A Project Study report ON “DETAIL STUDY OF INDIAN CAPITAL MARKET” Submitted in partial fulfillment for the Award of degree of Bachelor of Business Administration
SUBMITTED To:
SUBMITTED BY:
Mr. MANOJ SHARMA
AKANKSHA SONI
Department of management study
BBA 2nd Year
GOVERNMENT ENGINEERING COLLEGE, JHALAWAR 2011-2012
DECLARATION
I hereby declare that this project work entitled “A STUDY ON INDIAN CAPITAL MARKET.” is my work, carried out under the guidance of my faculty guide Mr. Manoj Sharma faculty of GECJ Jhalawar.This report neither full nor in part has ever been submitted for award of any other degree of either this university or any other university.
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Acknowledgement
We know that the success is backed up by the helping hands of many people. The same is the case with my project. Even my project wouldn’t have been possible without the eminent guidance of my teachers, teachers, suggestion of my fellows, and all those sources which I used for preparation of this project.
I am thankful to Mr. MANOJ SHARMA SIR , Lecture, GECJ Jhalawar for giving me continuous help and guidance for the project. I also want to give him thanks for his vital suggestions and recommendations in preparation of the report.
I am grateful to Mr.Manoj Sharma sir for his valuable guidance and necessary encouragement in this project.
I am in an extreme dilemma as to how I can appropriately acknowledge my deep gratitude and thanks to Mr. Raj sir for giving there valuable time and suggestion for this work. .
I expre express ss my heart heart full full grati gratitud tude e to family family,, who assis assisted ted and and supp support orted ed to accomplish my goal. Above all, I am thankful to the almighty that blossomed me with his blessings for the completion of the project.
TABAL CONTENT S.NO.
CONTENTS 3
PAGE
1
INTRODUCTION
5-8
2
CAPITAL MARKET
9-12
3
REGULATORS
13-15
4
PRIMARY MARKET
16-22
5
SECONDARY MARKET
23-40
6
SENSEX AND NIFTY
41-47
7
STOCK BROKER
48-52
8
PROBLEM FORMULATION
53
9
RESEARCH METHODOLOGY
54-55
10
COLLECTION OF DATA
56
11
QUESTIONARRIER
12
BIBLOGRAPHY CHAPTER 1. INTRODUCTION
1. History of Capital Market in India Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly nearly 200 200 years years ago. ago. The The earli earliest est record records s of secur security ity deali dealing ngs s in India India are are meager and obscure. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted transacted towards the close of the eighteenth century.
4
By 1830's business on corporate 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 brokers increased increased into 60.In 60.In 1860-61 1860-61 the America American n Civil 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 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.
2.Cities in Stock Market Operations Ahmadabad Ahmadabad gained importance importance next to Bombay with respect to cotton textile industry. After 1880, many mills originated from Ahmadabad and rapidly forged ahead. As new mills were floated, the need for a Stock Exchange at Ahmadabad was realized and in 1894 the brokers formed "The Ahmadabad Share and Stock Brokers' Association". What What the the cotto cotton n textil textile e indus industr try y was was to Bomba Bombay y and Ahmad Ahmadab abad ad,, the the jute jute industry industry was to Calcutt Calcutta. a. Also Also tea and coal coal industr industries ies were the other major major
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industrial groups in Calcutta. After the Share Mania in 1861-65, in the 1870's there was a sharp boom in jute shares, which was followed by a boom in tea shares in the 1880's and 1890's; and a coal boom between 1904 and 1908. On June June 1908 1908,, some some lead leading ing brok brokers ers forme formed d "The "The Calc Calcutt utta a Stock Stock Exch Exchan ange ge Association". Association". In the beginning of the twentieth century, the industrial revolution was on the way in India with the Swedishi Movement; and with the inauguration of the Tata Iron and and Stee Steell Compa ompany ny Limi Limite ted d in 1907 1907,, an impo import rtan antt stag stage e in indu indust stri rial al advancement under Indian enterprise was reached. Indian Indian cotto cotton n and and jute jute textil textiles es,, steel steel,, suga sugar, r, paper paper and and flour flour mills mills and and all all companies generally enjoyed phenomenal prosperity, due to the First World War. In 1920 1920,, the the then then demu demure re city city of Madr Madras as had had the the maid maiden en thri thrill ll of a stoc stock k exchange functioning in its midst, under the name and style of "The Madras Stock Exchange" with 100 members. However, when boom faded, the number of members stood reduced from 100 to 3, by 1923, and so it went out of existence. In 1935, the stock market activity improved, especially in South India where there was was a rapi rapid d incr increa ease se in the the numb number er of text textil ile e mill mills s and and many many plan planta tati tion on companies were floated. In 1937, a stock exchange was once again organized in Madras - Madras Stock Exchange Association (Pvt) Limited. (In 1957 the name was changed to Madras Stock Exchange Limited). Lahore Stock Exchange was formed in 1934 and it had a brief life. It was merged with the Punjab Punjab Sto Stock ck Exchang Exchange e Limite Limited, d, which which was incorp incorpora orated ted in
1936.
3. Indian Stock Exchanges - An Umbrella Growth
6
The Second World War broke out in 1939. It gave a sharp boom which was followed by a slump. But, in 1943, the situation changed radically, when India was fully mobilized as a supply base. On accou account nt of the restri restrict ctive ive contro controls ls on cott cotton, on, bulli bullion on,, seeds seeds and and other other commodities, those dealing in them found in the stock market as the only outlet for their activities. They were anxious to join the trade and their number was swelled by numerous others. Many new associations were constituted for the purpose and Stock Exchanges in all parts of the country were floated. The Uttar Pradesh Stock Exchange Limited (1940), Nagpur Stock Exchange Lim Limited ited (194 (1940) 0) and and
Hyde Hydera raba bad d
Stoc Stock k
Exch Exchan ange ge Limi Limite ted d
(194 (1944) 4) were were
incorporated. In Delhi Delhi two stock exchange exchanges s - Delhi Delhi Stock Stock and Share Share Brokers Brokers'' Associat Association ion Limited and the Delhi Stocks and Shares Exchange Limited - were floated and later in June 1947, amalgamated into the Delhi Stock Exchange Association Limited.
4. Post-independence Scenario Most of the exchanges suffered suffered almost a total eclipse during depression. depression. Lahore Exchange was closed during partition of the country and later migrated to Delhi and merged with Delhi Stock Exchange. Bangalore Stock Exchange Limited was registered in 1957 and recognized in 1963. Most Most of the the other other exch exchang anges es lang languis uished hed till till 1957 1957 when when they they applie applied d to the the Central Government for recognition under the Securities Contracts (Regulation) Act, 1956. Only Bombay, Calcutta, Madras, Ahmadabad, Ahmadabad, Delhi, Hyderabad and Indore, the well established exchanges, were recognized under the Act. Some of 7
the members of the other Associations were required to be admitted by the recognized stock exchanges on a confessionals basis, but acting on the principle of unitary control, all these pseudo stock exchanges were refused recognition recognition by the Government of India and they thereupon ceased to function. Thus, during early sixties there were eight recognized stock exchanges in India (mentioned above). The number virtually remained unchanged, for nearly two decades. During eighties, however, many stock exchanges were established: Cochin Cochin Stock Stock Exchang Exchange e (1980), (1980), Uttar Uttar Prades Pradesh h Stock Stock Exchang Exchange e Associa Associatio tion n Limited (at Kanpur, 1982), and Pune Stock Exchange Limited (1982), Ludhiana Stock Exchange Association Limited (1983), Gauhati Stock Exchange Limited (1984), Kanara Stock Exchange Limited (at Mangalore, 1985), Magadh Stock Exchange Association (at Patna, 1986), Jaipur Stock Exchange Limited (1989), Bhubane Bhubaneswa swarr Stock Stock Exchange Exchange Associa Associatio tion n Limited Limited (1989), (1989), Saurash Saurashtra tra Kutch Kutch Stock Exchange Limited (at Rajkot, 1989), Vadodara Stock Exchange Limited (at Baroda, 1990) and recently established exchanges - Coimbatore and Meerut. Thus, at present, there are totally twenty one recognized stock exchanges in India excluding the Over the Counter Counter Exchange of India Limited (OTCEI) and the National Stock Exchange of India Limited (NSEIL).
CHAPTER 2. CAPITAL MARKET Markets exist to facilitate the purchase and sale of goods and services. The Financial market exists to facilitate sale and purchase of financial instruments and comprises of two major markets, namely the capital market and the money market. The distinction between capital market and money market is that capital market mainly deals in medium and long-term investments investments (maturity more than a year) while the money market deals in short term investments (maturity up to a year).
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The capital (securities ies markets) markets) is the market for securities, securities , where where capital market market (securit companies and the government can raise long-term funds. The capital market includes the stock market and the bond market. market . Financial regulators, such as the U.S. Securities and Exchange Commission, Financial Services Authority in the UK, Financial Supervision Authority in Finland, and Securities and Exchange Board of India, India , oversee the markets to ensure that investors are protected. The capital markets consist of the primary market, market , where new issues are distributed to investors, and the secondary market, market , where existing securities are traded. Capital market can be divided into two segments viz. Primary and Secondary. The primary market is mainly used by issuers for raising fresh capital from the investors by making initial public offers or rights issues or offers for sale of equity or debt. The secondary market provides liquidity to these instruments, through trading and settlement on the stock exchanges. Capital Capital market is, thus, thus, importan importantt for raising raising funds funds for capital formation formation and investments and forms a very vital link for economic development of any country. The capital market provides a means for issuers to raise capital from investors (who (who have have surpl surplus us money money avail availab able le from from savin saving g for inves investme tment) nt).. Thus Thus,, the savings normally flow from household sector to business or Government sector, who normally invests more than they save. A vibrant and efficient capital market, which ensures an orderly development and contains measures for protection of interest of the investors, is the most important parameter for evaluating health of any economy. The major objectives of capital market are:
To mobilize resources for investments.
