FACTORS AFFECTING INVESTMENT DECISIONS AN COMPETITIVE ADVANTAGES OF INDIABULLS

A SUMMER TRAINING REPORT ON

ANALYSIS OF INDIAN BROKING INDUSTRY AND COMPETITIVE POSITION OF MASTER TRUST LTD.

SUBMITTED BY: RAJDEEP SINGH

A report submitted in the partial fulfillment ofM.Com (Honors) Program of UBS Chandigarh

Submitted to:FACULTY GUIDE COMPANY GUIDEDR. PARAMJIT KAUR MR. NITIN SHAHIUBS CHANDIGARH V.P., MASTER TRUST

Date of submission:

DECLARATION

I Rajdeep Singh, a student of University business School, Chandigarh of hereby declare that the project work, presented in this report is my own and has been carried out under the supervision of Mr. Nitin Shahi, senior vice president of Master Trust Ltd..

This work has not been previously submitted to any other university for any examination.

Date: -Place: -

Signature-: Rajdeep Singh

ACKNOWLEDGEMENT

I hereby take this opportunity to thank MASTER TRUST LTD., for providing me a corporate exposure through the course of my summer internship.I would like to express my sincere gratitude towards my company guide Mr. NITIN SHAHI, for providing me great insights about Indian broking industry ,stock markets, futures , commodity markets various other ventures, for guiding me all throughout and for being a great support.I would also like to thank Dr.Paramjit Kaur, my faculty guide for instructing me and giving me her valuable advice on my project.I will also like to thank Mr. Aman Baweja one of the members of Master Trusts family who provided a great co-operation and help all throughout.I would like to extend my gratitude to UBS Chandigarh, for providing me such a platform. Last but not the least all my friends and family for their support and co-operation.

Thanking You,Rajdeep Singh,

EXECUTIVE SUMMARY

The increasing trend towards globalization and industrialization has increased the trend of competition in the financial market, intensified by the coming of Non Banking Financial Company (NBFC), like Master Trust, and so has the need for the marketing of financial instruments has intensified.This project is completely focused to study and analyse the Indian Broking Industry. The tools used for studying the attractiveness of the industry are Michael E. Porters five forces model and PESTEL analysis. It also undertakes the study some of the demand drivers and supply factors that affect the working of the Indian broking industry, and in this regard what are the various differentiating factors that provide Master Trust a competitive edge over other players in the market.There has been an emphasis on the various aspects of Master Trust that make it standout in this league, rather than being a me too product. In words of Al Ries and Jack Trout, differentiate or die.

TABLE OF CONTENTSSL NO.CONTENTSPAGE NO.

01Declaration

02Acknowledgement

03Executive summary

04-aIntroduction- Background and Literature review

bObjective of project

cThe Brokerage Industry

dMichael Porters five Force anlaysis

05-aDemand & supply drivers of the industry

bGlobal & domestic economic environment

cPhases of Indian Brokerage industry

dPestel analysis of Indian Brokerage industry

eLegal issues with a brokerage firm

fCompany overview

gMission, Vision & Corporate Philosophy

hGroup Milestones

iSWOT analysis

jPorters 5 force analysis

kMarket Dynamics

06-aFactors affecting investment decisions

bComparison of various rates

cCompetitive advantage of Master Trust

dFinancial Evaluation

eConclusion

fReferences

LIST OF FIGURES AND TABLESSl. NO.CONTENTPg.NO.

01Porters Five Force analysis

02Critical Success factors of industry

03Pestel analysis of industry

04Value system of Master Trust

05SWOT analysis of Master Trust

06Comparison of various rates

BACKGROUND AND LITERATURE REVIEW The Securities Brokerage Industry is cyclical and comprised of two distinct types of businesses. Brokerages, also known as financial services companies, strive to meet the investing needs of their clients, and exchanges facilitate securities trading. Net profits correlate to the performance of the broader equity market. In this market with less differentiated products and many players, there exists an oligopoly (saying in book terms), characterized by tough competition, entry and exit barriers and many more.

1. Al Ries and Jack Trout, in his work said differentiate or die, too many less differentiated products creates a kind of information overload, and in this clutter of too much information, products which are not properly differentiated or advertised just end up becoming a me too product. To avoid it every marketer needs to position his/ her products in a way that makes a specific image in the minds of consumers.

2. Jack Miller, in his work published on June 03, 2010, talked about how investors make investment decisions. He broke the process of decision making in pulling the buy or sell trigger. According to him investors made the investment decisions in the ways like simple screening, then lateral recommendation, followed by piggy bank investing.

