MINOR PROJECT

ON

“ANALYSIS OF CONSUMER BEHAVIOR TOWARDS SHARE TRADING IN INDIABULLS

SECURITIES LTD”

IN

INDIA BULLS

FOR THE PARTIAL FULFILMENT OF THE BBA PROGRAM OF G.G.S. INDERPRASTHA UNIVERSITY DELHI

SESSION- 2006-2009

Submitted By:- NEHA VERMA

B.B.A. (MARKETING)ENROL. NO. – 0101701706

Under Guidance:- Mr. RAJESH BAJAJ

Project Supervisor

Guru Gobind Singh University

1

Kashmiri Gate; New Delhi

ACKNOWLEDGEMENTS

I Shivani Sharma student of sem-5 BBA would like to express my sincere thanks to India

bulls Securities Ltd., Delhi for giving me the opportunity to carry out the Summer

Internship Program in their organization. The whole period spent with the organization

has been of immense learning experience about the Indian Stock Market.

Preparing a project of such a kind was not an easy task in itself and I am sincerely

thankful to all those people who help me lot, in preparing and completing this project.

I am grateful to India bulls Securities Ltd. who has given me this opportunity to carry out

the project “Analysis of Consumer Behavior towards Share Trading in India bulls

Securities Ltd.” A study on investor’s perception their behavior about equities.

I sincerely thank to Mr. Vishal Kumar (Branch Manager) for providing me this

valuable learning opportunit

SHIVANI SHARMA

2

CERTIFICATE

I, Miss. Annu Aggarwal, hereby certify that Miss. Shivani Sharma of Tecnia Institute

Of Avanced Studies of G.G.S.I.P.U [Semester V] has completed her project, titled

‘ANALYSIS OF CONSUMER BEHAVIOR’ in the academic year 2006-2009. The

information submitted herein is true and original to the best of my knowledge.

______________________

Signature Of The Project Co-ordinator

[Miss Annu Aggarwal]

3

DECLARATION

I, Miss Shivani Sharma , of Tecnia Institute of Advanced Studies of G.G.S.I.P.U [Semester V] hereby declare that I have completed my project, titled ‘’ in the Academic Year 2006-2009. The information submitted herein is true and original to the best of my knowledge.

___________________

Signature of Student

[NEHA VERMA]

4

EXECUTIVE SUMMARY

Investing in equities in a market like India is speculative and involves risk that may be

greater than other types of investment strategies. Before investing an Investor should be

careful enough about him investment decision to avoid erosion of wealth. As seen in the

recent times the volatility of market is more detrimental to the retail investors as it seems

to be lucrative for speculative gains of short duration of time. Hence an investor has to

evaluate his options carefully for a prudent investment, keeping long-term horizon in

mind.

The report has tried to bring out the parameters those are of paramount importance to

general public dealing in an equity trading on day-to day and delivery base trading. The

working methodology has been discussed i.e. the data collection methods, sampling

methods and the survey questionnaire methods. Thee questionnaire prepared is designed

so as to cover a wide range of customer “touch points”

The report given a view about the investors perception that what thy think while making

investments in shares.

A sample of 100 people was selected randomly and survey was done as per the

parameters of the questionnaire. The results of every parameter have been included in

this report and shown graphically (Pie Charts, bar graphs etc.) A complete structure of the

research design has been included.

Apart from above discussed points the brief history of India bulls Securities Ltd, its

business diversification and a brief introduction about the concept of share trading.

5

Contents

S.No. Title Page No.

1. INTRODUCTION

1.1 OVERVIEW OF THE INDUSTRY

1.2 BOMBAY STOCK EXCHANGE

1.3 NATIONAL STOCK EXCHANGE

1

2

4

5

2. COMPANY PROFILE

2.1 PROFILE OF THE COMPANY

2.2 MAIN OBJECTIVE OF THE COMPNAY

2.3 CREDIT TRADING

2.4 PROBLEMS OF THE COMPANY

2.5 COMPETITION INFORMATION

2.6 SWOT ANALYSIS

7

8

12

13

23

23

30

3. RESEARCH METHODOLOGY

3.1 SIGNIFICANCE

3.2 MANAGERIAL USEFULNESS OF THE STUDY

3.3 OBJECTIVE OF THE STUDY

3.4 SCOPE OF THE STUDY

3.5 METHODOLOGY

3.6 LIMITATIONS OF THE RESEARCH

32

33

33

33

33

33

37

4. CONCEPTUAL DISCUSSION 38

5. DATA ANALYSIS 75

6. CONCLUSION 83

7. RECOMMENDATIONS 85

8. ANNEXURE 89

9. BIBLIOGRAPHY 93

6

Chapter 1

INTRODUCTION

1

INTRODUCTION OF THE INDUSTRY

1.1 OVERVIEW OF THE INDUSTRY

The only stock exchanges operating in the 19th century were those of Bombay set up in

1875 and Ahemadabad set up in 1894. These were organized as voluntary non-profit

making organization of brokers to regulate and protect their interests. Before the control

on securities trading became a central subject under the constitution in 1950, it was a

state subject and the Bombay securities contract (CONTROL) Act of 1952 used to

regulate trading in securities. Under this Act, the Bombay stock exchanges in 1927 and

Ahemadabad in 1937.

During the war boom, a number of stock exchanges were organized in Bombay,

Ahemadabad and other centers, but they were not recognized. Soon after it became a

central subject, central legislation was proposed and a committee headed by A.D.

Gorwala went into the bill for securities regulation. On the basis of committee’s

recommendations and public discussions the securities contracts (regulations) Act

became law in 1956.

DEFINITION OF STOCK EXCHANGE

“Stock exchange means anybody or individuals whether incorporated or not, constituted

for the purpose of assisting, regulation or controlling the business of buying, selling or

dealing in securities.”

It is an association of member brokers for the purpose of self regulation and protecting

the internets of its members. It can operate only if it is recognized by the Govt. under the

securities contract (regulation) Act, 1956 the recognition is granted under section 3 of Act

by the Central Govt. ministry of finance.

2

BYELAWS

Beside the above act, the securities contract (regulation) rules were also made in 1975 to

regulate certain matter of trading on Stock Exchange. These are also byelaws of the

exchanges, which are concerned with following subjects.

Opening/Closing of the Stock Exchange, timing of trading, regulation of blank transfer,

regulation of Badla or carryover business, control of statement, and other activities of

stock exchange, fixation of margins, fixation market price or making price, regulation of

intraday (jobbing), regulation of broker trading, brokerage charges, trading rules on

exchanges, attribution and settlement of disputes, settlement and clearing of the trading

etc.

REGULATION OF STOCK EXCHANGE

The securities contract (regulation) is the basis of the stock exchange in India. No

exchange can operate legally without the Govt. permission or recognition. Stock

exchanges are given monopoly in certain areas under section 19 of the above Act to

ensure that the control and regulation are facilitated. Recognition can be granted to a

stock exchange provided certain condition are satisfied and the necessary information is

supplied to the government. Recognition can also be withdrawn, if necessary. Where

there are no stock exchanges, the government can license some of the brokers to perform

the function of stock exchange in its absence.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

SEBI was setup as an autonomous regulatory authority by the Government of India in

1988 “to perform the interest of investors in the securities and to promote the

development of, and to regulate the securities market and for matters connected therewith

or incidental thereto.” It is empowered by two Acts namely the SEBI act, 1992 and the

securities contract (regulation) Act 1956 to perform the function of protecting investor’s

right and regulating the capital market.

3

1.2 BOMBAY STOCK EXCHANGE

The stock exchange, Mumbai, popularly known as “BSE” was established in 1875 as

“The Native share and stock broker association”, as a voluntary non-profit making

association. It has an evolved over the year into its present status as the premiere stock

exchange in the country. It may be noted that the stock exchanges the oldest one in the

Asia, even older than the Tokyo Stock Exchange, which was founded in 1878.

The Exchange, while providing an effective and transparent market for trading in

securities, uphold the interest of the investors and ensure redressed of their grievances,

whether against the companies or its own member brokers. It also strives to educate and

enlighten the investors by making available necessary informative inputs and conducting

investor education programmes.

A governing board comprising of 9 elected directors, 2 SEBI nominees, 7 public

representatives and an executive director is the apex body, which decides the policies and

regulates the affairs of the exchanges.

The executive director as the chief executive officer is responsible for the day today

administration of the exchange. The average daily turnover of the exchange during the

year 2006-07 (April-March) was Rs. 6984.19 crores and average number of daily trades

15.69 lakhs.

BSE INDICES

In order to enable the market participants analysis etc., to track the various ups and

downs in the Indian stock market, the Exchange has introduced in 1986 an equity stock

index called BSE-SENSEX that subsequently became the barometer of the moments of

the share prices in the Indian Stock market. It is a “Market capitalization weighted”

index of 30 components stocks representing a sample of large, well-established and

leading companies. The base year of Sensex is 1978-79. The Sensex is widely reported

in both domestic and international markets through print as well as electronic media.

4

Sensex is calculated using a market capitalization weighted method. As per this

methodology, the level of the index reflects the total market value of all 30-component

stocks form different industries related to particular base period. The total market value

of a company is determined by multiplying the price of its stock by the number of shares

outstanding. Statisticians call an index of a set of combined variables (such as price and

number of shares) a composite Index. An Indexed number is used to represent the results

of this calculation is order to make the value easier to work with the track over a time. It

is much easier to graph a chart based on Indexed values than one based on actual values

world over majority of the well-known Indices are constructed using “Market

capitalization weighted method”.

In practice, the daily calculation of SENSEX is done dividing the aggregate market value

of the 30 companies in the Index Divisor. The keeps the Index comparable over a period

or time and if the reference point for the entire Index maintenance adjustments. SENSEX

is widely used to describe the mood in the Indian Stock Markets. Base year average is

changed as per the formula new base year average = old base year average* (new market

value/old market value).

1.3 NATIONAL STOCK EXCHANGE

The NSE was incorporated in Now 1992 with an equity capital of Rs. 25 crores. The

international securities consultancy (ISE) of Hong Kong has helped in setting up NSE.

ISE has prepared the detailed business plans and installation of hardware and software

systems. The promotions for NSE were financial institutions, insurance companies,

banks an SEBI capital market ltd., Infrastructure leasing and financial services ltd. and

stock holding corporation ltd.

It has been set up to strengthen the move towards professionalisation of the capital

market as well as provide nation wide securities trading facilities to investors.

5

NSE is not an exchange in the traditional sense where brokers own and mange the

exchange. A two tier administrative set up involving a company board and a governing

abroad of the exchange is envisaged.

NSE is a national market for share PSU bonds, debentures and government securities

since infrastructure and trading facilities are provided.

NSE-NIFTY

The NSE on April 22, 1996 launched a new equity Index. The NSE-50. The new index,

which replaces the existing NSE-100 index, is expected to serve as an appropriate Index

for the new segment of futures and options.“Nifty” means National Index for Fifty

Stocks.The NSE-50 comprises 50 companies that represent 20 board Industry groups

with an aggregate market capitalization of around Rs. 5,70,000 crores. All companies

included in the Index have a market capitalization in excess of Rs. 1000 crores each and

should have traded for 85% of trading days at an impact cost of less than 1.5%.

The base period for the close of prices on Nov 3, 1995, which makes one year of

completion of operation of NSE’s capital market segment. The base value of the Index

has been set at 1000.

