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A Summer Internship Project Report on ANALYZING EFFECT OF TOP FIVE BANKS AND BANKING SECTOR INDEX ON STOCK MARKET

OF INDIA . Submitted in fulfillment of the requirements for the degree of Post Graduate Diploma in Management (Finance) By UVESH KUNDA (Roll No.B-29) Under the guidance of MSS. SHUBHRA SINHA A Study Conducted for IIFL

At Indira School of Business Studies, Tathawade, Pune 411033 (2009-11)

ACKNOWLEDGEMENT

I would like to express my greatest gratitude to the people who have helped me and supported me throughout my project. It is my immense privilege to thank all those who helped me in molding and shaping my project. Without their guidance, cooperation and best wishes it would have not been possible for me to complete my training and report satisfactorily, I express my thanks to Mr.ANTRIKSH MANUJA for all the valuable support throughout the training period and successful completion of this report. I am grateful to Mr.NEERAJ,Mr.HITESH, for their continuous support for the project, from initial advice and contacts in the early stages. Their selected views, moral support and proper guidance helped me in beautifying the project and that too in a scheduled time. A special thanks of mine goes to Mss SHUBHRA SINHA, my internal guide and my colleagues who helped me in completing the project & who exchanged his/her interesting ideas, thoughts & made this project easy and precise. Finally I wish my thanks to my parents for their undivided support and interest who aspired me and encouraged mAe to go my own way, without whom I would be unable to complete my project. At last but not the least I want to thank all those who appreciated me for my work, motivated me and for being kind enough to help me whenever I needed them. And finally to God who made everything possible.

CONTENTS

Sl.No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

Particulars Introduction Industry / Company overview Theoretical background Objectives Research Methodology Analysis Findings Conclusion Limitations Recommendations Bibliography

Page numbers 1-3 4-11 12-17 18-19 20-22 23-61 62-64 65-66 67-68 69-70 71-72

CHAPTER-1 INTRODUCTION

Every modern A financial system economy is based on a sound financial system is a set of institutional arrangements through which financial surpluses are mobilized from the units generating surplus income and transferring them to the others in need of them. The activities include production, distribution, exchange and holding of financial assets/instruments of different kinds by financial institutions, banks and other intermediaries of the market. The financial markets have two major components; they are Money market ,Capital market,Financial Markets,New issue (Primary),Stock(Secondary) Market. MONEY MARKET: The Money Market refers to the market where borrowers and lenders exchange short-term funds to solve their liquidity needs. CAPITAL MARKET: The Capital Market is a market for financial investments that are direct or indirect claims to capital (Gart, 1988). SECURITIES MARKET: It refers to the markets for those financial instruments/claims/obligations that are commonly and readily transferable by sale. It has two inter-dependent and inseparable segments, the new issues (primary) market and the stock (secondary) market. SECONDARY MARKET: The secondary market enables those who hold securities to adjust their holdings in response to changes in their assessment of risk and return. PRIMARY MARKET: The Primary Markets provides the channel of sale of new securities.

DEFINITION OF THE PROJECT: To Analyze the effect of top five banks and banking sector index on stock market of India. PURPOSE OF THE STUDY: PRIMARY PURPOSE:How INDIA INFOLINE Ltd is best services providers as a stock broker in the Tri-city region.

SECONDARY PURPOSE: 1. To know about the awareness towards stock brokers and share market.

2. To study about the competitive position of INDIA INFOLINE Ltd in Competitive Market. 3. To study about the effectiveness & efficiency of INDIA INFOLINE Ltd in relation to its competitors 4. To study about whether people are satisfied with INDIA INFOLINE Services & Management System or not SCOPE:-

1. Identification of investors, objectives, constraints & preferences. 2. Marketing strategies are to be developed & implemented tune with investment policies are formulated.
SALIENT CONTRIBUTION TO THE PROJECT: India Infoline is one of the major Financial support firms which provides more products and services. The company and information which helped me a lot to find some critical facts. I did able to do a successful SWOT, PEST analysis to find about some information about customer power , threat of compititors etc. in order of Five sales forces. I tried to analyze that what company is doing in the field of Equity services, and again in terms of product that provide a suitable solution to end user. They are always been a successful in every field wherever they put their stamp on.

