CHAPTER-I

INTRODUCTION

EQUITY ANALYSIS
The listed company which trade shares in public is an interesting topic. The are so many
books who study about equity. The Investors are interesting in equity analysis because it
could give us so many return. The good analysis could predict which company could
give multiple return. The investor has invested money at the company and they
It is impossible that a bad company could give us high return. Garbage in, Garbage out.
Unfortunately, some bad companies looks very good. They often manipulate the financial
statement.
The equity analysis may disclose the real company condition. This analysis is also
important not only for investor but also other company.
There are two major equity analysis i.e. fundamental analysis and technical analysis.
Both analysis has different way. Fundamental analysis analyze the financial statement of
company; meanwhile, the technical just analyze the price movement.
In accounting and finance, equity is the residual claim or interest of the most junior class
of investors in assets, after all liabilities are paid. If valuations placed on assets do not
exceed liabilities, negative equity exists. In an accounting context, Shareholders' equity
(or stockholders' equity, shareholders' funds, shareholders' capital or similar terms)
represents the remaining interest in assets of a company, spread among individual
shareholders of common or preferred stock.
At the start of a business, owners put some funding into the business to finance
operations. This creates a liability on the business in the shape of capital as the business
is a separate entity from its owners. Businesses can be considered to be, for accounting
purposes, sums of liabilities and assets; this is the accounting equation. After liabilities
have been accounted for, the positive remainder is deemed the owner's interest in the
business.

This definition is helpful in understanding the liquidation process in case of bankruptcy.

At first, all the secured creditors are paid against proceeds from assets. Afterward, a
series of creditors, ranked in priority sequence, have the next claim/right on the residual
proceeds. Ownership equity is the last or residual claim against assets, paid only after all
other creditors are paid. In such cases where even creditors could not get enough money
to pay their bills, nothing is left over to reimburse owners' equity. Thus owners' equity is
reduced to zero. Ownership equity is also known as risk capital, liable capital or simply,
equity.
Equity investments
An equity investment generally refers to the buying and holding of shares of stock on a
stock market by individuals and firms in anticipation of income from dividends and
capital gains, as the value of the stock rises. It may also refer to the acquisition of equity
(ownership) participation in a private (unlisted) company or a startup company. When the
investment is in infant companies, it is referred to as venture capital investing and is
generally understood to be higher risk than investment in listed going-concern situations.
The equities held by private individuals are often held via mutual funds or other forms of
collective investment scheme, many of which have quoted prices that are listed in
financial newspapers or magazines; the mutual funds are typically managed by prominent
fund management firms, such as Schroders, Fidelity Investments or The Vanguard Group.
Such holdings allow individual investors to obtain the diversification of the fund(s) and
to obtain the skill of the professional fund managers in charge of the fund(s). An
alternative, which is usually employed by large private investors and pension funds, is to
hold shares directly; in the institutional environment many clients who own portfolios
have what are called segregated funds, as opposed to or in addition to the pooled mutual
fund alternatives.
A calculation can be made to assess whether an equity is over or underpriced, compared
with a long-term government bond. This is called the Yield Gap or Yield Ratio. It is the
ratio of the dividend yield of an equity and that of the long-term bond.
3

SCOPE OF THE STUDY

Investor can assess the company financial strength and factors that affect the
company. Scope of the study is limited. We can say that 70% of the analysis is
proved good for the investor, but the 30% depends upon market sentiment.

The topic is selected to analyses the factors that affect the future EPS of a
company based on fundamentals of the company.
The market standing of the company studied in the order to give a better scope to
the Analysis is helpful to the investors, share holders, creditors for the rating of
the company.

NEED AND IMPORTENCE OF STUDY

One of the single best things you can do to further your education in trading commodities
is to keep thorough records of your trades. Maintaining good records requires discipline,
just like good trading. Unfortunately, many commodity traders dont take the time to
track their trading history, which can offer a wealth of information to improve their odds
of success most professional traders, and those who consistently make money from
trading commodities, keep diligent records of their trading activity. The same cannot be
said for the masses that consistently lose at trading commodities.
Losing commodity traders are either too lazy to keep records or they cant stomach to
look at their miserable results. You have to be able to face your problems and start
working on some solutions if you want to be a successful commodities trader. If you cant
look at your mistakes and put in the work necessary to learn from them, you probably
shouldnt be trading commodities.

OBJECTIVE OF THE STUDY

This study is done to know about Primary and Secondary market (Stock exchange)
activities.
To know why the companies go to new issue market in INDIA INFOLINE LTD
(IIFL).
To know how the primary market intermediaries communicate companies and
investors in INDIA INFOLINE LTD (IIFL).
To know how the primary market activities used by the companies in their new
issue shares in INDIA INFOLINE LTD (IIFL).
To know how the companies listed in the stock exchanges.
To know how trading activity is to be done.
To know the complete awareness of secondary market (stock exchanges like NSE,
BSE).

METHODOLOGY
The data collection methods include both the Primary and Secondary Collection
methods.
1. Primary Collection Methods:
This method includes the data collected from the personal discussions with
the authorized clerks and members of the Exchange.
2. Secondary Collection Methods:
The Secondary Collection Methods includes the lectures of the
superintend of the Department of Market Operations, EDP etc, and also the data
collected from the News, Magazines of the NSE, HSE and different books issues of
this study
5

LIMITATIONS OF THE PROJECT

-

Time constraint was a major limiting factor. Forty five days were insufficient to
even grasp the theoretical concepts.

Several other strategies that could have been studied were not done.

Lack of knowledge with the brokers.

Difference of theory from practice.

Absence of required knowledge and technology.

CHAPTER-II
INDUSTRY PROFILE
&
COMPANY PROFILE

For the Indian investors, the year belonged to stock markets, which have been shining
bright when it comes to generating wealth, while the glitter of gold and silver faded for
the second straight year in 2013.
Measured by BSE Sensex, stock market has generated a positive return of about 9 per
cent for investors in 2013, while gold prices fell by about three per cent and its poorer
cousin silver plummeted close to 24 per cent.
After outperforming stock market for more than a decade, gold has been on back foot for
two consecutive years now vis-a-vis equities, shows an analysis of their price
movements.
"Gold's under-performance was mainly due to prices falling in dollar terms amid
anticipated tapering over last several months combined with FII investment in Indian
stocks.
"This movement has been equally true for global markets as 2013 saw gold losing its
shine and markets coming back with a bang," said Jayant Manglik, President Retail
Distribution, Religare Securities.
"As always, gold and stock prices follow opposite trends and this year was no different
except that both changed direction," he said.
Improvement in the world economy has brought the risk appetite back amongst retail
investors and this has drenched the liquidity from safe havens such as gold leading to its
under-performance, an expert said.
In 2012, the Sensex had gained over 25 per cent, which was nearly double the gain of
about 12.95 per cent in gold. The appreciation in silver was at about 12.84 per last year.
According to Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio, "Markets have
particularly shown great strength post July-August 2013 when RBI took some strong
measures to control the steeply depreciating rupee."
"When the US Fed gave indications that it might taper its stimulus programme given the
economy shows improvement, a knee-jerk correction was seen in most risky assets,
including stocks in Indian markets. However, assurance by the Fed about planned and
staggered tapering in stimulus once again proved to be a catalyst for the markets."

"External factors affecting Indian stocks seem to be negative for the first half of 2014 due
to continued strength of the US dollar and benign in the second half. By that time,
elections too would have taken place. A combination of domestic and international
factors point to a bumper closing of Indian markets in 2014 with double-digit percentage
growth," he said.
Stock market segment mid-cap and small-cap indices have fallen by about 10 per cent
and 16 per cent, respectively, in 2013.
Foreign Institutional Investors have bought shares worth over Rs 1.1 lakh crore (nearly
USD 20 billion) till December 19. In 2012, they had pumped in Rs 1.28 lakh crore (USD
24.37 billion).
Evolution
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 meager 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.
Other leading cities in stock market operations
Ahmadabad gained importance next to Bombay with respect to cotton textile industry.
After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new
mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in
1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association".
What the cotton textile industry was to Bombay and Ahmadabad, the jute industry was to
Calcutta. Also tea and coal industries were the other major industrial groups in Calcutta.
After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares,
which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom
between 1904 and 1908. On June 1908, some leading brokers formed "The Calcutta
Stock Exchange Association".
In the beginning of the twentieth century, the industrial revolution was on the way in
India with the Swadeshi Movement; and with the inauguration of the Tata Iron and Steel
Company Limited in 1907, an important stage in industrial advancement under Indian
enterprise was reached.
Indian cotton and jute textiles, steel, sugar, paper and flour mills and all companies
generally enjoyed phenomenal prosperity, due to the First World War.
In 1920, the then demure city of Madras had the maiden thrill of a stock exchange
functioning in its midst, under the name and style of "The Madras Stock Exchange" with

10

100 members. However, when boom faded, the number of members stood reduced from
100 to 3, by 1923, and so it went out of existence.
In 1935, the stock market activity improved, especially in South India where there was a
rapid increase in the number of textile mills and many plantation companies were floated.
In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange
Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange
Limited).
Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with
the Punjab Stock Exchange Limited, which was incorporated in 1936.
Indian Stock Exchanges - An Umbrella Growth
The Second World War broke out in 1939. It gave a sharp boom which was followed by a
slump. But, in 1943, the situation changed radically, when India was fully mobilized as a
supply base.
On account of the restrictive controls on cotton, bullion, seeds and other commodities,
those dealing in them found in the stock market as the only outlet for their activities.
They were anxious to join the trade and their number was swelled by numerous others.
Many new associations were constituted for the purpose and Stock Exchanges in all parts
of the country were floated.
The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Limited
(1940) and Hyderabad Stock Exchange Limited (1944) were incorporated.
In Delhi two stock exchanges - Delhi Stock and Share Brokers' Association Limited and
the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947,
amalgamated into the Delhi Stock Exchnage Association Limited.
Post-independence Scenario

11

Most of the exchanges suffered almost a total eclipse during depression. Lahore
Exchange was closed during partition of the country and later migrated to Delhi and
merged with Delhi Stock Exchange.
Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963.
Most of the other exchanges languished till 1957 when they applied to the Central
Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only
Bombay, Calcutta, Madras, Ahmadabad, Delhi, Hyderabad and Indore, the well
established exchanges, were recognized under the Act. Some of the members of the other
Associations were required to be admitted by the recognized stock exchanges on a
concessional basis, but acting on the principle of unitary control, all these pseudo stock
exchanges were refused recognition by the Government of India and they thereupon
ceased to function.
Thus, during early sixties there were eight recognized stock exchanges in India
(mentioned above). The number virtually remained unchanged, for nearly two decades.
During eighties, however, many stock exchanges were established: Cochin Stock
Exchange (1980), Uttar Pradesh Stock Exchange Association Limited (at Kanpur, 1982),
and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association
Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange
Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986),
Jaipur Stock Exchange Limited (1989), Bhubaneswar Stock Exchange Association
Limited (1989), Saurashtra Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara
Stock Exchange Limited (at Baroda, 1990) and recently established exchanges Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock
exchanges in India excluding the Over The Counter Exchange of India Limited (OTCEI)
and the National Stock Exchange of India Limited (NSEIL).
The Table given below portrays the overall growth pattern of Indian stock markets since
independence. It is quite evident from the Table that Indian stock markets have not only
grown just in number of exchanges, but also in number of listed companies and in capital
12

of listed companies. The remarkable growth after 1985 can be clearly seen from the
Table, and this was due to the favouring government policies towards security market
industry.
Trading Pattern of the Indian Stock Market
Trading in Indian stock exchanges are limited to listed securities of public limited
companies. They are broadly divided into two categories, namely, specified securities
(forward list) and non-specified securities (cash list). Equity shares of dividend paying,
growth-oriented companies with a paid-up capital of atleast Rs.50 million and a market
capitalization of atleast Rs.100 million and having more than 20,000 shareholders are,
normally, put in the specified group and the balance in non-specified group.
Two types of transactions can be carried out on the Indian stock exchanges: (a) spot
delivery transactions "for delivery and payment within the time or on the date stipulated
when entering into the contract which shall not be more than 14 days following the date
of the contract" : and (b) forward transactions "delivery and payment can be extended by
further period of 14 days each so that the overall period does not exceed 90 days from the
date of the contract". The latter is permitted only in the case of specified shares. The
brokers who carry over the outstandings pay carry over charges (cantango or
backwardation) which are usually determined by the rates of interest prevailing.
A member broker in an Indian stock exchange can act as an agent, buy and sell securities
for his clients on a commission basis and also can act as a trader or dealer as a principal,
buy and sell securities on his own account and risk, in contrast with the practice
prevailing on New York and London Stock Exchanges, where a member can act as a
jobber or a broker only.
The nature of trading on Indian Stock Exchanges are that of age old conventional style of
face-to-face trading with bids and offers being made by open outcry. However, there is a
great amount of effort to modernize the Indian stock exchanges in the very recent times.
Over The Counter Exchange of India (OTCEI)
13

The traditional trading mechanism prevailed in the Indian stock markets gave way to
many functional inefficiencies, such as, absence of liquidity, lack of transparency, unduly
long settlement periods and benami transactions, which affected the small investors to a
great extent. To provide improved services to investors, the country's first ringless,
scripless, electronic stock exchange - OTCEI - was created in 1992 by country's premier
financial institutions - Unit Trust of India, Industrial Credit and Investment Corporation
of India, Industrial Development Bank of India, SBI Capital Markets, Industrial Finance
Corporation of India, General Insurance Corporation and its subsidiaries and CanBank
Financial Services.
Trading at OTCEI is done over the centres spread across the country. Securities traded on
the OTCEI are classified into:

Listed Securities - The shares and debentures of the companies listed on the OTC
can be bought or sold at any OTC counter all over the country and they should not
be listed anywhere else

Permitted Securities - Certain shares and debentures listed on other exchanges and
units of mutual funds are allowed to be traded

Initiated debentures - Any equity holding atleast one lakh debentures of a

particular scrip can offer them for trading on the OTC.