3. According to U.S. Securities and Exchange Commissions, one of the articles: investors first evaluate their current financial roadmap, and then they evaluate their comfort zone in taking on risk. Consider an appropriate mix of investments, create and maintain an emergency fund, consider dollar averaging, consider rebalancing portfolio occasionally, and in the process also try to avoid the circumstances that can lead to fraud.OBJECTIVE OF THE PROJECT

An increasing trend has been observed in demand for the services of Non Banking Financial Institutions nowadays. This project focuses on the brokerage industry in general and the competitive position of Master Trust Ltd. in particular. There has also been emphasis to find out the plus points of Master Trust or the differentiating factors that give Master Trust a competitive edge. In short: To analyse the Indian Broking Industry. To find out various competitive advantages that makes Master Trust of the leading stock broking companies in India.

THE BROKERAGE INDUSTRYThe brokerage industry is currently characterized by a large number of companies (private or unorganized). In effect it is a fragmented industry with a large number of participants. The industry thus has monopolistic competition, i.e. a large number of firms selling a slightly differentiated product.Indian stock broking industry is the oldest trading industry that has been around even before the establishment of BSE in 1875. Despite passing through a number of changes in post liberalization period, the industry has found its way towards sustainable growth. With the purpose of gaining deeper understanding about the role of Indian stock broking industry, in the countrys economy, let us have a look at the following data-: On the basis of geographical concentration, Western region has maximum of 52%, around 24% are located in the North, 13% in South, and 10% in the East. 3% of firms started broking operations before 1950, 65% between 1950-1995, and 32% post 1995. On the basis of terminals 40% are located in Mumbai, 12% in Delhi, 8% in Ahmadabad, 7% in Kolkata, 4% in Chennai, and 29% in other cities. From the study it was found that 36% of firms trade in cash, 27% in derivatives, and 20% in cash, derivatives and commodities. In the cash market, 34% trade in NSE, 14% in BSE, 45% in both. Whereas in debt market, 31% trade in NSE, 26% trades in BSE, and 43% in both. Majority branches are located in North, i.e. 40%, 31% in West, 24% in South, and 5% in East. In terms of sub-brokers, around 55% are located in South, 29% in West, 11% in North, and 4% in East. Trading, IPOs and Mutual Funds are the top three products offered by 90% of firms offering trading, 67% IPOs, and 53% offering Mutual Fund transaction. In terms of various areas of growth, 84% of firms have shown their interest in expanding their institutional clients, 66% firms intend to increase FIIs, and 34% are interested in setting up Joint Ventures in India and abroad. In terms of IT penetration 62% firms provide their website, and 90% have email facility.

Analysis of brokerage industry based on Michael Porters 5 factor model

Fig: 1 CompetitionThe industry is now in a fairly high growth phase. However the brokerage industry is very cyclical and is impacted by activity levels in the markets. During the downturns such as 2008-2009 periods, the smaller players were squeezed out of the business. As a result there is a contrast consolidation happening in the industry. Potential of new entrantsA new entrant in addition to the above also needs a reasonable level of capital to fund the working requirements of the business (finance to customers, deposits with exchanges, etc).The scale requirements are increasing constantly and as a result a new entrant will require higher levels of investments in the future to enter the business. As pointed out, it is likely to see many entrants in the industry. On the contrary, it is likely that the smaller players will exit by selling out or closing. Power of the supplierNot much relevant in most segments except investment banking, where employees control client relationships and hence have to be highly compensated. Power of the buyers/customersThis is important in the institutional brokerage business which involves high volume and low brokerage charges. The extent of buyer power is very low to non-existent in all kinds of retail segments. Threat of substitutesThe products offered by all firms in this industry are more or less differentiated. Investing rather saving in the bank rather than investing in a brokerage firm can be one option; else this is not applicable for this industry.

In a summary the industry has a moderate to low level of competitive advantage. There is low level of customer lock-in and customer will move his or her business if the brokerage rates are not competitive with rest of the industry. The only competitive advantage for companies in this sector comes from size and scale which enables them to leverage their size to reduce average costs and thus make a profit on low brokerage margins.In addition to high fixed costs, the industry has very low margin cost. As a result the cost of adding an additional customer is low and per transaction costs are limited. Due to this reason, we are seeing a constant pressure on the brokerage rates has intensified the competition in the industry and is resulting in consolidation with the top players.The basic brokerage business is now sometimes a loss leader to enable the brokerage firm to acquire customers and sell other products such as wealth management services, or third party mutual funds. This segment will provide adequate returns in the future for a company with scale.

