summar training

8/8/2019 Summar Training

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BLS INSTITUTE OF TECHNOLOGY

MANAGEMENT

SUMMAR TRAINING IN DESTIMONEY SECURITIES PVT LTD

GURU GOVIND SINGH

INDRAPRASTHA UNIVERSITY

SUMITTED BY MUKESHJOSHI


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Introduction about the Company

Destimoney (erstwhile Dawnay Day AV) is an innovative financial

services provider and advisory firm, formed in the year 2006 as a subsidiary of

Dawnay Day UK. In mid 2008, NSR (New Silk Route) had acquired 100%

stake in the business.

Vivek Vig is the CEO of Destimoney group. He is former Country Head of

Centurion Bank of Punjab. He also worked as the Country Head of Citibank in

Saudi Arabia, Turkey Business Head in Taiwan and Poland.

The Destimoney Group at present has 4 business lines; Destimoney India

Services Pvt Ltd, which provides portfolio management services; Destimoney

Enterprises Pvt Ltd, which provides financial advisory services and distributes

insurance products, loans, fixed deposits, mutual funds, structured products;

Destimoney Securities Pvt Ltd., which deals with broking of stocks & shares;

Decimal Point Analytics, which is into global research outsourcing businesses.

Currently, Destimoney has a network of over 130 branches spread in over 70

locations in 20 states across the country. With an unrelenting focus on our twin

values of "Integrity" and "Client First" Policy, Destimoney, with the help of

over 3000 employees and a strong IT infrastructure, provides advisory services

to individuals and institutional clients in India and abroad.

Our vision is to build a world class customer centric financial services

enterprise that fulfils the financial needs of Middle India with Global

Processes and focuses on profitable growth. We plan to do this, by distributing

all financial products and manufacturing a select few and building an


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organization that unlocks the potential across four dimensions, viz. individual,

team, customer and market place

In providing services to our clients, we take the fiduciary trust they place in usvery seriously. By strictly adhering to our core values, we ensure that our

processes, risk management systems, and staffing are concentrated solely on

preserving and increasing our clients hard earned capital within a transparent

and controlled investment process

Our Funding Partner New Silk Route

New Silk Route is a leading Asia-focused growth capital firm founded in 2006

with over $1.4 billion under management, focused on the Indian subcontinent,

as well as other rapidly growing economies in Asia and the Middle East. The

firm is led by Rajat Gupta - Chairman, Victor Menezes Senior Advisor, Parag

Saxena - CEO, each of whom has a track record of building and leading global

organizations.

NSR have made 9 Investments to date in sectors of Consumer Services,

Telecom, Manufacturing, Financial Services and Infrastructure. They have a

team of16 Investment Professionals working out of 4 offices; New York,

Mumbai, Dubai, and Bangalore


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Our Philosophy

Integrity & Value for our Clients

Sound Research & Advice

Value Investments

1. Building Value for a Lifetime

Integrity

"Client First" Policy

Our Mission

To forge strong, sustained relationships with our clients by creating value for

them.


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WHO WE ARE


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Key People

Key Personnel Destimoney

Name Experience Role

Vivek Vig

Former Country Head of Centurion bank of

Punjab

Country head of Citibank in Saudi Arabia,

Turkey; Business Head in Taiwan and

Poland

MD / Group CEO

BrijeshParnami

Business Director -Distribution

Saurabh Shukla

Former group COO for one of the largest

brokerages in the country. CEO - Broking

Jamshed Vakeel Former Creative Group Head at Ogilvy &

Mather, London

Specializes in Direct Response

CommunicationCreative Director

K. Giri Former Country Controller Nestle

(Uzbekistan).

Group CFO

Viraf Ghyara

Former HR Head SBI Funds Management

Pvt. Ltd Head HR & Admin

Kartik Bhansali

Former Associate, Institutional Broking KR

ChokseyHeadInstitutional

Broking

Extensive experience in distribution and assets

at Centurion, Standard Chartered and GE

Capital


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INTRODUCTION ABOUT INVESTMENT

Definition:-

Investment is the commitment of money or capital to purchase financial

instruments or other assets in order to gain profitable returns in form ofinterest,

income, or appreciation of the value of the instrument. The essential quality of

an investment is that involves waiting for reward. It involves the commitment of

resources which have been saved or put away from current consumption in hope

that some benefits will accrue in the future.

According to F. Amling, Investment may be defined as the purchase by

an individual or institutional investor of a financial or real asset that produces a

return proportional to the risk assumed over some future investment period.

Introduction:-

Investment management is a subject of growing an importance and

interest. Investment is the sacrifice for the future reward. Investment decision is

trade off between risk and return. The entire globe is based on risk and return.

Investing is an activity that is of interest to many individuals regardless of

occupation or income level.