OUTLINE OF PROJECT REPORT:


On the basis of the study it is found that IndiaInfoline Ltd is better services provider than the other stockbrokers because of their timely research and personalized advice on what stocks to buy and sell. Infoline Ltd. provides the facility of Trade tiger as well as relationship manager facility for encouragement and protects the interest of the investors. It also provides the information through the internet and mobile alerts that what IPOs are coming in the market and it also provides its research on the future prospect of the IPO. Study also concludes that people are not much aware of commodity market and while its going to be biggest market in India. The company should also organize seminars and similar activities to enhance the knowledge of prospective and existing customers, so that they feel more comfortable while investing in the stock market.

COMPANY OVERVIEW
INDIA INFOLINE. We are a one-stop financial services shop, most respected for quality of its advice, personalised service and cutting-edge technology. Vision Statement: Our vision is to be the most respected company in the financial services space.

India Infoline Group: The India Infoline group, comprising the holding company, India Infoline limited and its wholly-owned subsidiaries, straddle the entire financial services space with offerings ranging from equity research, equities and derivatives trading, commodities trading, portfolio management services, mutual funds, life insurance, fixed deposits, goi bonds and other small savings instruments to loan products and investment banking. India Infoline also owns and manages. websites www.indiainfoline.com andwww.5paisa.com the company has a network of over 2100 business locations (branches and sub-brokers) spread across more than 450 cities and towns.

India Infoline Group Subsidiaries :

India Infoline Media and Research Services Limited India Infoline Commodities Limited India Infoline Marketing & Services India Infoline Investment Services Limited IIFL (Asia) Pte Limited

Our Global Presence: USA, Dubai, Singapore.

HISTORY: We were founded in 1995 by Mr. Nirmal Jain (Chairman and Managing Director) as an independent business research and information provider. We gradually evolved into a one-stop financial services solutions provider. Our strong management team comprises competent and dedicated professionals

We are a pan-India financial services organization across 1,361 business locations and a presence in 428 cities. Our global footprint extends across geographies with offices in New York, Singapore and Dubai. We are listed on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE).

We offer a wide range of services and products comprising broking (retail and institutional equities and commodities), wealth management, credit and finance, insurance, asset management and investment banking.

We are registered with the BSE and the NSE for securities trading, MCX, NCDEX and DGCX for commodities trading, CDSL and NSDL as depository participants. We are registered as a Category I merchant banker and are a SEBI registered portfolio manager. We also received the FII license in IIFL Inc. IIFL Securities Pte Ltd received approval from the Monetary Authority of Singapore to carry out corporate advisory and dealing in securities operations. Two subsidiaries India Infoline Investment Services and Moneyline Credit Limited are registered with RBI as non-deposit taking non-banking financial services companies. India infoline Housing Finance Ltd, the housing finance arm, is registered with the National Housing Bank.

PRODUCTS AND SERVICES :

Equities

Indiainfoline provided the prospect of researched investing to its clients, which was hitherto restricted only to the institutions. Research for the retail investor did not exist prior to Indiainfoline. Indiainfoline leveraged technology to bring the convenience of trading to the investors location of preference (residence or office) through computerized access. Indiainfoline made it possible for clients to view transaction costs and ledger updates in real time.

APPLY IN IPOs You could also invest in Initial Public Offers (IPOs) online without going through the hassles of filling ANY application form/ paperwork.

PMS

Our Portfolio Management Service is a product wherein an equity investment portfolio is created to suit the investment objectives of a client. We at Indiainfoline invest your resources into stocks from different sectors, depending on your risk-return profile. This service is particularly advisable for investors who cannot afford to give time or don't have that expertise for day-to-day management of their equity portfolio.

