ORGNAIZATION STUDY ON HEDGE EQUITIES LTD. Submitted to MAHATMA GANDHI UNIVERSITY, KOTTAYAM
In partial fulfilment of requirement for the award of
MASTERS DEGREE IN BUSINESS ADMINISTRATION (2012 - 2014)
By, VISHAL VINCENT PALATTY (Reg No: 40872)
RAJAGIRI COLLEGE OF SOCIAL SCIENCES RAJAGIRI P.O Kochi – 683104
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DECLARATION
I, VISHAL VINCENT PALATTY, Student of Rajagiri College of Social Sciences, Kochi, hereby declare that this report titled “Organizational study on Hedge Equities Ltd.” is a bona fide record of the project work done by me at Hedge Equities Ltd, Kochi and submitted to Mahatma Gandhi University, Kottayam in the partial fulfillment of the award of Masters in Business Administration. I further
declare that this project has not been submitted to any other university/board for
the award of any degree/diploma.
Place : Kakkanad
VISHAL VINCENT PALATTY
Date
Rajagiri College of Social Sciences
:
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ACKNOWLEDGEMENT I would like to express my gratitude to, Dr. Joseph I Injodey, Principal, Rajagiri College of Social Sciences, and his team for providing me the opportunity to be a part of Rajagiri College of Social Sciences and undertaking this organization study. I offer my profound gratitude to my guide Prof. Vinod, faculty of Rajagiri College of Social Sciences in whole heartedly helping me in successfully completing this project. I really thank Mr. Benil D.A. (Dean of Hedge School of Applied Economics) and Mrs. Sini Ralph (Manager, Compliance Department), HEDGE EQUITIES PVT LTD. for their guidance in collecting necessary information and for their support in successfully completing this project. I thank my parents, teachers, GOD and all others who have directly or indirectly assisted me in doing this project and also for the help, support, interest and valuable hints they have provided.
VISHAL VINCENT PALATTY
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LIST OF CONTENTS SERIAL NO:
TOPIC
PAGE NO
TITLE PAGE DECLARATION ACKNOLEDGEMENT EXECUTIVE SUMMARY
01
SECTION: I
ORGANIZATION STUDY
02
1.1
INDUSTRY PROFILE
03
1.1.1
STRUCTURE OF INDIAN FINANCIAL SYSTEM
03
1.1.1.1
FINANCIAL INSTITUTIONS
04
1.1.1.2
FINANCIAL INSTRUMENTS
04
1.1.1.3
FINANCIAL SERVICES
04
1.1.1.4 1.1.1.4.1
FINANCIAL MARKETS MONEY MARKET
05 05
1.1.1.4.2
CAPITAL MARKET
05
1.1.2
STOCK EXCHANGES
05
1.1.2.1
MAJOR STOCK EXCHANGES
05
1.1.2.1.1
NSE
05
1.1.2.1.2
BSE
06
1.1.3
BROKERAGE FIRMS
06
1.1.3.1 1.1.3.2
CURRENT SCENARIO MAJOR INDIAN BROKERAGE FIRMS
07 07
1.1.3.3
CHALLENGES FACED BY INDIAN FIRMS
08
2.1
COMPANY PROFILE
08
2.1.1
HISTORY AND INCORPORATION
08
2.1.2
HEDGE GROUP
09
2.1.2.1
HEDGE EQUITIES
09
2.1.2.2
HEDGE COMMODITIES
10
2.1.2.3
HEDGE FINANCE
10
2.1.2.4
HEDGE SCHOOL OF APPLIED ECONOMICS
10
2.1.3
PROMOTERS
11
2.1.4
VISION AND MISSION STATEMENTS
12
5
2.1.5
PHYSICAL LOCATION
13
2.1.6
ORGANIZATIONAL STRUCTURE
14
2.1.6.1
REGIONAL ORGANIZATOIN STRUCTURE
15
2.1.7
PRODUCTS AND SERVICES OFFERED
15
2.1.7.1
EQUITIES TRADING
15
2.1.7.2
COMMODITIES TRADING
16
2.1.7.3
CURRENCY TRADING
16
2.1.7.4
MUTUAL FUNDS AND BONDS
16
2.1.7.5
ONLINE TRADING
17
2.1.7.6
INTERNET TRADING
17
2.1.7.7
DEPOSITORY SERVICES
17
2.1.7.8
DERIVATIVE TRADING
17
2.1.7.9
KNOWLEDGE CENTRE
17
2.1.7.10
EQUITIES RESEARCH
18
2.1.7.11
PORTFOLIO MANAGEMENT SERVICES
18
2.1.8
FUNCTIONAL DEPARTMENTS
18
2.1.9
USP OF HEDGE
24
2.1.10
CORPORATE SOCIAL RESPONSIBILTITY
25
2.1.11
INNOVATIVE MANAGEMENT PRACTISES
25
2.1.12
SWOT ANALYSIS
26
2.1.13
OBSERVATIONS
26
SECTION: II
RESEARCH REPORT
29
BIBILOGRAPHY
38
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EXECUTIVE SUMMARY