The term investment refers to funds invested in various securities,

consisting of government and semi government securities, loans, debentures of

local authorities, such as port trusts, municipal corporations and debentures and

shares of companies. There are various forms of investments available with

their relative merits and demerits. Investments are freely bought and sold in the

stock exchange through banks and bankers, who charge a small amount of

commission for their services. Investment means the use of money to earn more
http://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Incomehttp://en.wikipedia.org/wiki/Moneyhttp://en.wikipedia.org/wiki/Interesthttp://en.wikipedia.org/wiki/Income


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by way of interest, dividend or money to earn more by way of interest, dividend

or capital appreciation. Well planned investment alone can ensure regular

income, capital appreciation and can be used to meet financial requirements of

the investors. The dynamics of economic growth provide various opportunities

for investors to invest their money in different types of securities.

The financial and economic meaning of investment is related to each

other, because investment is a part of the savings of individuals, which flow in

to capital market either directly or institutions divided in to new and secondary

capital financing. Investors as suppliers & users of long term funds will find

meeting place in the capital market.

Investment will generally be used in its financial sense and as such,

investment is allocation of monetary resources to assets that are expected to

yield some gain or positive return over a given period of time. Investment is

commitment of a persons funds to derive future income in the form of interests,dividends, rent, premium, pension benefits or the appreciation of the value of

his investment. In the process of the investment the transfer of financial assets

will be made from one person or institution to investor. Investments will include

various kinds of instruments or securities & institutional media into which

savings are placed.


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CONCEPT OF INVESTMENT:-

1. Economic Investment

Economic investment means the net additions to the capital stock of the

society which consists of goods and services. Addition to capital stock means an

increase in buildings, plants, equipments and inventories over the amount of

goods and services that existed.

2. Commitment Investment

Commitment investment refers to money commitment to satisfy personal

desires, since no rate of return is involved in such investment nor capital growth

is expected. For e.g. a commitment of money to a new car is certainly

investment from individual point of view.

3. Financial Investment

It involves investment of funds in various assets, such as stock, bonds,

real estate, mortgage etc. Investment is employment of funds with aim of

achieving additional income or growth in value. It involves commitment of

resources which have been saved or put away from current assumption in hope

some benefits will accrue in future. Investment involves long term commitment

of fund and waiting for reward in the future.

NATURE OF INVESTMENT

Investment requires continuous flow of decisions which can not be

avoided. All investment choices are made out points of time in respect to

personal investments in stock market will from time to time reappraise and

revaluate their various investment commitments in the light of new information


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changed expectations and ends. Investment choices are found to be outcomes of

the following related classes of factors.

The investment decisions are based on many streams of data which taken

together represent to investor the observable environment and the general and

particular of the security and enterprises in which he may invest.

Investing has been activity confined to the rich and business class in the

past. This can be attributed to the fact that availability of investible funds is pre-

requisite to deployment of funds but today we find that investment has become

household word and is very popular with people from all walks of life.

HISTORY OF THE STOCK BROKING

INDUSTRY

Indian Stock Markets are one of the oldest in Asia. Its history dates back to

nearly 200 years ago. The earliest records of security dealings in India are

meager and obscure. By 1830's business on corporate stocks and shares in Bank

and Cotton presses took place in Bombay. Though the trading list was broader

in 1839, there were only half a dozen brokers recognized by banks and

merchants during 1840 and 1850. The 1850's witnessed a rapid development of

commercial enterprise and brokerage business attracted many men into the

field and by 1860 the number of brokers increased into 60. In 1860-61 the

American Civil War broke out and cotton supply from United States of Europe

was stopped; thus, the 'Share Mania' in India begun. The number of brokers

increased to about 200 to 250. However, at the end of the American Civil War,

in 1865, a disastrous slump began (for example, Bank of Bombay Share which


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had touched Rs 2850 could only be sold at Rs. 87). At the end of the American

Civil War, the brokers who thrived out of Civil War in 1874, found a place in a

street (now appropriately called as Dalal Street) where they would conveniently

assemble and transact business. In 1887, they formally established in Bombay,

the "Native Share and Stock Brokers' Association" (which is alternatively

known as "The Stock Exchange"). In 1895, the Stock Exchange acquired a

premise in the same street and it was inaugurated in 1899. Thus, the Stock

Exchange at Bombay was consolidated. Thus in the same way, gradually with

the passage of time number of exchanges were increased and at currently it

reached to the figure of 24 stock exchanges.

MAIN STOCK EXCHANGE IN INDIA

BSE(BOMBAY STOCK EXCHANGE)

Bombay Stock Exchange is the oldest stock exchange in Asia What is now

popularly known as the BSE was established as "The Native Share &

Stock Brokers' Association"in 1875. Over the past 135 years, BSE has

facilitated the growth of the Indian corporate sector by providing it with

an efficient capital raising platform.


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Today, BSE is the world's number 1 exchange in the world in terms of

the number of listed companies (over 4900). It is the world's 5th most active in

terms of number of transactions handled through its electronic trading system.

And it is in the top ten of global exchanges in terms of the market capitalization

of its listed companies (as of December 31, 2009). The companies listed on

BSE command a total market capitalization of USD Trillion 1.28 as of Feb,

2010.

