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A PROJECT REPORT ON STUDY OF THE STOCK BROKING INDUSTRY

A project report in partial fulfillment for the degree of Master in Business Administration from Asia-Pacific Institute of Management

BY RUPEN SINGHAL 2K11B25 M.B.A (FIRST YEAR)

FACULTY GUIDE: DR. PRACHEE MISHRA

ASIA-PACIFIC INSTITUTE OF MANAGEMENT


3 & 4 INSTITUTIONAL AREA, JASOLA, OPP. SARITA VIHAR, NEW DELHI-110025 ACKNOWLEDGEMENT

It gives me great pleasure in presenting the Project Report that gives the details of my project on Study of the stock broking industry carried out in Amrapaliaadya Trading & Investment Firm Pvt. Ltd. I thank the college guide Dr. Prachee Mishra for her kind and consistent guidance and help during the project work. It is impossible to list all the people who have helped me during my project. I take this opportunity to express whole hearted thanks to Mr. Ashish Singh; Marketing Manager of Amrapaliaadya, Mr. Vijay Rana who gave me the guidance to undertake the project work. I would like to thank Mr. Vinod Agarwal (Franchisee) who guided me at every step in the execution of the project & their experience and valuable guidance were very helpful. I would like to express my deep sense of gratitude towards all Managers, Staff and workers and to all those who directly or indirectly helped us in successful completion of project.

Rupen Singhal

CERTIFICATE

This is to certify that the Project Report titled, Study of the stock broking industry is a bonafied work carried out by Rupen Singhal, a student of M.B.A (First Year) of Asia-Pacific Institute of Management, in partial fulfillment of Degree of M.B.A from Asia-Pacific Institute of Management. He has worked under our guidance and direction.

_________________ Signature of Director Date: Place:

______________ Signature of Guide Date: Place:

CONTENTS

SR.NO.

TOPIC

PAGE NO.

EXECUTIVE SUMMARY

This project is an attempt to understand the basics of stock market. A project which will make me well versed with the Stock market concepts, verticals in the stock broking firm, various products available with the broking firm, fundamental & a little bit of technical analysis, and at last how does a stock broking firm works. The chapter On Job Training explains the steps that I took in understanding the equity market. It mentions a step by step detail of how I went by in order to answer my own doubts & the techniques that I used to go ahead. It also gives a detailed report of my summer internship done at the company. It gives the jobs assigned to me at work, followed by the methods which I undertook in going about my internship. The next chapter gives a brief description about the company where I did my internship from, which is AmrapaliAadya Trading & Investment Firm Pvt. Ltd. which is a 100% subsidiary of Amrapali Group (Real Estate Group). The next chapter is on Stock market concepts and various terms; segments; risks explains in detail the entire working of the stock market, its role, importance, services provided, depository participant. The next chapter gives brief analysis of Broking and Investment Management Industry, it describes economy overview, industry overview. It also gives Analysis of Amrapali Aadya Trading & Investment Firm Pvt. Ltd. & India Bulls Securities Pvt. Ltd. The next chapter gives Financial Analysis of Inter firms, Intra firm & Industry analysis. The conclusion gives the details about the learning that I have gained in the company and the findings I did while doing the analysis and suggestions recommended.

INTRODUCTION TO THE STUDY INTRODUCTION OF STUDY INTRODUCTION The following project is a study of the stock broking industry. The capital market (securities markets) is the market for securities, where companies and the government can raise long-term funds. The capital market includes the stock market and the bond market. A stock market is a market for the trading of company stock and derivatives. The objectives of my internship are as follows: Understanding the various activities in an Stock- Broking firm. To get acquainted with all the workings of online trading as well as manual trading. To gain practical knowledge in share trading To analyze the financial market & the share movements in order to study the prospects of investing in a particular stock or sector. The aim of the project is to understand the overall equity market, to get to know the trading, clearing & settlement aspect of the equity market. As far as this project is concerned, it will help us to understand the overall working of the equity market & its importance to the economy of the India. A huge amount of money flows & millions of shares exchange hands in a single market day. This exchange of shares enables the flow of money in & out of a firm. The company whose shares are listed & the government who plays a vital role through the policies formed in the market, helps them to raise long term funds which can be used for the benefit & the growth of the companies & also gives back some part of their profit to the investor in the form of dividends. Also through this project what I am trying to derive is the Detail Study of Stock market role and concepts; its importance and the financial modelling concluding with the opportunities of investing in the sector. The reason why I have selected Broking and Investment Management sector is because of the growth in the earning power of the individual, each one aims a creating