NSE-MIDCAP INDEX

The NSE madcap Index or the Junior Nifty comprises 50 stocks that represents 21 abroad

Industry groups and will provide proper representation of the madcap segment of the

Indian capital Market. All stocks in the index should have market capitalization of

greater than Rs. 600 crores and should have traded 85% of the trading days at an impact

cost of less 2.5 %.

The base period for the index is Nov 4, 1996, which signifies two years for completion of

operations of the capital market segment of the operations. The base value of the Index

has been set at 1000.

Average daily turn over of the present scenario 258212 (Laces) and number of averages

daily trades 2160 (Laces).

6

Chapter 2

COMPANY PROFILE

7

COMPANY PROFILE

2.1 PROFILE OF THE ORGANIZATION

INTRODUCTION TO INDIABULLS

Indiabulls is India's leading retail financial services company with over 414 locations in

more than 124cities. While our size and strong balance sheet allow us to provide you

with varied products and services at very attractive prices, our over 5400 Client

Relationship Managers are dedicated to serving your unique needs.

Indiabulls is lead by a highly regarded management team that has invested crores of

rupees into a world class Infrastructure that provides our clients with real-time service &

24/7 access to all information and products. Our flagship Indiabulls Professional

Network offers real-time prices, detailed data and news, intelligent analytics, and

electronic trading capabilities, right at your finger-tips. This powerful technology is

complemented by our knowledgeable and customer focused Relationship Managers.

Indiabulls offers a full range of financial services and products ranging from Equities to

Insurance to enhance your wealth and hence, achieve your financial goals. Indiabulls

Client Relationship Managers are available to you to help with your financial planning

and investment needs. To provide the highest possible quality of service, Indiabulls

provides full access to all our products and services through multi-channels.

8

INNOVATION IS THE KEY TO SUCCESS- PROVED BY

INDIABULLS

Sameer Gehlaut and Rajiv Rattan

Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal, friends got together to start the

company. For some years they worked in the oil field services industry. The idea to start

their own outfit on a technology platform was born in 1999 when Gagan Banga joined

the three IIT-Delhi engineers who promoted the company. These first generation

entrepreneurs knew very well that nothing small works. They didn’t want to build a small

business which would get overnight success and shut down; rather they wanted to build a

sustainable profitable business.

This idea was to target the huge untapped retail segment of the market. The first task of

course was to work out a sound business model, which was sustainable and profitable.

They soon realized the implicit strength of their model. India was toying around with the

9

idea of brokerage getting done through the internet and clients directly managing their

accounts. Around the middle of 1999, the core promoters had got together and acquired a

shut down brokerage firm from its promoters at that time. The whole idea was to get a

brokerage license from the stock exchange and a membership of the stock exchange.

In 1999-2000, there was dotcom boom, there were a lot of dotcoms coming into being, lot

of venture capitalists were funding the dotcoms business but none of the dotcom had any

revenue model so the scope of a dotcom business was immense. Indiabulls came into

existence to take advantage of this. The three promoters got together and took over a

defunct brokerage company Orbis Securities- the whole idea was to get a brokerage

license and a membership of the stock exchange. This brokerage firm was restarted and it

started making miniscule amount of revenue for the company – it basically catered to the

HNIs - High Networth Individuals(?). Immediately after this the venture capitalists were

contacted. In this there were several models, which were discussed including involving a

strategic investor. Initially the company was promoted as a dotcom company. The

promoters chose the famous Charles Schwab model, which perfectly addressed their

need to have the business on a technology platform. The idea was that since it worked in

other parts of the world, it would work here also. The company thus had clear-cut

revenue model. It was very clear in the minds of the promoters that revenue was very

important. Profitability is the key to the entire thing. The emphasis on profitability was

there from day one. Indiabulls has been profitable for every financial year beginning

2000-01 the only financial year it has not been profitable has been 1999-2000. The

company focused on the retail segment and used Internet to exploit the massive scope in

the retail segment. The company also enjoyed the first mover advantage, as at that time

there was no company catering to the needs of retail segment through Internet Sameer

Gehlaut, took over as chairman and CEO, and now looks after sales, marketing and

external relationships, while Rajiv Rattan, in the role of CFO and president, manages

operations, finance and back office.

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THE INDIABULLS PHILOSOPHY – YOU COME FIRST

We have created a unique organization that is designed for you – the Smart Investor –.

We passionately believe in the Smart Investor who wants to make his own educated

investment choices and demands world class access to a full range of services and

products ranging from Equities to Insurance, combined with the highest level of integrity,

service and professionalism.

Indiabulls is a full service investment firm offering clients access to a tremendous range

of financial services from 414 locations across 124 cities. We have a strong team of over

4400 Client Relationship Managers focussed on serving your unique needs. Our world

class infrastructure, built with tens of crores of investment, provides our clients with real-

time service, multi-channel & 24/7 access to all information and products. As we've

expanded and developed to serve the needs of all kinds of investors, we've been guided

by one underlying philosophy: You come first.

We are proud to introduce to you Indiabulls Professional NetworkTM that offers real-

time prices, equity analysis, detailed data and news, intelligent analytics, and electronic

trading capabilities, right at your finger-tips. This powerful technology is complemented

by our knowledgeable and customer focussed Relationship Managers who are available

to help with your financial planning and investment needs.

We invite you to learn more about Indiabulls by calling 1600 11 1130 (toll free) or visit

our 135 Indiabulls Offices Nationwide or explore the services we offer through the

Indiabulls Market Trader.TM

HISTORY AND OTHER CORPORATE MATTERS OVERVIEW

Indiabulls Financial Services Limited was incorporated on January 10, 2000 as M/s

Orbits InfoTech Private Limited at New Delhi under the Companies Act, 1956 with

Registration No. 55 – 103183. The name of the Company was changed to M/s.

Indiabulls Financial Services Private Limited on March 16, 2007 due to change in the

11

main objects of the Company from Infotech business to Investment & Financial Services

business. It became a Public Limited Company on February 27, 2006 and the name of

Company was changed to M/s. Indiabulls Financial Services Limited. Company was

promoted by three engineers from IIT Delhi, and has attracted more than Rs.700

million as investments from venture capital, private equity and institutional investors

such as LNM India Internet Ventures Ltd., Transatlantic Corporation Ltd., Farallon

Capital Partners, L.P., R R Capital Partners L.P., and Infinity Technology Trustee Pvt.

Ltd. and has developed significant relationships with large commercial banks such as

Citibank, HDFC Bank, Union Bank, ICICI Bank, ABN Ambro Bank, Standard Chartered

Bank, Lord Krishna Bank and IL&FS. Company and there subsidiaries have facilities

from the above mentioned banks and financial institutions aggregating to Rs. 1760

million. Companies headquarters are co-located in Mumbai and Delhi, allowing it to

access the two most important regions for Indian financial markets, the Western region

including Mumbai, rest of Maharashtra and Gujarat; and the Northern region, including

the National Capital Territory of Delhi, nearby cities, parts of Haryana, Uttar Pradesh and

Punjab; and access the highly skilled and educated workforce in these cities. The

Marketing and Sales efforts are headquartered out of Mumbai; with a regional

headquarter in Delhi; and its back office, risk management, internal finances etc. are

headquartered out of Delhi, allowing our Company to scale these processes efficiently for

the nationwide network.

2.2 MAIN OBJECTS OF THE COMPANY

The main objects to be pursued by the Company on its incorporation are:

1. To hold investments in various step-down subsidiaries for investing, acquiring,

holding, purchasing or procuring equity shares, debentures, bonds, mortgages,

obligations, securities of any kind issued or guaranteed by our Company.

2. To provide financial consultancy services; to provide investment advisory services

on the internet or otherwise; provide financial consultancy in the area of personal

12

and corporate finance; publish books and CD ROMs and any other information

related to the above.

3. To conduct the business of sale, purchases, distribution and transfer of shares, debts,

instruments and hybrid financial instruments and to perform all related, incidental,

ancillary and allied services.

4. To conduct depository participant services; to conduct de-materialization and re-

materialization of shares; set up depository participant centers at various regions in

India and to perform all related, incidental, ancillary and allied services.

5. To receive funds, deposits and investments from the public, Government agencies,

financial institutions and Corporate bodies; grant advances and loans; conduct

advisory services related to banking activities, project financing, funding of mergers

and acquisition activities; fund management and activities related to money market

operations.

6. To carry on the business of portfolio management services, investment advisory

services; custodial services; asset management services; leasing and hire purchase;

mutual fund services and to act as brokers of real estate and financial instruments.

7. To carry on the business of financing; provide lease and hire purchase services; to

provide consultancy in the area of lease and hire purchase financing.

8. To operate mutual funds; receive funds from investors; equity or debt instrument

research activity instrument in debt and/or equity instruments.

2.3 CREDIT RATING

The company ranks at 82nd position in the list of most valuable companies in India has a

market capitalization of approx US $ 800 million. The consolidated net worth of the

company is approx US $ 400 million.

13

Indiabulls Securities Limited has been granted ‘PR1+’ rating for its unsecured short

term borrowing program of Rs. 300 million. Vide letter dated May 5, 2007 the rating

agency has increased the unsecured short term borrowing limit to Rs. 350 million

maintaining the ‘PR1+’ rating. ISL also enjoys ‘A+’ rating for medium to long term

unsecured borrowing program of Rs. 300 million. The Rating to the company has been

assigned by Credit Analysis Research Limited. As for the present issue of equity shares

of our Company, credit rating is not required.

SHAREHOLDERS AGREEMENT

Shareholders Agreement was entered into by and among our Company (formerly Orbis

Infotech Private Limited), Infinity Technology Trustee Private Limited as the trustee of

Infinity Venture India Fund, LNM India Internet Ventures Limited, Transatlantic

Corporation Limited (together the “VC Investors”) and the Promoters dated November 2,

2006. The VC Investors invested an aggregate amount of Rs. 206,000,000 in our

Company for which they were issued 55,425 equity shares at an average price of Rs.

3,716.73 per equity share. Pursuant to a letter agreement (the “Letter Agreement”) dated

May 27, 2006 between the parties to the Shareholders Agreement, each of the VC

Investors have agreed not to enforce rights that have accrued to them before the said

Letter Agreements and have agreed that the Shareholders Agreement, together with all

the rights and obligation on the parties will stand terminated immediately upon the listing

of the shares of our Company and consequent to the listing, the rights of the Shareholders

Agreement, including the rights that have arisen prior to such termination shall be

terminated. A copy of the Shareholders Agreement, and a copy of the Letter Agreement

terminating the Shareholders Agreement are available for inspection as material

documents at the corporate offices of our Company.

14

Key Competitive Strengths

DIVERSE BRANCH NETWORK

Since Company inception in FY 2006 Company and its subsidiaries have grown from a

single location to a nationwide network spread over 414 Offices in 124 cities. They have

a pan India distribution networks for the purpose of distribution of financial products and

services. Such a diverse and integrated network provides a centralized platform to there

clients.

BOUQUET OF FINANCIAL PRODUCTS AND SERVICES

Company and its subsidiaries offer various financial services and products ranging from

equity, F & O and wholesale debt, mutual fund, insurance and IPO distribution, equity

research analysis, depository services to cater to the specific needs of the retail and

institutional investors thus providing all these services in a single platform.