We all live in an economy which is affected by inflation. The value of money depreciates at a greater pace which puts in dilemma where we have to choose between various investment options the economy in which we are living has a strong financial structure and put forward various investment options. Deciding upon an investment option differs from person to person because of varied risk taking mentality. Investment opportunities what we have is broad one that includes real estates, equities , capital market instruments, money market instruments, commodities etc. In India the volume of population that invests in capital market is very low when comparing it with the investment made in real estate and gold. Awareness about the product is the initial part in a buying behaviour. Without awareness various beneficial investments are unseen by the investors. The organizational study was done at the head office of Hedge Equities Ltd. Hedge Equities is an established retail and institutional financial services provider in India. Based in Kochi, Hedge Equities Ltd has a growing pan-India presence with more than 130 retail outlets India and an overseas office in Dubai. The services folio of hedge equities include Equity, Mutual Funds, Derivatives, Commodities, Currency, Online trading, Depository Services, Clearing Services, Fixed Income, Research and Wealth management services (WMS). The report includes a detailed study on the organization, the industry in which it operates, the market scenario, the product and services offered and a SWOT analysis, with respect to the organization. These details can be used in order to further improve the organization and its business.
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SECTION: I ORGANIZATION STUDY
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1.1 INDUSTRY PROFILE The economic development of any country depends upon the existence of a well organized financial system. It is the financial system which supplies necessary financial output for the production of the goods and service which in turn promote the well being and standard of living of the people of a country. The responsibility of a financial system is to mobilize the savings in form of money and monitory assets and invest them into productive ventures. In finance, the financial system is the system that allows the transfer of money between savers and borrowers. It comprises a set of complex and closely interconnected financial institutions, markets, instruments, services, practices, and transactions. Financial systems are crucial to the allocation of resources in a modern economy. They channel household savings to the corporate sector and allocate investment funds among firms; they allow inter-temporal smoothing of consumption by households and expenditures by firms; and they enable households and firms to share risks. The financial services industry includes companies whose sales come from the management of money for individuals and institutions. It consist of credit unions, banks, credit card companies, insurance companies, consumer finance companies, stock brokerages, investment funds and some government sponsored enterprises. A brokerage firm, is a financial institution that facilitates the buying and selling of financial securities between a buyer and seller. Brokerage firms provide services to different groups of customers and assist them in buying public stocks and securities via their agent stockbrokers. Brokerage firms based service provided can be classified into 2 groups:
Full service brokers
Discount brokers
Full service brokers: Provides continuous stock reports and in most cases does buying and selling of shares on behalf of client. They provide more services than any of discount brokers.
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Discount brokers: A discount broker or an online broker is a firm that charges relatively small commission by having its clients perform trades via automated, computerized trading system rather than by having an actual stockbroker assist with trade.