To facilitate efficient use of capital.
To facilitate buying and selling of securities.
To facilitate the process of efficient price discovery.
To faci facili lita tate te
sett settle leme ment nt
of
tran transa sact ctio ions ns
predetermined time schedules.
9
in
acc accorda ordanc nce e
with with the the
1. Investment Instruments Investment is a deployment of funds to one or more types of assets that will be held for over a period of time. Various forms of investment are available to an investor. They cover bank deposits, term deposits, recurring deposits, company depo deposi sits ts,,
post postal al
savin avings gs
sche scheme mes, s,
depos eposit its s
wit with
nonnon-ba bank nk
fina financ ncia iall
intermediaries, Government and corporate bonds, life insurance and provident funds, equity shares, mutual funds, tangible assets like gold, silver and jewellery, real estate and work of Arts etc. Capital market instruments instruments can be broadly divided into two categories categories namely
Debt, Equity and Hybrid instruments.
Derivative Products like Futures, Options, Forward rate agreements and Swaps.
A. Debt: Instrum Instrument ents s that that are issued issued by the issuers issuers for borrow borrowing ing monies from the investors with a defined tenor and mutually agreed terms terms and conditions conditions for payment payment of interes interestt and repayment repayment of principal. Debt instruments are basically obligations undertaken by the issuer of the instrument as regards certain future cash flows representing interest and principal, which the issuer would pay to the. the. The The shar shares es could could gener generall ally y be eithe eitherr ordin ordinary ary share shares s or preference preference shares. legal owner of the instrument. Debt instruments are of vario various us types types.. The The key key terms terms that that distin distingui guish sh one one debt debt instrument from another are as follows:
Issuer of the instrument
Face value of the instrument
Interest rate and payment terms
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Repayment terms (and therefore maturity period / tenor)
Security or collateral provided by the issuer
Differ Different ent kinds kinds of money money mark market et instr instrume ument nts s which which repre represen sentt debt debt are are commercial papers (CP), certificates of deposit (CD), and treasury bills (T-Bills), Govt. of India dated securities (GOISECs), etc.
B. EQUITY: Instruments that grant the investor a specified share of ownership of assets of a company and right to proportionate part of any dividend declared. The equity is represented by shares issued by a company
2. Major Difference between Equity and Debt Share represents the smallest unit of ownership of a company. If a company has issued 1, 00,000 shares, and a person owns 10 of them, he owns 0.01% of the company. A debenture or a bond represents the smallest unit of lending. The bond or debenture holder gets an assured interest only for the period of holding and repayment of principal at the expiry thereof, while the shareholder is partowner of the issuer company and has invested in its future, with a corresponding share in its profit or loss. The loss is, however, limited to the face value of the shares owned by him.
Instruments that include features of both debt and equity, such as 1) HYBRIDS: Instruments bonds with equity warrants e.g. convertible debentures and bonds.
Derivative ive is defined defined as a contrac contractt or instrume instrument, nt, whose whose 2) DERI DERIVA VATI TIVE VES: S: Derivat value is derived from the underlying asset, as it has no independent value. Underlying asset can be securities, commodities, bullion, currency, etc. The
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two derivative products traded on the Indian stock exchanges are Futures and Options.
3) FUTU FUTURE RES S (INDE (INDEX X AND STOCK STOCK): ): Futures are the standardized contracts in
terms of quantity, delivery time and place for settlement on any date in future. It is a legally binding agreement between a seller and a buyer, which requires the seller to deliver to the buyer, a specified quantity of security at a fixed time in the the futu future re,, at a spec specif ifie ied d pric price. e. Such Such cont contra ract cts s are are trad traded ed on the the exchanges.
4) OPTI OPTION ONS S (INDEX (INDEX AND STOC STOCK) K):: These are deferred delivery contracts that
give the buyer the right, but not the obligation to buy or sell a specified security at a specified price on or before a specified future date. At present in India, both Futures and Options are cash settled.
Chapter 3. REGULATORS 1. Why does Securities Market need Regulators? The absence of conditions of perfect competition in the securities market makes the role of the Regulator extremely important. The regulator ensures that the marke markett parti partici cipan pants ts beha behave ve in a desir desired ed manne mannerr so that that secur securiti ities es marke markett
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continues continues to be a major source of finance for corporate and government and the interest of investors are protected.
2. Regulators of Stock Market The responsibility for regulating the securities market is shared by
Department of Economic Affairs (DEA), Department of Company Affairs (DCA), Reserve Bank of India (RBI) and Securities and Exchange Board of India (SEBI).
3. SEBI and its role The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) protecting the interests of investors investors in securities securities (b) promoting the development development of the securities market and (c) regulating regulating the securities market. Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for: •
§ Regulating the business in stock exchanges and any other securities markets
•
§ Registering and regulating the working of stock brokers, sub–brokers etc.
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•
§ Promoting and regulating self-regulatory organizations
•
§ Prohibiting fraudulent and unfair trade practices
•
§ Calling for information from, undertaking inspection, conducting inquiries and and audit audits s of the the stock stock exchan exchange ges, s, inter intermed mediar iaries ies,, self self –regu –regulat lator ory y orga organiz nizat ation ions, s, mutual mutual funds funds and and other other perso persons ns assoc associat iated ed with with the the securities market.
4. ACTS governing Securities Market Securities Contracts (Regulation) Act, 1956 Securities Contracts (Regulation) Rules, 1957 Securities and Exchange Board of India Act, 1992 SEBI (Stock Brokers & Sub-Brokers) Rules, 1992 SEBI (Stock Brokers & Sub-Brokers) Regulations, 1992 SEBI (Prohibition of Insider Trading) Regulations, 1992 SEBI (Prohibition if Fraudulent and unfair Trade Practices relating to Securities Markets) Regulations, 1995
The Depositories Act, 1996 Indian Contract Act, 1872 The Companies Act, 1956 Public Debt Act, 1944 Income Tax Act, 1961
Chapter 4. Primary Market
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Primary market provides the channel for sale of new securities. Primary market helps the company the raise funds from public through issue of securities to meet the long term capital requirements of corporate business & industry in the form of equity/debt capital. Primary Market is the medium for floating pubic issues. Public issue issue mean means s an invita invitatio tion n by a compa company ny to the the publi public c to subsc subscrib ribe e to the securities offered through a prospectus. Primary market is the centre stage of capital market bringing together the two segments of market that is investors and seekers of capital. Primary market helps the company to list new securities in the market through new public issues. They may issue the securities at face value or at a discount/premium .They may issue securities in domestic market and or international market.
1. Benefits of Primary Market ⇒
Resources mobilsed are not repayable except in the case of winding up or buy back of shares.
⇒
Payment of dividend is optional and depends upon company’s profit after meeting all other overheads.
⇒
The shareholders enjoy the benefit of liquidity of their investment, when the shares are listed and traded in the stock-exchange.
2. Disadvantages/Problems Faced by Corporate ⇒
Rais Raisin ing g capi capita tal/ l/fu fund nds s thro throug ugh h the the prim primar ary y mark market et is time time cons consum umin ing, g, expensive.
⇒
The Issuer has to engage the services of a number of intermediaries and undergo with number of legal formalities which is again time consuming.
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⇒
Listing
burdens the company company to regularly regularly disclose disclose information information to to public and
SEBI.
3. Different kinds of issue Issues can be classified as public, Rights or Preferential issues. The procedure for Preferential issue is simple than Public issue. 1) Initial Public Offer (IPO) This is when an unlisted company makes either a
fresh issue or offers sale of its existing securities or both for the first time to public public.. In other other word words s it is the first first sale of a corporation corporation's 's common shares to investors on a public stock exchange. This Initial Public Offering can be made through the fixed price method, book building d or a combination of both .
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In case the issuer chooses to issue securities through the book building route then as per SEBI guidelines, an issuer company can issue securities in the following manner:
a) 100% of the net offer to the public through the book building route. b) 75% of the net offer to the public through the book building process and 25% through the fixed price portion when listed listed comp company any offers offers fresh fresh issue issue to exist existing ing 2) Rights Rights Issue Issue This is when shareholders on a record date. Rights issue are offered in particular ratio to the number of securities held prior by the shareholder before the issue.
4. Reasons for issue of shares through IPO’s ⇒
To raise extra capital by the company for its further expansion or to set up business for long term.
⇒
Once a company is listed it will be able to issue further shares via a rights issue issue,, there thereby by again again provi providi ding ng itself itself with with capita capitall for expan expansio sion n with without out incurring any debt.
5. Price Discovery through Book Building Book Building is basically a process used in Initial Public Offer (IPO) which helps to determine price and demand discovery. It is a process used for marketing a public offer of equity shares of a company. It is a process where, during the period for which the book for the IPO is open, bids are collected from investors at various prices, which are above or equal to the floor price. The offer/issue price is then determined after the last date of IPO based on certain evaluation criteria.
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An issuer company proposing to issue capital through book building has two options i.e. 70% book building and 100% book building. In case of 100 %, not more than 60% of net offer to public can be allotted to QIBs, not less than 15% of the net offer to public can be allotted to non-institutional investors applying for more than 1000 shares, and not less than 25% of the net offer to public can be allotted to retail investors applying for more than 1000 shares. In case of 75% book building, not more than 60% of net offer to QIBs, not less than 15% of net offer to non-institutional investors. The balance 25% to public offered at a price determined through book building.
6. The Process: The Issuer who is planning an IPO nominates a lead merchant banker as a 'book runner'.
The Issuer specifies the number of securities to be issued and the price band for orders.