The BSE Index, SENSEX, is India's first and most popular Stock Market

benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on BSE

and in Hong Kong. Futures and options on the index are also traded at BSE.

VISION

"Emerge as the premier Indian stock exchange by establishing global

benchmarks"

Board of Directors


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Non-Executive Chairman

Managing Director &

Chief Executive Officer

___________________________

________________________

NSE (NATIONAL STOCK EXCHANGE)

NSE was incorporated in 1992 and was given recognition as a stock exchange

in

April 1993. It started operations in June 1994, with trading on the Wholesale

Debt

Market Segment. Subsequently it launched the Capital Market Segment in

November 1994 as a trading platform for equities and the Futures and

Options

Segment in June 2000 for various derivative instruments.
http://www.bseindia.com/about/board.asp#%23


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The following years witnessed rapid development of Indian capital market with

introduction of internet trading, Exchange traded funds (ETF), stock derivatives.

Mission

NSE's mission is setting the agenda for change in the securities markets in

India. The NSE was set-up with the main objectives of:

establishing a nation-wide trading facility for equities, debt instruments

and hybrids,

ensuring equal access to investors all over the country through an

appropriate communication network,

providing a fair, efficient and transparent securities market to investors

using electronic trading systems,

enabling shorter settlement cycles and book entry settlements systems.


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Promoters

NSE has been promoted by leading financial institutions, banks, insurance

companies and other financial intermediaries:

Industrial Development Bank of India Limited

Industrial Finance Corporation of India Limited

Life Insurance Corporation of India

State Bank of India

ICICI Bank Limited

IL & FS Trust Company Limited

Stock Holding Corporation of India Limited

SBI Capital Markets Limited

Bank of Baroda

Canara Bank

General Insurance Corporation of India

National Insurance Company Limited

The New India Assurance Company Limited

The Oriental Insurance Company Limited

United India Insurance Company Limited

Punjab National Bank

Oriental Bank of Commerce

Indian Bank

Union Bank of India

Infrastructure Development Finance Company Ltd.


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__________________________

___________________

SOURCE OF INVESTMENT INFORMATION

For taking of right investment decision, investors generally need to know

the better source of information to invest. In stock market, information about the

corporate world plays an important role in making decisions. Following are the

best source of information to the intelligent investor.

1. Global affairs

Day to day development around globe are published in news papers like

Indian Economist, Far Eastern Economic Review, Newyork times, Washington

Post, Economic Times etc. word information is also available with IME

quarterly Journal, IMF News survey, Times Magazine etc.


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2. National Economic Affairs

These affairs are covered in all the leading financial news papers like

The Economic Times, The Business World, Business Today, Southern

Economist, Economic and Political Weekly, the Capital Market, Vikalpa,

Finance India, Indian Management Fortune India, Dalal Street and Intelligent

Investor etc.

3. Associations

Almost many daily news papers bring out regularly the result of studies

made on the working of industries and their prospects. In India there are various

associations like chamber of commerce, FICCI, Trade Associations and other

agencies publish knowledgeable, analytical data. The reports of Planning

Commission, Government of India, RBI Bulletins, publications contain a good

amount of information.

1. Company Information

At present the companies information is freely available in almost all the

news papers, periodicals, journals and some pages are allotted for the reports

about the business in general and company working results, performance of

companies and other needful data. Besides news papers, the Journals of Capital

Market, Dalal Street, Business India contain a lot of information about the

industries and companies listed on stock exchanges. Annual reports, quarterly

and half- yearly results also form important sources of information.


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Risk in Investment

Analysis of Risk in Investment

Saving is invested in various investment opportunities for earning better

returns. The return of the investment depends upon the risk of such investment.

All investments involve some risk. The objective of any investor is to minimize

the risk and maximize return. The value of financial assets depends on their

return and risk pattern.

Risk may be defined as the chance of future loss that can be foreseen.

Risk can be defined as the chance factor in trading in which expected or

perspective advantage, gain, profit or return may not materialize.

The actual outcome of investment may be less than the expected out

come. The greater is the variability in the possible outcome, the greater is the

risk. Generally, the variance and standard deviation of return are used as the


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alternative statistical measures of the risk of the financial asset. Similarly, co-

variance measures of the risk of the asset, relative to other asset in a portfolio.

Risk free investment means only the certainty of the return of an investment and

not free from all risks. Risk comprises all elements which cause for the

variability in the return. Some risks can be controlled by the investors. Others

cannot be controlled, and they are to be borne compulsorily by the investor.

Risk may be caused by the factors, such as wrong decision of investment,

wrong timing of investment, kinds of instruments, maturity period of the

investment, amount of investment, method of investment, nature of the

industry and national, international economical factors. Number of factors

will influence the risk and depending upon the cause, the risk can be classified

in to the following major types:

Types of Risk in Equity Investment

1. Financial Risk

Financial risk refers to the risk on account of pattern of capital structure.