1.1.1 STRUCTURE OF INDIAN FINANCIAL SYSTEM The financial system consists of financial institutions, financial markets, financial instruments and financial services which are regulated by regulators like Ministry of Finance, the Company Law Board, Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Department of Economic Affairs, Department of company Affairs, etc.,
Indian Financial System
Financial
Financial
Financial
Financial
Institutions
Instruments
Services
Markets
Banking
Non Banking
Money Market
Capital Market
Fig 1.1 Structure of Indian Financial System
1.1.1.1 FINANCIAL INSTITUTIONS Financial Institutions are the business organizations that act as mobilizes of savings, and as purveyors of credit and finance. They also provide various financial services to the community. These financial business organizations deal in financial assets such as deposits, loans, securities, and so on. These are further divided into banking and non-banking institutions.
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1.1.1.1.1 BANKING FINANCIAL INSTITUTIONS Banking institutions are those institutions which participate in the economy's payments system, i.e., they provide truncation services. Some of the major banking institutions in India include, SBI, UBI, Canara Bank, Yes Bank etc.
1.1.1.1.2 NON-BANKING FINANCIAL INSTITUTIONS Non-banking financial institutions are those institutions which act as mere purveyors of credit and they will not create credit. Some examples of Indian non-banking financial institutions include, LIC, UTI, IDBI, etc.
1.1.1.2 FINANCIAL INSTRUMENTS Financial instruments are those instruments which are used for raising resources for corporate entities. The financial instruments may be capital market instruments or money market instruments. The ones that are used for raising capital through the capital market are known as capital market instruments. The financial instruments which are commonly used in India include Government securities, bonds, preference shares, equities etc.
1.1.1.3 FINANCIAL SERVICES Financial services are an important component of a financial system. Financial services cater to the needs of financial institutions, financial markets and financial instruments. The functioning of the financial system very much depend on the range of financial services provided by the providers, and their efficiency.
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1.1.1.4 FINANCIAL MARKETS Generally speaking there is no place or location to indicate a financial market. Wherever a financial transaction take place, it is deemed to have taken place in the financial markets. Financial markets can be referred to as those centres and arrangement which facilitate buying and selling of financial assets, claims and services. Financial markets could be further divided into money market and capital market.
1.1.1.4.1 MONEY MARKET The money market is a market for short-term funds, which deals in financial assets whose period of maturity is up to one year. Some of the major financial assets traded in the Indian money market include, call money, treasury bill, commercial paper, certificate of deposit and trade bill.
1.1.1.4.2 CAPITAL MARKET
Capital Market may be defined as a market dealing in medium and long-term funds. It is an institutional arrangement for borrowing medium and long-term funds and which provides facilities for marketing and trading of securities. It could be further divided into primary market and secondary markets.
1.2 STOCK EXCHANGES Stock exchange is the term commonly used for a secondary market, which provide a place where different types of existing securities. There are 20 exchanges in India which deals with cash market instruments and seven exchanges which deals with derivative instruments. Some of the largest exchanges in terms of volume of trade could be National Stock Exchange, Bombay Stock Exchange, Multi Commodity Exchange of India Ltd. etc.
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1.2.1 MAJOR STOCK EXCHANGES IN INDIA
1.2.1.1 NATIONAL STOCK EXCHANGE (NSE)
The National Stock Exchange of India Limited has genesis in the report of the High Powered Study Group on Establishment of New Stock Exchanges, which recommended promotion of a National Stock Exchange by financial institutions (FI’s) to provide access to investors from all across the country on an equal footing. Based on the recommendations, NSE was promoted by leading Financial Institutions at the behest of the Government of India and was incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the country. On its recognition as a stock exchange under the Securities Contracts (Regulation) Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM) segment in June 1994. The Capital Market (Equities) segment commenced operations in November 1994 and operations in Derivatives segment commenced in June 2000 NSEs mission is setting the agenda for change in the securities markets in India. The NSE was set-up with the main objectives of: Establishing a nation-wide trading facility for equities and debt instruments. NSE Ensures equal access to investors all over the country through an appropriate communication network and provides a fair, efficient and transparent securities market to investors using electronic trading system.