DEMAND AND SUPPLY DRIVERS OF THE INDUSTRY

Demands for financial products are driven by risk-reward assessment, which considers: Potential yieldThe expectation of financial incentives or return on investment is a great demand driver which tempts people to invest or engage into transactions of the financial markets. Risk RatingHigher risks assumes higher profits and vice versa. Risk ratings are a vital point when making a decision to park ones resources into this industry. LiquidityTo maintain strong and flexible liquidity position people tend to invest in financial markets, in order to meet their contingencies. Availability of informationThe more disclosure, the more is information symmetry, and so will be visibility and access to returns and so will be the expectation from this market increase along with investment. Access to alternativesMore the disclosure in the market more will be the competition with more profits, so more will be the choices and access to alternatives to park ones resources.

The major supply drivers are: Money supplyThe supply of money has a big role to play in this industry, the more the supply of money in this industry; more will be the availability of financial services and products. Interest ratesInterest rate determines the terms of trade, fluctuations in interest rates can entirely fluctuate this industry. Higher interest rate= will give higher returns, with great supply no doubt but borrowing or ascertaining the real market value may become difficult. InflationValue of a currency appreciates and depreciates with the rates of inflation. Inflation thus serves as a great supply driver in this market. As in high inflation with higher supply of money there will be higher supply and vice versa. Economic conditionsRates of inflation, the upsurge or downturn in the domestic and global economy is another supply driver which is beyond the control of any business firm. Government RegulationsThe attitude of the government towards the trade policies and various other financial firms and industry matters a lot. Various restrictions or duties or taxes may restrict the supply and may hinder the growth of this industry. And will flourish with the ease of trade.

GLOBAL AND DOMESTIC ECONOMIC ENVIRONMENT OF The financial industryAccording to global 2000 (annual report by Forbes), seven of the top 10 companies belonged to the financial industry. These included the Citigroup, Bank of America, HSBC Holdings, and JPMorgan Chase. Their combined revenue in 2007 was worth $647 billion, down from 2006 high of $785 billion.According to Fortune 500 rankings, in 2006 financial services generated $257 billion in profits, a third of total Fortune 500 profits. In 2008, however, they lost a staggering $213 billion, a total swing of $470 billion. Big players on the list, such as Citygroup and Bank of America, may only be alive today just because of government money.The financial industry is an industry in itself as well as an ancillary that supports other industries. Trade and commerce across the world would come to standstill if there was no means to fund, pay and protect the transactions.

The Brokerage industryDomestic Economic EnvironmentIn 1991, Manmohan Singh, as Finance Minister in Narasimha Raos government, embarked on a programme of liberalization prompted by an acute balance-of-payment crisis.

Fig: (Indian economy growth factors)PHASES OF INDIAN BROKERAGE INDUSTRYIndian Brokerage Industry-Pre 2000 Post liberalization period. Business restricted to friends and relatives. Settlement T+15 days. Low trade volumes- No derivatives trading allowed. Lack of investment in technology- No front or back office software.Indian Brokerage Industry 2000-2008 Venture capital funding for brokerage businesses. Investment in technology- Front end and back end. National presence. Integrated risk management system. Significant increase in trade volumes- Derivatives trades play a major role. Margin funding for the retail clients.Indian Brokerage Industry 2009 onwards Paradigm shift from transaction oriented to research/ portfolio based advisory. Focus on franchisee based business model. Dematerialized accounts access for international trade. Access to international stock exchange. Trading on hand held platform (mobile phones etc) allowed.

Current Global Economic Environment

The global economy is slowly recovering from a deep recession, with significant risks remaining. Euro crisis has become one of the hindrance in the overall economic growth of the world economy and thereby, Indian economy too. Countries are looking for ways to achieve sustainable economic growth and job creation. Competitiveness has become more important than ever-Globalization will continue and strong international competitors are emerging.-Companies are re-examining everything in terms of how and where they operate. India has achieved a long-term competitive transformation, but the next stage of development will be more challenging.

Critical Success Factors of the Industry

Fig:2Seeing the overall brokerage as a single unit, the key success factors or the winning strategy of Indian Brokerage Industry is a mixture of: People Process TechnologyThere are the three ingredients that together create value for both international and domestic customers.By people it indicates to the service providers or the employees of the various firms of this industry, who day in and day out interact with the customers and provide them services and satisfy them.Transparency of the process followed and disclosure method is yet another success factor. The settlement of transactions is generally done in a process of T+2 days. And the government support even still plays a very vital role in forming the rules and norms of such processes.Technology enables to stay competitive and on edge with the competitors; facilitating the ease of processes and speed and to maintain and be up to date. This serves as a great success of the brokerage industry. All these factors together help create value to the customer.PESTEL ANALYSIS OF BROKERAGE INDUSTRY

PESTEL analysis stands for "Political, Economic, Social, Technological, Environmental and Legal analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management. It is a part of the external analysis when conducting a strategic analysis or doing market research, and gives an overview of the different macro environmental factors that the company has to take into consideration. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations.