Advanced Technology team that delivers market leading product innovation

There ongoing investment in technology is a key element in expanding there product and

service offerings, enhancing there delivery systems, providing fast and consistent client

service, reducing processing costs, and facilitating there ability to handle significant

increases in client activity without a corresponding rise in risk and staff. Company and its

subsidiaries have an in-house technology team of 27 people comprising of several

engineers. The in-house technology team has been responsible for developing the

technology products for operating at a large scale with efficient back office systems. The

application of technology allows Company and its subsidiaries to build scaleable product

and service offerings. The in-house technology team developed one of the first Internet

trading platforms in India, one of the first in-house real-time CTCL link with NSE.

Company and its subsidiaries introduced integrated accounts with automated gateways

with client bank accounts so that they can transfer funds to and from their bank account

to their brokerage account with the Company. This has enhanced customer ability to

access their funds for market related activities. The in-house technology team has good

15

expertise to create mission critical applications and in the maintenance and upkeep of

high transaction processing of there web-site.

Strong Sales and Marketing Teams with continuous reinvestment and training

Company’s relationship manager channel (through a team of 4400 Relationship

Managers as on july 30, 2007) offers a single point contact to retail customers whereby

their high net worth clients have separate relationship managers catering to them. These

managers offer personalized services to the customers helping build strong and

continuing relationships with them. Also, our marketing associate channel helps

Company and its subsidiaries in client acquisitions at minimal costs with client loyalty.

The marketing associate’s channel also helps Company and its subsidiaries in increasing

their penetration in smaller town and cities.

STRONG CROSS SELLING OPPORTUNITIES

With 414 branches spread over 124 cities all over India and variety of financial products

and offerings coupled with online, relationship manager & marketing associate channels,

Company and its subsidiaries have strong cross product selling opportunities thus

providing a multi-channel delivery systems to there diverse client base of 3,25,000 clients

as on July 10, 2007.

STRONG TEAM OF EXPERIENCED PROMOTERS

Indiabulls has a strong team of promoters who are engineers from Indian Institute of

Technology and have several years’ experience in financial services industry. They

believe that their strong technical experience will help them in achieving our key

business strategies.

LEADING PRODUCT INNOVATION AND MARKETING STRATEGIES

Management is innovative and nimble and has historically introduced many new and

innovative products to the market place that have played a significant role in their

16

growth. Company’s relationship manager model has introduced private banking

experience to the clients. The relationship managers are trained and incentives to work

with their client base and enhance ability to cross sell and leverage the large client base.

Indiabulls have launched marketing associate model, which replaces the traditional sub-

broker model with an authorized person that client can appoint independently and provide

them with the benefit of their trading, clearing and servicing strengths. Its equity analysis

product provides clients with unbiased research. Company plans to continuously innovate

and introduce market leading products and services to add to its competitive advantage.

WELL CAPITALIZED PLAYER, WITH STRONG BANKING RELATIONSHIPS

AND CREDIT RATINGS

Indiabulls consolidated net worth is Rs. 1023.19 million making us a well capitalized

companies. The Company and ISL have received sanctioned facilities of Rs. 1760 million

from 11 leading commercial banks and financial institutions. The details of the banking

relationships as of June 24, 2007 are as follows:

ABILITY TO COMBINE PEOPLE & TECHNOLOGY IN UNIQUE WAYS

They provide multiple distribution channels by combining people and technology. Clients

can visit one of the 414 offices in 124 cities or access via telephone, call centre or online

channel. Web enabled tools such as technical analysis, information, news, interactive web

based programs and tools and back office solutions for clients and marketing associates;

Power Indiabulls an order entry, routing and management technology through

technology platform, for actively- trading investors.

Strong market presence and increased market share leads to virtuous cycle of

growth and profitability

They’re growing client base and market share have increased their market presence,

brand recognition enhanced their profitability and increased the available credit facilities

from the banks further strengthening its strong balance sheet. Company’s brand and

profitability allows them to recruit good and efficient employees, compensate them

17

attractively and provides the flexibility toes for investments in the business and

technology systems. These attributes in turn have a positive effect on the growth of its

client base thereby increasing its market share, leading to higher profits and credit

facilities and thus forming a virtuous circle.

KEY BUSINESS STRATEGIES

Their focus on the client has allowed Company and its subsidiaries to offer a range of

services that have changed the investing landscape and created a new model of financial

services that melds people and technology to provide an integrated human assisted

technology interface service for investors who range from self-directed full-time active

investor to those who prefer to deal with through a marketing associate in smaller towns

and cities. Their key strategies include:

Defend and maintain their differentiation as the firm that delivers ethical and useful

services

Build and expand “investing insight” through product offerings such as Equity

Analysis which is objective,

Uncomplicated and not driven by commission

Give clients new levels of choice tailored to their desire for help, tools for investing

their assets, their willingness to pay for additional services and the level of business

they can do with the company.

Provide clients with tools, relationship managers and choices that support their

desired investment outcomes. Indiabulls has developed a client specific approach as a

core element of its business strategy and are constantly focusing on acquiring new

clients and expanding their customer base. They believe that the strong secular

growth of the Indian financial Markets, due to increased household penetration of

financial assets; increasing liquidity and market capitalization of Indian Markets, led

18

by the listing of many public sector entities; and the increasing affluence of Indian

households and savers provides an impetus to the growth perspective.

They believe that this diversification and growth strategy will continue to produce results

and allow Company and its subsidiaries to grow business at a rapid pace irrespective of

market conditions. In addition, management believes that the growth of the Indian

financial markets, due to increased household penetration of financial assets; increasing

liquidity and market capitalization of Indian markets, led by the listing of many public

sector entities; and the increasing affluence of Indian households and savers, favors our

long term growth outlook.

The table below encapsulates the financial metrics on an annual basis, and compares that

with the Market trading volume.

(NSE Yearly Trading Volume is taken as representative of Market activity).

The core pillars of our business strategy are discussed below:

Increase the number of Client Relationships

They are focused on increasing the number of client relationships through a wide network

of offices throughout India and having more number of relationship managers to service

these relationships. They plan to grow their business by growing the number of client

relationships. During a downturn of the markets they believe that increased number of

client relationships will add stability to their earnings.

Offer Diversified Financial Products & Services – Capture Greater Share of Wallet

Company and its subsidiaries offer to their clients a wide range of financial services and

products allowing the clients to leverage their relationship with Indiabulls and get

products suiting their varied needs. This strategy allows them to gain “share of wallet” of

the clients’ consumption of financial services. They offer to the client a comprehensive

product offering and are able to increase their revenues per client by selling different

19

products to the same client. Indiabulls offer equity, debt & derivatives brokerage, IPO

distribution, mutual funds and insurance products. Their strategy is to increase the

number of client relationships and then leverage those client relationships into offering in

a whole suite of financial products.

Multiple Channels – Enhance Customer Experience and Opportunities to interact

with us

Company’s clients can access their products and services through 414 offices spread

across 124 cities; through operator assisted call Centers; or through their website

www.indiabulls.com; or through their respective relationship managers or through

marketing Associates. These multiple channels provide flexibility to the clients and allow

them to utilize their existing business Relationship with them through any channel from

any part of India. Company’s strategy is to provide the most convenient, efficient and

value added channel to the client at the lowest possible cost, and allow the clients with

choice and varied access points. Indiabulls believe that their multiple channel strategy has

been particularly effective in the affluent segment where many sophisticated clients like

to have a close-by office they can access and yet have the flexibility of Internet account

management, transactions and electronic funds transfer and settlement.

Relationship Manager driven sales model, provide high quality service and exploit

cross-sell opportunities

Company’s clients benefit from the personal attention and advice of the trained and

motivated relationship managers. All its relationship managers are qualified and educated

professionals, who have been extensively trained in-house to provide the products and

services to the clients. These relationship managers are encouraged to develop long-term

relationships with the clients and can access a variety of resources within the Company,

such as insurance specialists, research services and others to add value to their clients.

Most of the clients have dedicated relationship managers irrespective of the channel they

use.

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LOW COST AND HIGHLY SCALABLE BUSINESS

Indiabulls has utilized the technologies available and have constantly invested in products

and innovations to provide an enhanced experience to its customers. The benefits of such

infrastructure include integrated customer trading account with depositary services;

electronic gateway for instant funds transfer to and from the bank to the brokerage

account; and comprehensive client systems that track all activity in various segments.

They believe that technology and systems are one of the key competitive edges in terms

of lowering their operating costs; managing the business; reducing risk and providing an

enhanced experience to the clients with superior service standards.

BROKERAGE OFFERING

Company’s retail equity business primarily covers secondary market equity broking. It

caters to the needs of individual Indian and Non-resident Indian (NRI) investors. They

offer broker assisted trade execution and automated online investing and trading facilities

to their customers. Automated online investing and trading includes automated order

placement and execution of market and limit equity orders; and advanced trading

platforms for active traders. All investors have full access to real - time quotes,

personalized portfolio tracking, charting and quote applications, real-time market

commentary, real-time quotes and news.

ONLINE AUTOMATED CHANNEL

Automated Online Business contributes more than 34.6% of its overall revenues. They

control more than 20% market share in the online business. Clients are able to obtain

financial information and execute trades on an automated basis through their online

channel using product offerings like Power Indiabulls and Indiabulls Market Trader.

This channel is designed to provide added convenience for clients and minimize its costs

of responding to and processing routine client transactions. Online channels include the

Indiabulls Group Professional Network that provides access via their web-site

www.indiabulls.com to information and trading service on the Internet. Additionally,

Power Indiabulls online trading system is designed for the high volume trader and

21

provides enhanced trade information and order execution integrated software-based

trading platforms. While most client transactions are completed through the online

channel, they continue to stress the importance of blending the power of the Internet with

personal service to create a full-service client interface. They offer an online portal where

the clients can execute securities purchase and sales transactions through the Internet.

This covers the Equity, Debt & Derivatives segment in the Indian securities market.

With an objective of assisting our customers in taking investment decisions, the portal

also provides financial information on various companies listed. For executing a

transaction clients can directly log on to our website without requiring any assistance

from offline intermediaries

THIRD PARTY FINANCIAL PRODUCTS OFFERING

They distribute third party products and services through our comprehensive retail

distribution network. The products offered include third party insurance, mutual funds

and initial and secondary public offerings. They have a pan India retail distribution

network, comprising 7000 relationship managers and 414 branches spread over 124 cities

SOME OF THE UNIQUE FEATURES ARE:

Trading via branch network, telephones and Internet account. That is Both online

and offline (by telephone).

Automated Extended Margin Trading Facility.

Integrated Trading and Depositary Account.

Technology transforming desktop into NEAT like terminal for Internet trading.

One Screen for both Cash and Derivatives Trading.

Facility to Buy Today & Sell Tomorrow itself.

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Equity Research Department which studies the market and provides information.

Up-to-date news, data and analysis via Indiabulls.com.

Equity Analysis Report to support your investment decisions.

2.4 PROBLEMS OF THE ORGANIZATION

The other of India Bulls is that they give more attention to HNIs (high networth

individuals) as compared to retail investors or individuals; this is why volumes of

trading at India Bulls are less as compared to its competitors.

Most of the processing and clarifications (account opening, payments, etc) are routed

to the head office in Mumbai due to lack of decision –making powers of local

branches which delays the speedy execution of decision

2.5 COMPETITION INFORMATION

5paisa.com

Company Background

Indiainfoline was founded in 1995 and was positioned as a research firm. In 2000 e-

broking was started under the brand name of 5 paisa.com. Apart from offering online

trading in stock market the company offers mutual funds online.It also acts as a

distributor of various financial services i.e GOI securities, Company Fixed Deposits,

Insurance.Limited ground network, present in 20 Cities.