OTC has a unique feature of trading compared to other traditional exchanges. That is,
certificates of listed securities and initiated debentures are not traded at OTC. The
original certificate will be safely with the custodian. But, a counter receipt is generated
out at the counter which substitutes the share certificate and is used for all transactions.
In the case of permitted securities, the system is similar to a traditional stock exchange.
The difference is that the delivery and payment procedure will be completed within 14
days.

14

Compared to the traditional Exchanges, OTC Exchange network has the following
advantages:

OTCEI has widely dispersed trading mechanism across the country which
provides greater liquidity and lesser risk of intermediary charges.

Greater transparency and accuracy of prices is obtained due to the screen-based

scripless trading.

Since the exact price of the transaction is shown on the computer screen, the
investor gets to know the exact price at which s/he is trading.

Faster settlement and transfer process compared to other exchanges.

In the case of an OTC issue (new issue), the allotment procedure is completed in a
month and trading commences after a month of the issue closure, whereas it takes
a longer period for the same with respect to other exchanges.

Thus, with the superior trading mechanism coupled with information transparency
investors are gradually becoming aware of the manifold advantages of the OTCEI.
National Stock Exchange (NSE)
With the liberalization of the Indian economy, it was found inevitable to lift the Indian
stock market trading system on par with the international standards. On the basis of the
recommendations of high powered Pherwani Committee, the National Stock Exchange
was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and
Investment Corporation of India, Industrial Finance Corporation of India, all Insurance
Corporations, selected commercial banks and others.
Trading at NSE can be classified under two broad categories:
(a) Wholesale debt market and
(b) Capital market.
15

Wholesale debt market operations are similar to money market operations - institutions
and corporate bodies enter into high value transactions in financial instruments such as
government securities, treasury bills, public sector unit bonds, commercial paper,
certificate of deposit, etc.
There are two kinds of players in NSE:
(a) trading members and
(b) participants.
Recognized members of NSE are called trading members who trade on behalf of
themselves and their clients. Participants include trading members and large players like
banks who take direct settlement responsibility.
Trading at NSE takes place through a fully automated screen-based trading mechanism
which adopts the principle of an order-driven market. Trading members can stay at their
offices and execute the trading, since they are linked through a communication network.
The prices at which the buyer and seller are willing to transact will appear on the screen.
When the prices match the transaction will be completed and a confirmation slip will be
printed at the office of the trading member.
NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since intermarket operations are streamlined coupled with the countrywide access to the
securities.

Delays in communication, late payments and the malpractices prevailing in the

traditional trading mechanism can be done away with greater operational
efficiency and informational transparency in the stock market operations, with the
support of total computerized network.
16

Unless stock markets provide professionalized service, small investors and foreign
investors will not be interested in capital market operations. And capital market being one
of the major source of long-term finance for industrial projects, India cannot afford to
damage the capital market path. In this regard NSE gains vital importance in the Indian
capital market system.
Preamble
Often, in the economic literature we find the terms development and growth are used
interchangeably. However, there is a difference. Economic growth refers to the sustained
increase in per capita or total income, while the term economic development implies
sustained structural change, including all the complex effects of economic growth. In
other words, growth is associated with free enterprise, where as development requires
some sort of control and regulation of the forces affecting development. Thus, economic
development is a process and growth is a phenomenon.
Economic planning is very critical for a nation, especially a developing country like India
to take the country in the path of economic development to attain economic growth.
Why Economic Planning for India?
One of the major objective of planning in India is to increase the rate of economic
development, implying that increasing the rate of capital formation by raising the levels
of income, saving and investment. However, increasing the rate of capital formation in
India is beset with a number of difficulties. People are poverty ridden. Their capacity to
save is extremely low due to low levels of income and high propensity to consume.
Therefor, the rate of investment is low which leads to capital deficiency and low
productivity. Low productivity means low income and the vicious circle continues. Thus,
to break this vicious economic circle, planning is inevitable for India.
The market mechanism works imperfectly in developing nations due to the ignorance and
unfamiliarity with it. Therefore, to improve and strengthen market mechanism planning is
very vital. In India, a large portion of the economy is non-monitised; the product, factors
17

of production, money and capital markets is not organized properly. Thus the prevailing
price mechanism fails to bring about adjustments between aggregate demand and supply
of goods and services. Thus, to improve the economy, market imperfections has to be
removed; available resources has to be mobilized and utilized efficiently; and structural
rigidities has to be overcome. These can be attained only through planning.
In India, capital is scarce; and unemployment and disguised unemployment is prevalent.
Thus, where capital was being scarce and labour being abundant, providing useful
employment opportunities to an increasing labour force is a difficult exercise. Only a
centralized planning model can solve this macro problem of India.
Further, in a country like India where agricultural dependence is very high, one cannot
ignore this segment in the process of economic development. Therefore, an economic
development model has to consider a balanced approach to link both agriculture and
industry and lead for a paralleled growth. Not to mention, both agriculture and industry
cannot develop without adequate infrastructural facilities which only the state can
provide and this is possible only through a well carved out planning strategy. The
governments role in providing infrastructure is unavoidable due to the fact that the role
of private sector in infrastructural development of India is very minimal since these
infrastructure projects are considered as unprofitable by the private sector.
Further, India is a clear case of income disparity. Thus, it is the duty of the state to reduce
the prevailing income inequalities. This is possible only through planning.
Planning History of India
The development of planning in India began prior to the first Five Year Plan of
independent India, long before independence even. The idea of central directions of
resources to overcome persistent poverty gradually, because one of the main policies
advocated by nationalists early in the century. The Congress Party worked out a program
for economic advancement during the 1920s, and 1930s and by the 1938 they formed a
National Planning Committee under the chairmanship of future Prime Minister Nehru.
The Committee had little time to do anything but prepare programs and reports before the
18

Second World War which put an end to it. But it was already more than an academic
exercise remote from administration. Provisional government had been elected in 1938,
and the Congress Party leaders held positions of responsibility. After the war, the Interim
government of the pre-independence years appointed an Advisory Planning Board. The
Board produced a number of somewhat disconnected Plans itself. But, more important in
the long run, it recommended the appointment of a Planning Commission.
The Planning Commission did not start work properly until 1950. During the first three
years of independent India, the state and economy scarcely had a stable structure at all,
while millions of refugees crossed the newly established borders of India and Pakistan,
and while ex-princely states (over 500 of them) were being merged into India or Pakistan.
The Planning Commission as it now exists, was not set up until the new India had
adopted its Constitution in January 1950.
Objectives of Indian Planning
The Planning Commission was set up the following Directive principles :

To make an assessment of the material, capital and human resources of the

country, including technical personnel, and investigate the possibilities of
augmenting such of these resources as are found to be deficient in relation to the
nations requirement.

To formulate a plan for the most effective and balanced use of the countrys
resources.

Having determined the priorities, to define the stages in which the plan should be
carried out, and propose the allocation of resources for the completion of each
stage.

To indicate the factors which are tending to retard economic development, and
determine the conditions which, in view of the current social and political
situation, should be established for the successful execution of the Plan.
19

To determine the nature of the machinery this will be necessary for securing the
successful implementation of each stage of Plan in all its aspects.

To appraise from time to time the progress achieved in the execution of each stage
of the Plan and recommend the adjustments of policy and measures that such
appraisals may show to be necessary.

To make such interim or auxiliary recommendations as appear to it to be

appropriate either for facilitating the discharge of the duties assigned to it or on a
consideration of the prevailing economic conditions, current policies, measures
and development programs; or on an examination of such specific problems as
may be referred to it for advice by Central or State Governments.

The long-term general objectives of Indian Planning are as follows:

Increasing National Income

Reducing inequalities in the distribution of income and wealth

Elimination of poverty

Providing additional employment; and

Alleviating bottlenecks in the areas of : agricultural production, manufacturing

capacity for producers goods and balance of payments.

Economic growth, as the primary objective has remained in focus in all Five Year Plans.
Approximately, economic growth has been targeted at a rate of five per cent per annum.
High priority to economic growth in Indian Plans looks very much justified in view of
long period of stagnation during the British rule

20

COMPANY PROFILE
About IIFL
The IIFL (India Infoline) group, comprising the holding company, India Infoline Ltd
(NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is one of the leading players in
the Indian financial services space. IIFL offers advice and execution platform for the
entire range of financial services covering products ranging from Equities and
derivatives, Commodities, Wealth management, Asset management, Insurance, Fixed
deposits, Loans, Investment Banking, GoI bonds and other small savings instruments.
IIFL recently received an in-principle approval for Securities Trading and Clearing
memberships from Singapore Exchange (SGX) paving the way for IIFL to become the
first Indian brokerage to get a membership of the SGX. IIFL also received membership of
the Colombo Stock Exchange becoming the first foreign broker to enter Sri Lanka. IIFL
owns and manages the website, www.indiainfoline.com, which is one of Indias leading
online destinations for personal finance, stock markets, economy and business.
IIFL has been awarded the Best Broker, India by FinanceAsia and the Most improved
brokerage, India in the AsiaMoney polls. India Infoline was also adjudged as Fastest
Growing Equity Broking House - Large firms by Dun & Bradstreet. A forerunner in the
field of equity research, IIFLs research is acknowledged by none other than Forbes as
Best of the Web and a must read for investors in Asia. Our research is available not
just over the Internet but also on international wire services like Bloomberg, Thomson
First Call and Internet Securities where it is amongst one of the most read Indian brokers.
A network of over 2,500 business locations spread over more than 500 cities and towns
across India facilitates the smooth acquisition and servicing of a large customer base. All
our offices are connected with the corporate office in Mumbai with cutting edge
networking technology. The group caters to a customer base of about a million customers,
over a variety of mediums viz. online, over the phone and at our branches.

21

History & Milestones

1995
Commenced operations as an Equity Research firm
1997
Launched research products of leading Indian companies, key sectors and the
economy Client included leading FIIs, banks and companies.
1999
Launched www.indiainfoline.com
2000
Launched online trading through www.5paisa.com Started distribution of life
insurance and mutual fund
2003
Launched proprietary trading platform Trader Terminal for retail customers
2004
Acquired commodities broking license
Launched Portfolio Management Service
2005
Maiden IPO and listed on NSE, BSE
2006
Acquired membership of DGCX
Commenced the lending business
2007

22

Commenced institutional equities business under IIFL

Formed Singapore subsidiary, IIFL (Asia) Pte Ltd
2008
Launched IIFL Wealth
Transitioned to insurance broking model
2009
Acquired registration for Housing Finance
SEBI in-principle approval for Mutual Fund
Obtained Venture Capital license
2010
Received in-principle approval for membership of the Singapore Stock Exchange
Received membership of the Colombo Stock Exchange
2011
Launchied IIFL mutual funds

23

24

Board of directors

Mr. Nirmal Jain

Chairman & Managing Director , India Infoline
Ltd.

Mr. Nirmal Jain is the founder and Chairman of India Infoline Ltd. He is a PGDM
(Post Graduate Diploma in Management) from IIM (Indian Institute of Management)
Ahmedabad, a Chartered Accountant and a rank-holder Cost Accountant. His
professional track record is equally outstanding. He started his career in 1989 with
Hindustan Lever Limited, the Indian arm of Unilever. During his stint with Hindustan
Lever, he handled a variety of responsibilities, including export and trading in agrocommodities. He contributed immensely towards the rapid and profitable growth of
Hindustan Levers commodity export business, which was then the nations as well as
the Companys top priority.
He founded Probity Research and Services Pvt. Ltd. (later re-christened India Infoline)
in 1995; perhaps the first independent equity research Company in India. His work set
new standards for equity research in India. Mr. Jain was one of the first entrepreneurs
in India to seize the internet opportunity, with the launch of www.indiainfoline.com in
1999. Under his leadership, India Infoline not only steered through the dotcom bust
and one of the worst stock market downtrends but also grew from strength to strength.

25

Mr. R. Venkataraman

Executive Director , India Infoline Ltd.

