrap and 14% from official sector sales.

Introduction: Silver Silver is one of the precious metals, which was first, located during 3000 to 2500 B.C. in the area of Armenia. It is unusual among the metals in the sense that most of it is not produced from silver mines. Over 75% of the global silver is produced as a by-product of another metal. Silver production is influenced by a far wider range of factors other than those relating specifically to the silver market.

Domestic Scenario

For centuries, India has been a substantial market for gold and silver, with both metals still closely woven into the social fabric of the sub-continent. Gold and Silver are privately held and it remains the basic form of saving for the majority of the Indian families, especially in the rural areas. The market has changed radically during the 1990s with official imports of metal permitted for the first time in a generation. Imports were forbidden from 1947 until 1992, except for the limited amounts for jewellery made for the export. INSURANCE LIFE INSURANCE The basic customer needs met by life insurance policies are protection and savings. Policies that provide protection benefits are designed to protect policyholder or his dependents from the financial consequences of the unwelcome events such as death or long-term disability/sickness. Policies that are designed as savings contract allow the policyholder to build up funds to meet specific investment objectives such as income in retirement or repayment of loan. In practice, there are many policies, which provide mixture of savings and protection benefits. Benefits of Insurance: Insurance is an instrument of security, saving and peace of mind. It provides several benefits by paying a small amount of premium to an insurance company. Some of these benefits are:1. Safeguards oneself and one's family for future requirements. 2. Peace of mind-in case of financial loss. 3. Encourage saving. 4. Tax rebate. 5. Protection from the claim made by creditors 6. Security against a personal loan, housing loan or other types of loan. 7. Provide a protection cover to industries, agriculture, women and child Money Market Instruments By convention, the term "money market" refers to the market for short-term requirement and deployment of funds. Money market instruments are those instruments, which have a maturity period of less than one year. The most active part of the money market is the market for overnight and term money between banks and institutions (called call money) and the market for repo transactions. The former is in the form of loans and the

latter are sale and buy back agreements both are obviously not traded. The main traded instruments are commercial papers (CPs), certificates of deposit (CDs), treasury bills (T-Bills) and repos. All of these are discounted instruments i.e. they are issued at a discount to their maturity value and the difference between the issuing price and the maturity/face value is the implicit interest. These are also completely unsecured instruments. One of the important features of money market instruments is their high liquidity and tradability. A key reason for this is that these instruments are transferred by endorsement and delivery and there is no stamp duty or any other transfer fee levied when the instrument changes hands. Another important feature is that there is no tax deducted at source from the interest component. MUTUAL FUNDS A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized is shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:

Advantages of Mutual Funds Mutual funds provide following benefit to investors: Professional Management

Mutual Funds provide the services of experienced and skilled professionals, backed by a dedicated investment research team that analyses the performance and prospects of companies and selects suitable investments to achieve the objectives of the scheme.

Diversification

Mutual Funds invest in a number of companies across a broad cross-section of industries and sectors. This diversification reduces the risk because seldom do all stocks decline at the same time and in the same proportion. You achieve this diversification through a Mutual Fund with far less money than you can do on your own. Convenient Administration Investing in a Mutual Fund reduces paperwork and helps you avoid many problems such as bad deliveries, delayed payments and follow up with brokers and companies. Mutual Funds save your time and make investing easy and convenient.

Return Potential Over a medium to long-term, Mutual Funds have the potential to provide a higher return as they invest in a diversified basket of selected securities.

Low Costs Mutual Funds are a relatively less expensive way to invest compared to directly investing in the capital markets because the benefits of scale in brokerage, custodial and other fees translate into lower costs for investors.

Liquidity

In open-end schemes, the investor gets the money back promptly at net asset value related prices from the Mutual Fund. In closed-end schemes, the units can be sold on a stock exchange at the prevailing market price or the investor can avail of the facility of direct repurchase at NAV related prices by the Mutual Fund.