Political factors are how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Economic factors include economic growth, interest rates, exchange rates and the inflation rate. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Social factors include the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates. Technological factors include technological aspects such as R&D activity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality and lead to innovation. Environmental factors include ecological and environmental aspects such as weather, climate, and climate change, which may especially affect industries such as tourism, farming, and insurance. Legal factors include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.

Fig: 3

LEGAL ISSUES WITH A BROKERAGE FIRMSecurities Exchange Act of 1934 (Exchange Act)In contrast to the Securities Act, the Exchange Act primarily regulates transactions of securities in the secondary market - that is, sales that take place after a security is initially offered by a company (the issuer). These transactions often take place between parties other than the issuer, such as trades that retail investors execute through brokerage firms. The Exchange Act operates somewhat differently from the Securities Act. To protect investors, Congress crafted a mandatory disclosure process that is designed to force companies to make public information that investors would find pertinent to making investment decision. In addition, the Exchange Act provides for direct regulation of the markets on which securities are sold (the securities (stock) exchanges) and the participants in those markets (industry associations, brokers, and issuers).Monetary and Fiscal PoliciesIn the securities industry there exist regulators who have established a set of rules and regulations that administer the entire industry. Financial markets, depositors, clearing houses, and vendors work together to regulate the investment in the industry.The 3 major US government agencies that govern the securities industry and frame monetary and fiscal policy, they are: the Federal Reserve System, the Securities Exchange Commission (SEC), and the Office of Comptroller of the Currency. Federal Reserve SystemThe Federal Reserve System is a government institution created to administer nations credit and monetary policies and to oversee the banking industry as well as certain aspects of the broker activity, such as credit. The Fed is responsible for establishing and enforcing monetary policy and for regulating the amount of credit outstanding. The fed does this by establishing the bank discount rates and the rules for credit. The markets response to the Feds determination to control inflation by raising and lowering the discount rate affects long term interest rates, which have a significant impact on the securities market. Securities Exchange CommissionThe Securities Exchange Commission (SEC) is the primary regulatory agency that oversees the securities industry. The SEC is an independent bipartisan, quasi-judicial agency of the government. The laws administered by SEC deal with securities and finance and seek to provide protection for investors in their securities transactions.

COMPANY OVERVIEWMaster Trustis one of the leading financial services group in India with 26 years of customer's patronage built on loyalty and trust.

The Philosophy of Master Trust has its seeds embedded in the group's belief in nurturing the investment culture towards value investing.

Its constant endeavor to understand the client's needs and meeting them with the right financial solutions has helped it emerge as one of the leading broking houses in the country.

As a one stop shop catering to all kinds of investment needs, Master Trust focuses on the retail investors who are looking for value added financial solutions.

With a network of over 750 Business Locations across India & around 1.5 Lac client base we provide products likeEquity, Derivatives, Commodity, Currency, Gold ETF, Mutual Funds, Insurance, IPO, Forex, NRIServices& Merchant Banking.

Our endeavor is to constantly meet every financial need of our clients. The one-stop destination is specifically designed for retail customers who require a very strong relationship driven approach towards value investing. We provide unmatched convenience by serving individual consumers, small and middle market businesses and large corporations with a full range of investment, asset management and risk mitigation products. Our strength is seamless integration of asset holdings, advisory based execution of trades & financial planning.

Needless to say Master Trust services have ushered in an era of unmatched quality and excellence never experienced before.

Our open-mindedness together with our innovative and personalized services has helped us emerge as one of the leading financial services group in India.

MISSION AND VISION

MISSION: To always earn the right to be our clients first choice through personal & social wealth maximization

VISION:To be well diversified financial shop for wealth creation and being an ideal service provider in our domain of business.

CORPORATE PHILOSOPHY:Becoming an expert at anything takes a strong will, unyielding determination and pure ability

VALUE SYSTEM:

Fig:4Group Milestones-:

2007:Set up regional offices at Baroda, Kolkata and Hyderabad

2006:Became SEBI registered Portfolio Manager

2005:Acquired the membership of Bombay Stock Exchange Ltd.(BSE)Commenced Internet Trading and margin funding against Shares.