Mr. R Venkataraman, Co-Promoter and Executive Director of India Infoline Ltd, is a

B.Tech (electronics and electrical communications engineering, IIT Kharagpur) and an
MBA (IIM Bangalore). He joined the India Infoline Board in July 1999. He previously
held senior managerial positions in ICICI Limited, including ICICI Securities Limited,
their investment banking joint venture with J P Morgan of US, BZW and Taib Capital
Corporation Limited. He was also the Assistant Vice President with G E Capital
Services India Limited in their private equity division, possessing a varied experience
of more than 19 years in the financial services sector
Mr. Nilesh Vikamsey
Independent Director , India Infoline
Ltd.
Mr. Nilesh Vikamsey Board Member since February 2005 - is a practicing Chartered
Accountant for 25 years and Senior Partner at M/s Khimji Kunverji & Co., Chartered
Accountants, a member firm of HLB International, a world-wide organisation of
professional accounting firms and business advisers, ranked amongst the top 12
accounting groups in the world. Mr. Vikamsey headed the audit department till 1990
and thereafter also handled financial services, consultancy, investigations, mergers and
acquisitions, valuations and due diligence, among others. He is elected member of the
Central Council of Institute of Chartered Accountant of India (ICAI), the Apex
decision making body of the second largest accounting body in the world, 20102013.
He is on the ICAI study group member for the introduction of the Accounting
Standard 30 on financial instruments recognition and management. Convener of
26

the Study group Formed by ASB of ICAI to formulate comments on various Exposure
Drafts, Discussion Papers and other matters pertaining to IFRS originating from
IASB, Representative of the Institute of Chartered Accountants of India on the
Committee for Improvement in Transparency, Accountability and Governance(ITAG)
of South Asian Federation of Accountants (SAFA), Member of Executive Committee
& IFRS Implementation Committee of WIRC of Institute of Chartered Accountant of
India (ICAI), Accounting and Auditing Committee of Bombay Chartered Accountant
Society (BCAS) and also on its Core Group, member of Review, Reforms &
Rationalisation Committee, IPR Committee of Bombay Chamber of Commerce and
Industry (BCCI), Member of Legal Affairs Committee of Bombay Chamber of
Commerce and Industry(BCCI), Corporate Members Committee of The Chamber of
Tax Consultants (CTC), Regular Contributor to WIRC Annual Referencer on Bank
Branch Audit, Study/ Sub Group formed by ICAI for Considering Developments on
Fair Value Accounting (AS 30) post Sub Prime crisis, Sub Group formed by ICAI for
approaching the Government and Regulatory Authorities for Convergence with IFRS.
He is also a Vice Chairman of Financial Reporting Review Board Accounting
Standard Board and Member of Accounting Standard Board and various other
Standing and Non Standing Committees. Mr. Vikamsey is also a Director of Miloni
Consultants Private Limited, HLB Offices and Services Private Limited, Trunil
Properties Private Limited, BarKat Properties Private Limited and India Infoline
Investment Services Limited.
Mr. Kranti Sinha
Independent Director , India Infoline
Ltd.
Mr. Kranti Sinha Board member since January 2005 completed his masters from
the Agra University and started his career as a Class I Officer with Life Insurance
Corporation of India. He served as the Director and Chief Executive of LIC Housing
Finance Limited from August 1998 to December 2002 and concurrently as the
27

Managing Director of LICHFL Care Homes (a wholly-owned subsidiary of LIC

Housing Finance Limited). He retired from the permanent cadre of the Executive
Director of LIC; served as the Deputy President of the Governing Council of
Insurance Institute of India and as a member of the Governing Council of National
Insurance Academy, Pune apart from various other such bodies. Mr. Sinha is also on
the Board of Directors of Hindustan Motors Limited and Cinemax (India) Limited.
Mr. A. K. Purwar
Independent Director , India Infoline
Ltd.
Mr. Purwar is currently the Chairman of IndiaVenture Advisors Pvt. Ltd., investment
manager to IndiaVenture Trust Fund I, the healthcare and life sciences focussed
private equity fund sponsored by the Piramal Group. He has also taken over as the
Chairman of IL & FS Renewable Energy Limited in March 2008 and India Infoline
Investment Services Ltd in November 2009. He is working as Independent Director in
leading companies in Telecom, Steel, Textiles, Power, Auto components, Renewable
Energy, Engineering Consultancy, Financial Services and Healthcare Services. He is
an Advisor to Mizuho Securities in Japan and is also a member of Advisory Board for
Institute of Indian Economic Studies (IIES), Waseda University, Tokyo, Japan.
Mr. Purwar was the Chairman of State Bank of India, the largest bank in the country
from November 02 to May 06 and held several important and critical positions like
Managing Director of State Bank of Patiala, Chief Executive Officer of the Tokyo
branch covering almost the entire range of commercial banking operations in his
illustrious career at the bank from 1968 to 2006. Mr. Purwar also worked as Chairman
of Indian Bank Association during 2005 2006. Mr. Purwar has received the CEO of
the year Award from the Institute for Technology & Management (2004);
Outstanding Achiever of the year Award from Indian Banks Association (2004);
Finance Man of the Year Award by the Bombay Management Association in 2006.

28

IIFLs philosophy on Corporate Governance

IIFL (India Infoline) is committed to placing the Investor First, by continuously striving
to increase the efficiency of the operations as well as the systems and processes for use of
corporate resources in such a way so as to maximize the value to the stakeholders. The
Group aims at achieving not only the highest possible standards of legal and regulatory
compliances, but also of effective management.
Audit Committee
Terms of reference & Composition, Name of members and Chairman: The Audit
committee comprises Mr Nilesh Vikamsey (Chairman), Mr Sat Pal Khattar, Mr Kranti
Sinha, three of whom are independent Directors. The Managing Director, the Executive
Director along with the Statutory and Internal Auditors are invitees to the Meeting. The
Terms of reference of this committee are as under: - To investigate into any matter that
may be prescribed under the provisions of Section 292A of The Companies Act, 1956 Recommendation and removal of External Auditor and fixation of the Audit Fees. Reviewing with the management the financial statements before submission of the same
to the Board. - Overseeing of Companys financial reporting process and disclosure of its
financial information. - Reviewing the Adequacy of the Internal Audit Function.
Compensation/ Remuneration Committee
Terms of reference & Composition, Name of members and Chairman: The Compensation
/ Remuneration Committee comprises Mr Kranti Sinha (Chairman), Mr Nilesh Vikamsey
and Mr. Sat Pal Khattar all of whom are independent Directors. The Terms of reference of
this committee are as under: - To fix suitable remuneration package of all the Executive
Directors and Non Executive Directors, Senior Employees and officers i.e. Salary,
perquisites, bonuses, stock options, pensions etc. - Determination of the fixed component
and performance linked incentives alongwith the performance criteria to all employees of
the company - Service Contracts, Notice Period, Severance Fees of Directors and
employees. - Stock Option details: whether to be issued at discount as well as the period

29

over which to be accrued and over which exercisable. - To conduct discussions with the
HR department and form suitable remuneration policies.
Share Transfer and Investor Grievance Committee
Details of the Members, Compliance Officer, No of Complaints received and pending and
pending transfers as on close of the financial year. The committee functions under the
Chairmanship of Mr Kranti Sinha, a Non-executive independent Director. The other
Members of the committee are Mr. Nirmal Jain and Mr. R Venkataraman. Ms Sunil
Lotke, Company Secretary is the Compliance Officer of the Company.
In line with our vision to be the most respected company in the financial services
space, we recognize the importance of contributing to and sustaining social
transformation. With this end in mind, we have setup the IIFL foundation, which
will work for the support and upliftment of the underprivileged sections of society.
The IIFL Foundation focuses on specific areas of need such as healthcare and education,
the foundation will screen and select institutions and developmental agencies which are
working in these domains and will provide necessary aid to improve the lives of the
underprivileged and help them in achieving their potential.
Some of the activities undertaken by the IIFL Foundation:
Barsana eye camp
The IIFL Foundation sponsored an eye and dental camp held in February, 2010 with the
support of expert doctors and surgeons from the Bhaktivedanta Hospital in Barsana near
Mathura. While over 2,600 people underwent eye tests and over 800 were selected for
free eye surgery, a total of over 1,800 dental procedures like extraction, scaling and
filling, among others, were performed.
Team IIFL provided its whole-hearted support to this noble cause and will continue to do
so in the future
Pandharpur medical camp
30

The IIFL Foundation sponsored the Pandharpur medical camp which was held by the
Bhaktivedanta Hospital in July 2010 at Pandharpur. Free medical treatment was given at
4 camp sites, to approximately 49,815 pilgrims who had come to Pandharpur during
Ashadi Ekadashi. The pilgrims were treated for fever, injuries, fractures, gastroenteritis,
myalagia, headache, epilepsy, malaria, respiratory infections etc, during the camp.
Blood donation drive
IIFL regularly organizes blood donation drives via camps at its various locations across
India. Over 800 employees have participated in these camps.

CHAPTER-III
31

LITERATURE REVIEW

Equity Analysis
Decisions like whether you should buy or sell when trading in the share market is a
difficult task to do. It requires split-hair analysis of the market. To do so one also needs to
have excellent understanding of the market. Equity analysis forms an integral part of the
share trading experience. Equity analysis decides the stance one would take in the share
trading industry. Finding out the highs and lows in the market and analyzing the equity is
of utmost importance before making any sort of investment. Technical analysis,
fundamental

analysis

and

others

form

part

of

the

equity

analysis.

www.bestindiansites.com has found you five best sites for your equity analysis
www.sensex.in
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www.indiainfoline.com
This is the official website of indiainfoline. You can get your equity analysis here. They
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will only have to be a member and everytime you want an updated analysis, you will
have to log in and find out. However, if you are a new user, they have a sample you can
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www.equitymaster.com
Find out from equity master about their trends in equity analysis. Find the current listings,
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plan on investment. Become a member and surely you will benefit additionally from this.
To find out more on equity analysis, visit their site.
www.nseindia.com
National Stock Exchange of India is one of the most trusted names in the market. They
have been active in the market and a great analyzer of the latest trends. You will find the
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www.chartalert.net
They offer easy to use technical analysis prospecting tools that help in trading, online
33

trading and stock investing. They offer to analyze individual stocks, industry groups,
sector and indices. Find out how they do it from their site. Their methods have been
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link above and you will be showered with information.

Capital Market Instruments

The capital markets are relatively for long term (greater than one year maturity)
financial nstruments e.g bonds and stocks). It is the largest source of funds with long
and indefinite maturity for companies are there by enhances the capital formation in
the country. It offers a investment avenues to investors.

The capital market

instruments are the vehicles between the companies and the investors. The financial
instruments that have short or medium term maturity periods are dealt in the money
market whereas the financial instruments that have long maturity periods are dealt in
the capital market. The different types of financial instruments that are traded in the
capital markets are equity instruments, credit market instruments, insurance
instruments, foreign exchange instruments, hybrid instruments and derivative
instrument Stock market is the capital and SEBI is the driver. These instruments are
of two types
Primary market
Secondary market
A part from derivative instruments, the following is the major
mediums of
approaching capital markets:

Equity shares

Preference shares

Debentures/ bonds

American Depository Receipts (ADR)

34

Global Depository Receipts (GDR)

Derivatives

Employee stock option plan.

EQUITY SHARES:
They are also called as common stock. The common stock holders of a company are
its real owners, the own the company and assume the ultimate risk associate with
ownership. Their liability, how ever is restricted to the amount of their investment in
the event of liquidation, these stock holders have a residual claim on the assets of the
company after the claims of all creditors and preferred stock holders,are settled in
full. Common stock like preferred stock, as no maturity date.NSE started trading in
the equities segment (Capital Market segment) on November 3, 1994 and within a
short span of 1 year became the largest exchange in India in terms of volumes
transacted.Trading volumes in the equity segment have grown rapidly with average
daily turnover increasing from Rs.17 crores during 1994-95 to Rs.14,148 corers
during FY 2007-08. During the year 2007- o8,NSE reported a turnover of
Rs.3,551,038 crores in the equities segment.The Equities section provides you with
an insight into the equities segment of NSE and also provides real-time quotes and
statistics of the equities market. In-depth information regarding listing of securities,
trading systems & processes,clearing and settlement, risk management, trading
statistics etc are available here.
AUTHORIZED, ISSUED AND OUTSTANDING SHARES:

An authorized shares is the maximum no. of shares that the articles of association
(AOA) of thecompany permit it to issue in the market. A company can however
amend its AOA to increase the number. The number of shares that the company has
actually issued out these authorized shares is called as issued shares. A company

35

usually likes to have a number of shares that a authorized but un-issued. These unissued allow flexibility in granting stock options, pursuing merger targets and
splitting the stock. Outstanding shares refer to the number of shares issued and
actually held by public. The corporation can buy back part of its issued stock and hold
it as a treasury stock.Par value , book value and liquidating value :The par value of a
share of stock is merely a recorded figure in the corporate charter and is of little
economic significance. A company should not, however, issue common stock at a
price less than par value, because any discount from par value ( amount by which the
issuing price is less than the par value) is considered a contingent liability of the
own wrest to the creditors of the company. In the event of liquidation, the share
holders would be legally liable to creditors of any discount from par value.
Example: suppose that xyz inc. is ready to start business for the first time and sold
10000 shares rupees 10 each . the share holders equity portion of the balance sheet
would be common stock @ 10 each at par value:10000 shares issued and outstanding
RS100000

Total shares holders equity RS100000.The book value per share of

common stock is the shareholders equity total assets minus liabilities and preferred
stocks as listed on the balance sheet- dividing by the number of shares outstanding
.suppose that xyz is now 1 year old has generated RS 500000 after- tax profits, but
pays number dividing. Thus, retained earnings are RS 50000. the share holders equity
is now RS 100000+ RS 50000 =150000

and the book value per share is rs

1500000/10000=RS 25.Although one might expect the book value per share of stock
to correspond to the liquidating value (per share) of the company, most frequently
does not. Often assts are sold for less than their values, particularly when liquidating
costs are involved.