Online Account Types

• Investor Terminal : Investors / Students

• Trader Terminal : Day Traders / HNI’s

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PRICING FOR RETAIL CLIENTS

Investor Terminal

• Account Opening: Rs 500

• Demat 1st Yr: Rs 250

• Initial Margin: Rs 2500(Compulsory)

• Min Margin Retainable: Rs 1000

• Brokerage:

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

PRICING FOR HNI CLIENTS

Trader Terminal

• Account Opening: Rs 500

• Demat 1st Yr: Rs 250

• Initial Margin: Rs 5000(Compulsory)

• Min Margin Retainable: Rs 1000

• Brokerage:

Trading 0.10% each side + ST

Delivery 0.50% each side + ST

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(Negotiable to 0.05% each side & 0.25%)

• Account Access Charges

Monthly Rs 800, adjustable against Brokerage

Yearly Rs 8000, adjustable against brokerage

Deal Clinchers v/s 5 Paisa

• Downtime

Recent past 5 paisa Trader Terminal (T.T) is experiencing high frequency

downtime between 3 – 3:30 p.m due to server load (as their T.T is feature heavy

compared to Speetrade charting)

• Manual Accounting

The 5 paisa accounting system is manual, Online fund transfer through bank is not

credited instantly. Limit is provided EOD for shares sold from DP, or call Similarly limit

released for shares sold under BTST is manual Delay in receiving pay-out of clear funds

from trading to Bank Account

• Min Account Balance

Concept of Min Rs 1,000 to be maintained in form of cash / securities to keep

account active. This can be withdrawn only on closure of account.

Kotakstreet

Company Background

Kotakstreet is the retail arm of kotak securities. Kotak Securities limited is a joint venture

between Kotak Mahindra Bank and Goldman Sachs

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Online Account Types

•Twin Advantage / Green Channel: 2 DP’s, Limit against shares

•Free Way: Flat Rs 999 Cover Charge p.m, 0.03% per transaction

•High Trader: 6 Times Exposure Cash & Derivatives, Auto sq off 2:55

PRICING OF KOTAK

•Account Opening: Rs 500

•Demat: Rs 22.5 p.m

•Initial Margin: Rs 5000(Compulsory)

•Min Margin Retainable: Rs 1000

•Brokerage Slab wise: Higher the volume, lower the brokerage. Even older customers

(on 0.25% & 0.40%) have been moved to the slab wise structure.

Deal Clinchers v/s Kotakstreet

•Rigid Account Opening Terms

No Flexibility of A/c opening charges (Rs 500) + Compulsory margin Rs 5000/-

Account opening free with Rs 10,000 Margin OR competitor Contract Note.

•No Customization of commercial Terms

No Flexibility in Leverage – Dependent on Type of Account ( 4 to 6 times only)

No flexibility in Brokerage, driven by slab structure

•Many Other Charges

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Rs 22.5 p.m towards DP AMC charges

DP incoming charges extra, 0.02%

Rs 1,000 as retainable Margin to keep account active

Rs 25 per call after 20 calls for the month

•Restricted Access to Terminal like product

KEAT Desktop restricted distribution on payment of Rs 500, Non refundable

ICICIDirect

Company Background

ICICI Web Trade Limited (IWTL) maintains ICICIdirect.com. IWTL is an affiliate of

ICICI Bank Limited and the Website is owned by ICICI BankLimited

Account Types

•ICICI Direct e-invest Account: Plain Vanilla Account with focus on 3 in 1 advantage.

Differentiated in services within the account

1. Cash on spot

2. MarginPlus

Premium trading interface of ICICI Direct Link is given to DBC partners and

HNI’s

•Account Opening: Rs 750

•Schemes: For short periods Rs 750 is refundable against brokerage generated in a qtr.

These schemes are introduced 3-4 times a year.

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•Demat: NIL, 1st year charges included in Account Opening Plus a facility to open

additional 4 DP’s without 1st yr AMC

•Initial Margin: Nil

•Brokerage: All brokerage is inclusive of stamp duty and exclusive of other taxes. Slab

wise brokerage ranges from 0.75% to 0.25% depending on volume.

Deal Clinchers v/s ICICI Direct

•Poor online Interface

Slow website interface with no real-time quotes creates dissatisfaction among high

frequency traders

•Margin trading restriction

The margin trading system is available up to 2:45 p.m, with outstanding net positions

under margin segment automatically squared off at any time between 2:45 – 3:30 p.m.

Thus no control of square off price.

•Morning Trades Issue

Being one of the websites with largest no of after hour orders which are pushed 1st thing

in the morning, creates a choking of orders to the exchange, causes delay of

confirmations for new order placed during the early morning trades.

•Restriction of BTST

The sale of shares purchased is restricted to T+1 day and is not permitted on T+2 Day.

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•No leverage for Delivery trades

Delivery is restricted to the total money allocated into the trading account.

•No flexibility on leverage on Intra-day trades

The leverage of 4 times is available for intra- day trades.

•Restriction of Bank Account

The choice of bank is restricted to ICICI Bank.

•Higher Brokerage rates with slabs

The delivery brokerage is pegged at 0.75% and trading at 0.10% each side, this makes is

very unviable for customers dealing in large volumes. Although progressively the

delivery and trading brokerage reduce as volumes go up.

2.6 SWOT ANALYSIS

STRENGTHS

The `do-it-yourself' framework of online share trading offers retail investors the three

benefits of transparency, access and efficiency. Paperwork diminishes significantly, and

no more painful trips to your broker to check if everything's in order. Online trading has

made it possible to universalize access to retail investors. This was earlier very difficult,

as the cost of servicing often-outweighed transaction volumes. Online brokerage ranges

between 0.05-0.20 per cent of the value of transactions for non-delivery-based trades, and

between 0.25-0.95 per cent for delivery-based trades. Once major investments in online

infrastructure are over and done with - and with the economies of scale coming into play

- it is expected that brokerage rates would head further downwards.

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WEAKNESSES

Every thing in the world has a flip side to it - Transaction velocity is crucial. And more

often than not, connections are lousy. There's also a degree of investor skepticism about

online payment and settlement mechanisms in spite of all the encryption and fire walling

brought into play. Time and technology will soon assuage these concerns, which hark

back to the `physical' days.

OPPORTUNITIES

You have some money to dabble with. Trading shares on BSE/NSE has always been your

dream. When will you ever find the time? And besides, the hassle of finding a broker is

not easy. This is your main opportunity.

Realizing there is untapped market of investors who want to be able to execute their own

trades when it suits them, brokers have taken their trading rooms to the Internet. Known

as online brokers, they allow you to buy and sell shares via Internet.

THREATS

On to some threat perception - Domestic funds, foreign institutional investors and

operators comprise the three main market constituents. And all three include term

investors as well as opportunists in their pecking order. Some, for instance, hitch their

fate with what the FIIs are up to.

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Chapter 3

OBJECTIVE AND

RESEARCH

METHODOLOGY

31

RESEARCH METHODOLOGY

2.1 SIGNIFICANCE

The main significance of the project is to study the preferences and perceptions of

investors regarding various financial products from the stable of India bulls

Securities Ltd.

2.2 MANAGERIAL USEFULNESS OF THE STUDY

This project is very useful to study investor’s behavior towards different attributes

such as risk, return, liquidity etc. of investment in Equities.

2.3 OBJECTIVE

To study the issues and challenges that investor’s face while making investment

in share market. To study the preferences and perceptions of investors regarding

various financial products from the stable of Indiabulls Securities Ltd. so that the

firm can benefit from the findings of the report in launching any new investment

product in future. To study the consumers bahaviour in respect of investment in

shares Trading. To study about Risk Management with the help of equities.

2.4 SCOPE OF THE STUDY

To study the consumers bahaviour in respect of investment in shares Trading.

2.5 METHODOLOGY

The methodology section is the blue print for researcher activity and specifies

bow the investigator intents to study the people or describe social settings. In

other words the methodology section make explicit the study desire and

constitutes the “how to do it” phase.

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The project study has been conducted by collecting primary data only using

structured questionnaire. No secondary data is used.

I have put my best possible effort to do this research and collect the necessary

information to learn about this topic thoroughly.

DATA COLLECTION

The data collected was a primary & secondary in nature. Primary data was

collected using structured questionnaire. The questionnaire has been designed for

the target group to get the best amount of data possible keeping in view the

importance and authenticity of the information and convenience of the

respondent. The selection of investor was predetermined in nature Personal

contacts were established to conduct a face-to-face interview. Interview was

conducted under strict supervision to maintain the standards of the data collected.

Type of Research: - Descriptive research

Descriptive research includes Surveys and fact-finding enquiries of different kinds.

The main characteristic of this method is that the researcher has no control over the

variables; he can only report what has happened or what is happening.

DATA SOURCES

There are two types of data.

Primary Data The data that is collected first hand by someone specifically for

the purpose of facilitating the study is known as primary data. So in this research

the data is collected from respondents through questionnaire.

Secondary Data For the company information I had used secondary data like

brochures, web site of the company etc. The Method used by me is Survey

Method as the research done is Descriptive Research.

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RESEARCH INSTRUMENTS

Selected instrument for Data Collection for Survey is Questionnaire.

QUESTIONNAIRE DESIGN/FORMULATION

Questionnaire: - A questionnaire consists of a set of questions presented to

respondent for their answers. It can be Closed Ended or Open Ended

Open Ended: - Allows respondents to answer in their own words & are difficult to

Interpret and Tabulate.

Close Ended: - Pre-specify all the possible answers & are easy to Interpret and

Tabulate.

IMPORTANCE SCALE

A scale that rates the importance of some attribute.

RATING SCALE

A scale that rates some attribute from “highly satisfied ” to “highly unsatisfied “

and “very inefficient” to “very efficient”

SAMPLING UNIT: -

Who is to be surveyed? The marketing researcher must define the target population

that will be sampled. The sample Unit taken by me; General public of different age

group, different gender and different profession

SAMPLING FRAME:-

The source from which the sample is drawn

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Sampling Technique: -

How should the respondent be chosen? In the Project sampling is done on basis of

Probability sampling. Among the probability sampling design the sampling

design chosen is stratified random sampling. Because in this survey I had stratified

the sample in different age group, different gender and different profession

Sample Size/ Population Size: - How many people should be surveyed?

My sample size is 100

RESEARCH DESIGN

Research design is a specification of methods and procedures for acquiring the

information we need to solve the problems. Research design was adopted for the

purpose of collection and analysis of data in a manner aimed at getting relevant

information. It was conceptual structure within which research was conducted,

collected, measured and analyzed.

RESEARCH IDEA

To know the market scene of trading and Investment in equities through India

bulls securities Ltd.

RESEARCH QUESTION

What is the market trend regarding investment? What difficulties and challenges

investors are facing while making investments?

RESEARCH DESIGN

“To get an insight into the mind of investors regarding trading and investment in

Equities”

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“To get an insight into the mindset of investors regarding the importance assigned

to different attributes such as risk, return, liquidity etc. of various investment

channels such as equities. In the report this tries to understand the investor’s

behavior while trading.”

“To study the preferences and perceptions of investors regarding various financial

products from the stable of India bulls Securities Ltd. so that the firm can benefit

from the findings of the report in launching any new investment product in

future.”