Research

Sound investment decisions depend upon reliable fundamental data and stock selection techniques. Indiainfoline Equity Research is proud of its reputation for, and we want you to find the facts that you need. Equity investment professionals routinely use our research and models as integral tools in their work. They choose Ford Equity Research when they can clear your doubts.

Commodities

Indiainfolines extension into commodities trading reconciles its strategic intent to emerge as a one-stop solutions financial intermediary. Its experience in securities broking has empowered it with requisite skills and technologies. The Companys commodities business provides a contra-cyclical alternative to equities broking. The Company was among the first to offer the facility of commodities trading in Indias young commodities market (the MCX commenced operations only in 2003). Average monthly turnover on the commodity exchanges increased from Rs 0.34 bn to Rs 20.02 bn. The commodities market has several products with different and non-correlated cycles. On the whole, the business is fairly insulated against cyclical gyrations in the business.

Mortgages

During the year under review, Indiainfoline acquired a 75% stake in Moneytree Consultancy Services to mark its foray into the business of mortgages and other loan products distribution. The business is still in the investing phase and at the time of the acquisition was present only in the cities of Mumbai and Pune. The Company brings on board expertise in the loans business coupled with existing relationships across a number of principals in the mortgage and personal loans businesses. Indiainfoline now has plans to roll the business out across its pan-Indian network to provide it with a truly national scale in operations.

Home Loans Get expert advice that suits your needs

Personal Loans Freedom to choose from 4 flexible options to repay

Loan against residential and commercial property Expert recommendations Expert recommendations Easy documentation Easy documentation Quick processing and disbursal Quick processing and disbursal No guarantor requirement No guarantor requirement

INDUSTRY OVERVIEW
The Indian Equity Market is more popularly known as the Indian Stock Market. The Indian equity market has become the third biggest after China and Hong Kong in the Asian region. According to the latest report by ADB, it has a market capitalization of nearly $600 billion. As of March 2009, the market capitalization was around $598.3 billion (Rs 30.13 lakh crore) which is one-tenth of the combined valuation of the Asia region. The market was slow since early 2007 and continued till the first quarter of 2009. A stock exchange has been defined by the Securities Contract (Regulation) Act, 1956 as an organization, association or body of individuals established for regulating, and controlling of securities. The Indian equity market depends on three factors y y y

Funding into equity from all over the world Corporate houses performance Monsoons

The stock market in India does business with two types of fund namely private equity fund and venture capital fund. It also deals in transactions which are based on the two major indices - Bombay Stock Exchange (BSE) and National Stock Exchange of India Ltd. (NSE). The market also includes the debt market which is controlled by wholesale dealers, primary dealers and banks. The equity indexes are allied to countries beyond the border as common calamities affect markets. E.g. Indian and Bangladesh stock markets are affected by monsoons. The equity market is also affected through trade integration policy. The country has advanced both in foreign institutional investment (FII) and trade integration since 1995. This is a very attractive field for making profit for medium and long term investors, short-term swing and position traders and very intra day traders. The Indian market has 22 stock exchanges. The larger companies are enlisted with BSE and NSE. The smaller and medium companies are listed with OTCEI (Over The counter Exchange of India). The functions of the Equity Market in India are supervised by SEBI (Securities Exchange Board of India).

Scope of Indian market


Times are really quite exciting; an ever increasing plethora of events followed the global financial crisis. With globalization and innovation in the financial markets at its peak - it is very essential to study the market risks and requirements. Over the years, the India stock market has undergone major changes to remain at par with the global peers. With global trade and finance getting more dynamic day by day, the India stock market is not far behind to experience these developments. This has helped the financial structure of India get more innovative.

Main players in Indian stock market The India stock market is steered on by the two exchanges viz, Bombay Stock Exchanges (BSE) and National Stock Exchange (NSE). The trade and business of the entire country is dependant on the performance of these two main stock exchanges. Any minor developments in the economy might push the indexes on these exchanges down or vice versa.