Market value
Market value per share is the current price at which the stock is traded. For actively
traded stocks,

36

market price quotations are readily available. For the many in active stocks that have
thin markets,
price are difficult to obtain. Even when obtainable, the information may reflect only
the sale of a few shares of stock of common stock and not typify the market value of
the firm as the whole. The market value of a share of common stock will usually
differs from its book value and its liquidating value. Market value per share of
common stock is a function of the current and expected future dividends of the
company and the perceived risk of the stock on the part of investors.

Rights of common share holders:

1.Rights of income:
If the company fails to pay contractual interest and principle and
payments to creditors, the creditors are able to take legal action to insure that
principle payments are made of company is liquidated. Common share holders, on the
other hand, have legal recourse to a company for not distributing profits. only if
management, the board of directors, or both engaged in fraud may share holders take
their case to court and possibly force the company to pay dividends.
1. voting rights:
The common shares of a company are its owners and they are entitled to
elect a board of directors. In a large corporations shares holders usually exercise only
indirect control through the board of directors they elect. The board, in turn, select
the management, and the management actually controls the

operations of the

company. In a sole proprietorship, partnership, or small corporation, the owners

usually control the operation of the business directly.
2. proxies and proxy contests:

37

common share holders are entitled to one vote for each share of stock that
they own . it is usually difficult, both physically and financially, for the most share
holders to attend a corporations annual meetings. Because of this, many share holders
vote of means of a proxy, a legal document by which share holders assign their right
to vote to another person.

3. voting procedures:
Depending on the corporate charter, the board of directors is elected
under either majority rule voting system or a cumulative voting system. Under the
majority rule system, stock holders have one for each share of stock that they own,
and they must vote for each director position that is open. Under cumulating voting
system, a stock holder is able to accumulate votes and cast them for less than the total
number of directors being elected. The total number of votes of each share holders is
equal to the number of shares the stock holder times the number of directors being
elected.
ISSUE MECHNISM:
The success of an issue depends, partly, on the Issue Mechanism.
The methods by, which new issues are made of
1. public issue through prospectus.
2. Offer for sale.
3. Placement.
4. Rights issue.
1.

Public Issue Through Prospectus :

Under this method, the issuing companies themselves offer directly to general

public a fixed number of shares at a stated price, which in the case of new companies
38

is invariably the face value of the securities, and in the case of existing companies, it
may something include a underwritten to ensure arising out of unsatisfactory public
response. Transparency and wide distributions of shares are its important

and

advantages. The foundation of the public issue method is a prospectus, the minimum
contents of which are prescribed by the Companies Act 1956. It also provides both
civil and criminal liability for any misstatement in the prospectus. Additional
disclosure requirements are also mandated by the SEBI.
The content of the prospectus, inter aria, include:

Name and registered office of the issuing company.

Existing and proposed activities.

Board of directors.

Location of the industry.

Authorized, subscribed and proposed issued of capital to public.

Dates of opening and closing of subscription list.

Names of broker, underwriter, and other from whom application forms along
with copies of

prospectus can be obtained.

Minimum subscription.

Names of underwriter , if any, along with a statement that in the opinion of the
directors, the

resources of the underwriter are sufficient to meet the underwriting obligation.

A statement that the company will make an application stock exchange for the
permission to
deal in or for a quotation of its and so on.
39

2. Offer for sale:

Broker to their own client of securities which have been previously purchased
or
subscribed. Under this method, securities are acquired by the issue houses, as in
offer for sale
method, but instead of being subsequently offered to the public, they are placed with
the client of
the issue houses, both individual and institutional investors. Each issue house has a
prepared to
subscribe to any securities which are issued in this manner. Its procedure is the same
with the only
Difference of ultimate investors.

In this method, no formal underwriting of the issue is required as the

placement itself
amount to underwriting since the houses agree to place the issue with their clients.The
main
advantages of placing, as a method issuing new securities, is its relative cheapness.
There is a cost
cutting on account of underwriting commission, expense relating to applications,
allotment of
shares and the stock exchange requirements relating to contents of the prospectus and
its
advertisement. This method is generally adopted by small companies with
unsatisfactory financial
performances.
Its weakness arises from the point of distribution of securities. As the
securities are
40

offered only to a select group of investors, it may lead to the concentration of shares
in to a few
hands that may create artificial scarcity of scripts in times of hectic dealings in such
shares in the
market.
3.Rights Issue :
Only the existing companies can use this method. In the case of companies
whose shares
are already listed and widely-held , shares can be offered to the existing shareholders.
This is
called right issue. Under this method, the existing shareholders. Are offered the right
to subscribed
to new shares in proportion to the number of shares they already hold. This is made
by
circular to existing shareholders only.
In India, section 81 of the companies act 1956 provides that where a
company increases

its

subscribed capital by the issue of new shares, either after

two years of its formation or after one year of first issue of shares whichever is
earlier, these have to be first offered to the existing shareholders with this requirement
by passing a special resolution to the same effect. The chief merit of rights issues is
that it is an inexpensive method.

Sweat equity shares :

Under section 9Aof the companies Act , 1956, a company can issue sweat equity
shares to its employees or directors at discount or for consideration other than cash

41

for providing know-how making available rights in the nature of intellectual property
rights or value additions etc on the following.

conditions:
1. The issue of sweat equity share is authorized by a special resolution passed by
the company in
the general meeting.
2. The resolution specifies the number of shares, current market,
Price, resolution, if any, and the class or classes of directors Or employees to
whom such
equity shares are to be issued.
3. The company is entitled to issue sweat equity shares after completion of one year
from the
date of Commencement Of business.
4. The equity shares of the company must be listed on a recognized stock
exchange.
5. The issue of sweat equity shares must be listed on a accordance with the
regulations made by
the SEBI in the behalf.
6. An unlisted company can issue sweat equity shares in accordance with the
prescribed
guidelines made for this purpose.
7. All the limitations, restrictions and provision relating to equity shares shall be
applicable to
sweat equity shares.

42

PREFERENCE SHARES:

Preference shares are a hybrid security because it has both ordinary shares and
bonds. Preference

shareholders have preferential rights in respect of assets and

dividends. In the event of winding up the preference share holders have a claim on
available assets before the ordinary shareholders.

In

addition, preference

shareholders get their stated dividend before equity shareholders can

receive any

dividends.

TYPES OF PREFERENCE SHARES:

1. Cumulative and Non-cumulative preference shares:

The cumulative preference gives rights to demand the unpaid dividends of

any year, during the subsequent ears when the profits and ample. All preference
dividends

arrears must be paid before any dividends can be paid to equity

shareholders. The non cumulative preference share carry a right to a fixed dividend
out of the profits to any year. In case profits are not available in a year, the holders get
nothing, nor can they claim unpaid dividends in subsequent years.
2. Cumulative convertible preference shares:

The cumulative convertible preference

(CCP) share is an instruments that

embraces features of both equity shares and shares and preference shares, but which
essentially is a preference shares. Since the CCP shares capital would constitute a
class of shares, distinct from purely equity and purely preferences share capital, the
rights of the instrument holders must be stated either in a general body resolution or
in the articles or in the terms of issues inhe offer documents viz., prospectus /letter of
offer.
43

3. Participating and non participating preference shares:

Participating preference shares are those shares which are
entitled to a fixed
preferential dividend and . in addition , carry a right to participate in the surplus
profits along
with equity shares holders after dividend at a certain rate has been paid to equity
share holders.
Again in the event of winding up, if after paying back both preference and equity
share holders,
there is still any surplus left, then the participating preference share holders get
additional shares in
the surplus assets of the company. Unless expressly provided, preference share
holders get only the
fixed preference dividends and return on capital in the event of winding up out of
realized values of
assets after meeting all external liabilities and nothing more. The rights to participate
may be given
either in the memorandum or articles or by virtue of terms of issue.

4. Redeemable and Irredeemable preference shares:

Subjects to an authority in the articles of association, a public
limited
company may issue redeemable preference shares to be redeemed either at a fixed
date or after a
certain period of time during the life time of the company. The companies act, 1956
prohibits the
issue of any preference share which is irredeemable or is redeemable after the expiry
of a period of
44

twenty years from the date issue.

Power to Issue Redeemable Preference Shares:

Section 80 of the companies act 1956 permits a company
to issue
redeemable preference shares if:

The company is limited by shares.

Its article of association authoriese

the

issue of redeemable preference

shares.

Those shares are redeemable at the option of the company.

A company is allowed to issue redeemable preference shares in the following

circumstances:

Such preference shares shall be redeemed only out of profits of the company,

which would otherwise be available for dividend.

Such redemption can also be made out of the proceeded of fresh issues of

shares made of the purpose of redemption.

Before redemption, such shares must be fully paid up.The premium on

redemption shall be provided out of

profits of the company or out of securities

premium account, before the share are redeemed.

Where shares are redeemed out of profits to a separate account called capital

The redemption of preference shares under this section shall not be taken as

reducing the authorized capital of the company.

45

The capital redemption reserve account may used for issue of fully paid

bonus shares.Companies are not allowed to issued irredeemable preference shares or

preference shares which are redeemable after the expire of a period of 20 years from
the date of its issue.In case of default, the company and every officer of the company
who is indefault shall be punishable with a fine which may extend to Rs 10000.

Deferred/ Founders shares:

A private company any issue what are known as deferred or
founders shares. Such shares are normally held by promoters and directors of the
company. That is why they are usually called of a smaller denomination, say on
rupee each. How ever they are generally given. equal voting

rights with equity

shares, which may be of higher denomination, say Rs10 each. Thus, by investing
relatively lower amounts, the promoter may gain control over the management of the
company. As regards the payment of dividends have been declared on the preference
and equity shares. It is because of this deferment of the dividend payment that these
shares are also called deferred shares. The promoters, founders and directors tend to
have direct interest in the success of the company they will receive dividends on
these shares only if the profits are high enough to leave a balance of after paying
dividends to preference an equity shareholders. Besides greater the profits of the
company , the higher will be dividends paid on these shares.

Issued share at a premium:

When a company issues shares at a premium, whether or cash
or consideration other than cash, the premium collected on those shares shall be
transferred to a separate account called securities premium account.The provision
of the act relating reduction of shares capital shall also apply to the securities
premium account may be applied by the company in the following ways:

46

In paying up un issued shares of the company to be issued to members of the

company as fully paid up shares.
1.

In writing off the preliminary expenses of the company.

2.

In writing off the expenses of, or the commission paid or discount allowed on,

any issue of
3.

shares debentures of the company.

In providing for the premium payable on redemption of any preference shares or

debentures.

Issued share at a Discount:

The issued of shares at a discount must be of a class of shares issued by the
company.
1. The issue of shares at a discount must be authorized by a resolution passed in
the general
meeting and sanctioned by the central government.
2. The resolution shall specify the maximum rate of Discount at which the
shares are to be
issued.
3. The maximum rate of discount must not exceed 10% unless the central
government is of the
opinion that higher percentage of discount may be allowed in special
circumstances.
4. The shares must be issued within two months from the date of sanction by the
or within such
extended time as the central government may allow.

47

5. The issue of shares at a discount can be done by a company only a year after
the
commencement

of the business by the company.

6. In case of revival and rehabilitation of sick industry companies under chapter

VIA, the issue
of shares at discount shall be sanctioned by the Tribunal instead of central
government.
7. Every prospectus relating to issue of shares shall contain the details of
discount allowed on
the issue of shares or the unwritten off amount f discount at the date of issue
of prospectus.
8. In case of default , the company and every officer of the company who is in
default shall be
punishable with fine which may extend to Rs.500.Shares issued for
consideration other than
cash
9. To the underwriters of shares and promoters by way of payment
remuneration or for
expenses incurred.
10. To the vendor from whom the running business is purchased, as purchase
price or
consideration.
11. Issued of bonus shares out of the reserves to the existing shareholders of the
company

48

FURTURE TERMINOLOGY:
SPOT PRICE:
The price at which an asset trades in the spot market.
FURTURE PRICE:
The price at which the future contract trades in the futures market.
CONTRACT CYCLE:
The period over which a contract trades. The index futures contracts on the NSE as
well as BSE
have one-month and two-months and three-months expiry cycles, which expire on
last Thursday of the month. Thus a July expiration contract would expire on the last
Thursday of July. On the Friday
following the last Thursday, a new contract having a three - months expiry would be
introduced for
trading. More generally we can say, on the first trading day after the day of the expiry
of the months future contract a new contract having a three - months expiry would be
introduced for trading.
EXPIRY DATE:
It is the date specified in the future contract. This is the last day on which the contract
will be
traded. I will cease to exist by the end of that day.
CONTRACT SIZE:
The amount of asset that has to be delivered under one contract. The contract size of
the stock index
futures on NSE nifty is 200 and the contract size of the stock index futures on BSE
Sensex is 50.
49

BASIS:
Basis is usually defined as the spot price minus the futures price. There will be a
different basis for
each delivery month for same asset at any point in time. On 19 th June 2001 nifty
closed at 1096.65.
August 2001 nifty futures closed at 1098.90. Therefore the basis for the August nifty
futures is -2.25
index points. In a normal market, basis will be negative. This reflects the fact that the
underlying
asset is to be carried at a cost for delivery in the future.
COST OF CARRY:
The relationship between futures 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. In the case of stocks, dividend will be the income earned
on the asset.
The storage cost will be negligible.
INITIAL MARGIN:
The amount that must be deposited in the margin account kept with the broker at the
time a futures
contract is first entered into is known as initial margin. Margins are to be strictly
collected in the
future and options markets by brokers as per the exchange regulations. Otherwise the
exchange
cannot guarantee the trades to all participants in the market.