3.6 LIMITATIONS OF THE RESEARCH

To study share market is a very vast topic and the search is just limited to a small

portion.

Due to the reluctant nature of the respondents it was not an easy task to collect

relevant information from them.

Sometime it was difficult to make the respondents understand the purpose of the

survey.

Busy schedule of the respondents was also a major hindrance to establish a contact

with them.

It may be possible the information provided by them is not true.

36

Chapter 4

CONCEPTUAL

DISCUSSION

37

CONCEPTUAL DISCUSSION

INTRODUCTION AND CONCEPT OF SHARE TRADING

Trading in shares is old phenomena its regulation had been started when securities

contract act had been formed in 1956. Transfer of resources from those with idle

resources to others who have a productive need for them is most efficiently achieved

through the securities market. It provides a channel for reallocation of savings to

investments.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI) is a regulatory

governing body of security market. The SEBI Act 1992 was enacted to empower SEBI

with statutory powers for:

(a) Protecting the interests of investors in securities.

(b) Promoting the development of the securities market

(c) Regulating the securities market

Its regulatory jurisdiction extends over corporate in the issuance of capital and

transfer of securities. It has powers to register and regulate all the market all market

intermediaries and also to penalize them in case of violations of the provisions of the

ACT, rules and regulations made there under. SEBI has a full autonomy and authority to

regulate and develop an orderly securities market.

The share market can be segmented in two parts one is Primary Market another is

Secondary Market.

38

Financial market can be divided into following four sub-markets

Financial Market

Financial Market

Money Market Capital Market

Primary capital Secondary capital

Market Market

Primary Money Secondary Money

Market Market

PRIMARY MARKET

It provides opportunity to issuers of securities government as well as corporate to raise

resources to meet their requirements of investments. In this market companies issue fresh

security sin exchange of funds through public issues or private placements. The market

design for primary market is provided in the provision of Companies Act, 1956 which

deals with issues, listing and allotment of securities. The investors have to apply the

39

shares by filling the application form issue by the company along with the application

money. According to Disclosure and Investor Protection guidelines of SEBI, 1992

company has to disclose all the necessary information regarding pricing of issues, listing

requirements, disclosure norms lock-in-period for promoters contribution, contents of

offer documents pre and post issue obligations etc.

Company can issue shares at face value, at premium or at discount. Another method of

pricing which is now days common is issuing the securities through online system of the

stock exchange has to comply with the section 55 to 68a of the companies Act, 1956 and

SEBI guidelines 2007. The company is required to enter in to an agreement with the

stock exchanges which have the requisite system for online offer of securities. The

advantages for this new system are:-

(a) The investors part with money only after allotment.

(b) It eliminates refunds except in case of direct applications.

(c) It reduces the time taken for issue process

SECONDARY MARKET

Secondary market is the place for sale and purchase of existing securities. It enables an

investor to adjust his holdings of securities in response to changes in his assessment about

risk and return. It enables him to sell securities for cash to meet his liquidity needs. It

essentially comprises of the stock exchanges which provide platform for trading of

securities and a host of intermediaries who assist in trading of securities and clearing and

settlement of trades. The securities are traded, cleared and settled as per prescribed

regulatory framework under the supervision of the exchanges and oversight of SEBI.

TRADING MECHANISM

Earlier trading on stock exchanges in India used to take place through open outcry

without use of information technology for immediate matching or recording of trades.

40

This was time consuming and inefficient. This imposed limits on trading volumes and

efficiency. In order to provide efficiency, liquidity and transparency National Stock

Exchange introduced a nation wide on line fully automated screen based trading system

where a member can punch in to the computer quantities of securities and the prices at

which he likes to transact and the transaction is executed as soon as it finds a matching

sale or buy order from a counter party. Screen based trading electronically matches orders

on a price/time priority and hence cuts down on time, cost and risk of error, as well as on

fraud resulting in improved operational efficiency. It enables market participants,

irrespective of their geographical locations to trade with one another and it provides equal

access to everybody.

NSE has main computer which is connected through Very Small Aperture Terminal

(VSAT) installed at its office. The main computer runs on a default tolerant STRATUS

mainframe computer at the exchange. Brokers have terminals installed at their premises

which are connected through VSATs. An investor informs a broker to place an order on

his behalf.

41

PRODUCTS AND SERVICES

FUNCTIONAL AREAS OF INDIABULLS

The product range offered by Indiabulls includes

Equity Analysis

Equities & Derivatives

Depository Services

Commodities

Loans

Real Estate

A. INDIABULLS EQUITY ANALYSIS

Building and maintaining your ideal portfolio demands objective, dependable

information. Indiabulls Equity Analysis helps satisfy that need by rating stocks

based on carefully selected, fact-based measures. And because we're not focused on

investment banking, we don't have the same conflicts of interest as traditional

brokerage firms. This objectivity is an important difference in our ratings.

What is Indiabulls Equity Analysis?

An Equity Rating approach is objective and easy to understand

Indiabulls Equity Analysis provides clients with an objective stock rating system

for more than 500+ stocks

An unbiased approach to help in deciding which shares to buy and sell.

42

Includes third party opinions to facilitate more informed investing decisions.

FEATURES OF INDIABULLS EQUITY ANALYSIS

This feature of Equity Analysis provides its clients in short and precise the company’s

background, stock price, asset class, ratings along with the 3rd party opinions. Following

are the parameters:

OVERVIEW:

Contains precise information about the industry (cement, pharmaceutical, IT, etc), current

stock price, asset class (large cap; mid cap; small cap) and 52 week high-low.

COMPANY BACKGROUND /DETAILS:

Services and products offered

Client profile

Core competency

Achievements and its relative position (market share) in the industry.

1. EQUITY RATINGS:

Ratings are based on a set of parameters, which are as follows:

Fundamentals - Assessed on parameters like net profit margin and ROE (Return on

Equity).

Valuation - Assesses the attractiveness of a particular stock. Higher the current value

of the company, lower is its future attractiveness.

43

Risk - Assessed on parameters like price volatility, liquidity of the stock, debt/equity

ratio, etc.

Momentum - Assesses the potential of the stock to keep performing at a stronger

than market level in the future. The more the number of buy/buy-hold

recommendation the better the momentum rating for the company.

2. CURRENT CONSENSUS OPINION:

Perspective from the viewpoint of the Analyst which are used to generate ratings for each

company (scrip wise). This includes the following:

Third party opinions

Only for companies researched by some analysts

Parameters include Buy, Buy/Hold, Hold, Weak/Hold, Sell, No opinion

3. FUNDAMENTAL INFORMATION :

Under this parameter the company’s share is compared with the industry and market

which is based on the following parameters:

Revenue: Income generated from sales of the product.

Market capital : Number of shares * market price

Price/sales: Stock's current price / revenue per share

Profit margin(%): This parameter is an indicator of profitability which is

calculated as: Net earnings after taxes/revenues

44

ROE (%) Return on Equity : This is useful in comparing the profitability of a

company to other firms in the same industry and this calculated as: Net

income/shareholder’s equity

Long Term Debt/Equity: A measure of financial leverage indicating the

proportion of equity and debt used by the company to finance its assets.

4. PEER ANALYSIS:

The Scrip is compared with it peers with respect to various parameters like revenue,

growth P/E and the analyst Consensus.

This includes the following:

Revenue: Income generated from sales compared to its peers.

Growth %: Growth measured in terms of percentage which is compared to its peers

in the same industry.

P/E: PE Ratio is calculated as the current market price of a share divided by the

earnings per share (EPS). Higher P/E multiple would indicate the investor’s

willingness to pay more for the stock relative to its earnings which is reflected in

a high growth %.

Analyst consensus: The Analyst views are mentioned under this category.

5. GROWTH EXPECTATIONS AND VALUATION MEASURES

This parameter is based on the following valuations:

Annual EPS Trend

Current P/E multiples

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Valuing Potential Growth

ANNUAL EPS TREND:

EPS: The EPS is arrived by dividing the net profit by the number of shares in the

company. The ratio shows the kind of price that investors are willing to pay for

each rupee of earnings.

Indiabulls Equity Analysis provides the clients with a measure of the companies

future profitability with the help of forecasted EPS, which is derived from

historical data.

It shows the trend of the annual EPS generated.

CURRENT P/E MULTIPLES

P/E: It measures the stock ‘price relative’ to its earnings. PE Ratio is calculated as

the current market price of a share divided by the earnings per share (EPS).

It includes trailing data, which indicates last 4 quarters along with the estimated

financials.

Here the higher P/E multiple would indicate the investor’s willingness to pay

more for the stock relative to its earnings which is reflected in a high growth %.

It is useful to compare the P/E ratios of companies in the same industry, market,

or against the company's own historical P/E. This explains the use of this ratio in

case of peer analysis and the comparative analysis with respect to the industry and

the market as a whole.

46

VALUING POTENTIAL GROWTH

PEG: The PEG (price/earnings to growth) ratio is a tool that can help investors find

undervalued and overvalued stocks.

(a). If PEG =1 - then market is pricing the stock to fully reflect the stock's EPS

growth.

(b). If PEG > 1 - then the stock is possibly overvalued or that the market

expects future EPS growth to be greater than what is currently in the

market.

(c). If the PEG < 1 - it is a sign of a possibly undervalued stock or that the

market does not expect the company to achieve the earnings growth that is

reflected in the market.

B. DEPOSITARY SERVICES

Indiabulls is a depository participant with the National Securities Depository

Limited and Central Depository Services (India) Limited for trading and

settlement of dematerialized shares. Indiabulls performs clearing services for all

securities transactions through its accounts. We offer depository services to create

a seamless transaction platform – execute trades through Indiabulls Securities and

settle these transactions through the Indiabulls Depository Services. Indiabulls

Depository Services is part of our value added services for our clients that create

multiple interfaces with the client and provide for a solution that takes care of all

your needs.

SCHEDULE OF CHARGES

NSDL

CDSL

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C. PERSONAL LOANS

Offers the shortest route to a loan with minimum paperwork and procedures. With

Easymoney, you can avail of easy loans for a minimum of Rs.10, 000 to a

maximum amount of Rs.1,00,000.

FEATURES OF EASYMONEY ARE:

Flexible loan tenor of up to 4 years (i.e. 1 month to 48 months).

Loans available from a minimum of Rs.10,000 up to a maximum of Rs.100,000.

Easy monthly repayment through equated monthly installments (EMI).

Mediclaim Insurance bundled with every loan you avail.

Easy documentation and quick disbursal.

You take today and you can pay it tomorrow with no penalties

DOCUMENTS REQUIRED:

Residence Proof

Identity Proof

Income Proof

D. EQUITY & DERIVATIVE

Equity Business caters:

Needs of independent investors.

Active traders

48

Non-Resident Indian (NRI) investors.

INDIABULLS OFFERS:

Broker assisted trade execution

Automated online investing

Access to all IPO's.

Indiabulls offers the purchase and sale of securities, which includes Equity, Derivatives

and Commodities Instruments listed on National Stock Exchange of India Ltd (NSEIL),

The Stock Exchange, Mumbai (BSE) and NCDEX.

TYPES OF ACCOUNTS

Indiabulls Signature Account - Comprehensive services including research and

investing guidance for independent investors.

Power Indiabulls - Indiabulls is dedicated to empower Active Traders through

personal service and advanced trading technology.

Non-Resident Indian (NRI) Investor Services - With an extensive range of

investment products, you will discover an unwavering commitment to helping

you invest in India.