Key strength of Indian stock market The India stock market boasts of a fully automated trading system on all stock exchanges, provides a wide range of products. It is an integrated platform to trade in both cash and derivatives and has a host of around 4,000 corporate brokers all across India. The stock market of India has made considerable progress following its international peers and the modern market mechanisms have helped them create a niche for themselves. The market regular, Securities and Exchange Board of India (SEBI) plays an important role in the management of the stock exchanges in India. The regulatory methods are sound - in terms of intermediaries, trading mechanism, settlement cycles, risk management, derivative trading. The usage of Information technology is to a large extent responsible for the outstanding performance of the stock markets in India. The two main players of the India stock market - NSE and BSE have outshone all the other exchanges and majority of the stocks are listed on these two exchanges. The market participants are ever increasing, the volume of securities has been growing, transaction costs are getting reduced, and there is significant improvement in efficiency, transparency and safety. The international standards are well complied with to maintain global standard of performance.

Important elements of India stock market y y y y

Investors Issuers Intermediaries Regulators

If all these four elements are taken good care of from the onset, a stock market can easily exhibit sound growth and perform exponentially.

Main components of Indian stock market Bombay Stock Exchange (BSE) Bombay Stock Exchange is known to be the oldest stock exchange in the entire Asian region. If someone wants to know about the history of the India share market, it becomes synonymous with the history of the Bombay Stock Exchange. It started functioning in 1875 with the name 'The Native Share and Stock Broker's Association'. Under the Securities Contracts (Regulation) Act, 1956, the association got its recognition as a stock exchange in 1956. When it started, it was just an association of persons but with the recognition it got transferred to a corporate and demutualised entity.
y y y y

Trading items in Bombay Stock Exchange Equity or Shares Derivatives (Futures and Options) Debt Instruments

The main index of BSE is known as the BSE SENSEX or simply SENSEX (Sensitivity Index). It is an index which comprises of 30 financially sound company scrips, with an option to be reviewed and modified from time-to-time. The index calculation is based on the 'Free-float Market Capitalization' methodology. Leading bourses like the Dow-Jones also follow this methodology. Currently the Sensex is hovering around the 17,000 mark, all expected to touch 20K by 2010. But then volatility has its important role to spoil the entire game. National Stock Exchange (NSE) National Stock Exchange (NSE) is considered to be the leader in the stock exchange scenario in terms of the total volume traded. The market capitalisation the National Stock Exchange touched about $921.31 billion at the end of May 2009. The National Stock Exchange received the recognition of a stock exchange in July 1993 under Securities Contracts (Regulation) Act, 1956. The products that are traded in the National Stock Exchange are:-

y y y y y

Equity or Share Futures (both index and stock) Options (Call and Put) Wholesale Debt Market Retail Debt Market

NSE has a fully automated screen based trading system which is known as the NEAT system. The transactions are carried on with speed, efficiency, and are all transparent. The risk management system of the National Stock Exchange is world class and can be considered as the benchmark for other bourses. The leading index of NSE is known as Nifty 50 or just Nifty. It comprises of 50 diversified benchmark Indian company scrips and is constructed on the basis of weighted average market capitalization method.

Regulatory Authority of Indian Share Market SEBI or Securities and Exchange Board of India is the market watchdog and has the responsibility of protecting the investors' interests, develops regulatory norms and helps in the development of the securities market in India.