The Issuer also appoints syndicate members with whom orders can be placed by the investors.
Investors place their order with a syndicate member who inputs the orders into the 'electronic book'. This process is called 'bidding' and is similar to open auction. should remain remain open open for a minimum minimum of 5 days. A Book should
Bids cannot be entered less than the floor price. Bids can be revised by the bidder before the issue closes. On the close of the book building period the 'book runner evaluates the bids on the basis of the evaluation criteria which may include -
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o
Price Aggression
o
Investor quality
o
Earliness of bids, etc.
The book runner and the company conclude the final price at which it is willing to issue the stock and allocation of securities.
Generally, the numbers of shares are fixed; the issue size gets frozen base based d on the price price per per share share disco discove vere red d throu through gh the book book buildi building ng process. Allocation of securities securities is made to the successful successful bidders. bidders. Allocation
Book Building is a good concept and represents a capital market which is in the process of maturing.
7. Premium and Discount in Security Market When a security is sold above its face value it is issued at Premium and if security is issued below its face value it is said it is issued at Discount .
1) Issu Issue e Pri Price ce The price at which a company’s shares are offered initially in primary
market is called Issue Price.
2) cut-o cut-off ff Pric Price e
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In a book building issue, the issuer is required to indicate either the price band or a floor price in the prospectus .The actual discovered discovered price can be any price
in price band; this issue price is called Cut-off Price .
3) Who decid decides es the pric price e of an issue issue As per the guideline guideline the issuer issuer in consultation consultation with Merchant Merchant banker decides decides the price of the issue. There are no guidelines stipulated by the Sebi, so Sebi does not have any role to play in determining the price of the issue. The The book book shou should ld rema remain in open open for for a mini minimu mum m of 3 days days.. As per per SEB SEBI guidelines, the basis of allotment should be completed within 15 days from the issue close date. As soon as the basis of allotment is completed, within 2 working days the details of credit of demat account or dispatch of refund order needs to be completed. So an investor should know in about 15 days from the closure of issue, whether shares are allotted to him or not. It would take around 3 weeks after the closure of the book built issue, shares to get listed.
4) Role Role of SEBI SEBI in an an issue issue Any company making a public issue or a listed company making a right issue of value more than 50 lakh is required required to file a draft offer document with Sebi for its observations. observations. The company can proceed further after getting observations from
sebi. The validity period of Sebi observations letter is 3 months.
8.Difference between public issue and private placement
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When an issue is made to general public and investors at large it is a public issue. But if the issue is made to selected people it is called private placement, as per Companies Act, 1956 an issue becomes public if it is allotted to more than 50 people .
1) Prospectus Prospect Prospectus us is a very very important important documen document, t, which helps helps the investor investor to know about the company, company, what is the purpose purpose for raising money, money, the return return expected on money, company equity capital, its current and past performance and other other inform informati ation on which which helps helps the the inves investo torr in decid decidin ing g wheth whether er to invest invest in company or not. One of the guidelines issued by Sebi is disclosure of information to public.
2) Draft Offer Document Offer document means prospectus in case of public issue and letter of Offer in case case of right rights s issue issue which which is filed filed with with Regis Registra trarr of Comp Compan anies ies and and Stock Stock Exchanges. Draft Offer document are filed with SEBI, at least 21 days prior to the filing filing offer offer documen documentt with with Registr Registrar ar of Compan Companies. ies. SEBI may specify specify some changes in the offer document and the issuer or merchant banker should carry the changes specified by the SEBI. Abridged Prospectus is a shorter version of the prospectus and contains all features of a prospectus.
3) Book building through National Stock Exchange (NSE) NSE offers offers book book buildin building g process process through through online IPO’s. IPO’s. NSE operate operates s fully fully auto automa mate ted d scre screen en base based d bidd biddin ing g syst system em call called ed Nati Nation onal al Exch Exchan ange ge for for Automated Trading (NEAT) IPO that allows trading members to enter bid online from anywhere through a sophisticated telecommunication network .
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4) Merchant Banking Merchant banking activity in India is governed by SEBI. All merchant bankers have to register with SEBI. The person registering for merchant banking has to be a body corporate other than non banking financial company should have necessary infrastructure and at-least two people in his employment to conduct business of merchant banker.
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CHAPTER-5 SECONDARY MARKET 1. Intr Introd oduc ucti tion on Secondary Market is a place for sale and purchase of existing securities. Majority of trading is done in the secondary market. It enables the investors of securities market to sell their securities for cash to meet his liquidity. The securities are traded in the stock exchanges.
2. Meani eanin ng Secondary Market refers to a market where securities are traded after being initia initially lly offere offered d to the public public in the prima primary ry marke markett and and listed listed on the the Stock Stock Exchange. The secondary market is the financial market for trading of securities.
3. Role Role of the the Secon Secondar dary y Market Market a) Investor’s
The primary role of Secondary Market is to help investors in trading of their securities.
b) Management
It also monitors and controls conduit of the management by facilitating value enha enhanc ncin ing g
cont contro roll
acti activi viti ties es,,
enab enabli ling ng
impl implan anta tati tion on
of
ince incent ntiv ive e
base based d
manag managem ement ent contr contract acts s and provi provides des inform informati ation on that that guid guides es manage manageme ment nt decisions.
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4. Products in the Secondary Markets There are various products that are dealt with in a secondary market. This can be broadly classified in two:-
a) Shares b) Bonds
1) Shares Equity Shares: An equity share, commonly referred to as ordinary share, represents represents the form of fraction fractional al owners ownership hip in a busines business s venture venture.. The holders holders of such such shares shares are members of the company and have voting rights. A company may issue such shares with differential rights as to voting, payment of dividend, etc.
Bonus Shares: Shar Shares es iss issued ued by the the comp compan anie ies s to thei theirr shar shareh ehol old ders ers free free of cost cost by capitaliz capitalizatio ation n of accumul accumulated ated reserves reserves from the profits profits earned earned in the earlier earlier years.
Rights Issue/ Rights Shares: The issue of new securities to existing shareholders at a ratio to those already held, at a price.
Preference shares: Owners of these kinds of shares are entitled to a fixed dividend or dividend calculated at a fixed rate to be paid regularly before dividend can be paid in
24
respect of equity share. They also enjoy priority over the equity shareholders in payment of surplus.
Cumulative Convertible Preference Shares : A type of preference preference shares where the dividend dividend payable on the same accumulates, if not paid. After a specified date, these shares will be converted into equity capital of the company.
Cumulative Preference Shares: A type of preference shares on which dividend accumulates accumulates if remained remained unpaid. unpaid. All arrears of preference dividend have to be paid out before paying dividend on equity shares.
Participating Preference Share: The right of certain certain preference preference shareholde shareholders rs to particip participate ate in profits profits after after a specified fixed fixed dividend contracted contracted for is paid. Participation Participation right is linked linked with the quantum of dividend paid on the equity shares over and above a particular specified level.
2) Bond: Bond Bond is a nego negoti tiab able le cert certif ific icat ate e evid eviden enci cing ng inde indebt bted edne ness ss.. It is norm normal ally ly unsecured. A debt security is generally issued by a company, municipality or government agency. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified maturity date. The issuer usually pays the bond holder periodic interest payments over the life of the loan. The various types of Bonds are as follows:
Zero Coupon Bond:
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Bond issued at a discount and repaid at a face value. No periodic interest is paid. The difference between the issue price and redemption price represents the return to the holder. The buyer of these bonds receives only one payment, at the maturity of the bond.
Convertible Bond: A bond giving the investor the option to convert the bond into equity at a fixed conversion price.
3) Debenture: Bonds issued by a company bearing a fixed rate of interest usually payable half yearly on specific dates and principal amount repayable on particular date on redemp redemptio tion n of the the debe debentu ntures res.. Deben Debentur tures es are are norma normally lly secur secured/ ed/ char charged ged against the asset of the company in favour of debenture holder.
4) Security Receipts: Security receipt means a receipt or other security, issued by a securitisation company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right, title or interest in the financial asset involved in securitisation.
5) Government Securities (G-Secs): These These are sovereig sovereign n (credit (credit risk-fre risk-free) e) coupon coupon bearing bearing instrume instruments nts which which are issued by the Reserve Bank of India on behalf of Government of India, in lieu of
26
the Central Government's market borrowing programme. These securities have a fixed coupon that is paid on specific dates on half-yearly basis. These securities are available in wide range of maturity dates, from short dated (less than one year) to long dated (up to twenty years).
6) Commercial Paper: A short term promise to repay a fixed amount that is placed on the market either directly or through through a specialized specialized intermediary. intermediary. It is usually issued by companies companies with a high credit standing in the form of a promissory promissory note redeemable at par to the holder on maturity and therefore, doesn’t require any guarantee . Commercial paper is a money market instrument issued normally for tenure of 90 days .
7) Treasury Bills: Short-term (up to 91 days) bearer discount security issued by the Government as a means of financing its cash requirements.
5. Dematerialization of Shares Demat Demateri erial aliza izatio tion n is the proce process ss by which which an Inves Investor tor can can get get his phys physica icall securities converted into electronic form. Pre-requisites for dematerialization are:
Investor should have a demat account with any DP of CDSL.
27
Securities to be dematerialized must have been admitted in CDSL i.e. ISIN for the securities should be available in CDSL.
Investor should be the registered holder for the securities in the books of the company.
Dema Dematt of shar shares es has has been been intr introd oduc uced ed in all all the the shar shares es trad traded ed on the the secondary stock markets as well as those issued to the public in the primary markets. Even bonds and debentures are allowed in demat form.
Advantages of Dematerialization: It involves paperless trading
Time, money and efforts required earlier regarding transfer of shares is minimized through electronic transfer of shares.
However, if the investor prefers to hold the securities in physical form, they are allowed to do so.