All of this comes to you backed by your Relationship Manager available to you 24x7.

Indiabulls is India's leading retail financial services company with 414 locations

spread across 124 cities.

Over 4400 Client Relationship Managers are dedicated to serving your unique

needs.

49

Is complemented by our knowledgeable and customer focussed Relationship

Managers.

Provides our clients with real-time service & 24/7 access to all information and

products.

Indiabulls offers a full range of financial services and products ranging from

Equities to Insurance to enhance your wealth and hence, achieve your financial

goals.

POST REGISTRATION SERVICES:

Deliver and receive cheques and securities

Obtain market information

Place orders

Get access to IPOs via the Book Building route as well as to all the fixed price

issues.

DOCUMENTS REQUIRED FOR TRADING ACCOUNT AND

D-MAT A/C

2-passport size photograph.

Photocopy of Income Tax Permanent Account Number (PAN) Card - If you do

not have a PAN, then you would be required to give a declaration to that effect

and fill form 60.

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IDENTITY PROOF - PHOTOCOPY OF ANY OF THE

FOLLOWING:

Passport

PAN Card

Voter ID

Driving License

Ration Card

Address Proof - Photocopy of any one of Driving License / Passport/Ration

Card/Voter Card/ Bank Statement.

FEATURES OF POWER INDIABULLS

(It is a unique offering by the company which helps an investor to trade online).

An investor can avail this feature by paying a fee of Rs. 750; with this he can track all the

listed scripts at NSE.

The features include:

Live Streaming Quotes

Fast Order Entry

Tic by Tic Live Charts

Technical Analysis

Live News and Alerts

51

Extensive Reports for Real-time Accounting

E. INDIABULLS RESOURCES LTD

Indiabulls Resources Ltd, a 100 per cent subsidiary of Indiabulls Financial Services

Ltd., has been established with the objective of evolving as an independent oil company

over time. The immediate short-term goal is to partner with oil companies who are

willing to come to India and bid in the current NELP-6 round.

Through its group companies, Indiabulls is also engaged in real estate development. The

company is in the process of developing modern commercial complexes in the heart of

Mumbai. Indiabulls Estates Pvt Ltd. the real estate arm of Indiabulls Financial

Services, will set up an integrated township spread across 100 acres in Sonepat, 15 km

from Delhi.

52

EQUITY MARKET AND DERIVATIVE MARKET

What is equity ?

Financing a company through the sale of stock in a company is known as equity

financing. Alternatively, debt financing (for example issuing Bonds) can be done to avoid

giving up shares of ownership of the company. Unofficial financing known as trade

financing usually provides the major part of a company's working capital (day-to-day

operational needs). Trade financing is provided by vendors and suppliers who sell their

products to the company at short-term, unsecured credit terms, usually 30 days. Equity

and debt financing are usually used for longer-term investment projects such as

investments in a new factory or a new foreign market. Customer provided financing

exists when a customer pays for services before they are delivered, e.g. subscriptions and

insurance.

EQUITY MARKET

Public equity markets are those where corporates raise resources through IPOs by getting

listed in the stock exchanges. Public equity markets are subjected to a wide range of

governance, disclosure, transparency and compliance norms set by the securities

exchanges commissions/government agencies and also the self-regulatory functions set

by the exchanges themselves. Institutional and retail investors mostly use this channel.

The distinct advantages of the public equity capital are:

a. Lower cost of capital for the firm

b. Provide liquidity for current stockholders

c. Shift monitoring costs for private lenders

d. Firm can learn from information contained in the stock price movements.

53

However, public equity capital has some costs too. These include

a. Disclosure of proprietary information

b. Agency costs of outside equity

c. Costs of reporting/filing with regulators/exchanges

d. Costs of corporate control

e. Under-pricing

A few features generally observed in the respect of the IPO markets include:

Typically, IPO prices are below the level that they reach on the market a few

days or weeks later, when more public information is available (under pricing).

However the extent of under-pricing will narrow with several companies coming

up for listing.

Each IPO generates beneficial information externalities for other companies

that are about to go public.

Privatized companies tend to list in public equity markets that offering better

legal protection of shareholders.

The decisions to go public are affected by firms’ ownership structure. When

company has only one owner or when banks holds majority shares, companies are

less likely to prefer public equity.

54

PUBLIC EQUITY CAPITAL

Governments:

The scope of government in further development of public equity markets could consist

of:

Extend the realm of regulation to other markets as well

Extend fiscal support to corporates accessing public equity markets

Evolve policy framework that will streamline compliance requirements and thereby

costs of regulation

Refine regulation so as to make it cohesive, comprehensive and more integrated.

Choice of public equity markets in case of privatization and divestment process of

government stake.

DERIVATIVE MARKET

A derivative security can be defined as a security whose value depends on the values of

other underlying variables. Very often, the variables underlying the derivative securities

are the prices of traded securities. In fact, a derivative transaction helps cover risk, which

would arise on the trading of securities on which the derivative is based and a small

investor, can benefit immensely.

Let us take an example of a simple derivative contract:

Ram buys a futures contract.

He will make a profit of Rs 1000 if the price of Infosys rises by Rs 1000.

If the price is unchanged Ram will receive nothing.

If the stock price of Infosys falls by Rs 800 he will lose Rs 800.

55

As we can see, the above contract depends upon the price of the Infosys scrip, which is

the underlying security. Similarly, futures trading has already started in Sensex futures

and Nifty futures. The underlying security in this case is the BSE Sensex and NSE Nifty.

DERIVATIVES AND FUTURES ARE BASICALLY OF 3 TYPES:

Forwards and Futures

Options

Swaps

FORWARD CONTRACT

A forward contract is the simplest mode of a derivative transaction. It is an agreement to

buy or sell an asset (of a specified quantity) at a certain future time for a certain price. No

cash is exchanged when the contract is entered into.

ILLUSTRATION 1:

Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to buy it outright.

He can only buy it 3 months hence. He, however, fears that prices of televisions will rise

3 months from now. So in order to protect himself from the rise in prices Shyam enters

into a contract with the TV dealer that 3 months from now he will buy the TV for Rs

10,000. What Shyam is doing is that he is locking the current price of a TV for a forward

contract. The forward contract is settled at maturity. The dealer will deliver the asset to

Shyam at the end of three months and Shyam in turn will pay cash equivalent to the TV

price on delivery.

ILLUSTRATION 2:

Ram is an importer who has to make a payment for his consignment in six months time.

In order to meet his payment obligation he has to buy dollars six months from today.

However, he is not sure what the Re/$ rate will be then. In order to be sure of his

expenditure he will enter into a contract with a bank to buy dollars six months from now

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at a decided rate. As he is entering into a contract on a future date it is a forward contract

and the underlying security is the foreign currency.

The difference between a share and derivative is that shares/securities is an asset while

derivative instrument is a contract

What is an Index?

To understand the use and functioning of the index derivatives markets, it is necessary to

understand the underlying index. A stock index represents the change in value of a set of

stocks, which constitute the index. A market index is very important for the market

players as it acts as a barometer for market behavior and as an underlying in derivative

instruments such as index futures.

THE SENSEX AND NIFTY

In India the most popular indices have been the BSE Sensex and S&P CNX Nifty. The

BSE Sensex has 30 stocks comprising the index which are selected based on market

capitalization, industry representation, trading frequency etc. It represents 30 large well-

established and financially sound companies. The Sensex represents a broad spectrum of

companies in a variety of industries. It represents 14 major industry groups. Then there is

a BSE national index and BSE 200. However, trading in index futures has only

commenced on the BSE Sensex.

While the BSE Sensex was the first stock market index in the country, Nifty was

launched by the National Stock Exchange in April 1996 taking the base of November 3,

1995. The Nifty index consists of shares of 50 companies with each having a market

capitalization of more than Rs 500 crore.

FUTURES AND STOCK INDICES

For understanding of stock index futures a thorough knowledge of the composition of

indexes is essential. Choosing the right index is important in choosing the right contract

57

for speculation or hedging. Since for speculation, the volatility of the index is important

whereas for hedging the choice of index depends upon the relationship between the

stocks being hedged and the characteristics of the index.

Choosing and understanding the right index is important as the movement of stock index

futures is quite similar to that of the underlying stock index. Volatility of the futures

indexes is generally greater than spot stock indexes.

Everytime an investor takes a long or short position on a stock, he also has an hidden

exposure to the Nifty or Sensex. As most often stock values fall in tune with the entire

market sentiment and rise when the market as a whole is rising.

Retail investors will find the index derivatives useful due to the high correlation of the

index with their portfolio/stock and low cost associated with using index futures for

hedging

UNDERSTANDING INDEX FUTURES

A futures contract is an agreement between two parties to buy or sell an asset at a certain

time in the future at a certain price. Index futures are all futures contracts where the

underlying is the stock index (Nifty or Sensex) and helps a trader to take a view on the

market as a whole.

Index futures permits speculation and if a trader anticipates a major rally in the market he

can simply buy a futures contract and hope for a price rise on the futures contract when

the rally occurs. We shall learn in subsequent lessons how one can leverage ones position

by taking position in the futures market.

In India we have index futures contracts based on S&P CNX Nifty and the BSE Sensex

and near 3 months duration contracts are available at all times. Each contract expires on

the last Thursday of the expiry month and simultaneously a new contract is introduced for

trading after expiry of a contract.

58

EXAMPLE:

Futures contracts in Nifty in July 2007

Contract month Expiry/settlement

July 2007 July 27

August 2007 August 24

September 2007 September 28

                                On July 27

Contract month Expiry/settlement

August 2007 August 25

September 2007 September 28

October 2007 October 26

The permitted lot size is 100 or multiples thereof for the Nifty. That is you buy one Nifty

contract the total deal value will be 100*3000 (Nifty value)= Rs 3,00,000.

In the case of BSE Sensex the market lot is 50. That is you buy one Sensex futures the

total value will be 50*4000 (Sensex value)= Rs 2,00,000.

The index futures symbols are represented as follows:

BSE NSE

BSXJUN2007 (June contract) FUTDXNIFTY28-JUN2007

BSXJUL2006 (July contract) FUTDXNIFTY28-JUL2007

BSXAUG2006 (Aug contract) FUTDXNIFTY28-AUG2007

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OPTIONS

Stock markets by their very nature are fickle. While fortunes can be made in a jiffy more

often than not the scenario is the reverse. Investing in stocks has two sides to it –a)

Unlimited profit potential from any upside (remember Infosys, HFCL etc) or b) a

downside which could make you a pauper.

Derivative products are structured precisely for this reason -- to curtail the risk exposure

of an investor. Index futures and stock options are instruments that enable you to hedge

your portfolio or open positions in the market. Option contracts allow you to run your

profits while restricting your downside risk.

Apart from risk containment, options can be used for speculation and investors can create

a wide range of potential profit scenarios.

We have seen in the Derivatives School how index futures can be used to protect oneself

from volatility or market risk. Here we will try and understand some basic concepts of

options.

What are options?

An option is a contract, which gives the buyer the right, but not the obligation to buy or

sell shares of the underlying security at a specific price on or before a specific date.

‘Option’, as the word suggests, is a choice given to the investor to either honour the

contract; or if he chooses not to walk away from the contract.

To begin, there are two kinds of options: Call Options and Put Options.