THEROTICAL BACKGROUND The microstructure of the stock market in which brokers work is highly dynamic and volatile. Many stocks are available to be bought and sold, each exhibiting its own patterns and characteristics that are highly unpredictable. With so many options and considerations that need to be taken into account, it is an extremely arduous task for a broker to investigate aspects of the stock market and consistently provide effective advice to their clients.Thus, brokers perform their day-to-day tasks with the aid of a broker system. Such a system should provide tools for interacting with exchanges and performing analysis. As a consequence, these broker systems are quite large and complicated by themselves. This research aims is to analysis Stock broker on the basis of their services, products, growth, and their subsidiaries. Because Stockbrokers are one of the main participants in stock exchanges worldwide, they often act as an agent for their clients, making trades on their behalf. They also act as advisors, providing suggestions toTheir clients on what stocks to buy and sell. A known devil is better than an unknown angel,awareness refers to the strength of a brands presence in the consumers mind Consumers instinctively prefer a brand that they brand has an edge,brand signals the source of the product have previously seen to one that is new to them Protects customer and producer from competitors who have identical products Consumers form relationships with brands, not products or companies Brand makes an emotional and trustbased connection with consumer and distinguishes it from competition.

REVIEW OF LITERATURE According to SEBI, Professional Rating of market intermediaries, as a concept, is a matter of debate and discussions. The need for rating is felt not only from the point of view of greater disclosure requirements for investors interests, considering the important role such intermediaries play, being an interface between investors and exchanges but also from the point of view of measuring the adequacy of systems and controls to meet internal as well as external compliance requirements. So that need for Intermediaries Rating services (Brokers), In view of the developments that are taking place in the capital markets, the need to constantly upgrade and improve systems and procedures in operation as well as skill sets has gained considerable importance. And Rating objectives / benefits are rated entity would be in a position to brand its image and capitalize the same for generating more business. According to Michal Parness, Founder & CEO Investors dont Make Money in the Stock Market.One reason the institutions make so much money is that they are trading. They make money every time you buy or sell. They make money whether you win or lose. That means that when youre investing, youre basically just sitting there. Youre not going anywhere. Youre not making money as an investor. Trading the Trend: The Only Way to Make Money in the Market If you dont know this already, Trend Trading means trading trends based on human emotions. Not lagging indicators. Not complex statistical analysis and not Ph.D. level mathematical equations. With trend trading, you look for market movement. That could mean stocks that are going to move up or down during the course of a day (intraday). Youll play the gaps up and down, often several days a week. The Trend trading means being aware and taking advantage of trends like the run-ups that happen around earning sessions. These are trends that have worked time and time again in the market. They consistently yield results.

1. A stock market or equity market is a public market (a loose network of economic transactions, not a physical facility or discrete entity) for the trading ofcompany stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.

2. The stocks are listed and traded on stock exchanges which are entities of a corporation or mutual organization specialized in the business of bringing buyers and sellers of the organizations to a listing of stocks and securities together.

3. The stock or capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors. Stock is distinct from the property and the assets of a business which may fluctuate in quantity and value.

4. Preferred stock, also called preferred shares, preference shares, or simply preferreds, is a special equity security that has properties of both an equity and a debt instrument and is generally considered a hybrid instrument. Preferreds are senior (i.e. higher ranking) to common stock, but are subordinate to bonds

5. Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc. On the other hand, common shares on average perform better than preferred shares or bonds over time

6. A Registered share is a stock that is registered on the name of the exact owner. If the owner of such a share sells his share, the new owner must register with name and address.Registered shares offer issuers the advantage, enabling them to always know exactly who their shareholders are. Unexpected surprises with active investors could be prohibited with that stock-vehicle.

7. A voting share (also called common stock or ordinary share) is a share of stock giving the stockholder the right to vote on matters of corporate policy and the composition of the members of the board of directors.

8. The term Demat, in India, refers to a dematerialised account. For individual Indian citizens to trade in listed stocks or debentures. The Securities Exchange Board of India (SEBI) requires the investor to maintain a Demat account. In a demat account shares and securities are held in electronic form instead of taking actual possession of certificates. A Demat Account is opened by the investor while registering with an investment broker (or sub broker). The Demat account number which is quoted for all transactions to enable electronic settlements of trades to take place.