6. Rematerialization of Shares Rematerialization is the process of converting securities, held in a Demat account (i.e. electronic form) to physical form. An investor intending to convert the securities into physical form submits a remat request to the DP in a Rematerialization Request Form (RRF). DP verifies the information on the RRF and enters the details in the system to setup a request electronically. The The syste system m gene generat rates es a uniqu unique e seria seriall numbe numberr calle called d as Remat Remateri erial aliza izati tion on Request Number (RRN), which can be used for future reference. The DP sends
28
the RRF to the concerned Issuer/ RTA. If the remat request is in order, the Issuer/ RTA approves the same and confirms the RRN electronically to CDSL. On receivin receiving g such such confirm confirmatio ation, n, CDSL CDSL debits debits the investo investorr accoun account. t. Physica Physicall certificates are sent by the Issuer / RTA directly to the investor.
7. MUTUAL FUNDS A Mutual Fund is a trust that pools the savings of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them. Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified, professionally managed basket of securities at a relatively low cost. The flow chart below describes broadly the working of a mutual fund:
8. Derivatives Derivatives is a product whose value is derived from the value of one or more basic variable, called bases (underlying asset, index or reference rate), in a
29
contractual manner. The underlying asset can be equity, forex, commodity or any other asset. The International Monetary Fund defines derivatives as “financial instru instrume ments nts that that are linked linked to a spec specifi ific c finan financia ciall inst instrum rumen entt or indic indicato atorr or commodity and through which specific financial risk can be traded in financial markets in their own right. The value of a financial derivative derives from the price of an underlying item, such as an asset or index. Unlike debt securities, no principa principall is advance advanced d to be repaid repaid and no investme investment nt income income accrues accrues”. ”. For exampl example, e, whea wheatt farme farmers rs may wish to sell sell their their harve harvest st at a future future date to eliminate the risk of a change in prices by that date. Such a transaction is an example of a derivative. The price of this derivative is driven by the spot price of wheat which is the ‘underlying’.
9. Stock Exchange and Stock Trading 1). Stock Exchange Stock Exchange provide a trading platform, where buyers and sellers can meet to transact in securities. All the securities which need to be traded should be listed on the Stock Exchange therefore stock exchange is an integral part of the secondary market.
In India there are 23 recognized Stock Exchanges. Out of which only two are very important:
•
National Stock Exchange (NSE)
•
Bombay Stock Exchange (BSE)
The India stock exchanges are under overall supervision of regulatory authority, the Securities and Exchange Board of India (SEBI).
30
1
Technology 1
31
2). Stock Trading Systems
i.
Screen Ba Based Trading
Initially trading of securities on stock exchange in India took place through open outcry. This lead to delay in matching or recording of trades and also was time consuming and inefficient. In order to over come this problem NSE introduced a nationwide, online, fully automated screen based trading system (SBTS). In this system a member punches into computer the quantities of a security and the price at which he would like to transact, and the transaction gets over as soon as a matching sale or buy order from other member/party is found.
ii. ii.
Natio Nationa nall Exch Exchan ange ge for for Auto Automa mate ted d Trad Tradin ing g (NE (NEAT AT))
NEAT NEAT is a client client serve serverr based based appli applicat cation ion and and is a satel satellit lite e commun communica icatio tion n technology technology for trading. At the server end all trading information information is stored in an inmemory database to achieve minimum response time and maximum system availability for users. Its uptime record is 99.7%. NSE is the first stock exchange in the world to use satellite communication technology for trading i.e. NEAT. The NEAT system supports an order driven market, wherein orders match on the basis of time and price priority. All quantity fields are in units and prices
are quoted in Indian Rupees.
iii. iii.
BOMB BOMBAY AY ONON-LI LINE NE TRA TRADI DING NG SYS SYSTE TEM M (BOL (BOLT) T)
The Bombay On-line Trading System (BOLT) is CMC's on-line Trading System for trading in Stocks. The System is operational at Bombay Stock Exchange - the premier Stock Exchange in the South East Asian region since March 1995. It is one one of the the few few Stoc Stock k Trad Tradin ing g syst system ems s arou around nd the the glob globe, e, whic which h hand handle les s hybrid/mixed mode of trading i.e. Order driven as well as quote driven. BSE had replaced its open outcry system with Bombay On-line Trading (BOLT) facility in
32
1995. This totally automated screen based trading in securities was put into practice nation-wide within a record time of just 50 days. The BOLT platform capa capaci city ty has has been been enha enhanc nced ed to 40 lakh lakh orde orders rs per per day day by upgr upgrad adin ing g the the hardware. BOLT has been certified by DNV for conforming to BS7799 security standards. standards. The initiative enables enables investors anywhere in the world to trade on the BSE BSE platfo platform. rm. BSE BSE has also also been been succe success ssful ful in maint maintain ainin ing g syste systems ms and and processes uptime of 99.99%.
iv.
LIS LISTING OF SECURITIE TIES Listing means admission of the securities to dealings on a recognized stock exchange. The securities may be of any public limited company, Central or State
Government,
quasi
governmental
and
other
financial
institutions/corporations, municipalities, etc. A company intending to have its securities listed on the Exchange has to comply with the listing requirements prescribed by the Exchange. Some of the requirements are as under :-
[I] Minimum Listing Requirements for new companies The following revised eligibility criteria for listing of companies on the Exchange, through through Initial Initial Public Public Offering Offerings s (IPOs) (IPOs) & FollowFollow-on on Public Public Offering Offerings s (FPOs), (FPOs), effective August 1, 2006.
ELIGIBILITY CRITERIA FOR IPOs/FPOs Companies es have have been been classifi classified ed as large large cap companies companies and small small cap A. Compani
companies. companies. A large cap company is a company with a minimum issue size of Rs. 10 crores and market capitalization of not less than Rs. 25 crores. A small cap company is a company other than a large cap company. a) In respect of Large Cap Companies
33
applicant company (hereinafter (hereinafter 1) The minimum post-issue paid-up capital of the applicant referred to as "the Company") shall be Rs. 3 crores; and 2) The minimum issue size shall be Rs. 10 crores; and 3) The minimum market capitalization of the Company shall be Rs. 25 crores
(market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price). b) In respect of Small Cap Companies 1) The minimum post-issue paid-up capital of the Company shall be Rs. 3 crores;
and 2) The minimum issue size shall be Rs. 3 crores; and 3) The minimum market capitalization of the Company shall be Rs. 5 crores
(market capitalization shall be calculated by multiplying the post-issue paid-up number of equity shares with the issue price); and The minimu minimum m income income/tu /turno rnove verr of the Compa Company ny shou should ld be Rs.3 Rs.3 Crore Crores s 4) The in each of the preceding three 12-months period; and 5) The minimum number of public shareholders after the issue shall be 1000. 6) A due diligence study may be conducted by an independent team of Chartered
Accountants Accountants or Merchant Bankers appointed appointed by the Exchange, the cost of which will be borne by the company. The requirement of a due diligence study may be waived if a financial institution or a scheduled commercial bank has appraised the project in the preceding 12 months.
34
B. For all companies : 1) In respect of the requirement of paid-up capital and market capitalization, the
issuers shall be required to include in the disclaimer clause forming a part of the offer document that in the event of the market capitalization (product of issue price and the post issue number of shares) requirement of the Exchange not being met, the securities of the issuer would not be listed on the Exchange. 2) The applicant, promoters and/or group companies, should not be in default in
compliance of the listing agreement. 3) The above eligibility criteria would be in addition to the conditions prescribed
under SEBI (Disclosure and Investor Protection) Guidelines, 2000.
[II] Minimum Listing Requirements for companies listed on other stock exchanges The Governing Board of the Exchange at its meeting held on 6th August, 2002 amen amende ded d the the dire direct ct list listin ing g norm norms s for for compa ompan nies ies list listed ed on othe otherr Stoc Stock k Excha Exchang nge(s e(s)) and and seeki seeking ng listin listing g at BSE. BSE. Thes These e norms norms are are appl applica icabl ble e with with immediate effect. 1. The company should have minimum issued and paid up equity capital of Rs. 3
crores. 2. The Company should have profit making track record for last three years. The
revenues/profits revenues/profits arising out of extra ordinary items or income from any source of non-recurring nature should be excluded while calculating distributable profits. 3. Minimum net worth of Rs. 20 crores (net-worth includes Equity capital and free
reserves excluding revaluation reserves).
35
4. Minimum market capitalisation of the listed capital should be at least two times
of the paid up capital. The comp company any should should have have a divid dividend end paying paying track track recor record d for for the the last last 3 5. The consecutive years and the minimum dividend should be at least 10%. 6. Minimum 25% of the company's issued capital should be with Non-Promoters
shareholders as per Clause 35 of the Listing Agreement. Out of above Non Promoter holding holding no single shareholder shareholder should hold more than 0.5% of the paidup capital of the company individually or jointly with others except in case of Banks/Financial Banks/Financial Institutions/Fore Institutions/Foreign ign Institutional Institutional Investors/Oversea Investors/Overseas s Corporate Corporate Bodies and Non-Resident Indians. 7. The company should have at least two years listing record with any of the
Regional Stock Exchange. 8. The company should sign an agreement with CDSL & NSDL for demat trading.
[III] [III] Mini Minimu mum m Requ Requir irem emen ents ts for compa compani nies es deli deliste sted d by this this Exchange seeking relisting of this Exchange The The compa companie nies s delis deliste ted d by this this Exch Exchan ange ge and seek seeking ing relis relistin ting g are required to make a fresh public offer and comply with the prevailing SEBI's and BSE's guidelines regarding initial public offerings.