2004:Became Member of NCDEX (National Commodity Derivatives Exchange Ltd) and MCX (Multi Commodity Exchange of India Ltd.)Introduced Virtual Private Network (VPN)Became Insurance Broker under name of M/s Master Insurance Brokers.

2002:Entered into Insurance business as corporate agents for Life and General insurance.

2001:Launched Depository Services as a Depository Participant of CDSL.Commenced Trading in Derivatives Segments in NSE

1999:Launched Depository Services as a Depository Participant of NSDL

1997:Became RBI approved Fully Fledged Money Changers

1995:Master Trust Ltd. came out with the IPO (Initial Public Offer) of Equity Share & Fully Convertible Debenture.Upgraded Dealership of OTCEI to Membership.

1994:Master Capital Services Ltd. became Corporate Members of NSE (National Stock Exchange of India Ltd.)

1993:Acquired status of SEBI accredited Category I Merchant BankersBecame Dealer of OTCEI (Over the Counter Exchange of India)

1987:Became members of DSE (Delhi Stock Exchange) under the name of M/s Harjeet Arora and Co., (later, converted into a Corporate Membership as MTL Share and Stock Brokers Ltd.

1986:Acquired membership of Ludhiana Stock Exchange under the name of M/s H Arora and Co. (later converted into a Corporate Membership as Master Share and Stock Brokers Ltd.)

1985:The seeds of the Group were sown as Arora Financial Consultants (P) Limited (later converted into Master Trust Ltd.)

SWOT ANALYSIS OF MASTER TRUST LTD.This is a strategic planning method to evaluate the Strength, Weaknesses (limitations), Opportunities and Threats involved in a project or business venture. It involves specifying the objectives of the business venture or project and identifying internal and external factors that are favorable or unfavorable to achieve it. This technique is credited to Albert Humphrey of Stanford University.

Fig: 5PORTERs 5 FACTOR MODEL OF BROKING INDUSTRYNamed after Michel E. Porter, this model identifies and analyses 5 competitive forces that shape every industry and determines industrys weaknesses and strength. They are: Competition in the industryMaster Trust Ltd. faces competition from various firms like:

Potential of new entrantsThe market for Non Banking Financial Companies or rather broking houses are flourishing. This new trend poses for new threats also; this may be either the entry of local players who can provide lower rates or a very big player who can enter into a price war. Threat of new entry is high when: Capital requirements to start the business are less Few economies of scale are in place Customers can easily switch (low switching cost) Your key technology is not hard to acquire or isnt protected well Your product is not differentiated

Power of suppliersMaster Trust Group has very high profile corporate suppliers, who for obvious reasons have great bargaining power and offers from competitors also. The operations largely depend on these supplies. Bargaining Power of supplier means how strong is the position of a seller. Suppliers are more powerful when:

Suppliers are concentrated and well organized Few substitutes available to suppliers Their product is most effective or unique Switching cost, from one suppliers to another, is high You are not an important customer to Supplier

Power of customersCustomer is the king of the market. They have a lot of options while planning to purchase products. Products offered by Master trust are unsought in nature and are industry dependent. The threats which lies here are:

Too many goods chasing too few consumers. Buyer purchases in bulk quantities and are mostly corporate clients. Product is not much differentiated. Buyers cost of switching to a competitors product is low. Shopping cost is low. Credible Threat of integration.

Threat of substitutesMaster Trust poses great threat of substitutes like people of low risk appetite would like to invest in bank rather than in share market, real estate, commodities, etc. Its products can very well be substituted by substitutes offered by competitors.

MARKET DYNAMICSThe pricing signals that are created as a result of changing supply and demand level in a given market. Market dynamics describe the dynamic, or changing, price signals that result from the continual changes in both supply and demand of any particular product or group of products. Market dynamics is a fundamental concept in supply, demand and pricing economic models.There is great shift in the Indian consumption pattern that is being observed like: 69% of the population is less than 35 years of age and has spurred consumption demand. 54% of the population is in the working group. High savings and investment rate (over 35% of GDP). Indias manufacturing growth is amongst the fastest in the world. Indias manufacturing base is the fourth largest globally. The growth potential of the services sector in India is enormous at $200 billion offering employment to 40 million people. The confidence of a robust growth in the services sector is the highest in India among the 4 BRIC countries including Brazil, Russia, China and India service sector. Among 60% of firms there expect a rise in activity whileThe above factors along with many other factors are some of those market dynamics which greatly affect this market.