It is usually measured by the debt equity mix of the firm. The higher proportion

of debt in the capital structure, greater is the variability of return and financial

risk. Financial risk is an avoidable risk to the extent that managements have

freedom. A firm with no debt financing has no financial risk. Financial risk is

related to the debt and equity mix of financing in the firm. The Reliance on debt

financing is also called financial leverage. It has an important effect on the

shareholders return.

2. Business Risk

Business risk arises due to the uncertainty of return which depends upon

the nature of business. It will influence for the firms operating income. Itrelates to the variability of the business, sales, income, expenses, and profits. It


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depends upon the market conditions for the product mix, input supplies,

strength of the competitor etc. The business risk may be classified into two

kinds viz., internal risk and external risk. Internal risk is related to the operating

efficiency of the firm. This is manageable within or by the firm. Internal

business risk leads to fall in revenues and profit of the companies. External risk

refers to the policies of Government or strategies of competitor or unforeseen

situation in market. This risk may not be controlled and corrected by the firm.

3. Interest Rate Risk

It is the difference between the expected interest rates and the current

market interest rate. The markets will have different interest rate fluctuations,

according to market situation, supply and demand position of cash or credit. If

the maturity period is long, the market value of the security may fluctuate

widely. Further, the market activity and investor perceptions change with the

change in the interest rates and interest rate also depend upon the nature of

instruments such as bonds, debentures, loans and maturity period, credit

worthiness of the security issues.

4. InflationRisk

Inflation risk is also called as purchasing power risk. It is closely related

to interest rate risk since interest rates generally rise when inflation occurs.

Inflation risk is more relevant in case of fixed income securities; shares are

regarded as hedge against inflation. It is the risk that the real rate of return on

security may be less than the nominal return. There is always a chance that the

purchasing power of invested money will decline or that the real return will

decline due to inflation. The return expected by investor will change due to

change in real value of returns. Cost push and pull forces operate to increase

prices due to inadequate supplies and raising demand.

5. Currency Risk / Exchange Rate Risk


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Exchange rate risk is also called as currency risk. It is associated with the

exchange rate fluctuation of foreign exchange on international transactions. The

risk is faced by the limited organizations which are involved in export or import

business. This risk will arise due to changes in currency exchange rates, may

have an unfavorable impact on costs or revenues. There is no exchange rate risk

under the fixed exchange rate system.

RISK DISCLOSURE DOCUMENT

This document is issued by the National Stock Exchange of India

(hereinafter referred to as "NSE") in coordination with the Securities and

Exchange Board of India (hereinafter referred to as "SEBI") and contains

important information on trading in the Equities Segment of NSE. All

constituents are urged to read it before making a purchase or a sale in any

security being traded on NSE.

NSE/SEBI does neither expressly nor impliedly guarantee nor make any

representation concerning the completeness, the adequacy or accuracy of this

disclosure document nor has NSE/SEBI endorsed or passed any merits of

participating in this trading segment. This brief statement does not disclose all

the risks and other significant aspects of trading.

In the light of the risks involved, you should undertake transactions only if you


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understand the nature of the contractual relationship into which you are entering

and the extent of your exposure to risk.

You must know and appreciate that investment in Equity shares or other

instruments traded on the Stock Exchange, known as risk capital, is generally

not an appropriate avenue for someone of limited resources/limited investment

and/or trading experience and low risk tolerance. You should therefore carefully

consider whether such trading is suitable for you in the light of your financial

condition. In case you trade on NSE and suffer adverse consequences or loss,

you shall be solely responsible for the same and NSE, its Clearing Corporation

and/or SEBI shall not be responsible, in any manner whatsoever, for the same

and it will not be open for you to take a plea that no adequate disclosure

regarding the risks involved was made or that you were not explained the full

risk involved by the concerned member. The constituent shall be solely

responsible for the consequences and no contract can be rescinded on that

account. You must acknowledge and accept that there can be no guarantee of

profits or no exception from losses while executing orders for purchase and/or

sale of a security being traded on NSE.

It must be clearly understood by you that your dealings on NSE through a

trading member shall be subject to your fulfilling certain formalities set out by

the trading member, which may interlaid include your filling the know your

client form, client registration form, execution of an agreement, etc., and are

subject to the Rules, Byelaws and Regulations of NSE and its Clearing

Corporation, guidelines prescribed by SEBI and in force from time to time and

Circulars as may be issued by NSE or its Clearing Corporation and in force

from time to time.

NSE does not provide or purport to provide any advice and shall not be

liable to any person who enters into any business relationship with any trading

member and/or sub-broker of NSE and/or any third party based on any


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information contained in this document. Any information contained in this

document must not be construed as business advice/investment advice. No

consideration to trade should be made without thoroughly understanding and

reviewing the risks involved in such trading. If you are unsure, you must seek

professional advice on the same.