A Call Option is an option to buy a stock at a specific price on or before a certain date. In

this way, Call options are like security deposits. If, for example, you wanted to rent a

certain property, and left a security deposit for it, the money would be used to insure that

you could, in fact, rent that property at the price agreed upon when you returned. If you

never returned, you would give up your security deposit, but you would have no other

60

liability. Call options usually increase in value as the value of the underlying instrument

rises.

When you buy a Call option, the price you pay for it, called the option premium, secures

your right to buy that certain stock at a specified price called the strike price. If you

decide not to use the option to buy the stock, and you are not obligated to, your only cost

is the option premium.

Put Options are options to sell a stock at a specific price on or before a certain date. In

this way, Put options are like insurance policies

If you buy a new car, and then buy auto insurance on the car, you pay a premium and are,

hence, protected if the asset is damaged in an accident. If this happens, you can use your

policy to regain the insured value of the car. In this way, the put option gains in value as

the value of the underlying instrument decreases. If all goes well and the insurance is not

needed, the insurance company keeps your premium in return for taking on the risk.

With a Put Option, you can "insure" a stock by fixing a selling price. If something

happens which causes the stock price to fall, and thus, "damages" your asset, you can

exercise your option and sell it at its "insured" price level. If the price of your stock goes

up, and there is no "damage," then you do not need to use the insurance, and, once again,

your only cost is the premium. This is the primary function of listed options, to allow

investors ways to manage risk.

Technically, an option is a contract between two parties. The buyer receives a privilege

for which he pays a premium. The seller accepts an obligation for which he receives a

fee.

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CALL OPTION

An option is a contract between two parties giving the taker (buyer) the right, but not the

obligation, to buy or sell a parcel of shares at a predetermined price possibly on, or before

a predetermined date. To acquire this right the taker pays a premium to the writer (seller)

of the contract.

There are two types of options:

Call Options

Put Options

CALL OPTIONS

Call options give the taker the right, but not the obligation, to buy the underlying shares

at a predetermined price, on or before a predetermined date.

ILLUSTRATION 1:

Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call --Premium 8 This contract

allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any time between the

current date and the end of next August. For this privilege, Raj pays a fee of Rs 800 (Rs

eight a share for 100 shares).

The buyer of a call has purchased the right to buy and for that he pays a premium.

Now let us see how one can profit from buying an option. Sam purchases a December

call option at Rs 40 for a premium of Rs 15. That is he has purchased the right to buy that

share for Rs 40 in December. If the stock rises above Rs 55 (40+15) he will break even

and he will start making a profit. Suppose the stock does not rise and instead falls he will

choose not to exercise the option and forego the premium of Rs 15 and thus limiting his

loss to Rs 15.

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Let us take another example of a call option on the Nifty to understand the concept better.

Nifty is at 3000. The following are Nifty options traded at following quotes.

Option contract Strike price Call premium

JUNE Nifty 3000 Rs 90

3100 Rs 65

JULY Nifty 3000 Rs 160

3100 Rs 130

A trader is of the view that the index will go up to 3100 in July 2007 but does not want to

take the risk of prices going down. Therefore, he buys 10 call of July contracts at 3100.

He pays a premium for buying calls (the right to buy the contract) for 130*10*100= Rs

130000/-.

In July 2006 suppose the Nifty index goes up to 3100. He sells the call or exercises the

option and takes the difference in spot index price which is (3100-3000) * 100 (market

lot) = 10,000 per contract. Total profit = 100,000/- (10,000*10).

He had paid Rs 130,000/- premium for buying the call option. So he earns by buying call

option is Rs 40,000/- (130,000-60,000).

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If the index falls below 3100 the trader will not exercise his right and will opt to forego

his premium of Rs 60,000. So, in the event the index falls further his loss is limited to the

premium he paid upfront, but the profit potential is unlimited.

CALL OPTIONS-LONG & SHORT POSITIONS

When you expect prices to rise, then you take a long position by buying calls. You are

bullish.

When you expect prices to fall, then you take a short position by selling calls. You are

bearish.

HEDGING

We have seen how one can take a view on the market with the help of index futures. The

other benefit of trading in index futures is to hedge your portfolio against the risk of

trading. In order to understand how one can protect his portfolio from value erosion let us

take an example.

ILLUSTRATION:

Ram enters into a contract with Shyam that six months from now he will sell to Shyam 10 dresses for Rs 4000. The

cost of manufacturing for Ram is only Rs 1000 and he will make a profit of Rs 3000 if the sale is completed.

Cost (Rs) Selling price Profit

1000 4000 3000

However, Ram fears that Shyam may not honour his contract six months from now. So he inserts a new clause in

the contract that if Shyam fails to honour the contract he will have to pay a penalty of Rs 1000. And if Shyam

honours the contract Ram will offer a discount of Rs 1000 as incentive.

Shyam defaults Shyam honours

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1000 (Initial Investment) 3000 (Initial profit)

1000 (penalty from Shyam) (-1000) discount given to Shyam

- (No gain/loss) 2000 (Net gain)

As we see above if Shyam defaults Ram will get a penalty of Rs 1000 but he will recover

his initial investment. If Shyam honours the contract, Ram will still make a profit of Rs

2000. Thus, Ram has hedged his risk against default and protected his initial investment.

The above example explains the concept of hedging. Let us try understanding how one

can use hedging in a real life scenario.

Stocks carry two types of risk – company specific and market risk. While company risk

can be minimized by diversifying your portfolio market risk cannot be diversified but has

to be hedged. So how does one measure the market risk? Market risk can be known from

Beta.

Beta measures the relationship between movement of the index to the movement of the

stock. The beta measures the percentage impact on the stock prices for 1% change in the

index. Therefore, for a portfolio whose value goes down by 11% when the index goes

down by 10%, the beta would be 1.1. When the index increases by 10%, the value of the

portfolio increases 11%. The idea is to make beta of your portfolio zero to nullify your

losses.

Hedging involves protecting an existing asset position from future adverse price

movements. In order to hedge a position, a market player needs to take an equal

and opposite position in the futures market to the one held in the cash market.

65

Every portfolio has a hidden exposure to the index, which is denoted by the beta.

Assuming you have a portfolio of Rs 1 million, which has a beta of 1.2, you can factor a

complete hedge by selling Rs 1.2 mn of S&P CNX Nifty futures.

STEPS:

1. Determine the beta of the portfolio. If the beta of any stock is not known, it is safe to

assume that it is 1.

2. Short sell the index in such a quantum that the gain on a unit decrease in the index

would offset the losses on the rest of his portfolio. This is achieved by multiplying

the relative volatility of the portfolio by the market value of his holdings.

Therefore in the above scenario we have to shortsell 1.2 * 1 million = 1.2 million worth

of Nifty

Now let us study the impact on the overall gain/loss that accrues:

  Index up 10% Index down 10%

Gain/(Loss) in Portfolio Rs 120,000 (Rs 120,000)

Gain/(Loss) in Futures (Rs 120,000) Rs 120,000

Net Effect Nil Nil

As we see, that portfolio is completely insulated from any losses arising out of a fall in

market sentiment. But as a cost, one has to forego any gains that arise out of

improvement in the overall sentiment. Then why does one invest in equities if all the

gains will be offset by losses in futures market. The idea is that everyone expects his

66

portfolio to outperform the market. Irrespective of wh The same methodology can be

applied to a single stock by deriving the beta of the scrip and taking a reverse position in

the futures market.

Thus, we have seen how one can use hedging in the futures market to offset losses in the

cash market

Either the market goes up or not, his portfolio value would increase.

SPECULATION

Speculators are those who do not have any position on which they enter in futures and

options market. They only have a particular view on the market, stock, commodity etc. In

short, speculators put their money at risk in the hope of profiting from an anticipated

price change. They consider various factors such as demand supply, market positions,

open interests, economic fundamentals and other data to take their positions.

EXAMPLE:

Ram is a trader but has no time to track and analyze stocks. However, he fancies his

chances in predicting the market trend. So instead of buying different stocks he buys

Sensex Futures.

On May 1, 2006, he buys 100 Sensex futures @ 3600 on expectations that the index will

rise in future. On June 1, 2006, the Sensex rises to 4000 and at that time he sells an equal

number of contracts to close out his position.

Selling Price : 4000*100            = Rs 4,00,000

Less: Purchase Cost: 3600*100 = Rs 3,60,000

Net gain  Rs 40,000 Ram has made a profit of Rs 40,000 by taking a call on the future

value of the Sensex. However, if the Sensex had fallen he would have made a loss.

Similarly, if would have been bearish he could have sold Sensex futures and made a

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profit from a falling profit. In index futures players can have a long-term view of the

market up to atleast 3 month

ARBITRAGE

An arbitrageur is basically risk averse. He enters into those contracts were he can earn

riskless profits. When markets are imperfect, buying in one market and simultaneously

selling in other market gives riskless profit. Arbitrageurs are always in the look out for

such imperfections.

In the futures market one can take advantages of arbitrage opportunities by buying from

lower priced market and selling at the higher priced market. In index futures arbitrage is

possible between the spot market and the futures market (NSE has provided a special

software for buying all 50 Nifty stocks in the spot market.

Take the case of the NSE Nifty.

Assume that Nifty is at 1200 and 3 month’s Nifty futures is at 1300.

The futures price of Nifty futures can be worked out by taking the interest cost of

3 months into account.

If there is a difference then arbitrage opportunity exists

Let us take the example of single stock to understand the concept better. If Wipro is

quoted at Rs 1000 per share and the 3 months futures of Wipro is Rs 1070 then one can

purchase ITC at Rs 1000 in spot by borrowing @ 12% annum for 3 months and sell

Wipro futures for 3 months at Rs 1070.

Sale                = 1070

Cost = 1000+30 =

Arbitrage profit =    1040

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These kind of imperfections continue to exist in the markets but one has to be alert to the

opportunities as they tend to get exhausted very fast.

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BENEFITS OF TRADING WITH INDIABULLS

Personal Relationship Manager

Most competitive brokerage & DP charges (Delivery-0.5% and

Intraday-.005%)

No annual maintenance charges.

Technology transforming desktop into NEAT like terminal for internet trading.

Trading via branch network, telephone and internet account I.e. both Online &

Offline.

Real time Online fund Transfer & Exposure updating facility with HDFC Bank,

Citibank & ICICI Bank.

Integrated Trading and Depository Account.

Margin Trading of 4 times the cash deposited for delivery based trade.

Margin Trading of 10 times the cash deposited for intraday based trade.

Margin Trading of 2 times the approved category A based shares.

Quality equity Research department, Which studies the market and provides

personalized information.

Equity Analysis report to support your investment decisions.

70

INDIABULLS-IN NEWS 2006-2007

Farallon pays Rs 88cr for 33% stake in Indiabulls arm [The Times Of India ( Jan 3,

2006 )

Merrill Lynch acquires 2% in Indiabulls   [Economic Times - India ( June 29, 2006)

Amaranth to pick up 42.5% stake in Indiabulls [Economic Times - India ( June 08, 2007 )

US Fund Amaranth LLC Acquires 42.5 Percent Stake In Indiabulls IPO ...  