36
[IV] Permission to use the name of the Exchange in an Issuer Company's prospectus The Exchange follows a procedure in terms of which companies desiring to list their their securiti securities es offered offered through through public issues are required required to obtain obtain its prior permission to use the name of the Exchange in their prospectus or offer for sale documents before filing the same with the concerned office of the Registrar of Comp Compan anie ies. s. The The Exch Exchan ange ge has has sinc since e last last thre three e year years s form formed ed a "Lis "Listi ting ng Committee" to analyse draft prospectus/offer documents of the companies in respect of their forthcoming public issues of securities and decide upon the matter of granting them permission to use the name of "Bombay Stock Exchange Limited" Limited" in their their prospec prospectus/ tus/off offer er docume documents. nts. The committe committee e evaluat evaluates es the promoters, company, project and several other factors before taking decision in this regard.
[V] Submission of Letter of Application As per Section 73 of the Companies Companies Act, 1956, a company seeking listing of its securities on the Exchange is required to submit a Letter of Application to all the Stock Exchanges where it proposes to have its securities listed before filing the prospectus with the Registrar of Companies.
[VI] Allotment of Securities As per Listing Agreement, Agreement, a company is required required to complete allotment of securities offered to the public within 30 days of the date of closure of the subs subscr crip ipti tion on list list and and appr approa oach ch the the Regi Region onal al Stoc Stock k Exch Exchan ange ge,, i.e. i.e. Stoc Stock k Exchange nearest to its Registered Office for approval of the basis of allotment.
37
In case of Book Building issue, Allotment shall be made not later than 15 days from the closure of the issue failing which interest at the rate of 15% shall be paid to the investors.
[VII] Trading Permission As per Securities and Exchange Exchange Board of India Guidelines, the issuer company should complete the formalities for trading at all the Stock Exchanges where the secur securiti ities es are are to be liste listed d withi within n 7 work working ing days days of final finaliza izatio tion n of Basis Basis of Allotment. Allotment. A company should scrupulously scrupulously adhere to the time limit for allotment of all securiti securities es and dispatch dispatch of Allotmen Allotmentt Letters/ Letters/Shar Share e Certific Certificates ates and Refund Refund Orders and for obtaining the listing permissions of all the Exchanges whose names are stated in its prospectus or offer documents. In the event of listing permission to a company being denied by any Stock Exchange where it had applied for listing of its securities, it cannot proceed with the allotment of shares. However, the company may file an appeal before the Securities and Exchange Board of India under Section 22 of the Securities Contracts (Regulation) Act, 1956.
[VIII] Requirement of 1% Security The companies making public/rights issues are required to deposit 1% of issue amount with the Regional Stock Exchange before the issue opens. This amount is liable to be forfeited in the event of the company not resolving the complaints of investor investors s regardin regarding g delay delay in sending sending refund refund orders/ orders/sha share re certific certificates ates,, nonnonpayment of commission to underwriters, brokers, etc.
38
IX] Payment of Listing Fees All companies companies listed on the Exchange Exchange have to pay Annual Listing Fees by the 30th April of every financial year to the Exchange as per the Schedule of Listing Fees prescribed from time to time. The schedule of listing fees for the year 20062007, prescribed by the Governing Board of the Exchange is given hereunder:
SCHEDULE OF LISTING FEES FOR THE YEAR 2006-2007
Sr. No. 1 2
Amount
Particulars
(Rs.)
Initial Listing Fees
20,000
Annual Listing Listing Fees Fees (i) (i) Comp Compan anie ies s with with paid paid-u -up p capit apital al** up to Rs. Rs. 5 Cror Crores es (ii)
Above
Rs.
5
Crores
and
up
to
Rs.
10
Crores
(iii) Above Rs. 10 crores and up to Rs. 20 crores 3
10,000 15,000 30,000
Comp Compa anies nies whi which ch hav have e a paid paid-u -up p capi capita tal* l* of of more more tha than n Rs. Rs. 20 crores will pay additional fee of Rs. 750/- for every increase of Rs. 1 crores or part thereof.
4
In case case of deben debentur ture e cap capita itall (not (not conv convert ertibl ible e int into o equ equity ity shares shares)) of of companies, the fees will be charged @ 25% of the fees payable as per the above mentioned scales.
*includes equity shares, preference shares, fully convertible debentures, partly convertible debenture capital and any other security which will be converted into equity shares.
10. DELISTING OF SECURITITES
39
The term "delisting" of securities means permanent removal of securities of a liste listed d compa company ny from from a stock stock excha exchang nge. e. As a conse consequ quen ence ce of delis delistin ting, g, the securities of that company would no longer be traded at that stock exchange
.
There are 2 types of Delisting:
a) Compulsory Delisting:
Compu Compulso lsory ry delis delistin ting g refe refers rs to perma permanen nentt remov removal al of secu securit ritie ies s of a liste listed d company from a stock exchange as a penalizing measure at the behest of the stock exchange for not making submissions/comply with various requirements set out in the Listing agreement within the time frames prescribed.
b) Volunteer Delisting:
In volun voluntar tary y delis delistin ting, g, a listed listed compa company ny decid decides es on its own own to perma permanen nently tly remove its securities from a stock exchange. The SEBI Guidelines, 2003 for Delisting of Securities provides the full information of delisting procedure which can be seen on the website of SEBI.
11. EQUITY INVESTMENT Investing in Equity market is at present at its peak. Investing in Equity provides the investors portfolio with the highest growth as equity has potential potential to increase increase in value over time. Equity is also known as shares. In some cases it has been seen that equities have outperformed most of the other forms of investment in long term. Over a 15 year period between 1990 to 2005, Nifty has given annualized return of 17%. 17%. There Therefor fore e equit equities ies are are cons conside idered red the the most most challe challeng nging ing and and the rewarding when compared to other investment options.
40
•
Average Return on Equities in Indian Equity in India has returned about 7% on average in terms of increase in
share price and 1.5% dividends are paid on an average annually .
•
Mode of investing in the Equities There are 2 ways by which an investor can invest in the equities.
1) By subscribing the IPO’s of the companies in the Primary Market.
2) Trading of shares in the Secondary Market by opening an a/c in a
recognized Broking Firm.
•
Bid and Ask price
The Bid is the buyer’s price. Bid is the rate/price at which there is a ready buyer for the stock, which you intend to sell. The Ask is the rate/ price at which there is seller ready to sell his stock. The seller will sell his stock if he gets the quoted “Ask’ price.
12. DEBT INVESTMENT
41
Debt Investment means investing in debt instruments. These instruments are contract of one party lending money to another on pre-determined terms with regards to rate and periodicity of interest, repayment of principal amount by the borrower to the lender.
In Indian securities markets, the term ‘bond’ is used for debt instruments issued by the Central and State governments and public sector organizations and the term ‘debenture ’ is used for instruments issued by private corporate sector. Most Bond/Debenture issues are rated by specialized credit rating agencies. Credit rating agencies in India are CRISIL, CARE, ICRA and Fitch. The yield on a bond varies inversely with its credit (safety) rating. The safer the instrument, the lower
is the rate of interest offered. The investors in the debt markets are mainly mainly banks, banks, financi financial al institut institutions ions,, mutual mutual funds, funds, providen providentt funds, funds, insuranc insurance e companies and corporate.
•
Debt Instruments
Norm Normal ally ly the the name name of the the bond bond such such the the feat featur ure e of the the inst instru rume ment nt Debt Debt instrument has three features:
Maturity: Maturity of a bond/debentures refers to the date, on which the bond/debenture matures, which is the date on which the borrower has agreed to repay the principal.
Coupon: Coupon refers to the periodic interest payments that are made by the issuer of the bond/debentures to the subscriber of the bond/debentures .Coupon rate is the rate at which interest is paid, and is usually represented as a percentage of the par value of a bond.
42
Principal: Principal is the amount amount that has been borrowed, borrowed, and is also called the par value or face value of the bond.
•
Debt Market in India
In Indian debt market there are 3 main segments. (1) Government Securities (2) Public Sector Units (PSU) bonds, and (3) Corporate securities.
Mode of investing in Debt Market There are two ways of investing in Debt Market. 1. The investors may subscribe to issues made by the government/corporates in
the primary market. 2. He may purchase the same from the secondary market through the stock
exchanges.
Chapter 6. Sensex and Nifty
43
The Sensex is an "index". What is an index? An index is basically basically an indicator. It gives you a general idea about whether most of the stocks have gone up or most of the stocks have gone down.
The The Sens Sensex ex is an indi indica cato torr of all all the the majo majorr comp compan anie ies s of the the BSE. BSE. The Nift ifty is an indicat cator of all the the major jor compan panies of the the NSE. If the Sensex goes up, it means that the prices of the stocks of most of the major companies on the BSE have gone up. If the Sensex goes down, this tells you that the stock price of most of the major stocks on the BSE have gone down.
Just like the Sensex represents the top stocks of the BSE, the Nifty represents the top stocks of the NSE.
The BSE is the Bombay Stock Exchange and the NSE is the National Stock Exchange. The BSE is situated at Bombay and the NSE is situated at Delhi. These are the major stock exchanges in the country. There are other stock exchanges like the Calcutta Stock Exchange etc. but they are not as popular as the BSE and the NSE. Most of the stock trading in the country is done though the BSE & the NSE.
Besides Sensex and the Nifty there are many other indexes. There is an index that gives you an idea about whether the mid-cap stocks go up and down. This is called the “BSE Mid-cap Index”. There are many other types of indexes. There is an index for the metal stocks. There is an index for the FMCG stocks. Similarly there is an index for the automobile stocks etc.
How the Sensex is calculated?
44
The Sensex is calculated taking into consideration stock prices of 30 different BSE listed companies. It is calculated using the “free-float market capitalization” method. This is a world wide accepted method as one of the best methods for calculating a stock market index.