wealth by some of the other way. This is one of the most booming on huge amount of are flowed in this sector and with that there is growth of the economy in general and also there is huge investment opportunities in the sector & also to understand this sector for my future growth as a equity advisor for the sector. SCOPE: The scope of this project is limited to only one sector i.e. Broking & Investment Management sector. This project is concerned with only one sector in the stock market. The project does not extend its scope to any other sector of companies. Source of information for this project is Primary source: Amrapali Aadya had provided with Reports as well as various links. Secondary source: The information about the Stock Market, Products Available with the broking firm, and other data of Stock Broking firm India Bulls is all from websites, annual report, data bank of the firms.

COMPANY PROFILE AMRAPALIAADYA TRADING AND INVESTMENT FIRM PVT. LTD. AmrapaliAadya family welcomes all the investors to a highly committed and dependable financial organization that strives to deliver the best of investment related services. At Amrapali Aadya, we believe and dare to do what other financial and stock broking houses feel impossible in terms of client satisfaction. We are new but confident name in financial market. The company is always aggressive to adopt the latest technologies for its operations. AmrapaliAadya is using some of the best brains in trading and some of the best software and hardware systems to give its clients maximum profit. We are incorporated in 2004, having membership of National Stock exchange (NSE). We offer a large variety of investment avenues to cater to the needs of different classes of investors by our physical presence in different parts of India. Advantages: Internet Trading Electronic Contract Notes Risk Management and Surveillance Online Banking Gateway Online Back Office Integration Depository Services End To End Trade Solutions Exclusive Services for HNI and NRI Clients Mutual Fund, IPOs and Insurance

INTRODUCTION TO STOCK MARKET

A Stock Market or Equity Market is a public entity i.e. a loose network of economic transactions, not a physical facility or discrete entity for the trading of company stock or shares and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately. --- According to Wikipedia The market in which shares are issued and traded either through exchanges /over-the-counter markets. Also known as the equity market, it is one of the most vital areas of a market economy as it provides companies with access to capital and investors with a slice of ownership in the company and the potential of gains based on the company's future performance. --- According to Investopedia A Stock Market is a place that provides facilities to stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus it is the meeting place of the stock buyers and sellers. Various examples of the Stock Market are:1) 2) 3) 4) National Stock Exchange of India Bombay Stock Exchange NASDAQ NYSE

SEGMENTS OF THE STOCK MARKET

Stock Market can be categorized into two parts or two segments i.e. 1) 2) 1) Primary Market Secondary Market Primary Market

An Issuer/Company enters the Primary markets to raise capital. They issues new securities in Exchange for cash from an investor (buyer). If the Issuer is selling securities for the first time, these are referred to as Initial Public Offers (IPO's). Summing up this, Primary Market is the means by which companies float shares to the general public in an Initial Public Offering to raise capital. Eg. If the promoters of a private company, say XYZ makes its shares available to investors, company XYZ is said to have entered the primary market. 2) Secondary Market

Once new securities have been sold in the Primary Market, an efficient mechanism must exist for their resale, if investors are to view securities as attractive opportunities. Secondary Market transactions are referred to those transactions where one investor buys shares from another investor at the prevailing market price or at whatever price both the buyer and seller agree upon. In India, the Secondary and Primary Markets are governed by SEBI. For eg. If one of the investors who had invested in the shares of company XYZ sold it to another at an agreed upon price, a Secondary Market transaction is said to have taken place. Normally investors transact in securities using an intermediary such as a broker who facilitates the process.