FACTORS AFFECTING INVESTMENT DECISIONSThere are a numerous reasons that affect investment decisions here are some of them: Risk ToleranceRisk refers to the volatility of portfolios value. The amount of risk the investor is willing to take on is an extremely important factor. While some people do become more risk averse as they get older; a conservative investor remains risk averse over his life-cycle. An aggressive investor generally dares to take risk throughout his life. If an investor is risk averse and he takes too much risk, he usually panic when confronted with unexpected losses and abandon their investment plans mid-stream and suffers huge losses. Return NeedsThis refers to whether the investor needs to emphasize growth or income. Younger investors who are accumulating savings will want returns that tend to emphasize growth and higher total returns, which primarily are provided by equity shares. Retirees who depend on their investment portfolio for part of their annual income will want consistent annual payouts, such as those from bonds and dividend-paying stocks. Of course, many individuals may want a blending of the two some current income, but also some growth. Investment Time HorizonThe time horizon starts when the investment portfolio is implemented and ends when the investor will need to take the money out. The length of time you will be investing is important because it can directly affect your ability to reduce risk. Longer time horizons allow you to take on greater risks with a greater total return potential because some of that risk can be reduced by investing across different market environments. If the time horizon is short, the investor hasgreater liquidity needs some attractive opportunities of earning higher return has to be sacrificed and the result is reduced in return. Tax ExposureInvestors in higher tax brackets prefer such investments where the return is tax exempt, others will have no such preference. Management Outlooklf the management is progressive and has an aggressively marketing and growth outlook, it will encourage innovation and favor capital proposals which ensure better productivity on quality or both. In some industries where the product being manufactured is a simple standardized one, innovation is difficult and management would be extremely cost conscious. In contrast, in industries such as chemicals and electronics, a firm cannot survive, if it follows a policy of 'make-do' with its existing equipment. The management has to be progressive and innovation must be encouraged in such cases. Competitors StrategyCompetitors' strategy regarding capital investment exerts significant influence on the investment decision of a company. If competitors continue to install more equipment and succeed in turning out better products, the existence of the company not following suit would be seriously threatened. This reaction to a rival's policy regarding capital investment often forces decision on a company'. Opportunity created by technological changeTechnological changes create new equipment which may represent a major change in process, so that there emerges the need for re-evaluation of existing capital equipment in a company. Some changes may justify new investments. Sometimes the old equipment which has to be replaced by new equipment as a result of technical innovation may be downgraded to some other applications, A proper evaluation of this aspect is necessary, but is often not given due consideration. In this connection, we may note that the cost of new equipment is a major factor in investment decisions.

Market ForecastBoth short and long run market forecasts are influential factors in capital investment decisions. In order to participate in long-run forecast for market potential critical decisions on capital investment have to be taken. Fiscal IncentivesTax concessions either on new investment incomes or investment allowance allowed on new investment decisions, the method for allowing depreciation deduction allowance also influence new investment decisions. Cash Flow BudgetsThe analysis of cash-flow budget which shows the flow of funds into and out of the company may affect capital investment decision in two ways. 'First, the analysis may indicate that a company may acquire necessary cash to purchase the equipment not immediately but after say, one year, or it may show that the purchase of capital assets now may generate the demand for major capital additions after two years and such expenditure might clash with anticipated other expenditures which cannot be postponed. Secondly, the cash flow budget shows the timing of cash flows for alternative investments and thus helps management in selecting the desired investment project. Non-economic FactorsNew equipment may make the workshop a pleasant place and permit more socializing on the job. The effect would be reduced absenteeism and increased productivity. It may be difficult to evaluate the benefits in monetary terms and as such we call this as non-economic factor. Let us take one more example. Suppose the installation of a new machine ensures greater safety in operation. It is difficult to measure the resulting monetary saving through avoidance of an unknown number of injuries. Even then, these factors give tangible results and do influence investment decisions.

COMPARISON OF VARIOUS RATES FIRMS

FACTOR HDFCSHAREKHANMOTILALOSWALM.TKOTAKINDIABULLS

BROKERAGE5p to 50p5p to 25p5p to50p,1p-10p ( min)3p to 25p

4p to 40p2p to 20p or1p to 10p (min)

MINIMUMAMOUNTRs 10000,Rs 0 (for big corporate clients)Rs 10000Rs 50000Rs 0Rs 10000Rs 0

MINIMUM OPENING CHARGESRs 799 NilRs 200Rs 555Rs 550Rs 1350

PRODUCTS-Equity, features and options, ETF, IPO, mutual funds.-Do it yourself systematic investment planning, and-NRI offerings, loans, FD.Trade Tigers,IPO, MF online, contract note on paper, and ODIN Software.ETF, IPO, mutual funds, andNRI offerings.IPO, Mutual Funds, and CommoditiesK-25 and T-25.Brokerage, IPO, Mutual Funds, Commodities.IPO, Mutual Funds, Real Estate, Home loans, Commodity, and Derivatives.