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BASIC RISKS INVOVLED IN TRADING ON THE

STOCK EXCHANGE (EQUITY AND OTHER

INSTRUMENTS)

1. Risk of Higher Volatility:

Volatility refers to the dynamic changes in price that securities undergo

when trading activity continues on the Stock Exchange. Generally, higher the

volatility of a security, greater is its price swings. There may be normally

greater volatility in thinly traded securities than in active securities. As a result

of volatility, your order may only be partially executed or not executed at all, or

the price at which your order got executed may be substantially different from

the last traded price or change substantially thereafter, resulting in notional or

real losses.

2. Risk of Lower Liquidity:

Liquidity refers to the ability of market participants to buy and sell

securities expeditiously at a competitive price and with minimal price

difference. Generally, it is assumed that more the numbers of orders available in

a market, greater is the liquidity. Liquidity is important because with greater

liquidity, it is easier for investors to buy or sell securities swiftly and with

minimal price difference, and as a result, investors are more likely to pay or

receive a competitive price for securities purchased or sold. There may be a riskof lower liquidity in some securities as compared to active securities. As a

result, your order may only be partially executed, or may be executed with

relatively greater price difference or may not be executed at all.

Buying/selling without intention of giving and/or taking delivery of a

security, as part of a day trading strategy, may also result into losses, because in

such a situation, stocks may have to be sold/purchased at a low/high prices,


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compared to the expected price levels, so as not to have any obligation to

deliver/receive a security.

3. Risk of Wider Spreads:

Spread refers to the difference in best buy price and best sell price. It

represents the differential between the price of buying a security and

immediately selling it or vice versa. Lower liquidity and higher volatility may

result in wider than normal spreads for less liquid or illiquid securities. This in

turn will hamper better price formation.

4. Risk-reducing orders:

Most Exchanges have a facility for investors to place "limit orders, "stop

loss orders" etc". The placing of such orders (e.g., "stop loss orders, or "limit"

orders) which are intended to limit losses to certain amounts may not be

effective many a time because rapid movement in market conditions may make

it impossible to execute such orders.

A "market" order will be executed fully and promptly without regard to

price and that, while the customer may receive a prompt execution of a

"market" order, the execution may be at available prices of outstanding orders,

which satisfy the order quantity, on price time priority. It may be understood

that these prices may be significantly different from the last traded price or the

best price in that security.

A "limit" order will be executed only at the "limit" price specified for the

order or a better price. However, while the customer receives price protection,

there is a possibility that the order may not be executed at all.

A stop loss order is generally placed "away" from the current price of a

stock, and such order gets activated if and when the stock reaches, or trades

through, the stop price. Sell stop orders are entered ordinarily below the current

price, and buy stop orders are entered ordinarily above the current price. When


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the stock reaches the pre-determined price, or trades through such price, the stop

loss order converts to a market/limit order and is executed at the limit or better.

There is no assurance therefore that the limit order will be executable since a

stock might penetrate the pre-determined price, in which case, the risk of such

order not getting executed arises, just as with a regular limit order.

5. Risk of News Announcements:

Issuers make news announcements that may impact the price of their

securities. These announcements may occur during trading, and when combined

with lower liquidity and higher volatility, may suddenly cause an unexpected

positive or negative movement in the price of the security.

6. Risk of Rumours:

Rumours about companies at times float in the market through word of

mouth, financial newspapers, websites or news agencies, etc. The investors

should be wary of and should desist from acting on rumours.

7. System Risk:

High volume trading will frequently occur at the market opening and

before market close. Such high volumes may also occur at any point in the day.

These may cause delays in order execution or confirmation.

During periods of volatility, on account of market participants

continuously modifying their order quantity or prices or placing fresh orders,

there may be delays in order execution and its confirmations.

Under certain market conditions, it may be difficult or impossible to

liquidate a position in the market at a reasonable price or at all, when there are

no outstanding orders either on the buy side or the sell side, or if trading is

halted in a security due to any action on account of unusual trading activity or

stock hitting circuit filters or for any other reason.


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8. System/Network Congestion:

Trading on NSE is in electronic mode, based on satellite/leased line basedcommunications, combination of technologies and computer systems to place

and route orders. Thus, there exists a possibility of communication failure or

system problems or slow or delayed response from system or trading halt, or

any such other problem/glitch whereby not being able to establish access to the

trading system/network, which may be beyond the control of and may result in

delay in processing or not processing buy or sell orders either in part or in full.

You are cautioned to note that although these problems may be temporary in

nature, but when you have outstanding open positions or unexecuted orders,

these represent a risk because of your obligations to settle all executed

transactions.


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INVESTMENT IN EQUITY

EQUITY OVERVIEW

Equity shares are usually regarded as corner stone of corporate financial

resources. The ordinary shares provide a cushion of safety against temporary

unfavorable developments as the payment of dividends is not compulsory and is

depend on the discretion of management.

The reason for wide public interest in these securities is the possibility of

trading in stock exchange, free transferability, and marketability. Equity shares

constitute the ownership capital of a company and the equity holders have the

right of voting and sharing in profits and assets in proportion to his holding in

the total net assets of the company. He is entitled to all rights and obligations as

an owner and to residual profits. The dividend distributed to them may be

uncertain, variable and fluctuating. The equity holder gets his return in the form

of dividends distributed plus capital appreciation on his shares. The dividends

distributed depend upon the net earnings of the company after meeting all

expenses. This would influence the share price in the market, which may lead to

fluctuations in the prices either upward or downward and in turn capital

appreciation or depreciation.

