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TABLE OF CONTENTS
S.NO. TITLE PAGE NOABSTRACT 1
LIST OF TABLES
LIST OF FIGURES1 INTRODUCTION
1.1 OUT LINE OF THE PROJECT 2
1.2 NEED OF THE STUDY 4
1.3 SCOPE OF THE STUDY 5
1.4 OBJECTIVE OF THE STUDY 6
1.5 RESEARCH METHODOLOGY 71.5.1 RESEARCH DESIGN 7
1.5.2 DATA COLLECTION METHODS 8
1.5.3 RESEARCH INSTRUMENTS 9
1.5.4 SAMPLING 9
1.5.5 STATISTICAL TOOLS 10
1.6 LIMITATION OF THE STUDY 13
1.7 CHAPTERIZATION 14
1.8 LITERATURE REVIEW 15
1.8.1 COMPANY PROFILE20
1.8.2 PRODUCT PROFILE 34
2. DATA ANALYSIS AND
INTERPRETATION
2.1 PERCENTAGE ANALYSIS 42
2.1 GRAPHICAL ANALYSIS 42
2.2 STATISTICAL ANALYSIS 76
2.2.1 WEIGHTED AVERAGE 76
2.2.2 CHI-SQUARE 79
3. SUMMARY AND CONCLUSION
3.1 FINDINGS 82
3.2 SUGGESTIONS 87
3.3 CONCLUSIONS 88
APPENDIX 89
REFERENCES 94
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CHAPTER I:INTRODUCTION:
Advertising has always been criticized. The critics are very skeptical about themanipulative effect of advertising; that it can control the minds of the audience
and can drive them to a particular way of thinking. However, there is another
group who disagrees. It believes that advertising truly reflects a culture. People of
this group believe that:
You can tell the ideals of a nation by its advertisements
(Norman Douglas)
Thus, if one wants to have a true picture of a nation, their ads should be viewed,
i.e., the ads reflect the culture. The following text is an attempt to solve this
controversy.
To find out whether advertising reflects the trends or creates them, a
representative sample of about 150 respondents was taken. The respondents
belonged to youth of age group 18-25. Their responses were recorded on a self-
administered questionnaire.
The results are, however, not completely in any sides favor. The respondents
have agreed that advertising has more benefits than drawbacks. They further agree
that advertising has the driving power to make the audience act in a particular
way, and spend in a particular pattern, i.e. advertising does have manipulative
power. Thus, the ads that we view do have impact on the viewers. One particular
thing that is note worthy is the type of ads that respondents like. The initial results
might not clearly be on any one side, but in this regard, the results show that
irrelevant, obscene, and ads that do not conform to our culture have no space in
the audiences diary of likeable ads.
Thus, a safe conclusion would be that the line cannot be drawn whether the
advertising is inherently good or bad. It does have impact, either positive or
negative, it does reflect our culture. The need of the hour is to channel the
energies of ads to constructive impact.
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Advertising
When Semenik (2002, 10) defines advertising, he does so in a very concise
fashion: A paid, mass mediated attempt to persuade A more elaborate definition
of advertising states:
Advertising is the structured and composed, non personal communication of
information, usually paid for and usually persuasive in nature, about products
(goods, services, and ideas) by identified sponsors, through various mass media.
Arens (2002, 7)
This detailed definition has several terms asking for an explanation, that wont go
unattended.First, there is structured and composed, which means that the
advertising follows a definite pattern and that all the areas in an advertisement are
organized. Not only organized, they are all coordinated towards a common goal.
Selling can be done in two ways: Personal, where the seller and the buyer interact
face-to-face, together at the same place; Non-personal, which doesnt require a
face-to-face contact between the buyer and the seller. Advertising is non-personal
way of communication because both the parties are not present face-to-face
together, at the same time. Rather, advertisements use mass media which is
directed at a larger audience.
Communication is defined by Sharma and Singh (2006, 10) as a mean by which
a person can pass information, ideas or feelings to another through speech or
pictures. We communicate through our five senses. But in the world of
advertising, only two senses are required; Sound and Sight. Sound means words
that are uttered. They can be used in a variety of media to create a theatre of the
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mind, where the audience can imagine themselves, enjoying the advertised
product. Sight is the visual display of the advertised product. A picture is still
worth a thousand words and no matter how many words are used, some details
will be left out that are visible at a glance, Sharma and Singh (2006,
12)Information is knowledge, facts, or views. However, the information can be
complete or incomplete, biased or unbiased. The commonly held concept is that
advertisers present incomplete and biased information that favor the advertisers.
And, thinking from the advertisers point of view, it is quite logical. No advertiser
would want the audience to know the harmful aspects of its product, at any cost.
This is also discussed in the conclusions and recommendations section.The media
charges the advertisers for the time and space it provides to the advertisers, thus
advertising is always paid for, except for the Public Service AnnounPaintss
(PSAs) that are shown free of cost and the cost is borne by the media.
Being Persuasive in nature is the basic idea of advertising. All the pain that is
taken to make an ad is only to differentiate the product from that of the
competitors so as to convince people to act in the desired way.
Advertising can be about product, service, or ideas. As already explained, the
product comes in tangible goods, while the other two are intangible. When Honda
advertises its automobiles, its a product, when it mentions the sales and after
sales services, that is service, and finally when it advertises about the benefits of
wearing seat belts while driving, thats an idea.
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What is the advertising all about? Its all about getting people to know about the
company, to identify the sponsor. Without this, the advertiser is likely to be less
successful.
Mass Media are used to reach the target audience. Mass media used can be of
various kinds depending on the target audience and the desired result. The most
commonly used media are TV, radio, newspaper, magazines, billboards. Since
innovation is taking place everywhere, the advertisers have also found innovative
ways to advertise. Interactive advertising, sky-writing, air balloons, and electronic
hoardings are some of the recent innovations.
1.2.1 Classification of Advertising:
It depends on the marketing strategy of the company which type of advertising it
wants to adopt. But generally the advertising is classified in the following heads:
By Target audience:
Just as marketing mix is directed towards a target market, advertising strategies
are directed towards a target audience. It includes:
Consumer advertising:
Consumers are people who buy a product for their own personal consumption.
Most of the advertisements that we see daily belong to this category. Nestle and
Unilever products, Honda cars, Nokia cell phones are all consumer products.
Business advertising:
This advertising is targeted to audience who buy the product for all purposes other
than personal or family satisfaction. It is further classified as:
Trade advertising: advertising aimed at the intermediaries of the channel of
distribution, i.e. the wholesalers and the retailers.
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Professional advertising: advertising aimed at specific professions that require
specific needs to be fulfilled, like lawyers, doctors, engineers.
Agriculture advertising: directed at agri-business, and includes mainly
agricultural input/products. Pakistani media shows a lot of ads for this category.
Commonly seen ads are Engro and FFC fertilizers, tractors, and other
insecticides and pesticides.
Industrial advertising: these ads are directed at the manufacturers of other
products, as machineries, spark plugs etc.
By Geographic area:
Geography determines the type of advertising the company will devise. It
includes:
Local (retail) advertising:
When local stores inform the local audience about the availability of products or
for making any other announPaints, its called local advertising. For example, R-
Sheen, orServis, orWadud Sons announcing a Sale.
Regional advertising:
When a product that is sold in a specific region is advertised, it will be called as
regional advertising. For example Punjab has many specialties that are not
available in other provinces of Pakistan.
National advertising:
In this type of advertising, the products are advertised throughout the country. For
example, any new model of Honda or Toyota is advertised nationally in Pakistan.
International advertising:
It can also be called Global Advertising. A product available globally with no
or minimum variations is advertised through global advertising. Pepsi and Coke
use this strategy.
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By Medium:
Print media: newspapers, magazines, journals.
Broadcast/electronic media: TV, radio.
Out-of-home advertising: billboards, transit, posters, banners, electronic
billboards.
Direct-mail advertising: sent through postal services or e-mails.