The method used for calculating the Sensex and the 30 companies that are taken into consideration consideration are changed from time to time. This is done to make the Sensex an accurate index and so that it represents the BSE stocks properly.
In order to understand how the Sensex is calculated, first we should know what the term “free-float market capitalization” means. But, before we understand what “free-float market capitalization” means, we need to understand what “market capitalization” means.
What is Market Capitalization? Market cap or market capitalization is simply the worth of a company in terms of it’s shares, if you are suppose to buy all shares of the company ,the amount you have
to
pay
is
market
capitalization.
To calculate the market cap of a particular company, multiply the current share price by the number of shares issued by the Company. Depending on the value of the market cap, the company will either be a mid-cap or large-cap or small-cap company.
What is free-float market capitalization?
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Many different types of investors hold the shares of a company The Govt. may hold some of the shares. Some of the shares may be held by the founders or directors of the company. Some of the shares may be held by the FDI’s etc.
Only the open market shares that are free for trading by anyone are called the free-float shares.
A particular particular company may have certain shares in the open market and certain shares that are not available for trading in the open market.
According According the BSE, any shares shares that DO NOT fall under the the following criteria, criteria, can be considered to be open market shares:
⇒
Holdings by founders/directors/ acquirers which has control element
⇒
Holdings by persons/ bodies with "controlling interest"
⇒
Government holding as promoter/acquirer
⇒
Holdings through the FDI Route
⇒
Strategic stakes by private corporate bodies/ individuals
⇒
Equity held by associate/group companies (cross-holdings)
⇒
Equity held by employee welfare trusts
. A company has to submit a complete report about who has how many of the company’s shares to the BSE. On the basis of this, the BSE will decide the “free-float factor” of the company. If you multiply the free-float factor with the market cap of that company, you will get the
Free-float market cap that is the value of the shares of the company in the open market
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Why 30 companies and how are they selected? The 30 companies that make up the Sensex are selected and reviewed from time to tim time by an index comm ommitte ittee e. This his inde index x commit mmitte tee e is mad made up of academicians, mutual fund managers, finance journalists, independent governing board members and other participants in the financial markets .
The main criterion for selecting the 30 stocks is as follows:
Market capitalization : The Company should have a market capitalization in
the Top 100 market capitalization’s capitalization’s of the BSE. Also the market capitalization capitalization of each company should be more than 0.5% of the total market capitalization of the Index.
Trading frequency: The Company to be included should have been traded on each and every trading day for the last one year.
Number of trades : The scrip should be among the top 150 companies listed
by average number of trades per day for the last one year.
Industry representation: The companies should be leaders in their industry
group.
Listed history history: The companies should have a listing history of at least one
year on BSE.
Track record: In the opinion of the index committee, the company should
have an acceptable track record .
47
SMALL-CAP STOCKS The The stock stocks s of small small 2companie companies s that that have have the potential potential to grow grow rapidly rapidly are classified as small-cap stocks. These stocks are the best option for an investor who wishes to generate significant gains in the long run; as long he does not require current dividends and can withstand price volatility. volatility. Generally companies that have a market Capitalization in the range of up to 250 Crores are small cap stocks
As many of these companies companies are relatively new, it is difficult to predict how they will perform in the market. Being small enterprises, growth spurts dramatically affect their values and revenues, sending prices soaring.
On the other hand, the stocks of these companies tend to be volatile and may decline dramatically.
Most Initial Public Offerings are for small-cap companies, although these days large companies do tend to source the capital markets for expansion plans. Aggressive Aggressive mutual funds are also enthusiastic about adding small-cap small-cap stocks in their their portfo portfolio lios. s. Beca Becaus use e they they have have the adva advanta ntage ge of being being highly highly growt growth h oriente oriented, d, small-ca small-cap p stocks stocks can forego forego paying paying dividend dividends s to investor investors, s, which which enables the profits earned to be reinvested for future growth.
MID-CAP STOCKS Mid-cap Mid-cap stocks stocks are typical typically ly stocks stocks of medium-s medium-sized ized companie companies. s. These These are stocks of well-known companies, recognized as seasoned layers in the market. 2
48
They They offer offer you you the twin twin adva advanta ntage ges s of acquir acquiring ing stocks stocks with with good good grow growth th potential as well as the stability of a larger company. Generally companies that have a market Capitalization in the range of 250-400 Crores are mid cap stocks
Mid-cap stocks also include baby blue chips; companies that show steady growth backed by a good track record. They are like blue-chip stocks (which are largecap stocks) but lack their size. These stocks tend to grow well over the long term.
LARGE-CAP STOCKS Stocks of the largest companies (many being blue chip firms) in the market such as Tata, Reliance, ICICI are classified as large-cap stocks. Being established enterprises, they have at their disposal large reserves of cash to exploit new business opportunities.
The sheer volume of large-cap stocks does not let them grow as rapidly as smaller capitalized companies and the smaller stocks tend to outperform them over time. Investors, however gain the advantages of reaping relatively higher dividends compared to small- and mid-cap stocks while also ensuring the longterm preservation of their capital
BSE INDICES
SENSEX MIDCAP SMALLCAP BSE-100 BSE-200
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BSE-500
BSE Sectoral Indices
BSE Auto Index BSE BANKEX BSE Capital Goods Index BSE Consumer Durables Index BSE FMCG Index BSE Healthcare Index BSE IT Index BSE Metal Index BSE Oil & Gas Index BSE Mid Cap Index BSE Small Cap Index
NSE INCIDES
NIFTY S&P CNX NIFTY CNX NIFTY JUNIOR CNX IT BANK NIFTY CNX 100
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Chapter 7. STOCK BROKER A broker is a person who who buys and sells securities securities on behalf behalf of its client. In order to carry out these transactions the broker has to be a registered member of Securities and Exchange Board of India (SEBI).
The The broke brokerr gets gets commis commissi sion/ on/bro broke kerag rage e for every every transa transact ction ion he does, does, the the maximum brokerage that can be charged by broker from his clients cannot be more than 2.5% of the value mentioned in the purchase or sale note. In order to confirm whether the broker is registered with SEBI or not, one can check his registration certificate issued by SEBI. A broker’s registration number begins with Letters “INB” and that of sub broker with Letters “INS”.
1. ELIGIBILITY Tradership / Dealership of the Exchange is available to following persons: •
Individuals
•
Partnerships Firms registered under the Indian Partnership Act, 1932
•
Corp Corpor orat atio ions ns,, Corporations, Corporations,
Comp Compan anie ies s
or
Inst Instit itut utio ions ns
or
subs subsid idia iari ries es
of
such such
Companies Companies or Institutions Institutions set set up for providing providing financial financial
services.
51
Such other persons or entities as may be permitted form time to time by RBI/ RBI/SE SEBI BI
unde underr
the the
Secu Securi riti ties es
Cont Contra ract cts s
(Reg (Regul ulat atio ions ns))
Rule Rules, s,
1957.
2. Eligibility Criteria: 1) Individuals Age: Minimum age 21 years and Maximum age 60 years Status: Indian Citizen Educational Qualification : Graduate or equivalent qualification
experience in an activity related Experience : Should have a minimum of 2 years experience to dealing in securities or as portfolio manager manager or as investment consultant consultant or as a mercha merchant nt banke bankerr or in finan financia ciall serv service ices s or treasu treasury ry broke broker, r, sub-br sub-brok oker, er, authorized agent or authorized clerk or authorized representative or remisier or apprentice to a member of a recognized stock exchange, jobber, market maker, or in any other manner in dealing in securities or clearing and settlement thereof. Net-worth: Rs.4 lakh in case the applicant is a member of any other Stock
Exchange(s), it should satisfy the combined minimum net-worth requirements of all these Stock Exchange(s) including ISE.
2) Firms Age: Minimum age 21 years and Maximum age 60 years (applicable to all
partners)
52
Status: Partnership Firm registered under Indian Partnership Act, 1932 Educational Qualification : Two designated partners should be at least graduate
or equivalent qualification Experience : Minimum two designated partners of the Registered Partnership
firm should have a minimum of 2 years experience in an activity related to dealing in securities or as portfolio manager or as investment consultant or as merc mercha hant nt bank banker er or in fina financ ncia iall serv servic ices es or trea treasu sury ry brok broker er,, subsub-br brok oker er,, authorized agent or authorized clerk or authorized representative or remisier or apprentice to a member of a recognized stock exchange, jobber, market maker, or in any other manner in dealing in securities or clearing and settlement thereof. Net-worth: Rs.8 lakh in case the applicant partnership firm is a member of any
other other Stock Stock Exchang Exchange(s) e(s),, it should should satisfy satisfy the combined combined minimum minimum net-wor net-worth th requirements of all these Stock Exchange(s) including ISE. Shareholding : The registered firms shall identify a dominant partner who shall
be an individual holding at-least 51% of the Capital of the firm. For arriving at the capital holding of a dominant partner, the capital of his/her spouse only will be considered, provided the spouse gives a written irrevocable and unconditional support in the prescribed format in respect of such capital holding. Others: Number of Partners - Minimum two and maximum as permitted under
the applicable laws Provided further that partnership of two Traders / Dealers or a Trader and a Dealer of the Exchange is not permissible.
3) Corporate Age: Minimum age 21 years and Maximum age 60 years (applicable to directors) Status: Corporate registered under Indian Companies Act, 1956.