Definition of Share:

According tosection 2 (46) of the Indian Companies Act a share can be

defined as The capital of a company and includes stock except where a

distinction between stock and share is expressed or implied.

Farewell says that The interest of a shareholder in the company is measured by

a sum of money, for the purpose of liability in the first place and of interest in

the second but also consisting of a series of mutual convenient entered into by

all the shareholders interest.


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Merit of Equity Shares

(i) Financing through equity shares does not impose any burden on the

company, since payment of dividend on these shares depends on the

availability of profits and the discretion of the directors.

(ii) Capital raised through equity shares is perpetual source for the company

since it is not repayable during the life time of the company. It is repayable

only in the event of companys winding up and that too only after the

claims of preference shareholders have been met in full.

(iii) Equity shares do not carry any charge against the assets of the company

hence the capacity of the company to raise additional funds through

borrowing on the security of its assets is in no way diminished.

(iv) Financing through equity shares also provides the company with

sufficient flexibility in the utilization of its profits and funds, since neither

the payment of dividend is compulsory nor any provision is to be made for

repayment of capital.

Demerit of Equity Shares

1. Financing through equity shares is costly as compared to financing

through preference shares or debentures; on account of greater risk

expectation of the equity shareholders is also high as compared to

preference shares or debentures. Moreover, the dividend on equity shares

is not deductible as an expense out of profits for taxation purpose.

2. The control of the company can be easily manipulated through converting

of shares by a group of shareholders for their personal advantage at the

cost of companys interest.

3. Conservative management often avoids issue of addition equity shares toraise additional funds. Since the new shareholders are entitled to vote at


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par with the existing shareholders, this increases the possibility of

transferring of control form the existing holder to new holders of equity

shares.

4. Excessive reliance on financing through equity shares reduces the

capacity of the company to trading on equity. This may ultimately result

in over capitalization of the company.

5. The cost of underwriting and distributing the equity share capital is

generally higher than preference share capital or debentures.


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Investment Decision

It is important to save, but it is more important to invest money

effectively. Inflation is the deadly eroding your wealth. The power of

compounding over time is really magical. Lastly, by hording cash, youre

actually losing money. Not to mention the cost of opportunities foregone.

Planning for investment

1.

Invest in few ScrippsIn order to get the best returns on investment with spread of risk,

investors need to invest in multiple companies. So, investors have number of

companies in their portfolio. If numbers of companies are single digit, spread of

risk is not minimum, and various sectors cannot be properly represented. On the

other hand, if such number is too large, say 50-100; it is difficult to monitor

such a size of portfolio. As a result, some of the investment gets devalued

without coming to the notice of investors. Ideally, number of Scripps in a

portfolio should be about 15-20. We always advise to choose from high market

capitalization companies.

2. Selection of Scripps

In selection of Scripps, investors should apply two criterions: Sector and

Company. Higher weightage should be assigned to sunrise industries followed

by growth industries. Low growth sectors should be ignored in formation of a

portfolio. Once proportion of investment in particular industry is decided, one

should look for good companies within that segment. Selection of Scripps is not

a one-time decision. It is a continuous process of selection and review regularly.

Numbers and title of the companies should be reviewed and reshuffled from

time to time.


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3. Purchase in phases

It has become a practice of many persons to invest whenever they funds

in their hands, ignoring the timings; and sell whenever funds are required.

Purchases should be made gradually, once broad parameters of portfolio are

considered. Whenever there is a bearish trend, likely to be reversed, investor

should take position in steps. Purchases should be made when there is a decline

in the market. Those who have earned maximum have purchased at the time of

panic sale situations. This is a systematic and regular exercise.

4. Sell in stages

Many investors have good judgment for entering the market, but do not

make sale decisions at appropriate time. They feel that one should sell only

when funds are required, and just hold them for long time. In fact, for earning

good returns, it is equally necessary that one make sale decisions also regularly.

When there is increase in the prices by 15-20%, one should unload the shares in

steps. When one is selling shares, it is not because the company is not good or

he is in need of funds. Sale decisions on one hand helps the investors to

capitalize gains, and provide opportunity on the other hand; to cover them up at

level at the time of correction in trends. With better sale decisions, the returns

can be maximized.

5. Regular monitoring

Once a portfolio is formed, it requires regular monitoring. This can be

done in two ways. By keeping separate files of companies in the portfolio.

Investor should prepare company wise files, and file annual reports, quarterly

results, and other relevant headings in the file. This will help to develop vital

insight into the companies, whose shares are held.