Interactive advertising: internet, kiosks.
By purpose:
Product/Non-Product:
When the company wants to advertise a product (including service), that is called
product advertising. On the other hand, if the company wants to improve its
image, create goodwill, wants the people to know that it exists, then its called
non-product advertising.
Commercial/Non-commercial:
When the purpose of the advertising is to earn profit, irrespective of it being
product or non-product, it is called commercial advertising. Any advertisement
not for this purpose may be called as non-commercial advertising.
Primary/selective demand:
Advertising a whole class of products is advertising for primary demand. For
example, when advertising is done for the benefits of using internet, it will be
included in primary demand advertising. If the advertising is able to create a
demand, the specific ads of specified company providing internet connections will
be shown.
Direct action/indirect action:
If the advertiser is seeking an immediate response from the audience, by giving a
toll free number or announcing any free gifts, lets say, for the first 100
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customers, that is called direct action advertising. If the advertising is done just to
create awareness for future transactions, that is an indirect action advertising.
Figure 1: Diagram showing the relation of Customer C with the 4 Ps of the marketing
Mix. (Source: Perreault, William D. and Jerome McCarthy, 2005, 38)
The Two aspects of Advertising
Advertising is the granddaddy of all the promotional tools. Its the most
conspicuous, the most scrutinized, and the most controversial.Semenik (2002,
265)
Just like anything else, advertising also has its opponents and proponents. But the
difference of the advertising dilemma from others is that both the sides are true
and nones view point can be denied. Thus, the advertising industry lies in a
delicate balance ofto be or not to be.
The opponents of advertising say that it plays a manipulative role on its target
audience. It has the power to control the choices that the consumers make. It often
P
P
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portrays such glamorous images that aspires the audience to act in their desired
way, to buy a certain brand of car, wear specific designers clothes, use a
particular cell phone, join a specific fan-club, and visit the advertised location.
Failure to do so can result in dire consequences, ranging from simple inferiority
complex to outright rejection by the society. It is this philosophy that makes the
audience think that advertisers would do whatever they want, to get a bucket full
of cash, and would make the advertisers least concerned with the welfare of the
audience that becomes the customers of the product. This thinking has always
been haunting the advertisers, lest their advertising campaigns might be rejected
on these grounds, altogether.
On the far side there are the proponents of advertising who give hope to the
advertisers. They believe that although the advertising has the power to attract the
audience, but the real power lies with the audience. The audience can only be
attracted to that image which is already embedded in their minds. Remember
when the last time you saw an advertisement after which your response was
pathetic! This is because probably the ad wasnt directed towards you and you
didnt fall in the target audience. The advertisements then, only act as a stimulus,
a catalyst. They argue that how could a person ever be induced to buy something
that he/she doesnt want! The famous saying that Advertisements can sell a
refrigerator to Eskimos is then an exaggeration! And answering to the other
controversy, they say that since advertisers personal image, the companys
reputation, and both of their futures are at stake, therefore, no advertiser and
company would ever want to use dirty tricks in the bag to sell substandard,
harmful products to the customers. Consequently, the buyers can be confident in
buying the advertised products since the company has put its own reputation at
stake.
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History of Advertising
Advertising as a discrete form is generally agreed to have begun with
newspapers, in the seventeenth century, which included line or classified
advertising. Simple descriptions, plus prices, of products served their purpose
until the late nineteenth century, when technological advances meant that
illustrations could be added to advertising, and color was also an option.
An early advertising success story is that of Pears Soap. Thomas Barratt
married into the famous soap making family and realized that they needed to be
more aggressive about pushing their products if they were to survive. He launched
the series of ads featuring cherubic children which firmly welded the brand to thevalues it still holds today. he took images considered as "fine art" and used them
to connote his brand's quality, purity (i.e. untainted by commercialism) and
simplicity (cherubic children). He is often referred to as the father of modern
advertising.
World War I saw some important advances in advertising as governments
on all sides used ads as propaganda. The British used advertising as propaganda to
convince its own citizens to fight, and also to persuade the Americans to join. No
less a political commentator than Hitler concluded that Germany lost the war
because it lost the propaganda battle: he did not make the same mistake when it
was his turn. One of the other consequences of World War I was the increased
mechanization of industry - and hence increased costs which had to be paid for
somehow: hence the desire to create need in the consumer which begins to
dominate advertising from the 1920s onward.
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1.2. Need of the study:
This study is about advertising in Networth Stock Broking Ltd Stock
Broking Ltd. These studies to know the impact of Networth Stock Broking Ltd Stock
Broking Ltd advertising and the brand image created by the Networth
Stock Broking Ltd among competitor.
Findings of the study helps their satisfaction level at Networth Stock
Broking Ltd
SCOPE OF THE STUDY
This study undertaken for The Networth Stock Broking Ltd aims to study
and identify the potential customers.
This has been done by preparing a questionnaire which contains questions
put forth to the respondents which would help is analyzing advertisement
management in Networth Stock Broking Ltd.
All this would help in giving suggestion to The Networth Stock Broking
Ltd in improving Networth Stock Broking Ltd thereby satisfying their corporate
and retail clients
1.4 Objective of the study:
To study the brand image created by Networth Stock Broking Ltd
among competitor.
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To find out the reason for choosing Networth Stock Broking Ltd
To Create New marketing Strategies in Broking Companies
1.5 RESEARCH METHODOLOGY:
INTRODUCTION:
Research methodology is a way to systematically solve the research
problem is to how research is done scientifically. It consists of the different
steps that are generally adopted by the researcher to the study his research
problem along with logic behind them. It is necessary to the researcher todevelop certain tests.
1.5.1 RESEARCH DESIGN:
Research design is a plan to answer whom, when, where, and how the
subject under investigation conceived so as to obtain answers to research
questions. The type of research design involved in this study is descriptive
research studies.
DESCRIPTIVE RESEARCH STUDIES:
Descriptive research studies are those studies, which are concerned with
describing the characteristics of a particular individual, or of a group, where as
diagnostic research study determine the frequency with which something occurs
or its association with something else. The studies concerning whether certain
variables are associated are example of diagnostic research studies. As against
this, study concerned individual, group or situation are all example of descriptive
research studies. Most of the social research studies come under this category
from the point of view of the research design.
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1.5.2 DATA COLLECTION METHOD:
The required data was collected by both the primary and secondarysources.
The data objective are describe from the research objectives and their
determination rests mainly on the research to translate what the decision marker
wants into specific descriptive of the needed data.
Primary:
The primary data was collected from the, Networth Stock Broking Ltd.,
users at HYDERABAD. The Respondents were met personally at their
establishments and questionnaire has been given to them and answered
questionnaires were collected back.
Primary data is the data gathered for the first time by the researcher by
using questionnaire.
Secondary data:
Secondary data, on the other hand, is those which have already been
collected by someone else and which already been passed through the
statistical process.
Secondary data pertaining to this study was obtained from company
documents, broachers, departmental informations websites etc.
1.5.3 RESEARCH INSTRUMENTS:
Instrument : Questionnaires (personal administered)
Instrument Design : Both open end enclose ended
Question and used in questionnaires.
Questionnaire Design
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A well structured questionnaire was used for this study. The types
of questions used in the questionnaire were open-ended, multiple-choice
and Dichotomous questions.
1. Open-end questions are questions, which are entitled to give a
free response to their choice.
2. Multiple-choice questions are question, which contain a list of
answer and permit the subject to select the best answer.
1.5.4 SAMPLING:
Sampling is the process of selecting a sufficient number of elements
from the population, so that a study of sample and an understanding of its
properties or characteristics would make it possible for us to generalize such
properties or characteristics to the population elements.
SAMPLEING PLAN:
Sampling technique : Cluster sample
Sample size : Sample size chosen here for this study
was 100 as suggested by the company
SAMPLE DESIGN:
A Sample design is a definite plan for obtaining a sample from given
population. It refers to the technique or the procedure the researcher would adoptin selection items for the sample. Sample may as well lay down the number of
items to be included in the sample namely, the size of the sample.