53
Two desi design gnat ated ed dire direct ctor ors s shoul hould d be at leas leastt Educational Educational Qualificat Qualification ion: Two graduate or equivalent qualification Experience : Minimum two designated directors of the corporate should have a
minimum of 2 years experience in an activity related to dealing in securities or as portfolio manager or as investment consultant or as a merchant banker or in financial services or treasury broker, sub-broker, authorized agent or authorized clerk or authorized representative or remisier or apprentice to a member of a recognized stock exchange, jobber, market maker, or in any other manner in dealing in securities or clearing and settlement thereof. Net worth: Rs.10 lakh in case the applicant corporate is a member of any other
Stoc Stock k Exch Exchan ange ge(s (s), ), it shou should ld sati satisf sfy y the the comb combin ined ed mini minimu mum m net net wort worth h requirements of all these Stock Exchange(s) including ISE. applicant shall identify a dominant dominant promoter who shall be an Shareholding: The applicant individual holding at least 51% of the paid up equity capital of the applicant company directly and not through any firm or HUF. For arriving at the capital holding of the dominant promoter, the shareholding of his/her spouse only will be considered, provided the spouse gives a written irrevocable and unconditional support in the prescribed format in respect of such shareholding’s
54
Problem Formulation:Indian capital market is one of the oldest market in Asia. During last 15 years or so, Indian capital market has witnessed growth in volume of fund rised as well as of transactions. Despite these investors are warred to invest in Indian capital market due to presence of huge instability in stock prices. Speculative activities are increasing here. Regulatory bodies have not full control over the market activities. Indian capital market is lagging behind other Asian market, like Tokyo capital market and Singapore capital market. This is perhaps the reason why I am interested to go in for further research to see why the Indian stock market is lagging behind other Asian Market & what stapes should be taken to improve upon the same.
55
OBJECVTIVE OF THE STUDEY
56
OBJECTIVES OF THE STUDY •
To study the sales strategy of field force of SBI
•
To study the process of selling of Insurance policies by Advisors.
57
RESERCH METHODOLOGY
58
RESEARCH METHODOLOGY Research methodology is a way to systemaztically solve the research problem. Research methodology constitutes of research methods, selection criterion of research methods, methods, used in context of research study and explanation explanation of using of a particular method or technique so that research results are capable of being evaluated either by researcher himself or by others. Why a research study has been undertaken. How the research problem has been formulated, why data have been collected and what particular technique of analyzing data has been used and a best of similar other question are usually answered when we talk of research methodology methodology concerning concerning a research problem problem of study. The main aim of rese resear arch ch is to find find out out the the trut truth h whic which h is hidd hidden en and and whic which h has has not not been been discovered as yet.
59
AREA OF STUDY The area of the study related with getting correct information of life insurance policies of different peoples in the region of Jhalawar.
SAMPLE DESIGN
A sample design is a definite definite plan for for obtaining obtaining a sample sample from a given populatio population. n. It refer refers s to the techn techniqu iques es or the proce procedu dure re the the resea research rcher er would would adop adoptt in selecting items for the sample. Sample design may as well be drawn from the population to be included in the sample i.e. the size of the sample. Sample design is determined before data are collected.
During my study I have taken 50 Insurance care consultants as the size of Sample.
60
TOOLS USED To know the response. I have used the questionnaire questionnaire method. If one wish to find what insurance care consultants think or know, the logical procedure is to ask them. This has led marketing researchers researchers to use the questionnaire technique technique for collecting data more than any other method.
In this method questionnaire were distributed to the respondents and they were asked to answer the questions in the questionnaire. The questionnaire were stru struct ctur ured ed non non disg disgui uise sed d ques questi tion onna nair ire e beca becaus use e the the ques questi tion on whic which h the the questi question onna naire ire cont contain ained ed,, were were arran arrange ged d in a spec specifi ific c orde orderr besid besides es every every questi question on asked asked were logica logicall for for the the study study,, no ques questio tion n can be terme termed d as irrelevant.
The The
ques questi tion onna nair ire e
was was
nonnon-di disg sgui uise sed d
beca becaus use e
the the
ques questi tion onna nair ire e
was was
constructed so that the objective is clear to the respondent. The respondents were were awar aware e of the the obje object ctiv ive. e. They They knew knew why why the the were were aske asked d to fill fill the the questionnaire.
With the help of following techniques, which are using by SBI I analyse that the how techniques of sales promotion are useful.
61
DATA COLLECTION PRIMARY DATA SOURCES •
Through interaction with insurance care consultant
•
Through questionnaires filled form the insurance care consultant.
SECONDARY DATA SOURCES : •
Through internet, various official sites of the companies.
•
Through Pamphlets and brochures of the companies.
•
Journals & Magazine
62
LIMITATIONS OF THE STUDY Following limitations were faced during the study:
1. While While designing designing the the questionn questionnaire aire it was kept kept in mind to gather gather more more and more information from each target person. For the neither present nor descriptive questions could have served the purpose. Therefore the questionnaire contained in the open-ended questions.
2. The The study study was condu conduct cted ed in SBI SBI In Jhalaw Jhalawar ar City, City, Which Which has 127 to 170 insur insuran ance ce care care cons consult ultan ants ts only. only. The The samp sample le size size was was of 50 insurance care consultants only so that accuracy of date so collected could be absurd covered by circulation of questionnaire.
3. The The accu accura racy cy of indi indica cati tion ons s give given n by the the resp respon onde dent nts s may may not not be consider adequate as whether the language used in the questionnaire is understood by the respondent cannot be taken for granted.
4. The The study study is based based on the inform informati ation on gather gathered ed from the insur insuran ance ce care care cons consul ulta tant nts. s. Ther Theref efor ore e in such such case case it is poss possib ible le that that the the informat information ion supplie supplied d might might be biased biased because because the insuran insurance ce care consultant might have shown partiality towards their insurance policies.
5. Since Since the survey survey was limite limited d to 50 insur insuran ance ce care consu consulta ltant nts s it is rather difficult to give a precise conclusion But I have tried to the best of my capability to give the conclusion on a comprehensive manner.
63
DATA ANALYSIS & INTERPRETATION
64
DATE ANALYSIS AND INTERPRETATION (Based on survey conducted for 50 insurance care consultants) Q.1
Which Which techn techniqu ique e of of sal sales es promo promotio tion n you you pref prefer er ?
Options Display Door to Door Demo Exhibition Catalogue Price off
Response in % 40% 14% 16% 20% 10%
40%
35%
30%
25%
Series1
20%
15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretation :
According According to the study 40% insurance insurance care consultants consultants prefer display technique 20% insurance care consultants prefer catalogues, 16% to the exhibition, 14% to the door to door demo and 10% insurance care consultants prefer price off technique. Q.2
Which Which tech techni nique que is is givin giving g good good resp respons onse e from from custo customer mers s?
65
Options Display Door to Door Demo Exhibition Catalogue Price off
Response in % 18% 36% 18% 16% 12%
40%
35%
30%
25%
Series1
20%
15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretation :
According According to the study 36% insurance insurance care consultants consultants say door to door demo techniques giving good response, 18% insurance care consultants say to the display & exhibition, 16% to the catalogues & 12% say to the price off technique. Q.3
Which Which techn techniqu ique e is is eco econo nomic micall ally y bebf bebfici icial al ?
Options Display
Response in % 10%
66
Door to Door Demo Exhibition Catalogue Price off
22% 10% 46% 12%
50%
45%
40%
35%
30%
Series1
25%
20%
15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretation :
According According to the 46% insurance insurance care consultants, consultants, Catalogue Catalogue technique technique is economically beneficial. 22% to the door to door demo and 12% insurance care consultants prefer price off technique. 10% to the exhibition & display technique. Q.4
Which Which techn techniqu ique e requ require ires s less less time time in sale sales s promo promotio tion n?
Options Display Door to Door Demo Exhibition
Response in % 22% 38% 10%
67
Catalogue Price off
16% 14%
40%
35%
30%
25%
Series1
20%
15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretation :
According According to the study 38% insurance insurance care consultants consultants say display technique technique requir requires es less less time time in sales sales promot promotion ion.. 22% 22% to the the disp display lay tech techniq nique ue,, 16% 16% insu insura ranc nce e care care cons consul ulta tant nts s vate vate to the the cata catalo logu gues es,, 14% 14% insu insura ranc nce e care care consultants vate to the 10% to the exhibition.
Q.5 Q.5
Whic Which h tech techni niqu que e is easi easily ly man manag agea eabl ble? e?
Options Display Door to Door Demo Exhibition Catalogue Price off
Response in % 18% 30% 10% 34% 8%
68
35%
30%
25%
20% Series1 15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretation : According According to the study study 34% insurance insurance care consultants consultants say say that the the catalogues catalogues is easi easily ly mana manage geab able le,, 30% 30% to the the door door to door door demo demo,, 18% 18% insu insura ranc nce e care care consultants prefer display technique 10% to the exhibition, and 8% insurance care consultants say to the price off technique.
Q.6
Which Which techn techniqu ique e requ require ires s less less know knowled ledge ge to to exec execut ute e?
Options Display Door to Door Demo Exhibition Catalogue Price off
Response in % 14% 12% 12% 22% 40%
69
40%
35%
30%
25%
Series1
20%
15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretaion : According According to the study 40% insurance insurance care consultants consultants vote to the price off technique is require less knowledge to execute 22% insurance care consultants prefer catalogues, 14% to the display and 12% to the exhibition & door to door.
Q.7
Which Which techn techniqu ique e requ require ires s more more kno knowl wledg edge e to execut execute e?
Options Display Door to Door Demo Exhibition Catalogue Price off
Response in % 20% 42% 24% 10% 4%
70
45%
40%
35%
30%
25% Series1 20%
15%
10%
5%
0% Display
Door to Door Demo
Exhibition
Catalogue
Price Off
Interpretation : According According to the study 42% insurance care consultants consultants vote to the door-to-door door-to-door technique that it requires more knowledge to execute than others. 24% to the exhibition that it requires more knowledge to execute than others. 24% to the exhibition, 20% to the display technique, 10% insurance care consultants give vote vote to the the catal catalog ogues ues and and 4% insura insurance nce care care cons consult ultan ants ts prefe preferr price price off technique. Q.8
Price Price off off are are nece necessa ssary ry for for sale sales s pro promot motion ion ?