Transparency

you get regular information on the value of your investment in addition to disclosure on the specific investments made by your scheme, the proportion invested in each class of assets and the fund manager's investment strategy and outlook.

Flexibility

Through features such as regular investment plans, regular withdrawal plans and dividend reinvestment plans, you can systematically invest or withdraw funds according to your needs and convenience.

Affordability

Investors individually may lack sufficient funds to invest in high-grade stocks. A mutual fund because of its large corpus allows even a small investor to take the benefit of its investment strategy.

Choice

of

Schemes

Mutual Funds offer a family of schemes to suit your varying needs over a lifetime Well Regulated All Mutual Funds are registered with SEBI and they function within the provisions of strict regulations designed to protect the interests of investors. The operations of Mutual Funds are regularly monitored by SEBI.

Disadvantages Of Mutual Funds While the benefits of investing through mutual funds far outweigh the disadvantages, an investor and his advisor will do well to be aware of a few shortcomings of using the mutual funds as investment vehicles. No control over costs

An investor in a mutual fund has no control over the overall cost of investing. He pays investment management fees as long as he remains with the fund, albeit in return for the professional management and research. Fees are payable even while the value of his investments may be declining. a mutual fund investor also pays fund distribution cost, which he would not incur in direct investing. However, this shortcoming only means that there is a cost to obtain the benefits of mutual fund services.

No tailor made portfolios Investor who invests on their own can build their own portfolios of shares and bonds and other securities. Investing through funds means he delegates this decision to the fund managers. The very high net worth

individuals or large corporate investors may find this to be a constraint in achieving their objectives. However, most mutual fund managers help investors overcome this constraint by offering families of funds-----a large number of different schemes---within their own management company. An investor can choose from different investment plans and construct a portfolio of his choice. Growth In Assets Under Management A variety of schemes are offered by mutual funds. Based on the investment policy, the more commonly offered schemes may be broadly classified as follows: Equity Schemes Growth Schemes Index Schemes Sector Schemes

Balanced Schemes Debt schemes Income Schemes Gilt Schemes Money Market Schemes

Growth Schemes The corpus of a growth scheme is invested substantially (80-95%) in equity or equity-related instruments. The principle objective of such a scheme is to achieve long-term capital growth for the unit holders. Index Schemes An index scheme is an equity scheme that invests its corpus in a basket of equity stocks that comprise a given stock market index such as S & P CNX Nifty Index, with each stock being assigned a weight age equal to what it has in the index. Thus an index fund appreciates or depreciates the same way as the index. The principle objective of an index scheme is to give are turn in the line with index movement. Sectoral Schemes

A sectoral scheme invests its corpus in the equity stocks of a given sector such as pharmaceutical, information technology, and telecommunication and so on. Sectoral schemes appeal to investors interested in taking a bet on those sectors. Balanced Scheme A balanced scheme, as the name suggests, invests its corpus across two broad asset classes, viz. equity and debt in a more or less balanced manner. The objective of a balance scheme is to combine growth with stability. Income Scheme The corpus of an income scheme is invested primarily in fixed income securities such as Government of India securities, debt obligations of state and local governments, corporate debentures, and money market instruments. A small portion of the corpus, say 10 to 20 percent, may be invested in equity instruments. The primary objective of an income scheme is to provide a steady income without impairing the capital. Government Securities Schemes The corpus of a Government Securities Scheme (also referred as Gilt Scheme0 is invested in sovereign securities issued by the central and state governments and securities that are unconditionally guaranteed by the central and or state governments for payment of interest and principal. The scheme may also invest in money market instrument for liquidity purpose. The objective of such scheme is to earn a modest return without any credit risk. Money Market Scheme The corpus of a money market scheme is invested primarily in money market instruments such as Treasury bills, commercial paper, and certificate of deposit and call and notice money. Money market instrument have negligible interest risk exposure as well as credit risk exposure. The principal value of a unit in a liquid scheme stable though the periodic income may vary depending on the conditions in the money market.