Probability sampling:
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Make a specific mention of it in the thesis. So that the conclusions would
be evaluated accordingly. Probability sampling refers to the sampling process in
which the samples are selected for a specific purpose with a pre-determined basis
of selection. This type of samples is also required at times when random selection
may not be possible. Therefore the reliability of conclusions based on this type of
sampling is less. Whenever a researcher uses this type of sampling.
Cluster Sampling:
Cluster sampling method suggests, the samples are selected at different
stages. In this method, the population is first divided into different stages. Then
from the first stage, a few items are selected at random based on a specific feature
or characteristic. From these in the second stage, a few elements are selected at
random possessing, he characteristic. From which in the third stage a few are
selected at random satisfying the characteristic and so on to finally make the
necessary selection of samples. All the samples selected at random at different
stages will posses the common characteristic or will be homogeneous on some
basis.
Cluster sampling involves arranging elementary items in a population into
heterogeneous subgroups that are representative of the overall population. One
such group constitutes a sample for study.
SAMPLING SIZE:
The total numbers of respondents are termed as sample size. The
sample size for this analysis is 100 respondents.
Percentage Analysis:
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Percentage refers to a special kind of ratio. It is used to make
comparison between two or more series of data. They can be used to
compare the relative items, the distribution of two or more series of data
since the percentage reduce everything as common base and allow the
meaningful comparisons to be made.
Percentage refers to the special kind of ratio percentage are used in
making comparison between two or more series of data. Percentages are
used to describe relationship.
FORMULA:
No. of respondents
Percentage (%) = _________________________ X 100
Total respondents
Bar chart and Pie charts are used to explain the tabulation clearly.
LIMITATIONS OF THE STUDY
The study is restricted to some areas of Hyderabad city.
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The findings of the study are based on the assumption that the
respondents divulged correct information.
The study is relevant only to present situation and not to future.
Bias and unwillingness of certain respondents to answering some
questions may hinder the study.
The study is time bound, due to rapid changes in the market, expectation
level of consumers, introduction of new products.
The study may not be applicable over a period of time
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Company Profile
COMPANY PROFILE
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Incorporated in 1993, Net worth Stock Broking Limited (NSBL) has been
a listed company at Bombay Stock Exchange (BSE), Mumbai since 1995.
A Member, at the National Stock Exchange of India (NSE) and Bombay Stock
Exchange, Mumbai (BSE) on the Capital Market and Derivatives (Futures &
Options) segment, NSBL has been traditionally servicing Institutional clients and
in the recent past has forayed into retail broking, establishing branches across the
country. Presence is being marked in the Middle East, Europe and the United
States too, as part of our attempts to cater to global markets. We are a Depository
participant at Central Depository Services India (CDSL) with plans to become
one at National Securities Depository (NSDL) by the end of this quarter. We have
our customers participating in the booming commodities markets with our
membership at the Multi Commodity Exchange of India (MCX) and National
Commodity & Derivatives Exchange (NCDEX), through Networth Stock Broking
Ltd Stock.Com Ltd. With its strong support and business units of research,
distribution & advisory, NSBL aims to become a one-stop solution to the broking
and investment needs of its clients, globally.
Strong team of professionals experienced and qualified pool of human
resources drawn from top financial service & broking houses form the backbone
of our sizeable infrastructure. Highly technology oriented, the companys
scalability of operations and the highest level of service standards has ensured
rapid growth in the number of locations & the clients serviced in a very short span
of time. Networth Stock Broking Ltdians, as each one of our 400 plus and ever
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growing team members are addressed, is a dedicated team motivated to
continuously progress by imbibing the best of global practices, Indian sing
such practices, and to constantly evolve a comprehensive suite of products &
services trying to meet every financial / investment need of the clients.
NSE CM and Derivatives Segment SEBI Regn. 1NB230638639 &
1NF230638639
BSE CM and Derivatives Segment SEBI Regn. 1NB010638634 &
PMS SEBI Regn. 1NP000001371 CDSL DP SEBI Regn. IN-DP-CDSL
251-2004
Commodities Trading: MCX -10585 and NCDEX - 00011 (through Networth
Stock Broking Ltd Stock.Com Ltd.)
Hyderabad (Somajiguda)
401, Dega Towers, 4th Floor, Raj Bhavan Road, Somajiguda Hyderabad - 500
082
Andhra Pradesh.
Phone Nos.: 040-55560708, 55562256, and 30994985
Mumbai (MF Division)
49, Au Chambers, 4th Floor, Tamarind Lane, Fort
Mumbai - 400 001
Maharashtra.
Phone Nos.: 022- 22650253
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Mumbai (Registered Office)
5, Church gate House, 2nd Floor, 32/ 34 Veer Narirnan Road, Fort
Mumbai - 400 001
Maharashtra.
Phone No. 022-22850428
The Networth Stock Broking Ltd connectivity with 107 branches and
growing
1 0 7 b r a n c h1 0 7 b r a n c h
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Products and services portfolio
Retail and institutional broking
Research for institutional and retail clients
Distribution of financial products
PMS
Corporate finance
Net trading
Depository services
Commodities Broking
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Infrastructure
A corporate office and 3 divisional offices in CBD of Mumbai which
houses state-of-the-art dealing room, research wing & management and
back offices.
All of 107 branches and franchisees are fully wired and connected to hub
at Corporate office at Mumbai. Add on branches also will be wired and
connected to central hub
Web enabled connectivity and software in place for net trading.
60 operative IDs for dealing room
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In house technology back up team to ensure un-interrupted connectivity.
1993: Networth Stock Broking Ltd Started with 300 Sq.ft. of office space & 10
employees
2006: Spread over 42 cities (around 70,000 Sq.ft of office space) with over 107
branches & employee strength over 400
Market & research
Focusing on your needs
Every investor has different needs, different preferences, and different
viewpoints. Whether investor prefers to make own investment
decisions or desire more in-depth assistance, company committed to
providing the advice and research to help you succeed.
Networth Stock Broking Ltd providing following services to their customers,
Daily Morning Notes
Market Musing
Company Reports
Theme Based Reports
Weekly Notes
IPOs
Sector Reports
Stock Stance
Pre-quarter/Updates
Bullion Tracker
F&O Tracker
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QUALITY POLICY
To achieve and retain leadership, Networth Stock Broking Ltd shall aim for
complete customer satisfaction, by combining its human and technological
resources, to provide superior quality financial services. In the process, Networth
Stock Broking Ltd will strive to exceed Customers expectations.
As per the quality policy, Networth Stock Broking Ltd will:
Build in house processes that will ensure transparent and harmonious
relationships with its clients and investors to provide high quality of
services.
Establish a partner relationship with in its investor service agents and
vendors that will help in keeping up its commitments to the customers.
Provide high quality of work life for all its employees and equip them with
adequate knowledge & skill so as to respond to customers needs.
Continue to uphold the values of honesty & integrity and strive to
establish unparalleled standards in business ethics.
Use state-of-the art information technology in developing new and
innovative financial products and services to meet the changing needs of
investors and clients.
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Strive to be a reliable source of value-added financial products and services and
constantly guide the individuals and institutions in making a judicious choice of
it.
Strive to keep all stake-holders (share holders, clients, investors, employees,
suppliers and regulatory authorities) proud and satisfied.
Key Personnel:
Mr. S P Jain CMD Networth Stock Broking Ltd Stock Broking Ltd.
A qualified Chartered Accountant with over 15 years of experience in
the capital markets.
Mr. Deepak Mehta Head PMS
Over 12 years of experience in the capital markets and has the prior
work experience of serving on the Equity desk of Reliance.
Mr.Viral Doshi Equity Strategist
A qualified Chartered Accountant with experience of over a decade in
technical analysis with respect to equity markets.
Mr. Vinesh Jain Asst. Fund Manager
A qualified MBA graduate specializing in finance and over two years of
experience in the capital markets.