By keeping tab on prices, investors should note down prices of various

index and shares at regular interval, say weekly of fortnightly; in a

notebook or a diary. Now there are number of web sites available like


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www.walletwatch.com, www.indiainvest.com ,www.bloomberg.com where

such details can be placed.
http://www.walletwatch.com/http://www.indiainvest.com/http://www.walletwatch.com/http://www.indiainvest.com/


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When to buy & sell shares:

With high volatility prevailing in the market, major price fluctuations in equities

are not uncommon. Therefore, apart from ascertaining which stock to buy or

sell, it becomes equally important to consider when to buy or sell. Any

investor should be aware of the fact where all the investor is following i.e.,Buy

Low. Sell High.

That means we should buy stocks at a low price and sell them at a high price.

When to buy

Three ways by which we can figure that out what it is about this stock that

makes it hot.

1. Earnings per Share (EPS): How well the company is doing

EPS is the total earning or profits made by company (during a given period of

time) calculated on per share basis. It aims to give an exact evaluation of the

returns that the company can deliver.

Example:

Company XYZ Ltd. Capital: Rs 100 crore (Rs 1 billion).

Capital is the amount the owner has in the business. As the business grows and

makes profits, it adds to its capital. This capital is subdivided into shares (or

stocks). The capital is divided into 100 million shares of Rs 10 each.

Net Profit in 2003-04: Rs 20 crore (Rs 200 million).

EPS is the net profit divided by the total number of shares.

EPS = net profit/ number of shares

EPS = Rs 20 crore (Rs 200 million)/ 10 crore (100 million) shares = Rs 2 per

share


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Lesson to be learnt

1. If a company's EPS has grown over the years, it means the company is doing

well, and the price of the share will go up. If the EPS declines, that's a bad sign,

and the stock price falls.

2. Companies are required to publish their quarterly results. Keep an eye out for

these results; check for the trend in their EPS.

3. Price earnings ratio (PE ratio): How other investors view this share

An indicator of how highly a share is valued in the market. It arrived at by

dividing the closing price of a share on a particular day by EPS. The ratio tends

to be high in the case of highly rated shares. The average PE ratio for companies

in an industry group is often given in investment journal. Two stocks may have

the same EPS. But they may have different market prices. That's because, for

some reason, the market places a greater value on that stock. PE ratio is the

market price of the stock divided by its EPS.

PE = market price/ EPS

lets take an example of two companies.Company XYZ Ltd

Market price = Rs 100

EPS = Rs 2

PE ratio = 100/ 2 = 50

Company ABC Ltd

Market price = Rs 200EPS = Rs 2

PE ratio = 200/ 2 = 100

In the above cases, both companies have the same EPS. But because their

market price is different, the PE ratio is different.

Lesson to be learnt

In the case of EPS, it is not so much a high or low EPS that matters as the

growth in the EPS. The company's PE reflects investors' expectations of future


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growth in the EPS. A high PE company is one where investors have hopes that

earnings will rise, which is why they buy the share.

3. Forward PE: Looking ahead

The stock market is not nostalgic. It is forward looking. For instance, it

sometimes happens that a sick company, that has made losses for several years,

gets a rehabilitation package from its bank and a new CEO. As a consequence,

the company's stock shoots up. Because investors think the

company will do better in the future because of the package and new leadership,

and its earnings will go up. And we think it is a good time to buy the shares of

the company now. Suddenly, the demand for the shares has gone up. Because

stock prices are based on expectations of future earnings, analysts usually

estimate the future earnings per share of a company. This is

known as the forward PE. Forward PE is the current market price divided by the

estimated EPS, usually for the next financial year.

Forward PE = Current market price/ estimate EPS for the next financial

year.

To illustrate what we have been talking about, let's take the example of Infosys

Technologies.

Trailing 12-month EPS = Rs 56.82 (EPS of the last four quarters)

Closing price on January 6 = Rs 2043.15

PE = Price/EPS = 2043.15/ 56.82 = 35.95

Estimated EPS for 2004-05 = Rs 67Estimated EPS for 2005-06 = Rs 90

these figures are according to brokers' consensus estimates.

Forward PE = current market price/ estimated EPS for next financial year

Forward PE for 2004-05 = 2043.15/ 67 = 30.49

Forward PE for 2005-06 = 2043.15/ 90 = 22.70

With an EPS growth of over 30%, a forward PE of 22.7 is not high, indicating

that there is scope


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to be optimistic about the stock's price.

Lesson to be learnt

Sometimes, investors look out for a low PE stock, expecting that its price will

rise in the future. But sometimes, low PE stocks may remain low PE stocks for

ages, because the market doesn't fancy them.

Keep tab on the business news to check out the company's prospects in the

future.

When to sell

Stock Reaches Fair Value or Target Price

This is the easiest part of selling. We should sell when a stock reaches its fair

value. It is the main reason why we chose to buy it on the first place.

The target price can be computed by assessing the companys estimated

financial performance over the next 3 to 5 years, computing its EPS and using

an acceptable P/E ratio to compute the future market price. Based on this future

estimated price and our required return on our investment, compute our target

price.

When the prices reaches Stop loss

It is advisable to always consider the possibility of a loss before making our

investment. We should decide how much loss we are willing to book in the

stock. The lower price i.e., the price at which we are willing curtail our loss, is

called Stop Loss.