50

MARKING TO MARKET
In the futures market, at the end of each trading day, the margin account is a adjusted
to reflect the
investors gain or loss depending upon the futures closing price or settlement price.
This is called
Marking-to-Market.
MAINTENANCE MARGIN:
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.
BETA:
Beta is a concept to be used futures and options for hedging. Beta measures the
sensitivity of a share or a portfolio to that of the index. Beta of a share is found out by
relating the daily price changes of a share to the daily changes in a stock price index.
If a graph is drawn with daily changes of the share price on y axis and daily changes
in the index on x axis the slope of the straight line fitted will be the value of beta.
mathematically it is found by regression method. If the beta of Tisco is found to
bel.23,it implies if the index increases by 10% in a period, price of Tisco will increase
by 12.3%. Beta of the portfolios is found by weighted average of the betas of the
shares in the portfolios. For example, an investors portfolio has equal value in Tisco
and Infosys. Tisco has a beta of 1.23 and Infosys has a beta 1.37. the portfolio beta is
the average of 1.23 and 1.37 which is 1.3.NSE website is providing values of beta for
a large number of shares.

SPECULATORS AND HEDGERS IN FUTURES:

51

Speculators buy and sell derivatives to make profit, while hedgers buy and sell
derivatives to reduce risk. Speculators are vital to derivatives markets. They facilitate
hedging and provide liquidity. It is highly unlikely that hedger wishing to buy futures
will precisely match hedgers selling futures in terms of contracts to be traded. If
hedgers are net sellers there will be tendency for futures prices to fall. Speculators
will buy such under period futures. Such purchases by speculators allow net sales on
the part of hedgers. In so doing, they tend to maintain price stability since they are
buying into a falling market. Proper speculation thus provides stability to prices in
markets.In a liquid market, hedgers can make their transactions with ease and with
little impact costs. Speculative transactions add to market liquidity. speculators by
definition do a lot of information search and processing to forecast future behavior of
prices. Therefore they make markets more information ally efficient. In the stock
index futures markets speculators have two alternative strategies. If they are bullish
on the index they can go long on index Futures. If the spot prices go up, future prices
follow them along with their carry premiums and the speculators make the profits.If
the speculator is bearish he can go short on the index futures. If the spot Index goes
down, futures price also will go down and speculator makes a profit. The two
speculative strategies can be summarized as:

Bullish market,

long

index

futures

Bearish market,

short

index

futures

52

ARBITRAGE IN FUTURE AND SPOT MARKET:

Future prices and spot prices are tightly linked by the fair price formula. Also on the
day of the expiry, the final settlement price of the future is made equal to the spot
index price. thus at the end , the spot and futures prices converge. Any deviation
between the fair price and actual price of a future can be utilized for earning risk less
profits by agents who are willing to buy in the spot market and deliver in future at
expiry. Such operations are called as arbitrage operations. Buying in the spot and
delivering in the future market is resorted to when actual futures price in the market is
higher than the fair price. if the actual future price is lower than the fair, then futures
are bought and shares are sold in the spot market to carry out the arbitrage operations.

Introduction to options:
Options give the holder or buyer of the option the right to do something. If the option
is called option, the buyer or holder has the right to buy the number of shares
mentioned in the contract at the agreed strike price. if the option is a put option, the
buyer of the option has the right to sell the number of shares mentioned in the
contract at the agreed strike price. the holder or the buyer does not have to exercise
this right. Thus on the expiry of day of the contract the option may or may not be
exercised by the buyer. In the contrast, in a futures contract, the two parties to the
contract have committed themselves to doing something at future date. To have this
privilege of doing the transaction at a future only if it is profitable, the buyer of
options has to a premium to the seller of options.

53

HISTORY OF OPTIONS:
In 1983 trading on stock index options contracts started. Since 1983, trading on
options of
individual options decreased as most of the trading shifted to index options. One of
the reasons is
that volatilities of the individual scripts is high and therefore premiums on individual
scripts is also
high. In India stock index options were introduced in june 2001.

OPTION TERMINOLOGY:
INDEX OPTION:
An option having the index as the underlying asset. Like index futures contracts,
index option
contract are also called cash settled.
STOCK OPTIONS:
Stock options are options on individual stocks. A contract gives the holder the right to
buy or sell
shares at the specified price.
AMERICAN OPTIONS:
American options are options that can be exercised any time up to the expiration date.
This name is
only a classification and does not imply that they are available only in America.
EUROPEAN OPTIONS:
European options are options that can be exercised only on the expiration date.
European options
54

areeasier to analyze than American options, and properties of American options are
frequently
deducted from those of its European counter part.
CALL OPTIONS:
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 OPTIONS:
A put option gives the holder the right but not the obligation to sell an asset by a
certain date for a
certain price.
BUYER OF OPTIONS:
The buyer of the option, either call or put, pay the premium and 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. Option writer is the seller of the
option contract.

STRIKE PRICE:
The price specified in the option contract at which buying or selling will take place is
known as the
strikeprice or the exercise price.

55

OPTIONS PRICE:
Option price is the premium, which the option buyer pays to the option seller or
writer. Black and
scholes formula is widely used for determining the fair value of share.

EXPIRATION DATE:
It is the date on which the European option is exercised. It is also called as exercise
date, strike date
or maturity date.
INTRINSIC VALUE OF AN OPTION:
The option premium cab be broken down into two components- intrinsic value and
time value.The
intrinsic value of an option is the amount, which the holder will get by exercising his
option and
immediately selling or buying the acquired shares in the spot market. For example, if
the strike price of a call option on Reliance shares is Rs.325 and current market price
is Rs.350. The holder of
the option can buy the Reliance share at Rs.325 by exercising the option and can
make a profit of Rs.25 by immediately selling them in the market. In this case the
intrinsic value of the call option is Rs.25.
TIME VALUE OF THE OPTIONS:
The time value of an option is the difference between its premium and its intrinsic
value.
AT-THE-MONEY:

56

An option is called at-the-money option when the strike price equals, or nearly
equals, the spot price of the share. For example, if the strike price of stock index
option on Nifty index is also at 1080, the option is called at-the-money option.
SPOT PRICE > STRIKE PRICE
IN-THE-MONEY:
A call option is in the money when the underlying asset price is greater than the strike
price. for
example, if the strike price in the case of Nifty stock index option is 1050 and Nifty is
at 1080, the
option is in-the-money option.
SPOT PRICE = STRIKE PRICE
OUT-OF-THE-MONEY:
A call option is out-of-the-money if the strike price is greater than the underlying
asset price. For
example, if the strike price in the case of Nifty stock index option is 1100 and Nifty is
at 1080, the
option is out-of-the-money option.
SPOT PRICE < STRIKE PRICE
USES OF OPTIONS:
Like futures options are also used for hedging and speculations. Arbitrageurs can look
for miss
Pricing between spot, option and futures markets and do transactions whenever they
find miss
pricing.

57

TRADING OR SPECULATING WITH OPTIONS:

Options provide multiple opportunities for trading. Options premiums are determined
by volatility of the underlying asset, time to expiration of the option and the risk free
interest rate .Changes in any of these variables changes option premiums even though
the price of the underlying asset remains constant. Thus a speculator who analyses
multiple dimensions has a lot more opportunity in options to strategize and act.
ARBITRAGE WITH OPTIONS:
Arbitrage involves making risk less profits from miss pricing; relatively under priced
options are bought and relatively overpriced are sold. Pure arbitrage requires that
none of the arbitragers own capital is used. He should be able to borrow all the capital
required. If the arbitrager uses his own capital, the process is called quasi-arbitrage.
There will be number of situations providing arbitrage opportunity as three markets,
spot, futures and options are involved
SUMMING UP:
Options are used by hedgers and speculators. Options provide a variety of ways in
which they can be used to attain the hedging and speculative objectives. Thus trading
interest comes from different participants with different motives. Arbitrageurs will
have opportunities whenever option premiums are out of line with the fair prices. A
fully developed option market provides a good market for traders to display their
trading expertise and hedgers an alternative-hedging medium.

FORWARD CONTRACTS:

58

In order to avoid this risk one way could be that the farmer may sell his crop at an
agreed-upon rate now with a promise to deliver the asset, i.e., crop at a predetermined date in future. This will at least ensure to the farmer the input cost and a
reasonable profit.

Thus, the farmer would sell wheat forward to secure himself

against a possible loss in future. It is true that by this way he is also foreclosing upon
him the possibility of a bumper profit in the event of wheat prices going up steeply.
But the, more important is that the farmer has played safe and insured himself against
any eventuality of closing down his source of livelihood altogether. The transaction
which the farmer has entered into is called a forward transaction and the contract
which covers such a transaction is called a forward contract.
QUICK AND LOW COST TRANSACTIONS:
Futures contracts can be created quickly at low cost to facilitate exchange of money
for goods be
delivered at future date. Since these low cost instruments lead to a specified delivery
of goods at a
specified price on a specified date, it becomes easy for the finance managers to take
optimal decisions in regard to production, consumption and inventory. The costs
involved in entering into future contracts in significant as compared to the value of
commodities being traded underlying these contracts.
Price discovery function:
The price of futures contracts incorporates a set of information based on which the
producers and
the consumers can get a fair idea of the future demand and supply position of the
commodity and

59

consequently the futures spot price. this is known as the price discovery function of
futures.
Advantage of informed individuals:
Individuals who have superior information in regard to factors like commodity
demand supply,
market behavior, technology changes etc., can operate in futures markets and impart
efficiency to
the commoditys price determination process. This in turn leads to a more efficient
allocation of
resources.
Hedging Advantage:
Adverse price changes, which may lead to losses, can be adequately and efficiently
hedged against through futures contracts.An individual who is exposed to the risk of
an adverse change while holding a position, either long or short a commodity will
need to enter into a transaction which could protect him in the event of such an
adverse change. For example a trader who has imported a consignment of copper and
the shipment is to reach within a fortnight may sell copper futures if he foresees fall
in copper prices. In case copper prices actually fall, the trader will lose on sale of
copper but will recoup through futures. On the contrary if copper prices rise, the
trader will honour the delivery of the futures contract through the imported copper
stocks already available with him.

DEMATERIALISATION
Indian capital market has been witnessing rapid growth in the recent past, which has
been indicated by the key factor on the capital markets. However, this growth has not
matched with supporting infrastructure to handle the growing volume of paper that
has flooded the market. So there emerged the need for a better system to ensure that
the supporting infrastructure available is on par with such market growth. And also
the foreign investors seeking to invest in India also were apprehensive about the
60

reliability of the post trade settlement mechanism used in India. The biggest deterrent
or bottleneck in Indian capital market is largely manual and paper based settlement
system which is obsolete for a rapidly growing market since 1992, decade old trading
system in India stock exchanges have been under constant review.
The main deficiencies have been identified in two broad areas:
1. The clearing and settlement system in stock exchange where by delivery of shares
by seller and
payment by the purchaser is made.
2. Procedure for transfer of shares in the name of the purchaser current procedure
result in
excessive paper work, in clearing and settlement, work duplication, bad delivery,
non-transparency
in costs and rices at which customers orders are executed have prompted setting up
of depositories.

BASICS OF DEMATERILISATION:
Dematerialization is a process by which physical shares of investors are converted to
an equivalent
number of securities in electronic form and are credited in the investors account with
his depository
participated. Dematerialization trading is now compulsory for all investor. Beginning
of first week
of January 1999, investor can trade in specific scripts in the dematerializations
form. They can provide and receive delivery only in a dematerializations form and
share certificates will not be changed for these scripts. A depository is an organization
where securities of shareholder through depository participants (DPs). The system is
comparable to that in a bank. If an investor wants services offered by a depository, he
would have to open an account with it through a DP-similar to opening an account
with any other branches of the bank in order to avail of its services. Dematerialization
61

is a process by which physical certificates of an investor are taken back by the

company/ registrar and actually destroyed and an equivalent number of securities are
credited in the

depository account of that investor. A depository participant is

investors agent in this system. He maintain investors securities account and

intimated the status of holdings from time to the investor.