Research and the Back office.
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we have sought to provide premium financial services and information, so that the
power of investment is vested with the client. We equip those who invest with us
to make intelligent investment decisions, providing them with the flexibility to
either tap into our extensive knowledge and expertise, or make their own
decisions. We made our debut into the financial world by servicing Institutional
clients, and proved its high scalability of operations by growing exponentially
over a short period of time. Now, powered by a top-notch research team and a
network of experts, we provide an array of financial products & services spanning
entire India.Our strong support, technology-driven operations and business units
of research, distribution, advisory, wide array of products & services coalesce to
provide you with a one-stop solution to cater to all your investment needs. Our
single minded objective is to help you grow your Networth Stock Broking Ltd.
OUR GROUP COMPANIES
Networth Stock Broking Ltd Stock Broking Ltd. [NSBL]
NSBL is a member of the National Stock Exchange of India Ltd (NSE) and the
Bombay Stock Exchange Ltd (BSE) in the Capital Market and Derivatives
(Futures & Options) segment. NSBL has also acquired membership of the
currency derivatives segment with NSE, BSE & MCX-SX. It is Depository
participants with Central Depository Services India (CDSL) and National
Securities Depository (India) Limited (NSDL). With a client base of over 1L loyal
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customers, NSBL is spread across the country though its over 230+ branches.
NSBL is listed on the BSE since 1994.
Networth Stock Broking Ltd Wealth Solutions Ltd. [NWSL]
NWSL is into the business of delivery of Financial Planning & Advice. Its vision
is to Advice & Execute money related solutions to/for our customers in the most
Convenient & Consolidated manner, while making sure that their experience with
us is always pleasant & memorable resulting in positive advocacy. The product
& Services include Financial Planning, Life Insurance, On-line Trading Account,
Mutual Funds, Debentures/Bonds, General Insurance, Loans and Depository
Services.
Networth Stock Broking LtdStock.ComLtd.[NSCL]
NSCL is the commodities arm of NSBL. It is a member at the Multi Commodity
Exchange of India (MCX) and National Commodity & Derivatives Exchange
(NCDEX) and is backed by solid research & analytics in Commodities.
Networth Stock Broking LtdSoftTechLtd.[NSL]
NSL is an ISO 9001:2000 Certified Company. It is into Application Development
& maintenance. Building & Implementation of packaged software across various
functions within the Financial Services Industry is at its core. It also provides data
center services which include hosting of websites, applications & related services.
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It combines a unique delivery model infused by a distinct culture of customer
satisfaction.
Ravisha Financial Services Pvt. Ltd. [RFSL]
RFSL is a RBI registered NBFC engaged in financing, primarily it provides loan
against securities
Principles & Values
At Net worth Stock Broking Ltd. success is built on teamwork, partnership
and the diversity of the people.
At the heart of our values lie diversity and inclusion. They are a
fundamental part of our culture, and constitute a long-term priority in our
aim to become the world's best international bank.
Values
Responsive
Trustworthy
Creative
Courageous
Approach
Participation:- Focusing on attractive, growing markets where wecan leverage our relationships and expertise
Competitive positioning:- Combining global capability, deep local
knowledge and creativity to outperform our competitors
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Management Discipline:- Continuously improving the way we work,
balancing the pursuit of growth with firm control of costs and risks
Commitment to stakeholders
Customers:- Passionate about our customers' success, delighting
them with the quality of our service
Our People:- Helping our people to grow, enabling individuals to
make a difference and teams to win
Communities:- Trusted and caring, dedicated to making a
difference
Investors:- A distinctive investment delivering outstanding
performance and superior returns Regulators: - Exemplary governance and ethics wherever we are.
MARKET PROFILE
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NATIONAL STOCK EXCHANGE
The National Stock Exchange of India (NSE) situated in Mumbai - is the
largest and most advanced exchange with 1016 companies listed and 726 trading
members. Capital market reforms in India and the launch of the Securities and
Exchange Board of India (SEBI) accelerated the incorporation of the second
Indian stock exchange called the National Stock Exchange (NSE) in 1992. After a
few years of operations, the NSE has become the largest stock exchange in India.
Three segments of the NSE trading platform were established one after another.
The Wholesale Debt Market (WDM) commenced operations in June 1994 and the
Capital Market (CM) segment was opened at the end of 1994. Finally, the Futures
and Options segment began operating in 2000. Today the NSE takes the 14th
position in the top 40 futures exchanges in the world.
In 1996, the National Stock Exchange of India launched S&P CNX Nifty and
CNX Junior Indices that make up 100 most liquid stocks in India. CNX Nifty is a
diversified index of 50 stocks from 25 different economy sectors. The Indices are
owned and managed by India Index Services and Products Ltd (IISL) that has a
consulting and licensing agreement with Standard & Poor's.
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In 1998, the National Stock Exchange of India launched its web-site and was the
first exchange in India that started trading stock on the Internet in 2000. The NSE
has also proved its leadership in the Indian financial market by gaining many
awards such as 'Best IT Usage Award' by Computer Society in India (in 1996 and
1997) and CHIP Web Award by CHIP magazine (1999).
The NSE is owned by the group of leading financial institutions such as Indian
Bank or Life Insurance Corporation of India. However, in the totally de-
mutualised Exchange, the ownership as well as the management does not have a
right to trade on the Exchange. Only qualified traders can be involved in the
securities trading.
The NSE is one of the few exchanges in the world trading all types of securities
on a single platform, which is divided into three segments: Wholesale Debt
Market (WDM), Capital Market (CM), and Futures & Options (F&O) Market.
Each segment has experienced a significant growth throughout a few years of
their launch. While the WDM segment has accumulated the annual growth of
over 36% since its opening in 1994, the CM segment has increased by even 61%
during the same period. The National Stock Exchange of India has stringent
requirements and criteria for the companies listed on the Exchange. Minimum
capital requirements, project appraisal, and company's track record are just a few
of the criteria. In addition, listed companies pay variable listing fees based on
their corporate capital size.
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The National Stock Exchange of India Ltd. provides its clients with a single, fully
electronic trading platform that is operated through a VSAT network. Unlike most
world exchanges, the NSE uses the satellite communication system that connects
traders from 345 Indian cities. The advanced technologies enable up to 6 million
trades to be operated daily on the NSE trading platform.
NSE Nifty:
The S&P CNX Nifty (nicknamed Nifty 50 or simply Nifty), is the leading index
for large companies on the National Stock Exchange of India. S&P CNX Nifty is
a well diversified 50 stock index accounting for 22 sectors of the economy. It is
used for a variety of purposes such as benchmarking fund portfolios, index based
derivatives and index funds.
Nifty was developed by the economists Ajay Shah and Susan Thomas, then at
IGIDR. Later on, it came to be owned and managed by India Index Services and
Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is
India's first specialised company focused upon the index as a core product. IISL
have a consulting and licensing agreement with Standard & Poor's (S&P), who
are world leaders in index services.
CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices,
to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C'
stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The
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S&P prefix belongs to the US-based Standard & Poor's Financial Information
Services.
NSE other indices:
S&P CNX Nifty
CNX Nifty Junior
CNX 100
S&P CNX 500
CNX Midcap
S&P CNX Defty
CNX Midcap 200
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BOMBAY STOCK EXCHANGE:
The Bombay Stock Exchange Limited (formerly, The Stock Exchange, Mumbai;
popularly called The Bombay Stock Exchange, or BSE) is the oldest stock
exchange in Asia. It is located at Dalal Street, Mumbai, India.
Bombay Stock Exchange was established in 1875. There are around 5,600 Indian
companies listed with the stock exchange, and has a significant trading volume.
As of October2006, the market capitalization of the BSE was about Rs. 33.4
trillion (US $ 730 billion). The BSE SENSEX (SENSitive indEX), also called the
BSE 30, is a widely used market index in India and Asia. As of 2005, it is among
the 5 biggest stock exchanges in the world in terms of transactions volume.