1.2.2BOMBAY STOCK EXCHANGE (BSE) Mumbai, popularly known as "BSE" was established in 1875 as "The Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making Association of Persons (AOP) and is currently engaged in the process of converting itself into demutualised and corporate entity. It has evolved over the years into its present status as the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to have obtained permanent recognition in 1956 from the Govt. of India under the Securities Contracts (Regulation) Act 1956.The Exchange, while providing an efficient and transparent market for trading in securities, debt and derivatives upholds the interests of the investors and ensures redresses of their grievances whether against the companies or its own member-brokers. It also strives to educate and enlighten the investors by conducting investor education programmers and making available to them necessary informative inputs.
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1.3 BROKERAGE FIRMS The Indian brokerage companies are those that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a commission or transaction fee basis. The basic function of a brokerage firm is to execute buy and sell orders for clients. Traditionally these firms have offered the investigation of the quality and the possibilities of investing in a variety of investment products. It is still accustomed for brokerage firms to offer information about possible investments free of charge.
1.3.1 CURRENT SCENARIO According to the details provided by SEBI there are 1,376 brokers registered with BSE and 1,423 brokers registered with NSE. According to NSDL and CDSL there are about 2.4 million investor in the country and among them around 7.5 lakh are very active. The market structure here is perfect competition as there are many players and the products offered are more or less the same. The revenue of top brokers remained same as that in the previous year, which is about 105 billion Indian rupees. However the cost was reduced by 7 to 8 percentage leading to a better cost income ratio.
1.3.2 MAJOR INDIAN BROKERAGE FIRMS
Motilal Oswal Securities
ICICI Securities Ltd
Kotak Securities Ltd
Indiabulls Financial Services Ltd
www.sharekhan.com
Fortis Securities (Religare)
Karvy securities
Geojit BNP Paribas
HDFC Securities
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Hedge Equities
JRG Securities
India Infoline
Edelweiss Securities Ltd. Angel Broking Pvt. Ltd.
1.3.3 CHALLENGES FACED
BY
INDIAN BROKERAGE FIRMS
Protecting brokerage yields and market share in the highly competitive and fragmented equity brokerage industry.
Greater dominance of the foreign brokerage houses in the institutional broking segment.
Increasing investment requirement for purposes like automation and establishment of advanced risk management and surveillance system.
Achieving a critical scale of operations and managing costs to sustain profitability even in a prolonged dull phase.
2.1 COMPANY PROFILE Hedge Equities Private. Limited is one of the leading retail stock broking house which is running successfully in the country. Hedge offers its customers a wide range of equity related services including trade execution on BSE, NSE, Derivatives, Depository services, online trading ,investment advice etc. The firm has an online trading and investment site, www.hedgeequities.com. The site provides investors information like present share prices and also contains research reports about performance of each companies share which could very useful for clients . The content rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers bestof-breed technology and superior market information. The objective has been to let customers
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make informed decision and to simplify the process of investing in stocks. Hedge equities have always believed in investing in technology to build its business.
2.1.1 HISTORY AND INCORPORATION Hedge equities was incorporated under the Companies Act,1956 as Hedge Equities Private Limited on 17th December 2007. In May 2008 it started its full fledged operations. Initially it started its service from the head office at Kaloor, Ernakulum. Later it extended its services to derivatives also. Recently it also received the permission to start a Non- Banking Financial Company. The aim of the promoters was to establish financial supermarket which will provide solution to all kinds of financial problems and they are in the process of achieving it. Founder & Managing Director of HEDGE GROUP is Mr. Alex K Babu, Mr. Bhuvendran is CEO and Bobby J Arakunnel is COO. The Board members comprises of veterans from six power houses in their respective fields: FedEx Securities, Baby Marine Exports, Thakker Developers, Smart Financial, S.M. Hedge(CFO Videocon Industries) and Padmashree Mohanlal
2.1.2 HEDGE GROUP Hedge equities Ltd comes under the umbrella of Hedge Group. The other entities which comes under hedge group include, Hedge commodities, Hedge finance, Hedge school of applied economics. The hedge group have the same patrons running all its entities. The structure of hedge group can be given as follows.