Tax Implication Dividend paid by mutual funds is fully tax-exempt at the hands of the investor, although, debt funds have to pay a 12.81 per cent dividend distribution tax. On redemption of any units held for more than a year, your realization will attract long-term capital gains tax of 20 per cent plus surcharge after indexing for inflation, or at a flat rate of 10 per cent. If redeemed before a year it will be termed as short-term capital gain and taxed

along with your other income. However, you can save tax by investing in Equity-Linked Savings Scheme (ELSS) under Section 88 of the Income Tax Act, 1961, according to which 20 per cent of the amount invested in ELSS can be deducted from your tax liability subject to a maximum investment of Rs10000 per year

PROJECT PROFILE
TITLE OF THE STUDY:
INVESTMENT PATTERN OF CUSTOMERS OF BIKANER.

OBJECTIVE OF THE STUDY:

To find out which are the fields where the people of BIKANER invest. Analysis of the investment options are available
Where is shri ram finance standing in the investment market and its awarness among

investors. Satisfaction level of investors.

SIGNIFICANCE OF THE RESEARCH

TO THE COMPANY
By this research company came to know that where it stands and what is the market share of the company.

And came to know that how much people are interested to know about the company

TO INDIVIDUAL RESEARCHER
Practical knowledge of the on line trading.

Practical attitudes of people, and changing scenerio according to change of market. Big exposes of direct customer interaction

SCOPE OF STUDY
Study carried out a very clear image of the investors that how much they are risk taker and play safe. By the study we came to know that how much attraction is towards equity market, and almost all the investments are purpose oriented.

CHAPTER 4

FACTS AND FINDINGS

FACTS AND FINDINGS

Sample size
Total sample size was 1600 Data were collected from different places of the Bikaner by direct asking and answering them at canopy.

Age group All the data were collected from those candidates who are between 21 to 75 years age group they were decided in this format
Responses
There were very few people who agreed to give replies by requesting once. Most of them have suffered the problem of time. Rarely respondents gave their contact numbers , even if it was told to them that this is an academic research for summer training project.

(INVESTER)

(IN YEARS)

20% 20% 20% 20% 20%

21 31 41 51 61

30 40 50 60 ABOVE

Table: % of investors and their age group.

CHAPTER 5

ANALYSIS AND INTERPRETATION

Investment Pattern of Customers of Bikaner

Do you know about SHRI RAM FINANCE? YES- 1264 79% NO- 336 21%

21%

D o yo u kn o w a b o u t S h rira m F in a n c e ?
YES

79%

NO

1264 respondents were aware about the SHRI RAM FINANCE.

Do you invest through SHRI RAM FINANCE? YES - 189 12% NO -1411 88%

12%
Do you invest through Shriram Finance? Yes

88%1

No

189 respondents said that they have invested through Sri Ram finance.

Are you interested to invest through SRI RAM FINANCE? YES -600 37.5% NO -1000 62.5%

Are you interested to invest through Shriram Finance?

37.5% 62.5%

Yes

No

600 respondents were interested to invest through Sri Ram finance. Mean 33%.

RESEARCH ON INVESTMENTS

{Total numbers of samples are 1600}

INVESTORS STUDENT BUSINESSMAN SERVICEMAN GOVT.EMP

(IN %) 12% 17% 48% 23%

60 50 40 30 20 10 0
N D IN I. U V T .E M E . .. .. P T

Series1 Series2

S E

Out of all 48% investors were form pvt. Sector and 23% were form govt. but the total volume of investment was more form business class investors.

Investment in insurances. YES- 1144 71.5% NO - 446 28.5%

Total 1144 investors invested in insurance.

28.5%

Investment in insurance YES

71.5%

NO

Investment in mutual funds. YES -1272 79.5% NO - 328 20.5%

2 0 .5 %

In v es tm en t in m utual fun d s
Yes

7 9 .5 %

No

Out of 1600 investor 1272 invested in direct equity.

Investment in equity YES -363 22.5% NO -1137 87.5%

22.5%

Investment in equity YES

87.5%

NO

363 investors were investing in equity.