History:
An informal group of 22 stockbrokers began trading under abanyan tree opposite
the Town Hall of Bombay from the mid-1850s, 1875, was formally organized as
the Bombay Stock Exchange (BSE).In January 1899, the stock exchange moved
http://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/Trillionhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Banyanhttp://en.wikipedia.org/wiki/Town_Hall_(Bombay)http://en.wikipedia.org/wiki/1850http://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/1899http://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Market_capitalizationhttp://en.wikipedia.org/wiki/Indian_Rupeehttp://en.wikipedia.org/wiki/Trillionhttp://en.wikipedia.org/wiki/Asiahttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Banyanhttp://en.wikipedia.org/wiki/Town_Hall_(Bombay)http://en.wikipedia.org/wiki/1850http://en.wikipedia.org/wiki/1875http://en.wikipedia.org/wiki/1899 -
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into the Brokers Hall after it was inaugurated by James M MacLean. After the
First World War, the BSE was shifted to an old building near the Town Hall. In
1956, the Government of India recognized the Bombay Stock Exchange as the
first stock exchange in the country under the Securities Contracts (Regulation)
Act.1995, when it was replaced by an electronic (eTrading) system named BOLT,
or the BSE Online Trading system. In 2005, the status of the exchange changed
from an Association of Persons (AoP) to a full fledged corporation under the BSE
(Corporatization and Demutualization) Scheme, 2005 (and its name was changed
to The Bombay Stock Exchange Limited).
BSE Sensex:
The BSE SENSEX (also known as the BSE 30) is a value-weighted index
composed of 30 scrips, with the base April 1979 = 100. The set of companies
which make up the index has been changed only a few times in the last 20 years.
These companies account for around one-fifth of the market capitalization of the
BSE.
SENSEX, first compiled in 1986 was calculated on a "Market Capitalization-
Weighted" methodology of 30 component stocks representing a sample of large,
well-established and financially sound companies. The base year of SENSEX is
1978-79. The index is widely reported in both domestic and international markets
through print as well as electronic media. SENSEX is not only scientifically
designed but also based on globally accepted construction and review
methodology. From September 2003, the SENSEX is calculated on a free-float
http://en.wikipedia.org/w/index.php?title=James_M_Maclean&action=edithttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/1956http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/wiki/1995http://en.wikipedia.org/wiki/ETradinghttp://en.wikipedia.org/w/index.php?title=BOLT&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_OnLine_Trading&action=edithttp://en.wikipedia.org/wiki/2005http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/wiki/1979http://en.wikipedia.org/w/index.php?title=James_M_Maclean&action=edithttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/1956http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/w/index.php?title=Securities_Contracts_(Regulation)_Act&action=edithttp://en.wikipedia.org/wiki/1995http://en.wikipedia.org/wiki/ETradinghttp://en.wikipedia.org/w/index.php?title=BOLT&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_OnLine_Trading&action=edithttp://en.wikipedia.org/wiki/2005http://en.wikipedia.org/wiki/Corporationhttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/w/index.php?title=BSE_(Corporatization_and_Demutualization)_Scheme&action=edithttp://en.wikipedia.org/wiki/1979 -
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market capitalization methodology. The "free-float Market Capitalization-
Weighted"methodology is a widely followed index construction methodology on
which majority of global equity benchmarks are based.
The growth of equity markets in India has been phenomenal in the decade gone
by. Right from early nineties the stock market witnessed heightened activity in
terms of various bull and bear runs. More recently, the bourses in India witnessed
a similar frenzy in the 'TMT' sectors. The SENSEX captured all these happenings
in the most judicial manner. One can identify the booms and bust of the Indian
equity market through SENSEX.
The values of all BSE indices are updated every 15 seconds during the market
hours and displayed through the BOLT system, BSE website and news wire
agencies.
SENSEX calculation:
SENSEX is calculated using a "Market Capitalization-Weighted" methodology.
As per this methodology, the level of index at any point of time reflects the total
market value of 30 component stocks relative to a base period. (The market
capitalization of a company is determined by multiplying the price of its stock by
the number of shares issued by the company). An index of a set of combined
variables (such as price and number of shares) is commonly referred as a
'Composite Index' by statisticians. A single indexed number is used to represent
the results of this calculation in order to make the value easier to work with and
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track over time. It is much easier to graph a chart based on indexed values than
one based on actual values.
The base period of SENSEX is 1978-79. The actual total market value of
the stocks in the Index during the base period has been set equal to an indexed
value of 100. This is often indicated by the notation 1978-79=100. The formula
used to calculate the Index is fairly straightforward. However, the calculation of
the adjustments to the Index (commonly called Index maintenance) is more
complex.
The calculation of SENSEX involves dividing the total market capitalization of
30 companies in the Index by a number called the Index Divisor. The Divisor is
the only link to the original base period value of the SENSEX. It keeps the Index
comparable over time and is the adjustment point for all Index maintenance
adjustments. During market hours, prices of the index scrips, at which latest
trades are executed, are used by the trading system to calculate SENSEX every 15
seconds and disseminated in real time.During market hours, prices of the index
scrips, at which trades are executed, are automatically used by the trading
computer to calculate the SENSEX every 15 seconds and continuously updated
on all trading workstations connected to the BSE trading computer in real time.
BSE - other Indices:
Apart from BSE SENSEX, which is the most popular stock index in India, BSE
uses other stock indices as well:
BSE 500
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BSE PSU
BSE MIDCAP
BSE SMLCAP
BSE BANKEX
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THORETICAL FRAME WORK
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EQUITY MARKET
In financial markets, stock is the capital raised by a corporation through the
issuance and distribution of shares. A person or organization which holds shares
of stocks is called a shareholder. The aggregate value of a corporation's issued
shares is its market capitalization. When one buys a share of a company he
becomes a shareholder in that company. Shares are also known as Equities.
Equities have the potential to increase in value over time. It also provides the
portfolio with the growth necessary to reach the long-term investment goals.
Research studies have proved that the equities have outperformed than most other
forms of investments in the long term. Equities are considered the most
challenging and the rewarding, when compared to other investment options.Research studies have proved that investments in some shares with a longer
tenure of investment have yielded far superior returns than any other investment.
However, this does not mean all equity investments would guarantee similar high
returns. Equities are high-risk investments. One needs to study them carefully
before investing. Since 1990 till date, Indian stock market has returned about 17%
to investors on an average in terms of increase in share prices or capital
appreciation annually. Besides that on average stocks have paid 1.5 % dividend
annually. Dividend is a percentage of the face value of a share that a company
returns to its shareholders from its annual profits. Compared to most other forms
of investments, investing in equity shares offers the highest rate of return, if
invested over a longer duration. The first company to issue shares of stock was
the Dutch East India Company, in
1602. The innovation of joint ownership made a great deal of Europe's economic
growth
possible following the Middle Ages. The technique of pooling capital to finance
the
building of ships, for example, made the Netherlands a maritime superpower.
Before
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adoption of the joint-stock corporation, an expensive venture such as the building
of a
merchant ship could only be undertaken by governments or by very wealthy
individuals
or families. Equity markets, the world over, grew at a great speed in the decade of
the nineties. After the bear markets of the late eighties, the world markets saw one
of the largest ever bull
markets of more than ten years. The opening up of Indian economy in the 1990's
led to a
series of financial sector reforms, prominent being the capital market reforms.