9. A Depository Participant (DP) is described as an agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the provisions of the SEBI Act. As per the provisions of this Act, a DP can offer depository-related services only after obtaining a certificate of registration from SEBI.

10. Depository is an institution or a kind of organization which holds securities with it, in which trading is done among shares, debentures, mutual funds, derivatives, F&O and commodities. The intermediatories perform its actions in various kinds of securities at Depository on the behalf of its clients. These intermediatories are called Dipositories Participants. There are basically two kinds of depositories in India. One is the National Securities Depository Limited (NSDL) and the other is the Central Depository Service

Limited(CDSL). Every Depository Participant (DP) needs to be registered under this Depository before starting operation or trade in the market.

11. Demat Account Opening : A demat account is opened on the same lines as that of a Bank Account. Prescribed Account opening forms are available with the DP, needs to be filled in. Standard Agreements are to be signed by the Client and the DP, which details the rights and obligations of both parties. Along with the form the client requires to attach Photographs of Account holder, Attested copies of proof of residence and proof of identity needs to be submitted along with the account opening form.In case of Corporate clients, additional attachments required are - true copy of the resolution for Demat a/c opening along with signatories to operate the account and true copy of the Memorandum and Articles of Association is to be attached

12. National Securities Depository Limited (NSDL), the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standards that handles most of the securities held and settled in dematerialised form in the Indian capital market.

OBJECTIVES OF THE STUDY PRIMARY OBJECTIVE :- To know effect of ten major stocks on stock market .

SECONDARY OBJECTIVE: -

RESEARCH METHODOLOGY

TYPES OF RESEARCH On the basis of theoretical study a research has many types. All of these are distributed on the nature of research. Some of these are like 1. Descriptive and Analytical 2. Qualitative and Quantitative 3. Conceptual and empirical 4. Applied and fundamental 5. One time research Our research is based on Descriptive, Qualitative and Quantitative research. Descriptive Research:Descriptive research includes surveys and fact finding enquires of different kinds. The major purpose of descriptive research is description ofthe state of affairs as it exists at present. Researcher has no control over the variables of this type of research. Qualitative Research:In our research we need comparison between different stock brokers. So this based on all qualitative data. In short, Qualitative research is especially important in the behavioral sciences where the aim is to discover the underline motives of human behavior. Through such research we can analyses various factors which motivate to people to behave in a particular manner or which make people like or dislike a particular thing.

Quantitative research:Quantitative research is based on the measurement of quantity or amount. It is applicable to phenomena that can be expressed in terms of quantity. So we can use it in our research for collection of all the numerical data. SAMPLE DESIGN A sample design is a definite plan for obtaining a sample from a given population. It refers to the technique or the procedure the researcher would adopt in selecting item for the sample Generally Sample designs are two types 1.PROBABILITY RESEARCH DESIGN 2. NON PROBABILITY RESEARCH DESIGN We used the probability research design. SAMPLING UNITS Sampling unit may be a geographical one, such as state, district, village etc. The researcher will have to decide one or more of such units that he has to select for his study and my sample

SIZE OF SAMPLE This refers to the number of items to be selected from the universe to constitute a sample

In our research sample size is 100. But we also study the 5 stock broker companies related to security & commodity market like Indiainfoline, ICICIdirect, HDFC securities, Karvy consultant ltd. for the appropriate collection of the information. SOURES OF DATA COLLECTION While deciding about the method of data collection to be used for the study the researcher should keep to types of data. 1. Primary 2. Secondary Data. We use in our research primary data, as well as secondary data. Primary means collected a fresh, and the first time data and secondary means which are already available like annual report, magazines etc. Survey Method: Survey refers to the method of securing information concerning phenomena under study from all or selected number of respondents of the concerned area. In a survey the investigator examines those phenomena which exist in the universe independent of his action. We used the Scheduling Method.

Scheduling: In this method the enumerators along with schedules, go to respondents, put to them the questions from the Performa in the order the questions are listed and recorded the replies in the space meantfor the same in the Performa.