Types of trading adopted by customers Intraday 77% Delivery 23%

23%
intraday delivery

77%

Out of all only 23% investors were playing with delivery others were for intraday.

.Number of commodity investors

YES-326 NO -1374

20% 80%

20%

Num ber o f com modity inv estors. YES

80%
NO

Total commodity investors are 326 out of 1600. They were almost form business and Govt. employee.

. Are you satisfied with your investment? YES -1416 88.5% NO -184 11.5%

11.5%

Are you satisfied with your investment? YES

NO
88.5%

Out of 1600 respondents only 184 were not satisfied with their investment.

Purpose of investment
Saving 946 Profit 1490 Safety Others 1056 97 Tax rebate 1100 Tax rebate 1100

86 946 1490 1056 1106

Savi ng Safety Tax rebate Profits Others

Major purpose of investment is profit as shown in pie chart.

CHAPTER 6

LIMITATION OF STUDY

Limitations The study was restricted to Bikaner City so it is difficult to generalize the interpretation made out of the findings. (1) This research is dependent on the information provided by the respondents and sometimes

the respondents are very reluctant in providing right information and often provide it carelessly and the result drawn out by only this information, so sometimes all efforts might not find direction and results. (2) This conclusion and recommendations made are based on a very less experience of

researcher in this field. (3) Time was the biggest constraint as the study was limited for a period of 45 days as per the

curriculum of researcher, which means that any relevant market phenomenon before and after this duration of time might have been skipped in the study. (4) Many respondents did not reply and didnt gave accurate answer.

CHAPTER 7

CONCLUSION

CONCLUSION:

By research it was found that there is boom in the field of investment. But it is diversified in various fields. IN INSURANCE FIELD there is very good scope India has its potential market because till 2000 there was only company LIC after entering MNCs customers obtaining various options so they are very eager to know about them and to invest. Almost all people want insurance in difference field, now a day it became a necessity part of life. In Bikaner there is boom in this field. IN MUTUAL FUNDS this is the most booming sector in the investment options because of jumping of share market and safe and high return. People feel secure after investing money in mutual funds. One major reason of investing in mutual funds is that customers are needed not worry about fluctuation of the market. EQUITY AND COMMODITY this is the area where those people are investing who have very good knowledge of market. Among those businessmen, govt. employees are more in number and most of retired employee. And they are big players of the market but they also feel that this is the way of risk.

SUMMARISED CONCLUSIONS:

Business class investors more proportion of their income in shares and securities as compared

to service class investors. Majority of investors trade according to except the daily traders.

Majority of investors take the decision on investment (where/what amount to invest) on their

own idea and some rely on experts opinion and brokers advice. In cash segment, capital gain is the prior motive of the investors followed by regular of the

investors followed by regular income and tax income and tax planning. The satisfaction level regarding services by brokers of phone service & professional advice is

very low. Professional advice available is not adequate regarding investment in secondary market. Most of the investors feel that online trading is more transparent than the older form of trading

(Ring trading). Most of the people are aware of different charges charged by the brokers (Demat charges,

transaction charges, service charges etc.). While selecting a broker, brokerage & frequent payments were considered as main factors

followed by personal relations. Most of the investors are not satisfied with phone services provided by the brokers. The major problem faced by the investors is of brokers attitude towards small investors is not

same as with the big investors. Another major problems faced by the investors is to decide where/what amount is invested.

CHAPTER 8

RECOMMENDATION AND SUGGESTIONS

INVESTMENT It is suggested to the company that it can get customers of mutual funds easily. And they are interested to know about various schemes of mutual funds. NAME OF COMPANY Though shri ram finance is good and well known company but still people are not aware from the name of company. So company should take steps positively to introduce and familiarize itself among the

investors. Many people wanted to invest through the company, so company should approach them, their contact no. Have been submitted to the company. People are interested to open Dmat account because its charges are less as compare to the competitors. Customers have faith in Sri Ram finance so company should reap it.