Options Yes No Can’t say
Response in % 46% 40% 14%
71
50%
45%
40%
35%
30%
Series1
25%
20%
15%
10%
5%
0% Yes
No
Can't say
Interpretation : According According to the study 46% insurance care consultants consultants say yes that the price off are necessary for sales promotion. 40% say no and 14% say can’t say.
Q.9 Do you you thin think k that that sales sales promo promotion tion program program that that is is presen presently tly under undertak taken en by by SBI are satisfactory ?
Options Yes No Can’t say
Response in % 34% 46% 20%
72
50%
45%
40%
35%
30%
Series1
25%
20%
15%
10%
5%
0% Yes
No
Can't say
Interpretation :
According According to the study 46% insurance insurance care consultants consultants say no that the sales promotion program that is presently undertaken by SBI are satisfactorily 36% say Yes and 20% say can’t say.
Q.10 Should Should Bajaj Bajaj Allianz Allianz take take up new new sales sales promoti promotion on program program ?
Options Yes No Can’t say
Response in % 72% 22% 6%
73
80%
70%
60%
50%
Series1
40%
30%
20%
10%
0% Yes
No
Can't say
Interpretation : According According to the study study 72% insurance insurance care consultan consultants ts say yes installment installment offers offers are 22% say no and 6% say can’t say.
74
OBSERVATIONS & FINDINGS
OBSERVATIONS & FINDINGS
•
This sales promotion process was very much satisfying for me not only pract practica ically lly and and acade academic micall ally y but but it also also helpe helped d me in deve develop loping ing my communication skill and enriched my knowledge also.
•
I have come to know about the importance of marketing especially with regard to sales promotion on the most renowned organization like SBI especially because of emergence of many competitors with excellence in 75
services & competitive product. The base of this chapter conclusion is on the data analysis or what we say findings. •
I have finding from the insurance care consultants of the SBI and their insurance policies on my topic.
•
When the insurance care consultant is asked why they are dealing in this particular particular insurance policies (Product) they mostly stressed on company’s company’s image. They also said that all income and age group of customers are attracted towards their product but buyers are mainly from higher and middle-income group.
•
Insurance care consultants said that their sale is very much increased in the the last last year year beca becaus use e of an exce excell llen entt perf perfor orma manc nce e of the the prod produc uct. t. Insurance care consultants said that the customer are very much satisfied after getting insurance policies because of its features related with risks of life and also because of quality of service provide by their company is very good.
QUESTIONNAIRE Name
: ………………………………………………………………………………...
Address
:
……………………………………………………………….……….
Q.1
To whic which h tech techniq nique ue of of sale sales s promo promotio tion n your your prefe preferr ? (a)
Display
(b)
76
Door to door demonstration
Q.2
Q.3
Q.4
Q.5 Q.5
Q. 6
Q.7.
(c)
Exhibition
(e)
Price-off
(d)
Catalogue
Which Which tech techni nique que is is givin giving g good good resp respons onse e from from custo customer mers s? (a)
Display
(b)
Door to door demonstration
(c)
Exhibition
(d)
Catalogue
(e)
Price-off
Which Which Tech Techniq nique ue is econo economic micall ally y benef benefici icial al ? (a)
Display
(b)
Door to door demonstration
(c)
Exhibition
(d)
Catalogue
(e)
Price-off
Which Which Tech Techiqu ique e requ require ires s less less time time in in sales sales promo promotio tion n? (a)
Display
(b)
Door to door demonstration
(c)
Exhibition
(d)
Catalogue
(e)
Price-off
Whic Which h Tec Techn hniq ique ue is easi easily ly man manag agea eabl ble e? (a)
Display
(b)
Door to door demonstration
(c)
Exhibition
(d)
Catalogue
(e)
Price-off
Which Which techni technique que require requires s less less knowle knowledge dge to execute execute ? (a)
Display
(b)
Door to door demonstration
(c)
Exhibition
(d)
Catalogue
(e)
Price-off
Which Which techni technique que require requires s more more Knowl Knowledge edge to execu execute te ? (a)
Display
(b)
77
Door to door demonstration
Q. 8
Q.9
(c)
Exhibition
(e)
Price-off
(d)
Catalogue
Price Price off and and instal installmen lmentt offers offers are are neces necessary sary for sales sales promoti promotion on ? (a)
Yes
(c)
Can’t say
(b)
No
Do you you thin think k that that sales sales promo promotion tion program program that that is is presen presently tly under undertak taken en by by SBI are satisfactory ? (a)
Yes
(c)
Can’t say
(b)
No
Q. 10 Should SBI take take up new sales sales promotion promotion program program ? (a)
Yes
(c)
Can’t say
(b)
78
No
SUGGESTIONS
SUGGESTIONS
Here are some suggestions, which may help to strengthen the firm further •
Many of the insurance care consultants of the SBI has the lack of good communication skills and training. So Training should be easy.
•
SBI Should use new techniques of sales promotion.
79
•
Customer services should be more comfortable then others.
•
People must be made aware of the benefits of the policies of SBI.
•
The company should give personal attention to each customer.
•
Proper assistance should be provided to the customer at the time of claim settlement.
•
•
All the details details about about the company should should be given to the customers. customers. Regular advertisement of the company should be given TV and Newspaper.
•
The Company must try to find new markets especially in the rural areas.
•
The Company should do frequent analysis of the competitors.
Objective of the study:-
•
To have have an insi insigh ghtt abou aboutt the the Indi Indian an Capi Capita tall Mark Market et in the the ligh lightt of comp compar aris ison on with ith othe otherr Asia Asian n Mark Market ets s & the the vari variou ous s inv investm estmen entt instruments provided by the Capital Market.
•
To understand the reasons behind huge fluctuations in stock price indexes in India.
80
•
To analyze the psychology of market players in Indian capital market.
•
To know the role of broker in stock exchange in India.
•
To study the role of regulatory bodies.
•
To understand the clearing and settlement process at stock exchange in Indian.
•
To analyze risk management system in Indian capital marker.
•
To analyze how stock price indexes are calculated.
Hypothesis generation:-
In this research study it is assumed:•
Inves Investor tors s are ratio rationa nal. l. They They want want to earn earn more more and and more more prof profit it thro through ugh investment in capital market.
81
•
Most of investor are not able to beet the market, only the corporate investors, who have access to inside information may be
•
Regulative bodies are not so stringent in Indian capital market comparison with other countries like, Tokyo and Singapore.
•
Investors invest in shares not because of their economic valve but because they expected to go up in the prices.
Research Methodology:Type of Research:Research:There are basically three types of found:•
•
Exploratory Exploratory research: - It is conducted to clarify ambiguous problems. problems. It is needed to gain better understanding of the dimensions of the problems. Descriptive research: - It seeks to determine the answers to who, what, when, where, and how questions.
82
•
Caus Causal al rese resear arch ch:: - It is used used to iden identi tifi fica cati tion on of caus cause e and and effe effect ct relationship between variables.
In my resea research rch study study I have have appl applied ied Descriptive research to describ describe e the description of state of affairs as it exists at present . The main characteristic of this research is that researcher has no control over the variables; he can only report what has happened or what is happening.
Database:Both primary and secondary data are used for the research. • • • • • • • •
Newspapers Generals Books Internet Old records Magazines Offices Television
In this res research rch I have use used both prim prima ary and secondary ary data ata. To analyze psychology of investors and brokers primary data will be collected by conducting sample survey through questionnaire. And secondary data will be collected mainly from newspaper, book, magazine and periodicals and various website.
Sampling:-: Method Simple random sampling is used for purpose of research This type of sampling is also known as chance sampling or probability sampling where each and every item in the population population has an equal chance of inclusion in the sample and each one of the possible samples, in case of finite universe, universe, has the same probability of being selected. 83
Size For investors 100per 100 sampling size and for brokers 100per 10 size is used.
Contact method:• •
Direct contact Questionnaire
Presentation of data
•
Data Charts graphs Tables
•
Maps
• •
Collection of data In this res research rch I have use used both prim prima ary and secondary ary data ata. To analyze psychology of investors and broker’s primary data will be collected by conducting sample survey through questionnaire. And secondary data will be collected mainly from newspaper, book, magazine and periodicals and various website.
Methods of data collection:Primary data
84
Primary data is collected from Questionnaire • Interview •
Secondary data
Secondary data is collected from various sources. Books • Newspapers • • Internet • Old records Magazines • Television •
BIBLOGRAPHY o
o
o
o
o
Economic survey 1991-1992. Kothari,C.R.(2005_ “RESEARCH METHODOLOGY” New age international (P) LTD. Publishers. Wu,Henry T.C., Misunderstood derivatives: the causes of falior and promise of reguletory http://finmin.nic.in/the_ministry/dept_eco_affairs/index.html http://finmin.nic.in/the_ministry/dept_eco_affairs/capital_market_div /Organisational%20Structure%20and%20Functions.pdf
85
o
http://www.geocities.com/kstability/content/stock2/index.html
o
http://www.bseindia.com/bookbuilding/about.asp
o
http://en.wikipedia.org/wiki/Secondary_market
o
http://www.clubelders.com/money&law/stockexchange.htm#4
o
http://www.mapsofworld.com/india/stock-exchange-india.html
o
http://www.kotaksecurities.com/university/Equity2.html
o
o
http://www.thehindubusinessline.com/iw/2003/02/09/stories/200302 0900221300.htm http://in.advfn.com/StockExchanges/about/BSE/BombayStockExch ange.html
o
www.tse.or.jp
o
www.yeahindia.com/c-india1.html
o
www.ses.com.sg
o
www.sebi.gov.in
o
www.nseindia.com
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