PROCESS OF DEMATERIALIZATION:
In order to dematerialize his certificates an investor will have to first open an account
with a
depository participant (DP)and then dematerialization of his certificates by filling up
DEMATERIALIZATION REQUEST FORM (DRF) which will be available
with any DP. The
ISIN name and number should be mentioned. This is to ensure that the security
mentioned in the
demat request form is same as the one the client intended to dematerialize.

62

STEPS:
An investor has to submit the request from long with the share certificate, which are
to be
dematerialized to depository participant, the depository participant gives the demat
order to NSDL
through the system.

The depository participant submit the share certificates, DRF,

DRN, the issuer/RTA.

NSDL sends the demat request to the issuer/RTA.

The issuer/RTA sends confirmation / rejection statement after checking the

validity.

NSDL in turn sends the status intimation to the DP.

The issuer /RTA sends the objection memo to DP.

DP gives the statement of holding to the client.

63

This takes about 15 days from the date of request. Electronic holdings can be
converted back in to
certificates, if so desired, in a similar fashion as that for dematerializations.

ADVANTAGES OF DEMAT:
Transaction the depository way has several advantages over the traditional system of
share
certificates:

Trading in demat segment completely eliminates the risk of bad deliveries,

which in turn all cost and wastage of time associated with follow up for rectification.
This reduction in risk associated with bad delivery has lead to reduction in clearing
member age to the extent of 0.5% by many clearing member age firms.

Cost of delay/ courier/ neutralization/ the need for further follow up with the

clearing member for shares returned focompanys objection, which happens only in
case of physical securities can be avoided.

The investor can also the expense of applying for duplicated certificates in case
of loss/
mutilation of certificates. The investor can also receive your bonuses and rightd in
to your
depository account as a direct credit, thus eliminating risk of loss in transit.

RBI has increased the limit of loans against dematerialized securities

collateral to Rs 20

as

lakh borrower against Rs10 lakh per borrower in case of loan against physical
securities.

RBI also reduced the minimum margin to 25% for loan against dematerialized
securities as
64

against 50% for loan against physical securities.

Facilitation of cash corporate action such as dividends.

NSDL provides details of beneficial owners as on a given day (the record date)
to the issuer
company/ registrar so as to enable the company to calculate the benefits arising out of
these
holdings. The companys registrar and transfer agent forward the cash benefits to the
investor
directly.

Lending and borrowing of securities. A client having a beneficiary account with

the DP can

lend or borrow securities in electronic form through an approval

intermediary,who has opened a special intermediary account with DP.

Transmission of securities

of any client due

NSDL facilities transmission of securities balance

to death, lunacy, bankruptcy, insolvency or by any other lawful

means other transfer . in case where the deceased was one of the joint holders in the
client account. In case where the
deceased

was a sole holder of the client account, his legal heirs, or the legal

representatives
shall be the only person recognized by NSDLas having any title to the security
balance in that
sole client account.

65

TRADING, CLEARING AND SETTLEMENT OF DEMATERILISED

SECURITIES.
1. TRADING:
Trading of dematerialized securities is currently available at national stock
exchange(NSE),the Mumbai stock exchange (BSE)and Calcutta stock exchange
(CSE). At NSE, dematerialization securities are traded two separate segments called
AE segment and :BE segment which are in addition to the segment for trading in
securities in the physical form called EQ segment.In case of AE segment,
dematerialized securities are traded only in the market lot, where as in BE segment
these can be traded in multiples of one share. At BSE and CSE, dematerialized are
traded in a separate segment called Demat segment and physical securities are traded
in unified segment.For trading in physical securities, the sub-brokers collect the
orders from their client and place these order with the main brokers for execution in
the market. The main broker enter the details of each trade against each sub-broker in
a separate kept for each sub-broker. After execution of the trade, the main broker
issues the contract note in the name of sub-broker who in turn issues separate
purchases /sale note to his clients. There are only few cases in which the main broker
issues the contract note in the name of the clients directly.Even in the case of
dematerialized securities the same system can be followed. However in this case
since the fear of bad delivery is less, the brokers directly issue the contract note in the
name of clients, who is in edition t, facilitate the cost effective settlement with a clean
audit trail.Trading in dematerialized securities is very similar to trading in physical
securities except that physical segment follows account period settlements and demat

66

segment follow rolling settlement. In rolling settlement, all trades executed on a

particular day will be settled on the following 3 rd working day. This means trades
executed on Monday will be settled on thursaday.

2. TRADES:
All the traders executed at the exchanges are settled by the clearing
members(CM), as
in the case of securities in the physical form. To settle traders in demat segment each
CM should
open one clearing a/c with any of the DP.
The procedures for opening clearing accounts are:

Approach a DP.

Fill up an account opening form.

Sign on an agreement with the DP.

Application is forwarded NSDL by DP.

NSDL allots a number identified as CM BP ID.

DP opens account and an account number is provided along with CM BP

ID to the
clearing member.
The clearing account consists of three parts:

Pool account

Delivery account

Receipt account

67

Clearing account (CC/HH):

Delivery
Account

Pool account

Selling
client

Receipt

Buying
client

Pool Account:
It has two roles to play in clearing of securities. Before pay in the selling client of
the CM
transfers ecurities from his client account to the CM pool Account. The CM transfers
the securities
from his pool Account to the account of the buying client.
Delivery Account:
The CM transfers the securities in, from the pool Account to the delivery Account
before pay in
at the time of pay-in NSDL flushes out the securities in the delivery Account and
transfers the same
to the CC/HH.
Receipt Account:
On pay- out day, the CC/HH transfers securities to the pool account through the
receipt account.
68

CM has to ensure that before book closure or record date of any company the
securities are moved
from CM pool Account to a beneficiary account as holding in pool Account for longer
period is not
allowed.

3. SETTLEMENT:

C
M

Client

client

DP1

Pool
A/C

client

NSDL

Client
A
A/C

Client
B
A/C

client

DP2

Client
C
A/C

Client
D
A/C

In the depository system, any trade that is cleared and settled through the clearing
corporation
(CC/HH) is called market trade.

Procedures for pay-in of securities:

69

Give receipt instruction to the DP for transfer of securities from client

account to the pool account or give a standing instruction for the same.

Delivery to CC/HH instruction for the transfer of securities from pool

account to delivery account for pay-in.

clearing

Delivery
Account

pool Account

Both pay-in and pay-out happens to be on 5 th working day after the trading and the
instructions to
transfer the securities from the pool account to delivery account must be given before
pay-in such that this transfer is effected before pay-in. the transfer instruction is taken
as an authority to transfer

the security irrespective of when the client gives the delivery instruction, the
securities will be parked in the delivery account till final pay-in and the facility of
multiple instructions from the pool account to the delivery account is also provided to
the investors.In case of excess transfer of shares to the delivery account or excess
delivery to CC/HH. The instruction slip can be cancelled and issued new one or the
CC/HH will return the securities at the time of payout respectively.
Procedure for payout of securities:
Transfer of securities from CC/HH to pool account through receipt in account

70

Clearing

Receipt

Pool

Delivery instruction to transfer from pool account to client account on pay-out Client

C
M

client

DP1

Pool
A/C

client

NSDL

Clien
t
AA/
C

client

client

DP2

Clien
t
BA/
C

Clien
Clien
t
t
CA/
DA/
C
C
A/C Dp ID and AA/
on the delivery of the instruction form the clients name, clients
DP name
of the client must be mentioned and ensure that receipt instruction given byCclient to
receive the securities bears the same execution date as given in the delivery
instruction. However, the broker can hold the securities in the pool account until the
client meets his obligation but before the closure of books, the balances must be
transferred as the balances in the pool account which are not entitled for any
corporate benefits.

71

INTER DEPOSITORY TRANSFERS:

Transfer of securities from an account in one depository to an account in another
depository is termed as an a inter depository transfer. This facility is quite similar to
the account transfer with in NSDL.It can be done only for securities that are available
for dematerialization on both the depositories.The account in NSDL of can be either a
clearing account or a beneficiary account.For debiting the clearing account or the
beneficial account with NSDL, the form for Inter depository delivery instructions
is required to be submitted by the clearing member/beneficial owner to its DP.For
crediting the clearing account or the beneficial account, the standing instruction given
for
automatically crediting the account is applicable. In case the standing instruction are
not given, then the form for Inter Depository Receipt Instruction is required to be
submitted by the clearing member/ beneficial owner to its DP.As both the depositories
are connected to each another, the batches to effect inter depository transfers are
presently exchanged twice on each working day.The
issuer/registrar and transfers agent is informed about the transfer by both the
depositories and it amends its accordingly. Government securities cannot be
transferred from one depository to another using this facility.

REMATERIALIZATION OF SHARES:
Rematerialization is the term used for converting electronic holdings back into
physical certificates.
The DP will forward the investors request NSDL after verifying that the investors
have the handle certificates. necessary balances NSDL in turn will intimate the
registrar who will print the certificates and dispatch the sale to investors. In this
process NSDL doesnt directly
MATERIALIZATION OF SHARES:
Materialization is the term used for converting electronic holdings back into physical
certificates.The DP will forward the investors request to NSDL after verifying that the
72

investors have the necessary balance NSDL in turn will intimate the registrar who
will print the certificates and dispatch the same to investors in this process NSDL
doesnt directly handle certificates.

Steps involved in materialization:

Clients sends RRF (Remat request form) to DP

1.

DP sends the remat order to NSDL through system.

2.

DP sends the RRF and RRN to the issuer/RTA.

3.

NSDL then sends the remat request to issuer/ RTA.

4.

The issuer/ RTA intimates the confirmation /rejection status to NSDL.

5.

The NSDL in turn intimates this to DP.

6.
The issuer/ RTA sends the printed certificates to the client.
NATIONAL SECURITIES DEPOSITORY LIMITED:

73

NSDL was inaugurated in November 1996, as the first depository in the country to
avoid the myriad
problems in settlement.In depository system, securities are held in securities accounts.
Which more or less similar to holding funds in bank accounts. Transfer of ownership
is done through simple account transfer. This method does away with all the risks and
hassles normally associated with paper work. Consequently, the cost of transaction in
depository

environment

lower

as

compared

to

transaction

in

physical

certificates.Trading in dematerialized securities is quit similar to trading in physical

securities. The major difference is that at the time of settlement, instead of
delivery/receipt of securities in the physical form, the same is effected through
account transfer. Currently dematerialized trading is available at NSE, BSE,
CSE.Exclusive demat segment follow rolling settlement (T+3) cycle and the unified
segment follows account period settlement cycle. All investors, other than the
institutional investors, can deliver securities either in the physical or dematerialized
form in the market. From January 4, 1999, all categories of investors ran deliver only
in dematerialized form with respect to a select list of securities. However, initially this
was applicable only at those exchanges, which have joined the depository, but SEBI
has also specified that this list is to be expanded in a phased manner.The settlement
of trades in the stock exchanges is undertaken by the clearing corporation (CC)/
clearinghouse (CH)

of the corresponding stock exchanges. While settlement of

dematerialized securities are effected through NSDL, the funds settlement is effected
through the clearing banks. The physical securities are settled by the clearing
members directly with the CC/CH.

74

OUTCRY SYSTEM
The broker has to buy or sell securities for which he has received the orders. For this,
the broker or his authorized representatives goes to the stock exchange. This method
is called the open outcry system. Basically the brokers shout while buying or selling
the securities. The floor of the stock exchange is divided into a number of markets
also known as post pit or wing based on particular securities dealt there.
In the post pit or wing, the broker using open outcry method makes an offer or
bid price. For making the necessary bargain, he quotes his purchase or sale price, also
known as offer or bid price. The dealer, to whom the price is quoted, quotes his own
price when the quotation of the dealer suits the broker, he may loose the bargain. If he
is not satisfied with the quote price, he may turn to some other dealer. On the close of
the bargain, the dealer as well as the broker makes a brief note of the particulars of
the deal. Such notes are made on some pad and on it the number of shares, the price
agreed upon, the name of the party, what membership number etc., are noted.
DISADVANTAGES OF OUTCRY SYSTEM:

It lacks transparency.

The scope of manipulation, speculation and mal practice is more.

Signal were more important in the outcry system any member who could not
interpret the buy/sell signal correctly often landed himself in disaster situation.

In audibility was another disadvantage of the outcry system.

Due to the above disadvantages of the outcry system the Networth has shifted
from outcry system to online trading from February 29th 1997.