These reforms have led to the development of the Indian equity markets to t
standards of the major global equity markets. All this started with the abolition of
Controller of Capital Issues and subsequent free pricing of shares. The
introduction of dematerialization of shares, leading to faster and cheaper
transactions and introduction of derivative products and compulsory rolling
settlement
has followed subsequently. Despite a series of stock market scams and crises
beginning from 1992 Harshad Mehta's scam to the Ketan Parekh's 2001 scam, the
Indian equity markets have transformed themselves from a broker dominated
market to a mass market. The introduction of online trading has given a much-
needed impetus to the Indian equity markets. However, over the years, reforms in
the equity markets have brought the country on par with many developed markets
on several counts. Today, India boasts of a variety of products, including stock
futures, an instrument launched only by select markets. The introduction of
rolling settlement is the latest step in the direction of overhauling the stock
market. The equity market of the country will most likely be comparable with the
world's most advanced secondary markets with regard to international best
practices. The market moved to compulsory rolling settlement and now
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all settlements are executed on T+2 basis and market is gearing up for moving to
T+1
settlement in 2004 while the Straight Through Processing (STP) is in place from
December 2002.
The importance of equity market is increasing. Rightly, realizing the advantages
of
resource allocation through market, Government of India and Reserve Bank of
India have
been pushing reforms in equity markets. Series of steps are being taken to remove
hurdles, increase market efficiency and to make it attractive for the retail investors
to take
part in the equity market. It may not be an exaggeration to say that the Indian
markets are
resourceful to put themselves on par with the markets of the developed countries.
The
Indian markets have assimilated in a relatively lesser time, many a developments
that
took long time in the developed markets.
DEVELOPMENTS IN EQUITY MARKET
The Government of India has been trying to improve market efficiency, enhance
transparency and bring the Indian Equity Market up to international standards.
Many reform measures have been initiated in the 90s. The principal ones are the
formation of Securities Exchange Board of India (SEBI), repeal of the Capital
Issues (Control) Act, 1947, introduction of screen-based trading, shortening of
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trading cycle, demutualization of stock exchanges, establishment of depositories
disappearance of physical share certificates and better risk management systems
in stock exchanges. The formation of SEBI was the first attempt towards
integrated regulation of the securities market. SEBI regulates all market
intermediaries and has the powers to impose monetary penalties for misconduct of
any intermediary. One of the major stumbling blocks in fair pricing of capital
issues has been the Capital Issues (Control) Act, 1947. The issuers were denied
the opportunity to economically raise money from the capital market. This is now
a matter of the past thanks to the repeal of the Act itself. SEBI has also issued
Disclosure and Investor Protection (DIP) guidelines to ensure fair prices
the investors, though however, many issuers in the 90s could unfairly price their
capital issues at the cost of the poor common investors.
The introduction of Screen Based Trading Systems (SBTS) by NSE is a major
development in the capital market. This made the markets more efficient. The
geographical barriers to trade were dismantled resulting in increased trading
volumes. This was possible due to the great advancements in the area of
information technology. SBTS electronically matches orders cutting down time,
cost and errors, and minimizing the chances of fraud. Very long settlement cycle
was another major hindrance in effecting deliveries in the equity market. Often
the securities were delivered after 30 days or more due to weekly/fortnightly
settlements and carry forward transactions. Sebi has enforced the discipline to
compulsorily settle trades in T+3 days since April 2002. This is slated to reduce to
T+2 days from April 2003. All scrips are now under rolling settlement since
December 2001.
The Equity Market is incomplete without products to manage risks in portfolio
values. At long last, derivatives trading appeared on Indian exchanges in June
2000. While the product range in derivatives is still limited (futures and options
on stocks and stock indices), it is certainly a major step forward in broadening the
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financial markets. NSE was established as a demutualized structure separating the
roles of ownership, management and trading to eliminate any conflict of interest
among the stakeholders to improve market efficiency and to focus on investor
interest. Another notable development in the Indian equity market has been the
introduction of depositories to dematerialize the share certificates. This avoids
physical movement of certificates, bad deliveries and quicker transfer of
ownership of shares. Presently all actively traded shares are held, traded and
settled in demat form. The setting up of National Securities Clearing Corporation
Ltd., (NSCCL) in April 1996 has been a major development in managing
counterparty risks in the equity market. This has helped in increasing trading
volumes
since traders are now more confident about default-free settlements. While most
of the
above measures have helped in reinforcing confidence in the Indian equity market
by
providing more transparent and efficient buying, selling and transfer of shares.
International Scenario:
Global integration, the widening and intensifying of links, between high-income
and developing countries, have accelerated over the years. The correlation of
global
markets over a period of time is presented in (Table 1- 2).
Over the past few years, the financial markets have become increasingly global.
The descriptive statistics of the major markets in terms of daily returns is
presented in
(Table 1-3), which shows that the markets are increasingly getting interlinked.
Cross border capital flows have shifted from public transfers to primarily private
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sector flows. Indian market has gained from foreign inflows through investment
of
Foreign Institutional Investors (FIIs) route. During 2006-07, cumulative net
investments
by FIIs amounted to US $ 51,967 million.
Following the implementation of reforms in the securities industry in the past
years, Indian stock markets have stood out in the world ranking. As may be seen
from
(Table 1-4), India posted a turnover ratio of 93.1 %, which was quite comparable
to the
other developed markets. As per Standard and Poor's Fact Book 2007, India
ranked 15th
in terms of market capitalization (18th in 2004 and 17th in 2005) and 18th in
terms of
total value traded in stock exchanges and 21st in terms of turnover ratio as of
December
2006.
A comparative study of concentration of market indices and index stocks in
different
world markets is presented in the (Table 1-5). It is seen that the index stocks share
of total
market capitalization in India is 81.6% whereas US index accounted for 89.5%.
The ten
largest index stocks share of total market capitalization is 32.2% in India and
13.4% in
case of US.
The stock markets worldwide have grown in size as well as depth over the years.
As can
be observed from (Table 1-6), the turnover of all markets taken together have
grown from
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US $ 39.61 trillion in 2004 to US $ 67.91 trillion in 2006. It is significant to note
that US
alone accounted for about 48.99 % of worldwide turnover in 2006. Despite having
a large
number of companies listed on its exchanges, India accounted for a meager 0.94%
in total
world turnover in 2006. The market capitalization of all listed companies taken
together
on all markets stood at US $ 54.19 trillion in 2006 (US $ 43.68 trillion in 2005).
The
share of US in worldwide market capitalization decreased from 38.85 % as at end-
2004
to 35.84 % as at end 2006, while Indian listed companies accounted for 1.51% of
total
market capitalization in 2006.
According to the 'World Development Indicators 2007, World Bank' there has
been an
increase in market capitalization as percentage of Gross Domestic Product (GDP)
in
some of the major country groups. The increase, however, has not been uniform
across
countries. The market capitalization as a percentage of GDP was the highest at
112.9%
for the high income countries as at end 2005 and lowest for middle income
countries at
49.5%. Market capitalization as percentage of GDP in India stood at 68.6 % as at
end
2005. The turnover ratio, which is a measure of liquidity, was 122.2 % for high-
income
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countries and 96.6 % for low-income countries. The total number of listed
companies
stood at 28,733 for high-income countries, 11,141 for middle-income countries
and 6,177
for low-income countries as at end 2006.
EQUITY AS AN INVESTMENT
Equity is:
1. Stock or any other security representing an ownership interest.
2. On the balance sheet, the amount of the funds contributed by the owners (the
stockholders) plus the retained earnings (or losses), also referred to as
"shareholder's
equity".
3. In the context of margin trading, the value of securities in a margin account
minus
what has been borrowed from the brokerage.
Equity is a term whose meaning depends very much on the context. In general,
one can think of equity as ownership in any asset after all debts associated with
that asset are paid off. For example, a car or house with no outstanding debt is
considered the owner's equity since he or she can readily sell the items for cash.
Stocks are equity Because they represent ownership of a company, whereas bonds
are classified as debt because they represent an obligation to pay and not
ownership of assets. The ability of equities to deliver over longer time frames and
even outperform other investment avenues like gold, property and bonds is an
often chronicled fact. However, over shorter time frames, equities also hold the
potential to be a very risky asset class and expose the portfolio to high levels of
volatility. This is the primary reason why any fund
manager worth his salt always recommends a sufficiently long (at least 3 years)
time frame for an equity-oriented investment. Similarly financial planners
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advocate pruning of the equity holdings with advancement in the investors age,
when the investor is typically closer to retirement (shorter investment horizon)
and has a lower risk appetite as well.