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Hedge Group
Hedge Equities
Hedge Commoidities
Hedge Finance
Hedge School of Applied Economics
Hedge Yuva & Ohari Publications
Fig 2.1 Hedge Group Structure
2.1.2.1 HEDGE EQUITIES Hedge equities one major entity under the hedge group. It is one of initiators of share trading culture in Kerala. It is the first entity formed under the hedge group It has 35,000 satisfied customers who are reaping the benefits of professionally managed portfolios . It provides services like online trading in NSE &BSE stocks, investment advises for its customers, research based reports to assist investors in their decisions, it also provides wealth management services. It publishes a financial monthly 'Ohari' to educate the investors. It also conducts 'yuva' program which intends to educate youth about the industry.
2.1.2.2 HEDGE COMMODITY Hedge Commodities Ltd, formed in 2008 as a fully owned subsidiary of Hedge Equities, cater to its clients in Commodities market segment. The move to promote commodities was a carefully taken step by the management, identifying its growth potential
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and the opportunity commodities provides for the market participants. With membership in all major national level exchanges, Hedge Commodities provides service to varied set of clients, which includes investors, Hedgers, Arbitragers and Traders/Speculators. Hedge have clientele from different segments of the market, be it producers, manufacturers or end users, with exposure to international, non agri commodities and agricultural commodities.
2.1.2.3 HEDGE FINANCE One of newest group
into
member of
hedge group, hedge finance marks
the entry of
the booming NBFC industry. The company adheres strictly to the RBI
regulations and primarily focuses on the Loan Against Security sector. Hedge Finance will primarily be focusing in an under tapped segment – Securities. The company will look at providing loans to customers against financial instruments like equities, bonds and debentures. With LAS (Loan Against Securities model) Hedge Finance looks at unleashing the potential of a growing segment in the Indian Financial landscape. With many firsts and a rich history of achievements under its belt Hedge Equities adds sheen to this endeavour.
2.1.2.4 HEDGE SCHOOL OF APPLIED ECONOMICS It's a place were present and potential stock brokers are molded to international standards under the guidance of veteran financial experts. Live trading sessions and world class academic amenities are the highlights of the Hedge School. HSAE is the first ever educational venture dedicated to creating a class of high-end investment professionals in Kerala. It aims at fulfilling the following goals, serve the ever increasing need for credential manpower in the financial services sector globally and help students to nurture and grow their own investment portfolios. The programs are designed for financial professionals and investors who would be advocates of smart investments. It provides courses which are mainly divided according to the target group as, courses for beginning investors, for existing investors and for graduates for carrier guidance.
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2.1.3 PROMOTERS The promoters of hedge group are, FedEx Securities, Baby Marine Exports, Thakker Developers, Smart financial, SM Hegde and Padmashree Lt.Col Mohan Lal.
FEDEX SECURITIES Managed by a team of ex-bankers, Fedex is a SEBI registered category 1 merchant banker. The company concentrates on non fund based activities like structuring, tie up of project financing, financial restructuring, investment banking, corporate and advisory services. The core management team consists of bankers with rich experience of decades and exposure to volatile situations in commercial and investment banking. With offices at Nariman Point and Vile Parle East, Mumbai, FedEx Securities envisages a phenomenal growth in this sector for its clients.