[Business Wire -San Francisco, CA, USA ( June 07, 2007 ) ]

Toddler takes giant steps [Business India ( Feb 28-Mar 13, 2007 ) ]

Indiabulls raises $60m via GDR issue   [ Sify ( Feb 25, 2007 ) ]

Indiabulls GDR priced at Rs 107 per share   [Moneycontrol.com (Feb 25, 2006)]

Indiabulls prices $45mn GDR issue   [Business Standard (Feb 25, 2006 ) ]

Indiabulls raises $60 mln via GDR issue - BSE  [Reuters India (Feb 25, 2007)]

Indiabulls Financial prices GDR issue at US $45 million   [Myiris.com (Feb 25,

2007)]

Indiabulls GDR priced at Rs 107/share   [Economic Times (Feb 25, 2006)]

Indiabulls' net grows 173% in Q3   [Economic Times (Jan 13, 2006)]

Indiabulls for FII stake in Credit Services   [Moneycontrol.com (Jan 13, 2007)]

Indiabulls third-quarter net jumps, income rises too   [Hindustan Times (Jan 13,

2006)]

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Indiabulls Q3 net soars 175% to Rs 18.4cr - New Delhi,India    [Moneycontrol.com

(Jan 13, 2007)]

Indiabulls Q3 profits soar 173% to Rs. 18.4 crores   [Sify (Jan 13, 2007)]

Indiabulls plans to hike FII limit to 100%, EGM postponed:    [New Kerala (Jan 13,

2007)]

Farallon buys 33% in Indiabulls arm    [The Economic Times (Jan 3, 2007)]

Farallon buys 33% in Indiabulls Credit    [Business Standard (Jan 3, 2007)]

DLF and INDIABULLS JV buys DDA plot in South Delhi for 450 crores.

26 APRIL 2007

DLF and Indiabulls have acquired 35.8 acres of Residential Development under Public-

Private Partnership Project by putting in the highest bid of Rs 450.01 crores in the open

auction carried out by DDA.

Sources have indicated that the Residential Development will feature high end residential

apartments in private landscaped surroundings, and the Public-Private project will

involve the construction of housing units for Economically Weaker Section of the society

with all civic amenities. The residential development is in prime location at South Delhi

between Anand Mai Marg and Delhi-Mehrauli Road.

The residential development will be a unique project in New Delhi with beautifully

landscaped gardens and world class amenities and will feature around 750 residential

apartments in high rise buildings.

DLF and Indiabulls had also bought 3 out of 5 mills in Lower Parel in the NTC auctions.

While DLF had acquired Mumbai Textile Mills for Rs 702 crores, Indiabulls had

acquired Jupiter and Elphinstone Textile Mills for Rs 718 crores. DLF is country’s largest

real estate developer and is planning a mega issue of 10,000 crores, the largest by any

72

Indian company. To date DLF has completed and under development of over 207 million

sq ft across its residential, commercial and retail businesses with a spread of 54 million sq

ft under commercial, 19 million sq ft under retail and 134 million sq ft under residential

projects.

Recently Mr L N Mittal, the famous steel magnate and one of world’s richest man had

acquired 8.2% stake in Indiabulls subsidiary for Rs 90 crores valuing the subsidiary

at Rs 1,100 crores. On the news of winning the auction Indiabulls shares ended 12%

higher than previous closing at an all time high of Rs 279 and taking the market

capitalization of the company to more than a billion dollars. Indiabulls had earlier

reported Rs 253 crores in net profit for the last financial year.

LN Mittal buys 8% in Indiabulls Credit for 90 crores

29 MARCH 2007

Mr L N Mittal, the famous steel magnate and world’s third richest man has acquired

8.2% stake in Indiabulls Credit Services, the majority owned subsidiary of Indiabulls

Financial Services for Rs 90 crores, through LNMIIV Ltd. The investment at approx Rs

62 per share values Indiabulls Credit Services at Rs 1,100 crores.

This investment follows Farallon Capital’s two prior rounds of investments in Indiabulls

Credit Services. Recently Farallon had paid Rs 55 per share and invested $ 20 million in

the company and last year Farallon had paid Rs 22 per share to buy 33% stake for Rs 88

crores in Indiabulls Credit Services.

Mr. L N Mittal, through LNMIIV Ltd, has been an investor in Indiabulls Financial

Services, the listed company since the year 2000 when he had originally bought 61.3 lac

shares representing approx 7.52% stake in the company at an average price of Rs 6 per

share. LNM’s original investment in Indiabulls Financial Services has appreciated by

more than 40 times in 6 years, he continues to be a large shareholder in the company. The

total foreign shareholding in the company has gone up to 56.6% as per the latest stock

73

exchange filings and some of the shareholders who own more than 5% equity in the

company are Fidelity, Capital International and Merrill Lynch.

74

Chapter 5

DATA ANALYSIS

75

DATA ANALYSIS

ANALYSIS OF THE PREFERRED INVESTMENT AREA

The investment was broadly divided into five areas, mainly-Bank deposits. Shares,

Mutual Fund ,Real Estate and insurance plans.

Following observations can be made on the basis of above analysis:

Bank Deposits being the most preferred area, 43% respondents out of hundred

invested in bank deposits.

The second preferred area was Shares as 27% respondents were investing in the share

market.

Then preferred area was the Mutual Funds with 13% of respondents

Real estates were the least preferred area i.e. only 7%

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ANALYSIS OF THE FACTORS AFFECTING THE INVESTMENT

The factors are categorized in to four parameters to know the purpose of investment made

by the investor.

52% respondents go invests for higher returns.

29% respondents prefer Moderate Return for their investments.

15% prefer moderate risk.

Only 4% for Low risk.

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ANALYSIS FOR INTERMEDIATING COMPANY

These factors are categorized into brokerage, Information provided by them the exposure

limit or loan facility provided by them and their Brand Name.

21% respondents choose Kotak Securities Ltd.

38% respondents choose Indiabulls Securities Ltd. for trading.

7% respondents choose ICICI direct.

4% respondents choose Fortis.

30% go for others.

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ANALYSIS OF THE FACTORS FOR BROKING HOUSE

These factors are categorized into brokerage, Information provided by them the exposure

limit or loan facility provided by them and their Brand Name.

44% respondents choose their broking house on basis of information provided by

them.

28% prefer by the exposure limit and the loan facility provided to them.

12% by the brokerage charge by the broking house.

16% by Brand Name.

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ANALYSIS OF THE INFLUENCE OF THE PAST PROFILE OF A

COMPANY

58% respondents say yes they study profile of the company before making

investment.

42% respondents say no.

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ANALYSIS OF THE REQUIREMENT OF EXPERTISE

93% respondents say yes, they required expertise knowledge.

7% respondents say no.

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MOST IMPORTANT SERVICE PARAMETER

The most important service parameter that came up as a result of survey is

Information i.e. the investors feel that the information contained in the service

package is the key to more profits.

Second major parameter is Quality of service.

20% investors feel that the quickness of service is above par than any other aspect.

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Chapter 6

CONCLUSION

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FINDINGS

The perceptions of people about share markets are very strong. But they can be

influenced, if not completely changed.

The reason people prefer staying away from the share markets is lack of confidence -

about their own understanding of the market and the very nature of the market.

The fact that stock markets themselves are volatile and wide open to changes in external

forces makes it much more difficult for people to consider them as an investment

alternative.

The right kind of campaigning directed towards increasing the awareness of people will

get new customers. But more than that, this campaign will help retain customers, which is

the key to staying ahead in the market.

Indiabulls Securities is currently one of the biggest broking houses in the country and its

strategies to penetrate further into the market will certainly take it way ahead of its

competitors.

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Chapter 7

RECOMMENDATIONS

85

RECOMMENDATIONS

INTRODUCTION PROGRAMS must be held for the sales teams before letting them

go into the field. In these induction classes the experienced sales staff employees

should share their valuable live experiences and knowledge, which they have

experienced while in field.

Weekly magazines must be published and distributed to the investors that can help

them for making better investments.

Sales team must be fully equipped with latest technology such as using Laptop that

can be used for making presentation to the customers especially to the corporate

clients about their product and services provided by them.

Make your site user friendly so that more and more people know about trading and do

the same also.

Advertisement through Canopy, help to generate leads.

Company should advertise with a concern that has a brand name in the market.

OTHER RECOMMENDATIONS

1. Strong Need Of Brand Building

2. Promotional Strategies

3. Solid Network Required To Develop The Business Further

4. Make The Branch Self Informative

5. The RM should provide an in depth demonstration of the software and

client should be assisted regularly.

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6. Provision of a manual for online clients for ease of operation.

7. Time lag between the complaints put and follow up should be reduced.

8. Database should be verified properly, so that repeated entries do not occur.

This will reduce inconvenience to the clients, who complained about multiple

calls received.

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PROMOTIONAL STRATEGIES

Press publicity:

Outdoor publicity:

Press publicity:

Paper inserts

Advertisements in newspaper (local and national).

Interest cards distribution

Mailers/personal invitations to selective section of the society

Leaflets

OUTDOOR PUBLICITY:

Banners in commercial areas and prime sites.

Air balloons at shopping complex.

Bus stands shelters.

Off site ATM for developing business

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ANNEXURE

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ORGANISATIONAL CHART

CHAIRMAN & CEO

Sameer GehlantCEO

Rajeev RattanPresident & CEO

Surabh MitalCEO

Gagan BangaHead online sales

Oivyesh ShahHead online sales

T.S. MuglaniChief Tech

officer

Suresh JainV.P

Pheeta NagpalHead- HR

Ashok SharmaFinance

Controller

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SURVEY QUESTIONNAIRE

Name :

Address :

Phone no :

1. Where do you prefer to invest your money?

a) Bank Deposits

b) Shares

c) Mutual Funds

d) Real estate

e) Insurance Plans

2. What are the factors, which attracts you for the investment?

a) High Return b) Moderate Return

c) Low Risk d) Moderate Risk

3. Do you prefer to invest in shares?

a) Yes b) No

4. If yes, out of following, which intermediating company would you go For?

a) Kotak Securities b) Indiabulls Securities

c) ICICI d) Fortis

Securities

d) Others, please specify

5. If Indiabulls, What are the factors, which attract you to deal with Indiabulls?

6. If Others, What are the factors, which attract you, please specify?

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7. What attracts you to invest in Shares?

a) Brokerage b) Expertise Knowledge

c) Exposures/loan d) Brand

8. On what basis do you prefer to trade in shares?

a) Daily b) Monthly

c) Yearly d) other, please specify

9. Does the companies profile matter for the investment decisions?

a) Yes b) No

10. Do you require the opinion of portfolio managers to manage your investment?

a) Yes b) No

11. What is the most important service parameter that you look for

while trading.

a) Information b) Speed

c) Quality d) Other

12. Any recommendation / Suggestion

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BIBLIOGRAPHY

93

BIBLIOGRAPHY

INTERNET WEBSITE

www.indiabulls.com

www.nseindia.com

www.bseindia.com

www.sebi.gov.in

www.moneycontrole.com

JOURNALS & ARTICLES

Economics Times

BOOKS

C.R. Kothari, Marketing Research

NCFM W.Breen, “Low Price-Earnings Ratio & Industry Relatives”, Financial

Analysts’ Journal, July-Feburary 1968.

W.Breen & Savage J. “Portfolio Distribution & Security Selection Models”, Journal

of Finance, December 1968.

S.Basu, “Investment Performance of Common Stocks in Relation to Their Price-

Earning Ratios: A Test of the Efficient Market Hypothesis”, Journal of Finance, June

1977.

Basu, Sanjoy, "The Relationship between Earnings Yield, Market Value and Return

for NYSE Common Stocks: Further Evidence," Journal of Financial Economics 12

(1983): 129-156.

Indiabulls Broachres and Mannuals

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