Need the money

The generally happens due to improper planning. However, things happen. Even

the most carefully planned strategy may not work. Catastrophic events may

force investors to sell an investment if his household is affected by it.


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The book is unclean

When management left their post abruptly or when the SEBI conduct a criminal

investigation on a company, it may be time to sell. Our assumption may be

inaccurate as a lot of fair value calculation is based on the company's balance

sheet, cash flow or other financial statement published by management.

Takeover news

When one of your stock holding is getting bought by other companies, it may be

time to sell. Sure, you might like the acquiring company but you still need to

figure out the fair value of the common stock of the acquiring company. If the

acquiring company is overvalued, then it is best to sell.

Other Investment Opportunity

Let us consider we boughtstock A and it has risen to 10% below its fair value.

Meanwhile, we noticed that stock B fallen to below 50% of our calculated fair

value. This is an easy decision. We will sell our stock A and buy stock B. Our

goal as an investor is to maximize our investment return. Sacrificing a 10% of

return in order to earn a 50% return is a sensible way to do that.Inaccurate Fair Value Calculation

As investors, we sometimes made errors in our fair value calculation. There are

factors that we might not take into accounts when researching a particular

company. For example, satyam scandal.

New Competitors with Better Products

When new competitors sprung up, the company that you hold might have tospend more money in order to fend off competition. Recent example includes

the emergence of pay-per click advertising by Google. Any advertising business

such as newspapers or cable network, this new product by Google might hurt

profit margins and eventually the fair value of the stock.

Not having a valid reason to Buy

When we don't know why we bought a particular stock, we won't know how

much our potential return is or when we should sell it. This is the easiest way of


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losing money. When we have no valid reason to buy, we should sell

immediately.


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GUIDELINES FOR LONG TERM

INVESTORS:-

The investor should know how to analyze the share prices of the company &

pickup the undervalued shares.

He should follow the principle of contrariness. This means that if everyone

buying the script, he should avoid that script buy such a script which

although is deserted but has a good potential in future.

Before investing he should undertake a deep study on the Net sales, net

profit in relation to equity capital employed and should attempt to forecast

for the coming years.

He should not rely on tips form friends, family, brokers or they buy and sell

merely on bunches this is usually one of the fastest ways to lose a bundle in

the market.

If they follow the market trends connately then they can deliver excellent

returns.

He should not invest his money in one or two company because if the

companies prices decline, he will have to bear a huge loss.

He set his target of minimum profit before starting his operation in the field

of stock market.


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GUIDELINES FOR SPECULATORS

Plan your trade and trade your plan.

Avoid getting in or out of the market too often.

Losses make the speculator studious not profits. Take advantage of every

loss to improve your knowledge of market action.

The most profitable trading tool is a simply following the trend.

The most difficult task in speculation is not predication but self control

successful trading is difficult and frustrating. You are the most important

element in the success equation.

When a markets gotten away and youve missed the first leg. You should

still consider jumping even if it is dangerous and difficult.

Commodities are never high to being buying or too low to begin selling. But

after the initial transaction, avoid make a second unless the first shows a

profit.

The clearest and easiest way to determine a trend is from previous highs and

lows. Higher highs and higher lows make a down trend.


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RESEARCH OBJECTIVES

MAIN OBJECTIVE OF THE RESEARCH

The objective of my research is TO STUDY INVESTORSINVESTMENT BEHAVIOR IN STOCK MARKET & SUGGESTINGGOOD INVESTMENT STRATEGY

OTHER OBJECTIVES

To study the investment habit of the people in the stock market.

To know about the peoples preference for investment whether

investment or trading.

To understand the frequency of investment in the market.

To analyze from total saving how much portion of amount people investin stock market.

To understand how much people invest at a time.

To know that for how much period people invest in stock market.

To understand the expected return of people from investment.

To know on what basis people invest in stock market.

The preference of people for investment in a particular sector.

To analyze the preferred price range of share by people.

To understand the peoples investment strategy.

To find out the common mistakes made by investors.

To define certain views for making money in stock market.


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RESEARCH METHODOLOGY

RESEARCH APPROACH

To achieve this objective I have conducted a survey and then collected data andanalyzed it and lastly find out the needed results

SAMPLING METHOD

I have used simple random sampling method for my research

SOURCES OF DATA COLLECTION

Data sources of are two types1) Primary data sources2) Secondary data sources

1) Primary data sources

Primary data can be collected through the questionnaire ,calling to clients and otherspeople. Questionnaire contain the different question about the investment behaviorand investment strategy. Primary data sources are very helpful for research. This

provides information related to the investors investment behavior & investmentstrategy.

2) Secondary data sources

Secondary data can be collected through e-learning.,newspapers,magzines,internetetc.

SAMPLE SIZE

I used 60 samples for my study

STATISTICAL TOOL USED FOR DATA ANALYSIS

PERCENTILE METHOD

AREA OF STUDY


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