STOCK MARKET CONCEPTS # Stock Exchange The Securities Contract (Regulation) Act, 1956 [SCRA] defines Stock Exchange as anybody of individuals, whether incorporated or not, constituted for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in securities. Stock exchange could be a regional stock exchange whose area of operation/jurisdiction is specified at the time of its recognition or national exchanges, which are permitted to have nationwide trading since inception. NSE was incorporated as a national stock exchange. Securities traded on a stock exchange include shares issued by companies, unit trusts, derivatives, pooled investment products and bonds. To be able to trade a security on a certain stock exchange, it must be listed there. Usually, there is a central location at least for record keeping, but trade is increasingly less linked to such a physical place, as modern markets are electronic networks, which gives the advantages of increased speed and reduced cost of transactions. Trade on an exchange is done by members only. Role of Stock Exchange a) Raising capital for businesses The Stock Exchange provide companies with the facility to raise capital for expansion

through selling shares to the investing public. b) Creating investment opportunities for small investors Investing in shares is open to both the large and small stock investors because a person

buys the number of shares they can afford. Therefore the Stock Exchange provides the opportunity for small investors to own shares of the same companies as large investors. c) Corporate governance By having a wide and varied scope of owners, companies generally tend to improve

management standards and efficiency to satisfy the demands of these shareholders, and the more stringent rules for public corporations imposed by public stock exchanges and the government.

IMPORTANCE OF STOCK MARKET Function and purpose The stock market is one of the most important sources for companies to raise money. This allows businesses to go public, or raise additional capital for expansion. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate. History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central bank tends to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the important outlook of central banks. Exchanges also act as the clearinghouse for each transaction, meaning that they collect and deliver the shares, and guarantee payment to the seller of a security. The smooth functioning of all these activities facilitates economic growth in that lower cost and enterprise risks promote the production of goods and services as well as employment. In this way the financial system contributes to increased prosperity.

# Risk involved in the Stock Market


a) Market Risk

- This is the risk of investing in the stock market in general. It refers to a chance that a
securities value might decline. Although a particular company may be doing poorly, the value of its stock can go up because the stock market value is collectively going up. Conversely, your company may be doing very well, but the value of the stock might drop because of negative factors inflation, rising interest rates, political instability etc. that are effecting the whole market. All stocks are affecting by market risk.

b) Industry Risk
- This is risk that affects all companies in a certain industry. For e.g. Utility Companies, are often viewed as relatively low in risk because the utility industry is stable and operates in a predictable environment with relatively little change. In contrast, internet and other technology industries are usually viewed as high in risk because the industry is changing so quickly and unpredictably. The dotcom bubble burst in the 90s affected the valuation of all stocks in that industry. All stocks within an industry are subject to industry risk.

c) Regulatory Risk
- Virtually every company is subject to some sort of regulation. It refers to the risk that the government will pass new laws or implement new regulations, which will dramatically affect a business.

d) Business Risk
- These are the risks unique to an individual company. It refers to the uncertainty regarding the organizations ability to perform business or provide service Products, strategies, management, labor force, market share, etc. Which are among the key factors investors consider in evaluating the value of a specific company.

# Tools for Analysis of Stocks When day trading, a trader makes the decision about what to trade, when to trade, and how to trade, using either fundamental or technical analysis. Both forms of analysis involve looking at the available information and making a decision about the future price of the market being traded, but the information that is used is completely different. A) Fundamental Analysis

Fundamental traders use information about the global and national economies, and the financial state of the companies involved, as well as non financial information such as current political and weather information. Fundamental traders believe that the markets will react to events in certain ways and that they can predict future market prices based on these events. For example, if a company receives regulatory approval for a new product, a fundamental trader might expect the company's stock price to rise. Conversely, if a company has a financial scandal, a fundamental trader might expect its stock price to fall. Fundamental traders need access to all of the available information as soon as it is available, and are therefore often institutional traders with large support teams, rather than individuals B) Technical Analysis

Technical traders use trading information (such as previous prices and trading volume) along with mathematical indicators to make their trading decisions. This information is usually displayed on a graphical chart and is updated in real time throughout the trading day. Technical traders believe that all of the information about a market is already included in the price movement, so they do not need any other fundamental information (such as earnings reports).

MAJOR PLAYERS IN THE STOCK BROKING INDUSTRY 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 SHAREKHAN ANAND RATHI MOTILAL OSWAL INDIABULLS IL&FS HDFC SECURITIES INDIA INFOLINE ANGELBROKING RELIGARE RELIANCE MONEY ICICI DIRECT BONANZA MAGAL KESHAV JAIPURK SECURITIES UTI SECURITIES GEOJIT KARVY MAN FINANCIAL JP MORGAN STANLEY