75

MANUAL TRADING
Trading procedure before introduction of online trading
Trading on stock exchanges is officially done in the trading ring. In the trading ring
the space is provided for specified and non-specified sections, the members and their
authorized assistants have to wear a badge or carry with them an identity card given
by the exchange to enter the trading ring. They carry a sauda book or confirmation
memos, duly authorized by the exchange and carry a pen with them. The stock
exchanges operations are floor level are technical in nature .Non-members are not
permitted to enter in to stock market. Hence various stages have to be completed in
executing a transaction at a stock exchange .The steps involved in this method of
trading have given below:
Choice of broker:
The prospective investor who wants to buy shares or the investors, who wants to sell
shares and transact business, have to act through member brokers only. They can also
appoint their bankers for this purpose as per the present regulations.
Placement of order:
The next step is the placing order for the purchase or sale of securities with a broker.
The order is usually placed by telegram, telephone, letter, fax etc or in person. To avoid
delay, it is placed generally over the phone. The orders may take any one of the forms
such as At Best Orders, Limit Order, Immediate or Cancel Order, Limited Discretionary
Order, and Open Order, Stop Loss Order.
Execution of order or contract:
Orders are executed in the trading ring of the BSE. This works from 11:30 to 2.30
P.M on all working days Monday to Friday, and a special one-hour session on Saturday.
The members or the authorized assistants have to wear a badge given by the exchange to
enter into the trading ring. They carry a sauda Block Book or conformation memos,
76

which are duly authorized by the exchange when the deal is struck; both broker and
jobber make a note in their sauda block books. From the sauda book, the contract notes
are drawn up and posted to the client. A contract note is written agreement between the
broker and his clients for the transaction executed.
Drawing Up and Bills:
Both sale and purchase bills are prepared along with the contract note and it is posted
on the same day or the next day. This in a purchase transaction, once the shares are
delivered to the client effects payment for the purchases and pays the stamp fees for
transfer, a bill is made out giving the total cost of purchase, including other expenses
incurred by the broker in the price itself. With this, the process ends.
DEMATERLIZATION:
Dematerialization is the process by which physical certificates of an investor are
converted to an equipment number of securities in electronic from and credited in the
investor account with his DP. In order to dematerialize the certificates, an investor has
to first open an account with a DP and then request for the Dematerialization Request
Form, which is DP and submit the same along with the share certificates. The investor
has to ensure that he marks Submitted for Dematerialization on the certificates
before the shares are handed over to the DP for demat. Dematerialization can only be
done to those certificates, which are already registered in your name and belong to the
list of securities admitted for Dematerialization at NSDL.
Most of the active scrips in the market including all the scrips of S&P CNX NIFTY
and BSE SENSEX have already joined NSDL. This list is steadily increasing.
Briefly, the process is as follows: after completion of transfer, the investor gets the
option to dematerialize such shares. Investors willing to exercise this option sends a
Demat request along with the option letter sent by the company to his DP. The
company or its R&T agent would confirm the Demat request on its receipt from the
DP to reduce risk of loss in transit.
77

Dematerialized shares do not have any distinctive or certificate numbers. These

shares are fungible-which means that 100 shares of a security are the same as any
other 100 shares of the security. Odd lot shares certificates can also be dematerialized.
Dematerialization normally takes about fifteen to thirty days. To get back
dematerialized securities in the physical form, request DP for Rematerialization of the
same is made.
Rematerialization is the process of converting electronic shares in to physical shares.
Benefits of Demat:

It reduces the risk of bad deliveries, in turn saving the cost and wastage of
time associated with follow up for rectification. This has lead to reduction in
brokerage to the extent of 0.5% by quite a few brokerage firms.

In case of transfer of electronic shares, you save 0.5% in stamp duty. You
avoid the cost of courier / notarization.

You can receive your bonuses and rights issues into your DA as a direct credit,
this eliminating risk of loss in transit.

You can also expect a lower interest charge for loans taken against Demat
shares as compared to loans against physical shares.

There is no lost in transit, thus the overheads of getting a duplicate copy in

such circumstances is reduced.

RBI has also reduced the minimum margin to 25% for loans against
dematerialized securities as against 50% for loans against physical securities.

TRADING AND SETTLEMENT AT SHARE KHAN

The NSE first introduced online trading in India. The Online trading system imparted
a greater level of transparency and investors preferred exchanges that offered Online
trading because of the following factors:

The ease of operation from the view of the both members and the investors.

78

Increase in the confidence of the investors because of higher level of

transparency.

Facilities better monitoring of the market by the exchange.

The best price achieved in buying and selling.

All these resulted in ever-increasing volumes on the exchanges offering the online
trading.
TRADING PROCEDURE AT SHARE KHAN STOCK BROCKING
Share Khan deals in buying and selling equity shares and debentures on the National
Stock Exchange (NSE), the Bombay Stock Exchange (BSE) and the Over-TheCounter Exchange of India (OTCEI).
Share Khan is provided with a computer and required software from their
registered stock exchanges. These centers are called Broker Work Stations. These
computers are connected to the server at the stock exchanges through cable.
The member or broker sitting in his office can send the quotations, orders,
negotiations, deals, in-house deals, auction orders etc., through the computer. The
Central trading system (CTS) will accept these orders and send it for match. If there is
any mistake in the order, CTS will reject the orders and send respective error message
to the member concern. All these operations are in built. The main objective of CTS is
to monitor the Stock Exchanges operations.
Order placed by the broker will be sent for a match and if the match is found suitable,
the transaction will be executed. Otherwise, the order will be deleted automatically
after completion of trading time. The carry forward transactions (Good Till
cancellation) are forwarded to the next day. Even if the match is not found with in the
prescribed period, the order will not cancel.

79

TRADING SESSION
Trading timings are from 9:55 A.M. to 3:30 P.M. on all 5 days of the trading period.
Monday to Friday is the trading period in all the stock exchanges. SEBI has stipulated
that all the stock exchanges in India must have same trading period.
BROKER WORK STATION:
At the broker workstation the BBOs, the last traded price, the days opening price,
previous days closing price, highest and lowest prices, the weighted average price
and total trade value will be available continuously, as the BBO for each scrip.
Other information will be available on query from the BWS. These include top
gainers /losers of the day. Trader-wise, scrip wise net position, client wise net
position, top scrip by the volume/value, market summary etc.
Brokers are also provided with information relating to the companies in the matter of
Book closure, Dividend declarations, resolutions in board meeting, information about
liquidated companies, company report etc.
ORDERS:
Orders can be done one at a time or in a batch mode.
The submitted order will be accepted at the CTS, after validation if it finds
any invalid reason the order is return back to the BWS, with the appropriate
error message.
If Accepted at the CTS it will be added to the local pending order book.
The order will then be taken up for matching, if it is a buy order the system
tries to find a sell order, which fits the requirement of the buy order, when
such match is found a trade gets executed. Each trade involves two brokers
and
respective traders who sent the order. Both these traders are informed of the
trade being executed at their respective BWS.
At the BWS the trade is added to the local trade book.

80

Orders sent by the brokers are two types:

Good for the day (GFD)

Good till cancellation(GTC)

Good for the day:

This is also called as market order. For an order if the member selects the deal
as good for the day, the order is treated as market order. If a best bid founds match
with best order then the transaction gets executed. If the match is not found then
after trade time the order gets cancelled that day. Next day he has to place a new
order.
For example if a member wants to purchase 1000 shares of satyam info @ 400 each
through Good for Day order. If the correct match is not found, order gets cancelled
automatically and new quotation has to be placed the next day.
Good till cancellation:
This order is forwarded to the last trading day of that settlement period. This is
also called as carry forward order like GFD; broker has to select the option of GTC
for the order. If the order finds match with in the trading settlement period, the order
is executed. If no match is found, the order is cancelled on the last day of settlement
period. This order is not carried forward to the next settlement period.
For example, if a member a place purchase order of 500 shares of SBI @ 690 per
share and selects the order as GTC and place an order. If the match is not found on
that day it will be forwarded to the next day until trading settlement period day.
SETTLEMENT OF TRANSACTIONS:
Clearing of transaction in the form of shares and cash is called settlement. Buyers will
take the delivery of shares through the depository participants like NETWORTH and
others.
Finally, the settlement is made by means of delivering the share certificates along
with the transfer deeds. The transferor (or the seller) duly signed transfer deed. It
81

bears a stamp of the selling broker. The buyer then fills up the certificates fills up the
particulars in the transfer deed. Settlement can be done in the following way.
Spot settlement: under this method, the delivery of securities and payment for them
are affected on the day of the contract itself.
Rolling settlement: Under this rolling settlement the trading is on T+2,basis i.e. if
Monday is trading day then Wednesday is the paying day . In case on non-delivery,
the securities will go for auction.

DETAILS OF PROCEDURES:
Delivery in : The members who are in pay-out position delivers share certificates in
to clearing house within the settlement period along with the delivery Chelan filled in
with the details of share certificates which has folio numbers or distinctive numbers
etc.
Delivery out: The buyer of shares who made pay in position will take delivery of
shares from the clearing house.
Pay-in: The member who is in paying position shall pay for value of shares with in
the trading settlement period (T+2).
Payout: The cheques paid in the clearinghouse will be paid to members who are in
paying position.
All disputes arising between members regarding non-deliveries, non-payments, good
and bad deliveries pertaining to the settlement will be settled by the settlement
committee of the exchange.

82

The given flow chart clearly explains the process of online trading:

L o g in

S e ll t r a n s c a t io n

B u y t r a n s c a t io n

T h e s y s te m w ill c h e c k y o u r
d p ac c o u n t q u an tity

T h e s y s te m w ill c h e c k b u y in g
lim its

O rd e rs a c c e p te d

R e je c t e d o r d e r s w o u ld b e
c o m m u n ic a t e d a lo n g w it h r e a s o n s

o rd e rs a c c e p te d

y o u r o r d e r is t r a n s m it t e d t o e x c h a n g e f o r e x e c u t io n

p e n d in g b u y o r d e r s
w o u ld b e d is p la y e d
o n y o u r s c re en

y o u m a y e d it y o u r
p e n d in g o r d e r

o n e x e c u t io n
o f y o u r o rd e rs

y o u m a y e d it y o u r
p e n d in g o r d e r

y o u m a y d e le t e
y o u r p e n d in g o r d e r

f la s h e d o n y o u r
s c r e e n im m e d ia t e ly
o n e x e c u t io n

c o n f o r m a t io n c o u l
d b e s e n d to y o u r
e - m a il a n d m o b ile

83

p e n d in g s e ll o r d e r s
w o u ld b e d is p la y e d
o n y o u r s c re e n

y o u m a y d e le t e y o u r
p e n d in g o r d e r

c o n t r a c t n o t e w o u ld
b e s e n t t o b y m a il
o r h a n d d e liv e r y

CHAPTER-IV
DATA ANALYSES AND INTERPRETATION

84

STOCK MARKET
Company :WIPRO LTD. 507685
Period: 02-Dec-2013 to 20-Jan-2014

85

Date

Close

No. of
Trades

High

Low

2/12/13

471.00

483.60

466.95

481.50

475.57

1,12,888

3,453

5,36,86,538

3/12/13

483.55

486.20

481.50

482.20

482.96

2,52,682

3,449

12,20,36,099

4/12/13

482.00

494.45

479.35

491.60

490.10

1,73,531

5,778

8,50,47,762

5/12/13

494.50

499.00

486.50

492.50

491.58

1,17,876

3,440

5,79,45,270

6/12/13

492.00

497.50

486.30

493.35

492.71

74,173

2,768

3,65,45,691

9/12/13

499.00

509.00

490.30

507.15

502.07

2,09,005

6,145

10,49,35,261

10/12/13

504.00

522.00

504.00

516.50

516.84

2,81,327

8,616

14,54,00,346

11/12/13

515.50

521.00

510.05

518.25

519.245,24,416

5,136

27,22,98,899

12/12/13

518.00

518.00

508.50

510.65

511.92

89,850

2,761

4,59,95,612

13/12/13

508.00

520.00

507.00

518.95

517.33

1,05,117

3,003

5,43,79,943

16/12/13

518.00

526.50

515.50

524.20

522.23

1,64,238

5,263

8,57,69,362

17/12/13

525.00

530.00

515.65

518.00

524.25

1,12,896

3,307

5,91,86,091

18/12/13

515.00

524.05

513.60

522.40

519.00

84,821

3,052

4,40,21,782

19/12/13

524.60

537.95

518.55

529.90

531.00

2,99,817

7,898

15,92,01,895

20/12/13

534.50

552.00

531.00

548.95

542.82

2,90,803

8,083

15,78,55,040

23/12/13

548.00

557.00

545.10

551.90

551.31

1,72,863

4,755

9,53,01,119

24/12/13

551.00

554.10

539.00

540.30

544.76

1,00,195

2,973

5,45,82,072

26/12/13

541.55

551.00

537.00

547.65

544.31

1,25,691

3,579

6,84,14,974

27/12/13

550.00

558.00

548.00

555.40

553.10

1,50,121

5,132

8,30,31,699

30/12/13

556.15

557.90

546.35

552.10

551.06

95,332

2,814

5,25,33,397

31/12/13

553.00

561.25

549.60

559.05

555.98

84,740

2,460

4,71,13,701

86

WAP

No. of
Shares

Open

Total Turnover

INTERPRETATION:
On open value risen from 471.00 to 552.6 than compare to higher value of
EPS 483.6 to 577.25. Then coming to lower price from 466.95 to 552.6. Wholly the
conclusion is 481.5 to 573.3 rised.
The comings to the volume on the same dates or days volumes are
increased. Because on this session WIPRO LTD value is raised i.e. percentage of
5.35%.