Suggestion:

Professional advice should be made available in the city. Brokers should transfer the deliveries/payments to the investors in time. Brokers should deal all the investors in same respect. The phone service should be made prompt.

CHAPTER 9

APPENDIX

Questionnaire BONANZA PORTFOLIO LTD. BIKANER

Name 1 2 3 4 5

Age1. 2. 3.. 4. 5.

Occupation:

Student

Pvt. Service

Govt. employee

Businessman

1.Do you know about SRI RAM FINANCE? YES NO 2. Do you invest through SRI RAM FINANCE? YES NO 3..Are you interested to invest through FINANCE? YES NO RESEARCH ON INVESTMENTS

4.Do you investment in insurance?

YES NO 5.DO you investment in mutual funds? YES NO 6. Do you investment in equity? YES NO 7. Which type you prefer for trading? Intraday Delivery 8. Do you invest in commodity? YES NO 9. Are you satisfied with your investment? YES NO

Purpose of investment

Safet Saving 1 2 3 4 5 y

Tax rebate

Tax rebate t

Profi s

Other

SCHEEDULE

Name Address

Phone no..

Age :() below 20 ( ) 20 to 35 ( ) 51 to 65 ( ) more than 65

Job profile: ( ) Govt.servant ( ) Business ( ) others

Annual Income (in lac): ( ) Less than 1 Lac ( ) 1 to 5 Lac ( ) more than 5 Lac

Qualification: ( ) under graduate ( ) Graduate ( ) Post graduate ( ) others

1. Where do you invest your funds? a) b) c) Only cash / capital market Only derivative market Both

2. For how long you have been dealing capital market? a) b) c) Less than 1 year 1 to 5 year More than 5 year

3. How much share of income do you invest? a) b) c) d) Up to 5% 5% to 10% 10% to 25% More than 25%

4. How often do you trade? a) b) c) Daily Weekly Monthly According to the market 5. Whom do you consult before taking decision about the investment? a) b) c) d) e) On your own idea Experts opinion On friends / family members advice Brokers advice Other sources

6. What are your motives for investment in shares and securities in a) b) c) regular income in the form of divided / interest Tax planning Capital gain

Capital market (please rank)

7. Whether the professional advice is available or not? a) b) c) Yes No Sometimes

8. Which factor influences you while selecting a broker(please rank upto 3) a) Brokerage b) Frequent payments and transfer of securities c) Less advance margin d) Personal relation

9. What difference do you feel between ring trading (older form of trading) and on line trading? a) b) c) d) Online trading is more easier Online trading is more transparent Online trading is more faster Online trading is more accurate

10. Are you aware of difference charges charged by your broker? a) b) c) d) Turnover / transaction De-mat charges Services tax others

11. What is your satisfaction level pertaining to different charges charged by your broker? a) b) c) Satisfied Some what satisfied Dissatisfied

12. Rate the services provided by your broker? Services Good Phone service Brokerage Confirmation of trades Professional advice Relaxation in advance Fair Poor

margin Payment Staff behavior 13. Tick the problem faced by you while investing? a) b) c) d) e) f) Deciding the initial amount To decide where to invest To complete paper work Delay in payment Lack of knowledge Broker do not deal all the the investor equally

14. Any other problem faced by you.

CHAPTER 10
BIBLIOGRAPHY

WEBSITES 1. 2. 3. 4. 5. 6. www.nseindia.com www.amfiindia.com www.uniconindia.in www.capitalmarket.com www.irdaindia.org www.bseindia.com

7. 8. 9. 10. 11. 12.

www.sebi.gov.in www.valuenotes.com www.capitalmarket.com www.bbcworld.com www.thehindubusinessline.com www.wikipedia.com

Books/ journals:

Khatri Dhanesh, Security Analysis and Portfolio Management, Vol. 1, Macmillan publishers India Ltd. Mumdai. Kothari C.R., Research Methodology, Vol. 2, New age International Publishers, New Delhi