SERVICES-J2 ME windows, blackberry, android, iphone.- Call and trade, online and offline services for different time zones.Brokerage services, trade on mobile, online, call and trade, dedicated dealer desk at every city.Call and trade.

Brokerage-e and banking services.

Brokerage and banking services.Brokerage, Online and Offline Trading available on all phones, No extra charges on calls from clients.

QUALITY OF SALESPERSONGood Good GoodGoodGoodGood

PROCESST+2 daysT+2 daysT+2 daysT+2 daysT+2 daysT+2 days

Fig: 6

COMPETITIVE ADVANTAGE OF MASTER TRUST BROKERAGE SERVICES One of the lowest brokerage charge in the industry (currently). Best software in the industry. Listed company and aggressive in brand promotion. Mobile trading tie ups with Blackberry and other phones, where one can trade with ease. Both online and offline facilities are provided. Competitive commissions and service support at fair price (value for money). Relationship manager facility to assist customers as and when they need assistance and guidance. Full access to Master Trusts Equity Analysis, follows a fact based approach to rating stocks. Easy access to customers of the snap shots of their account statement and portfolio statements and to digital contract notes.

FINANCIAL EVALUATION OF MASTER TRUST(1) INCOME STATEMENT

Mar '12Mar '11Mar '10Mar '09Mar '08

12 mths12 mths12 mths12 mths12 mths

Income

Sales Turnover10.575.734.64.724.06

Excise Duty00000

Net Sales10.575.734.64.724.06

Other Income0.130.130.060.690.65

Stock Adjustments00000

Total Income10.75.864.665.414.71

Expenditure

Raw Materials00000

Power & Fuel Cost00000

Employee Cost0.810.850.920.720.53

Other Manufacturing Expenses00000

Selling and Admin Expenses01.090.220.210.36

Miscellaneous Expenses0.670.180.520.370.19

TotExpenses1.482.121.661.31.08

Mar '12Mar '11Mar '10Mar '09Mar '08

12 mths12 mths12 mths12 mths12 mths

Operating Profit9.093.612.943.422.98

PBDIT9.223.7434.113.63

Interest6.771.761.872.392.18

PBDT2.451.981.131.721.45

Depreciation0.070.050.050.040.03

Other Written Off00.010.010.010.01

Profit Before Tax2.381.921.071.671.41

Extra-ordinary items0.01-0.030.14-0.420

PBT (Post Extra-ord Items)2.391.891.211.251.41

Tax0.010.220.050.30.22

Reported Net Profit2.381.691.031.351.5

Total Value Addition1.482.121.661.31.08

Preference Dividend00000

Equity Dividend1.090.610.6100

Corporate Dividend Tax0.030000

Per share data (annualised)