87

Company :MAHINDRA & MAHINDRA LTD. 500520

Period: 02-Dec-2013 to 20-Jan-2014

88

Date

Close

No. of
Trades

Total Turnover

High

Low

2/12/13

938.00

961.00

932.35

958.25

950.32

91,359

3,841

8,68,20,677

3/12/13

950.00

959.90

945.10

950.20

950.30

43,769

2,166

4,15,93,644

4/12/13

950.00

953.25

940.05

943.15

945.82

47,740

2,111

4,51,53,560

5/12/13

950.00

959.70

939.65

944.65

948.07

65,694

2,663

6,22,82,662

6/12/13

947.00

957.00

943.00

945.75

949.45

53,081

2,263

5,03,97,812

9/12/13

960.00

976.45

953.20

966.75

966.68

1,60,863

5,622

15,55,02,252

10/12/13

964.00

970.00

948.00

953.45

957.87

57,265

2,388

5,48,52,513

11/12/13

952.50

958.85

942.00

950.55

951.85

44,191

1,880

4,20,63,009

12/12/13

949.00

951.50

940.00

942.35

944.54

38,745

1,723

3,65,96,365

13/12/13

940.90

952.50

932.00

948.10

946.38

53,557

2,575

5,06,85,158

16/12/13

951.50

951.50

925.10

927.85

934.61

50,156

3,296

4,68,76,355

17/12/13

926.00

939.40

925.10

931.70

933.33

30,255

1,437

2,82,37,841

18/12/13

931.90

950.50

927.00

946.30

943.36

36,802

2,022

3,47,17,408

19/12/13

949.00

955.00

926.25

937.85

938.52

45,617

2,275

4,28,12,446

20/12/13

938.50

979.00

930.00

969.25

957.49

90,307

4,015

8,64,67,964

23/12/13

973.00

978.00

961.50

965.00

968.03

47,867

2,433

4,63,36,477

24/12/13

965.00

974.80

954.45

963.45

968.88

33,317

2,706

3,22,80,085

26/12/13

960.00

969.00

955.30

959.10

961.82

44,312

1,674

4,26,20,382

27/12/13

957.50

971.40

952.95

964.55

964.31

58,773

2,278

5,66,75,278

30/12/13

963.00

972.50

944.50

949.50

959.49

70,840

3,051

6,79,70,471

31/12/13

953.00

956.20

940.00

943.50

947.95

43,546

1,886

4,12,79,331

1/01/14

945.00

952.20

943.15

947.60

948.00

81,540

1,995

7,72,99,677

2/01/14

947.00

958.75

930.00

936.05

948.70

49,928

3,204

4,73,66,597

89

WAP

No. of
Shares

Open

INTERPRETATION:
On open value has risen from 938.00 to 897.00 than compare to higher value
of EPS 961.00 to 912.85. Then coming to lower price from 932.35 to 892.00. Wholly
the conclusion is 958.25 to 907.4 rise.
The comings to the volume on the same dates or days volumes are
increased. Because on this session MAHINDRA & MAHINDRA LTD value is raised
i.e. percentage of 53.67%.

90

Company :TATA COMMUNICATIONS LTD. 500483

Period: 02-Dec-2013 to 20-Jan-2014
All Prices in

91

Date

Open

High

Low

Close

WAP

No. of
Shares

No. of
Trades

Total Turnover

2/12/13

287.65 299.70

283.50

296.25

293.49

1,02,036

2,507

2,99,46,295

3/12/13

298.00 299.60

290.05

291.20

294.44

98,126

2,479

2,88,91,907

4/12/13

291.20 297.05

286.00

287.90

292.22

58,217

1,768

1,70,12,364

5/12/13

291.00 293.70

286.70

288.15

289.99

65,112

1,846

1,88,82,011

6/12/13

288.00 293.00

283.55

285.00

286.50

35,893

1,256

1,02,83,465

9/12/13

288.00 291.00

281.00

282.95

284.36

28,205

1,014

80,20,513

10/12/13

284.65 288.85

278.70

279.90

281.51

76,993

2,110

2,16,73,941

11/12/13

282.00 283.80

277.00

278.60

280.20

28,376

1,241

79,51,022

12/12/13

281.80 283.15

274.10

274.90

278.58

33,224

1,317

92,55,425

13/12/13

274.00 278.05

269.00

270.95

274.21

33,173

1,419

90,96,315

16/12/13

273.50 273.50

265.00

266.95

267.81

41,678

1,459

1,11,61,779

17/12/13

269.05 279.80

267.70

276.00

274.77

77,601

2,476

2,13,22,125

18/12/13

280.00 283.00

276.60

278.05

279.09

84,877

2,329

2,36,88,143

19/12/13

279.00 285.80

273.15

280.40

280.52

1,41,541

2,621

3,97,05,783

20/12/13

280.50 297.05

278.00

293.60

288.44

1,87,719

4,303

5,41,44,779

23/12/13

295.00 297.65

288.90

290.35

293.77

1,08,514

3,137

3,18,77,958

24/12/13

290.05 304.70

290.05

295.85

299.15

2,59,474

5,885

7,76,20,486

26/12/13

296.00 301.00

291.00

293.50

295.91

1,28,938

2,924

3,81,54,604

27/12/13

295.00 304.90

295.00

298.55

301.10

1,90,139

4,251

5,72,51,558

30/12/13

301.70 301.70

295.65

296.40

298.63

69,032

1,769

2,06,15,144

31/12/13

297.00 309.65

297.00

309.05

305.45

2,85,239

6,228

8,71,25,979

1/01/14

311.00 313.65

306.05

309.50

310.60

1,73,133

4,498

5,37,74,547

2/01/14

310.10 316.00

295.25

299.85

310.02

1,63,606

6,020

5,07,21,559

3/01/14

300.00 312.50

298.90

309.60

304.99

1,63,401

3,944

4,98,36,474

6/01/14

309.80 316.55

307.85

314.90

312.49

1,19,957

2,983

3,74,85,151

7/01/14

317.40 319.50

305.30

313.80

314.55

1,31,732

3,589

4,14,36,102

8/01/14

315.00 315.75

307.40

309.85

311.65

63,898

1,586

1,99,13,790

92

INTERPRETATION:
On open value has increased from 287.65 to 298.20. Then compare to higher
value of EPS 299.70 to 302.35. Then coming to lower price from 283.50 to 298.00.
Wholly the conclusion is 296.25 to 299.75 increased.
Then coming to the volume on the same dates or days volumes are
increased. Because totally this session TATA COMMUNICATIONS LTD.. EPS value
is increased i.e. percentage of 2.93%.

93

Company :SYNDICATE BANK 532276

Period: 02-Dec-2013 to 20-Jan-2014

94

Date

Open

High

Low

Close

WAP

No. of
Shares

No. of
Trades

Total Turnover

2/12/13

89.95

90.60

88.40

88.85

89.68

2,57,442

2,216

2,30,87,514

3/12/13

89.40

89.90

88.10

88.75

88.86

1,60,873

1,947

1,42,94,720

4/12/13

88.50

89.55

87.50

87.75

88.36

1,61,956

1,718

1,43,10,756

5/12/13

88.70

91.00

88.70

89.55

89.92

1,92,385

2,255

1,72,99,621

6/12/13

89.95

91.25

88.60

90.40

90.26

2,47,116

2,972

2,23,05,818

9/12/13

93.00

95.00

92.00

92.55

93.42

3,93,718

3,791

3,67,82,548

10/12/13

93.30

93.45

90.00

91.20

91.15

2,20,660

2,244

2,01,12,361

11/12/13

90.90

91.50

89.90

90.85

90.67

1,28,802

1,488

1,16,78,458

12/12/13

90.50

90.90

89.15

89.50

90.03

1,21,446

1,226

1,09,34,169

13/12/13

88.50

89.00

86.95

87.40

87.74

1,87,456

1,942

1,64,47,993

16/12/13

87.70

88.00

86.10

86.95

87.17

1,31,501

1,173

1,14,62,985

17/12/13

86.20

87.90

84.00

84.70

85.68

1,62,370

1,581

1,39,11,795

18/12/13

84.20

89.20

84.20

88.65

87.52

2,67,423

2,896

2,34,05,558

19/12/13

89.50

91.90

85.65

86.10

86.77

1,94,702

2,069

1,68,94,397

20/12/13

87.00

89.20

86.10

88.65

87.63

1,59,353

2,637

1,39,64,236

23/12/13

89.50

93.35

89.00

92.05

91.75

2,81,651

6,193

2,58,41,491

24/12/13

92.15

93.25

90.30

92.10

91.62

1,27,638

1,364

1,16,94,361

26/12/13

92.10

94.70

92.10

93.60

93.74

2,16,029

2,136

2,02,50,448

27/12/13

94.50

98.30

93.90

95.10

96.29

3,64,909

3,143

3,51,36,488

30/12/13

95.50

96.00

93.20

93.40

93.99

1,22,807

1,152

1,15,42,804

31/12/13

94.00

94.90

92.35

94.60

94.08

1,47,957

1,558

1,39,19,516

1/01/14

95.50

96.90

94.25

96.05

95.32

1,85,543

1,555

1,76,85,799

2/01/14

96.25 100.70

93.10

93.75

97.59

5,66,628

4,525

5,52,95,448

3/01/14

93.70

95.75

91.95

95.35

94.17

2,21,783

2,403

2,08,85,770

6/01/14

95.30

95.60

92.85

93.40

93.92

1,27,485

1,871

1,19,73,173

7/01/14

93.55

94.25

90.90

92.05

92.19

2,05,571

2,138

1,89,51,717

8/01/14

92.50 100.05

92.50

99.40

97.70

8,26,365

7,428

8,07,36,791

95

INTERPRETATION:
On open value risen from 89.95 to 93.20 than compare to higher value of
EPS 90.60 to 94.00. Then coming to lower price from 88.40 to 92.00. Wholly the
conclusion is 88.85 to 93.30 raised.
The comings to the volume on the same dates or days volumes are
increased. Because on this session SYNDICATE BANK value is raised i.e.
percentage of 9.21%.

96

CHAPTER-V
FINDINGS
SUGGESSIONS
CONCLUSIONS
BIBLIOGRAPHY
97

FINDINGS

The volume on the same dates or days volumes are increased. Because on this
session WIPRO LTD value is raised i.e. percentage of 5.35%.

The volume on the same dates or days volumes are increased. Because on this
session MAHINDRA & MAHINDRA LTD value is raised i.e. percentage of
53.67%.

The volume on the same dates or days volumes are increased. Because totally
this session TATA COMMUNICATIONS LTD. EPS value is increased i.e.
percentage of 2.93%.

98

The volume on the same dates or days volumes are increased. Because on this
session SYNDICATE BANK value is raised i.e. percentage of 9.21%.

CONCLUSION
The comprehensive study of capital market instrument at Inter Connected
stock exchange has been an enlightening experience stressing on the
positive aspects on Dematerialization.
And settlement of shares, derivative market and capital instrumentshas
done in whole lot of good to the issuer, investor companies and country.
The depository systems has reduced the lag in delivery and settlement of
securities but also supported the cause of providing more liquidity to the
security holder, the need for setting up of a depository paper less trading.

99

 Through online trading system and settlement became inevitable and

unavoidable for the smooth and the efficient functioning of the capital
market.
This system has proved its worthiness by increasing in the speed of
transactions within T+3 days which are earlier T+5 days.
Now there is a proposal that the settlement will be done within T+1days in
near future which is in it an indication of a boon in the system of demat
and capital market instruments.
It has been fairly long since derivative trading started off on the Indian
Indexes.
Actively has failed to really take off with low figures being transacted in
terms of value and volumes.
The introduction of derivative trading was hailed by the punters in the
capital markets but has not really brought about a wave so as to speak.
There are several factors, which impede the growth of the derivative
markets in India.
Of these factors the absence of clear guidelines on tax-related issues and
the high cost of transactions are the most prominent.

100

SUGGESSIONS

I recommend the exchange authorities to take steps to educate Investors about

their rights and duties. I suggest to the exchange authorities to increase the
investors confidences.

I recommend the exchange authorities to be vigilant to curb wide fluctuations of

prices.

The speculative pressures are responsible for the wide changes in the price, not
attracting the genuine investors to the greater extent towards the market.
101

Genuine investors are not at all interested in the speculative gain as their
investment is based on the future profits, therefore the authorities of the exchange
should be more vigilant to curb the speculation.

Necessary steps should be taken by the exchange to deal with the situations
arising due to break down in online trading.

BIBLIOGRAPHY
BOOKS:

Investment management

Investment management

-V.K.Bhalla
-Preethi Singh
Security Analysis And Portfolio Management
-V.A.Avadhani
Marketing of Financial Services
-V.A.Avadhani
Indian Financial System
-M.Y.Khan
102

WEBSITES:

www.indiainfoline.com
www.bseindia.com
www.sebi.com
www.moneycontrol.com
www.economictimes.com
www.nseindia.com

MARKET WATCH WINDOWS:

BLUE COLOUR INDICATE SHARE VALUE INCREASE
RED COLOUR INDICATE SHARE VALUE DECREASE
NSE Scrips

103

NSE & BSE Scrips

(BUY Order Form)

104

(Sell Order Form)

(Market Depth)
105

(Order Book)

Client Margin
106

Trade Book

Client Activity Report

107

Exercise Report

108