INVESTING PRINCIPLES
1. Invest for Real Returns
2. Keep an Open Mind
3. Never Follow the Crowd
4. Everything Changes
5. Avoid the Popular
6. Learn from your Mistakes
7. Buy during Times of Pessimism
8. Hunt for Value and Bargains
9. Search Worldwide
10. No-one Knows Everything
Equity Markets in India An Overview
If you buy the same securities as other people, you will have the same results as
other people. It is impossible to produce a superior performance unless you do
something different from the majority. To buy when others are despondently
selling and to sell when others are greedily buying requires the greatest fortitude
and pays the greatest reward. Bear markets have always been temporary. And so
have bull markets. Share prices usually turn upward from one to twelve months
before the bottom of the business cycle and vice versa. If a particular industry or
type of security becomes popular with investors, that popularity will always prove
temporary and, when lost, may not return for many years.
The investor should bear in mind that while he makes investment decision, he
should have idea of the companys break-even point and companys position in
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the stock exchange. For this EQUITY RESEARCH is done. Equity Research does
the research of companys income and growth. In the process, it uses the various
sources of financial information available in the country and accordingly advises
in which company an investor should invest.
FUNDAMENTAL ANALYSIS
The investor while buying stock has the primary purpose of gain. If he invests for
a short period of time it is speculative but when he holds it for a fairly long period
of time the anticipation is that he would receive some return on his investment.
Fundamental analysis is a method of finding out the future price of a stock, which
an investor wishes to buy. The method for forecasting the future behavior of
investments and the rate of return on them is clearly through an analyze of the
broad economic forces in which they operate. The kind of industry to which they
belong and the analysis of the company's internal working through statements like
income statement, balance sheet and statement of changes of income.
ECONOMIC ANALYSIS
Investors are concerned with those forces in the economy, which affect the
performance of organizations in which they wish to participate, through purchase
of stock. A study of the economic forces would give an idea about future
corporate earnings and the payment of dividends and interest to investors. Some
of the broad forces within which the factors of investment operate are:
1. POPULATION: -
Population gives an idea of the kind of labor force in a country. In some countries
the population growth has slowed down whereas in India and some other third
world countries there has been a population explosion. Population explosion will
give demand for more industries like hotels, residences, service industries like
health, consumer demand like refrigerators and cars. Likewise, investors should
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prefer to invest in industries, which have a large amount of labor force because in
the future such industries will bring better rates of return.
2. RESEARCH AND TECHNOLOGICAL DEVELOPMENTS: -
The economic forces relating to investments would be depending on the amount
of resources spent by the government on the particular technological development
affecting the future. Broadly the investor should invest in those industries which
are getting a large amount of share in the funds of the development of the country.
For example, in India in the present context automobile industries and spaces
technology are receiving a greater attention. These may be areas, which the
investor may consider for investments.
3. CAPITAL FORMATION: -
Another consideration of the investor should be the kind of investment that a
company makes in capital goods and the capital it invests in modernization and
replacement of assets. A particular industry or a particular company which an
investor would like to invest can also be viewed at with the help of the economic
indicators such as the place, value and property position of the industry, group to
which it 110ngs and the year-to-year returns through corporate profits.
4. NATURAL RESOURCES AND RAW MATERIALS: -
The natural resources are to a large extent responsible for a country's economic
development and overall improvement in the condition of corporate growth. In
India, technological discoveries recycling of materials, nuclear and solar energy
and new synthetics should give the investor an opportunity to invest in untapped
or recently tapped resources which would also produce higher investment
opportunity.
SECTOR ANALYSIS
The industry has been defined as homogeneous groups of people doing a similar
kind of activity or similar work. In India, the broad classification of industry is
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made according to stock exchange list, which is published. This gives a distinct
classification to industry to industry in different forms such as:
(A) Engineering,
(B) Banking and Insurance,
(C) Textiles,
(D) Cement,
(E) Steel Mills and Alloys,
(F) Chemicals and Pharmaceuticals,
(G) Retail,
(H) Sugar,
(I) Information Technology,
(J) Automobiles and Ancillary,
(K) Telecommunications,
(L) FMCG,
(M)Miscellaneous.
Industry should also be evaluated or analyzed through its life cycle. Industry life
cycle may also be studied through the industrial life cycle state. There are
generally three stages of an industry. These stages are pioneering stage, expansion
stage and stagnation stage.
1. THE PIONEERING STAGE: -
The industrial life cycle has a pioneering stage when the new inventions and
technological developments take place. During this time the investor will notice
great increase in the activity of the firm. Production will rise and in relation to
production, there will be a great demand for the product. At this stage, the profits
are also very high as the technology is new. Taking a look at the profit many new
firms enter into the same field and ill; market becomes competitive. The market
competitive pressures keep on increasing with the en" of new-firms and the prices
keep on declining and then ultimately profits fall. At this stage all firms compete
with each other and only a few efficient firms are left to run the business and most
of the other firms are wiped out in the pioneering stage itself.
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2. THE EXPANSION STAGE: -
The efficient firms, which have been in the market now, find that it is time to
stabilize them. Although competition is there, the, number of firms have gone
down during ill pioneering stage itself and there are a large number of firms left to
run the business in the industry. This is the time when each one has to show
competitive strength and superiority. The investor will find that this is the best
time to make an investment. At the pioneering stage it was difficult to find out
which of the firm to invest in, but having waited for the stability period there has
been a dynamic selection proces and a few of the large number of firms are left in
the industry. This is the period of security and safety and this is also called period
of maturity for the firm. This stage lasts from five years to fifty years of a firm
depending on the potential and productivity and policy to meet the change of
competition and rapid change in buyer and customer habit. After this stage
develops the stage of stagnation or obsolescence.
3. THE STAGNATION STAGE: -
During the stagnation stage the investor will find that although there is increase in
sales of an organization, this is not in relation to the profits earned by the
company. Profits are also there but the growth in the firm is lower than it was in
the expansion stage. The industry finds that it is at a loss of power and cannot
expand. During most of the firms who have realized the competitive nature of the
industry and the arrival of the stagnation stage, begin to change their course of
action and start on a new venture should make a continuous evaluation of their
investments. In firms in which they have received profits for large number of
years and have reached stagnation they can plan to their investments and find
better avenues in those firms where the expansion stage has set in.
COMPANY ANALYSIS
Company analysis is a study of the variables that influence the future of a firm
both qualitatively and quantitatively. It is a method of assessing the competitive
position of a firm earning and profitability, the efficiency with which it operates
its financial position and its ful1l with respect to the earning of its shareholders.
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The fundamental nature of this analysis is that each share of a company has an
intrinsic value, which is dependent on the company's financial performance,
quality of management and record of its earnings and dividend. They believe that
the market price of share in a period of time will move towards its intrinsic value.
If the market price of a share is lower than the intrinsic value, as evaluated by the
fundamental analysis, then the share is supposed to be undervalued and it should
be purchased but if the current market price shows that it is more than intrinsic
value then according to the theory the share should be sold. This basic approach is
analyzed through the financial statements of an organization. The basic financial
statements, which are required as tools of the fundamental analyst, are the income
statement, the balance sheet, and the statement of
changes in financial position. These statements are useful for investors, creditors
as well as internal management of a firm and on the basis these statements the
future course of action may be taken by the investors of the firm. While
evaluating a company, its statement must be carefully judged to find out that they
are:
(a) Correct,
(b) Complete,
(c) Consistent and
(d) Comparable
TECHNICAL ANALYSIS
Technical analysis is simply the study of prices as reflected on price charts.