Shares in issue (lakhs)108.7768.4626257

Earning Per Share (Rs)2.192.471.662.182.64

Equity Dividend (%)10101000

Book Value (Rs)63.3657.7855.0246.3636.97

Source :Dion Global Solutions Limited

(2) BALANCE SHEET

Mar '12Mar '11Mar '10Mar '09

12 mths12 mths12 mths12 mths

Sources Of Funds

Total Share Capital10.926.786.146.14

Equity Share Capital10.926.786.146.14

Share Application Money07.0304.82

Preference Share Capital0000

Reserves57.9932.7427.9722.6

Revaluation Reserves0000

Networth68.9146.5534.1133.56

Secured Loans13.141.733.470.81

Unsecured Loans54.23111

Total Debt67.372.734.471.81

Total Liabilities136.2849.2838.5835.37

Mar '12Mar '11Mar '10Mar '09

12 mths12 mths12 mths12 mths

Application Of Funds

Gross Block1.441.182.742.97

Less: Accum. Depreciation0.670.610.550.5

Net Block0.770.572.192.47

Capital Work in Progress00.0700

Investments25.3516.117.6912.44

Inventories3.745.910.962.99

Sundry Debtors12.720.10.370.86

Cash and Bank Balance2.440.470.270.46

Total Current Assets18.96.481.64.31

Loans and Advances93.548.0738.2446.1

Fixed Deposits02.834.792.31

Total CA, Loans & Advances112.457.3844.6352.72

Current Liabilities0.9323.624.6631.74

Provisions1.311.241.270.54

Total CL & Provisions2.2424.8425.9332.28

Net Current Assets110.1632.5418.720.44

Miscellaneous Expenses00.010.010.02

Total Assets

136.2849.2938.5935.37

Contingent Liabilities117141.0567.5545.63

Book Value (Rs)63.3657.7855.0246.36

(3) CASH FLOW STATEMENTMar '12Mar '11Mar '10Mar '09Mar '08

12 mths12 mths12 mths12 mths12 mths

Net Profit Before Tax2.381.911.081.651.73

Net Cash From Operating Activities-11.91-13.894.63-13.662.7

Net Cash (used in)/from-9.443.09-5.013.56-5.41

Investing Activities

Net Cash (used in)/from Financing Activities20.499.042.6711.020.02

Net (decrease)/increase In Cash and Cash Equivalents-0.86-1.762.280.92-2.68

Opening Cash & Cash Equivalents3.35.062.771.854.53

Closing Cash & Cash Equivalents2.443.35.062.771.85

Source :Dion Global Solutions Limited

(4) FINANCIAL RATIOS

Mar '12Mar '11Mar '10Mar '09Mar '08

Investment Valuation Ratios

Face Value1010101010

Dividend Per Share111----

Operating Profit Per Share (Rs)8.365.274.755.525.23

Net Operating Profit Per Share (Rs)9.728.377.427.627.11

Free Reserves Per Share (Rs)--4036.9936.4227.03

Bonus in Equity Capital----------

Profitability Ratios

Operating Profit Margin(%)86.0162.9363.9972.573.47

Profit Before Interest And Tax Margin(%)84.3260.6662.0662.9758.78

Gross Profit Margin(%)85.3562.0362.8471.6672.68

Cash Profit Margin(%)22.829.8423.2925.9430.75

Adjusted Cash Margin(%)22.829.8423.2925.9430.75

Net Profit Margin(%)22.2428.8822.0425.1130.01

Adjusted Net Profit Margin(%)22.2428.8822.0425.1130.01

Return On Capital Employed(%)6.717.467.6311.3916.68

Return On Net Worth(%)3.454.283.014.77.14

Adjusted Return on Net Worth(%)3.444.283.014.77.14

Return on Assets Excluding Revaluations63.3657.7755.0146.3336.93

Return on Assets Including Revaluations63.3657.7755.0146.3336.93

Return on Long Term Funds(%)6.719.048.3513.4516.94

Liquidity And Solvency Ratios

Current Ratio50.342.051.371.581.1

Quick Ratio48.62.061.681.541.04

Debt Equity Ratio0.980.070.130.060.11

Long Term Debt Equity Ratio0.980.030.030.040.09

Debt Coverage Ratios

Interest Cover1.352.11.591.721.81

Total Debt to Owners Fund0.980.070.130.060.11

Financial Charges Coverage Ratio1.362.121.611.711.81

Management Efficiency Ratios

Inventory Turnover Ratio2.83--------

Debtors Turnover Ratio1.6524.137.455.894.43

Investments Turnover Ratio2.830.97--1.631.36

Fixed Assets Turnover Ratio7.36--------

Total Assets Turnover Ratio0.080.12--0.140.17

Asset Turnover Ratio0.110.130.120.161.96

Average Raw Material Holding----------

Average Finished Goods Held----------

Number of Days In Working Capital3,752.072,045.051,462.521,558.11430.9

Profit & Loss Account Ratios

Material Cost Composition----------

Imported Composition of Raw Materials Consumed----------

Selling Distribution Cost Composition--0.980.060.243.36

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit47.0736.0459.83----

Dividend Payout Ratio Cash Profit45.7434.8856.64----

Earning Retention Ratio52.7463.9640.17100100

Cash Earning Retention Ratio54.0865.1243.36100100

AdjustedCash Flow Times27.611.564.121.31.5

Mar '12Mar '11Mar '10Mar '09Mar '08

Earnings Per Share2.192.471.662.182.64

Book Value63.3657.7855.0246.3636.97

Source :Dion Global Solutions Limited

REFERENCES www.mastertrust.co.in www.moneycontrol.com www.rediffmoney.com www.bseindia.com www.nseindia.com www.wikipedia.org www.icra.in www.secgov/investor/pubs/financialnavigating.html www.tradestreaming.com/2010/06/04/investment decisions economicstimes.indiatimes.com>opinion en.wikipedia.org/wiki/marketing_research www.quickmba.com/strategy/matrix/bcg www.smallbusiness.wa.gav.au/business-life-cycle www.valueline.com/stock/industry en.wikipedia.org/wiki/porters-five-factor

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