Technical analysis assumes that current prices should represent all knowninformation about the markets. Prices not only reflect intrinsic facts, they also
represent human emotion and the pervasive mass psychology and mood of the
moment. Prices are, in the end, a function of supply and demand. However, on a
moment to moment basis, human emotionsfear, greed, panic, hysteria, elation,
etc. also dramatically effect prices. Markets may move based upon peoples
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expectations, not necessarily facts. A market "technician" attempts to disregard
the emotional component of trading by making his decisions based upon chart
formations, assuming that prices reflect both facts and emotion. Analysts use their
technical research to decide whether the current market is a
BULL MARKET or a BEAR MARKET.
1. STOCK CHARTS
A stock chart is a simple two-axis (X-Y) plotted graph of price and time. Each
individual equity, market and index listed on a public exchange has a chart that
illustrates this movement of price over time. Individual data plots for charts can
be made using the CLOSING price for each day. The plots are connected together
in a single line, creating the graph. Also, a combination of the
OPENING, CLOSING, HIGH and/or LOW prices for that market session can be
used for
the data plots. This second type of data is called a PRICE BAR. Individual price
bars are
then overlaid onto the graph, creating a dense visual display of stock movement.
Stock charts can be drawn in two different ways. An ARITHMETIC chart has
equal vertical distances between each unit of price. A LOGARITHMIC chart is a
percentage growth chart.
2. TRENDS
The stock chart is used to identify the current trend. A trend reflects the average
rate of change in a stock's price over time. Trends exist in all time frames and all
markets. Trends can be classified in three ways: UP, DOWN or RANGEBOUND.
In an uptrend, a stock Equity Markets In India An Overview 21 rallies often
with intermediate periods of consolidation or movement against the trend. In
doing so, it draws a series of higher highs and higher lows on the stock chart. In
an
Uptrend; there will be a POSITIVE rate of price change over time. In a
downtrend, a stock declines often with intermediate periods of consolidation or
movement against the trend. In doing so, it draws a series of lower highs and
lower lows on the stock chart. In a downtrend,
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there will be a NEGATIVE rate of price change over time. Range bound price
swings back and forth for long periods between easily seen upper and lower
limits. There is no apparent direction to the price movement on the stock chart
and there will be LITTLE or NO rate of price change. Trends tend to persist over
time. A stock in an uptrend will continue to rise until some change in value or a
condition occurs. Declining stocks will continue to fall until some change in value
or conditions occur. Chart readers try to locate TOPS and BOTTOMS, which are
those points where a rally or a decline ends. Taking a position near a top or a
bottom can be very profitable. Trends can be measured using TRENDLINES.
Very often a straight line can be drawn UNDER three or more pullbacks from
rallies or OVER pullbacks from declines. When price bars then return to that
trend line, they tend to find SUPPORT or RESISTANCE and bounce off the line
in the opposite direction.
3. VOLUME
Volume measures the participation of the crowd. Stock charts display volume
through individual HISTOGRAMS below the price pane. Often these will show
green bars for up days and red
Equity Markets In India An Overview 22 bars for down days. Investors and
traders can measure buying and selling interest by watching how many up ordown days in a row occur and how their volume compares with days in which
price moves in the opposite direction. Stocks that are bought with greater interest
than sold are said to be under ACCUMULATION. Stocks that are sold with great
interest than bought are said to be under DISTRIBUTION. Accumulation and
distribution often LEAD price movement. In other words, stocks under
accumulation often will rise some time after the buying begins. Alternatively,
stocks under distribution will often fall some time after selling begins. It takes
volume for a stock to rise but it can fall of its own weight. Rallies require the
enthusiastic participation of the crowd. When a rally runs out of new participants,
a stock can easily fall. Investors and traders use indicators such as ON
BALANCE
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VOLUME to see whether participation is lagging (behind) or leading (ahead) the
price action. Stocks trade daily with an average volume that determines their
LIQUIDITY. Liquid stocks are very easy for traders to buy and sell. Liquid stocks
require very high SPREADS (transaction costs) to buy or sell and often cannot be
eliminated quickly from a portfolio. Stock chart analysis does not work well on
illiquid stocks.
4. PATTERNS AND INDICATORS
How can one organize the endless stream of stock chart data into a logical format?
Charts allow
investors and traders to look at past and present price action in order to make
reasonable predictions and wise choices. It is a highly visual medium. This one
fact separates it from the colder world of value-based analysis. The stock chart
Equity Markets In India An Overview 23
activates both left-brain and right-brain functions of logic and creativity. So it's no
surprise that over the last century two forms of analysis have developed that focus
along these lines of critical examination. The oldest form of interpreting charts is
PATTERN ANALYSIS. This method gained popularity through both the writings
of Charles Dow and Technical Analysis of Stock Trends, a classic book written
on the subject just after World War II. The newer form of interpretation is
INDICATOR ANALYSIS, a math-oriented examination in which the basic
elements of price and volume are run through a series of calculations in order to
predict where price will go next. Pattern analysis gains its power from the
tendency of charts to repeat the same bar formations over and over again. These
patterns have been categorized over the years as
having a bullish or bearish bias. Some well-known ones include HEAD and
SHOULDERS, TRIANGLES, RECTANGLES, DOUBLE TOPS, DOUBLE
BOTTOMS and FLAGS. Also, chart landscape features such as GAPS and
TRENDLINES are said to have great significance on the future course of price
action. Indicator analysis uses math calculations to measure the relationship of
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current price to past price action. Almost all indicators can be categorized as
TREND-FOLLOWING or OSCILLATORS. Popular trend-following indicators
include MOVING AVERAGES, ON BALANCE VOLUME and MACD.
Common oscillators include STOCHASTICS, RSI and RATE OF CHANGE.
Trend-following indicators react much more slowly than oscillators. They look
deeply into the rear view mirror to locate the future. Oscillators react very quickly
to short-term changes in price, flipping back and forth between OVERBOUGHT
and OVERSOLD levels. Equity Markets In India An Overview 24
Both patterns and indicators measure market psychology. The core of investors
and traders that make up the market each day tend to act with a herd mentality as
price rises and falls. This "crowd" tends to develop known characteristics that
repeat themselves over and over again. Chart interpretation using these two
important analysis tools uncovers growing stress within the crowd that should
eventually translate into price change.
REASONS FOR TRANSITING IN SECONDARY MARKET
There are two main reasons why individuals transact in the secondary market:
1. INFORMATION MOTIVATED REASONS: -
Information motivated investors believe that they have superior information about
a particular security than other market participants. This information leads them to
believe that the security is not being correctly priced by the market. If the
information is good, this suggests that the security is currently under-priced, and
investors with access to such information will want to buy the security. On the
other hand, if the information is bad, the security will be currently overpriced and
such investors will want to sell their holdings of the security.
2. LIQUIDITY MOTIVATED REASONS: -
Liquidity motivated investors, on the other hand, transact in the secondary market
because they are currently in a position of either excess or insufficient liquidity.
Investors with surplus cash holdings (e.g., as a result of an inheritance) will buy
securities, where as investors with insufficient cash (e.g., to purchase a Car) will
sell securities.
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FUNCTION OF THE SECONDARY MARKET1. To facilitate liquidity and marketability of the outstanding equity and debt
instruments.
2. To contribute to economic growth through allocation of funds to the most
efficient Channel through the process of disinvestments to reinvestment.
3. To provide instant valuation of securities caused by changes in the internal
environment (that is, company-wide and industry wide factors). Such valuation
facilitates the measurement of the cost of capital and the rate of return of the
economic entities at the micro level.
4. To ensure a measure of safety and fair dealing to protect investors interest.
To induce companies to improve performance since the market price at the stock
exchanges reflects the performance and this market price is readily available to
investors.
INTROUCTION
EQUITY
Meaning:
Equity is a term whose meaning depends very much on the context. In
general you can think of equity as ownership in any asset after all debts associated
with that are paid off.Stocks are equity because they represent ownership of a company, whereas bonds
are classified as debt because they represent on obligations to pay and not
ownership of assets.
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In a brokerage account the market value of security amount borrowed equity is
particularly important for margin accounts for which minimum standards must
met.
SHARE
Meaning;
Any busines