BABY MARINE EXPORTS
Baby Marine Group, started its operations in 1977 from Kozhikode and through innovation and hard work has grown into three units and related industries spanning both the west and east coast of Indian. Baby Marine Exports, B.M products, and Baby Marine (Eastern) Exports are efficiently aided by pre processing units, ice factories, and a fleet of insulated and refrigerated trucks for sea food transportation. Due to constant upgrading of machinery, better links with raw material suppliers, and an established network of purchasers have obviously made Baby Marine Group a leading Exporter of processed marine Products to various international markets.
SMART FINANCIAL
Smart Financial entered the financial market only in 1992 but over this brief span has covered a niche for itself by becoming leading financial service provider. The company
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offers guidance to investors as to equities, commodities, mutual funds, portfolio management services and insurance. It offers complete range of financial solutions that encompasses every sphere of the life. aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa
THAKKER GROUP
Starting off as a land developer and builder in 1962, Thakkers group diversified into commercial production of agricultural and horticultural products, housing real estate marketing, plantations.etc. They have provided shelter to more than 40000 families by offering residential plots and premises. Thakker developer is the flagship company of the group. It was established as private limited in 1987 and later went on to become the only public limited company in North Maharashtra engaged in housing, commercial construction and land development.
S.M.HEGDE
Mr. S.M Hegde, a chartered accountant by profession is the Chief Finance Officer of the Indian Multinational Videocon International and has been at the helm of affairs for the last 20 years.
PADMASHREE LT.COL BHARAT MOHANLAL
Mohanlal, the south Indian movie superstar has become a legend, a brand, and cultural ambassador owing to various factors. Versatility and a natural flair for donning complex characters have won him numerous accolades not to speak of some unforgettable films contributed by him. A multifaceted personality, he has some business ventures also which include Vismaya Max Film Post Production Studio, College for Dubbing Artists at the Kinfra film and Video Park, Thiruvanathapuram. He is also the director of Uni Royal Marine Exports; a Kozhikode based major Seafood Export Company.
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2.1.4 VISION/MISSION STATEMENTS
VISION “Hedge Equities, endeavour to become a well reputed financial services super -mart catering to the evolving needs and unique requirements of our clientele, and partnering with them to Build, Manage, and grow the customer’s Wealth”.
MISSION “To create an ethical and sustainable financial services platform for our customers and partner them to build business, to provide employees with meaningful work, selfdevelopment and progression, and to achieve a consistent and competitive growth in profit and earnings for our shareholders and staff”. The hedge equities ltd wishes to help their customer to increase their wealth. They have done many actions in this direction, most of which are aimed at customer education they include, starting of the hedge school of applied economics, the television program 'market watch', the monthly magazine 'Ohari' etc. They also tries to develop their employees by giving them exposure to the newest advancements in the market. They have successfully completed five years in action and they are getting nearer to achieving their mission and focuses on their mission in every step that they make.
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2.1.5 PHYSICAL LOCATIONS
HEAD OFFICE Hedge Equities Hedge House Palarivattom, Cochin - 682025 Kerala, India.
REGIONAL OFFICE Office No.202 2nd floor, Raghuveer, Chamunda Circle, S.V.P Road, Borivali (West), Mumbai 4000092
It has 54 branches and 52 franchises spread across the four southern states (Kerala, Tamil Nadu, Karnataka and Andhra Pradesh) of India. In addition to this it has one branch in Dubai in U.A.E to cater to the needs of Indians over there.
2.1.6 ORGANIZATIONAL STRUCTURE The organizational structure in hedge equities can be given as follows, it follows a matrix structure as it uses group of employees to do multiple of its functions.
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CEO
COO
MD
Franchise
Marketing
VP
BDG
Online
Research
Admin
HSAE
Overseas Op
RMS
PCG
SD
WMS
Accounts
KYC
IT Reg. Mang.
SIP Dispatch Dealing
Compliance
HR
Front Office
House Keeping
Fig 2.2 Organization Structure
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2.1.6.1 REGIONAL ORGANIZATION STRUCTURE
REGIONAL MANAGER
BRANCH MANAGER
SUPPORT STAFFS
DEALER COMMODITY
EQUITY ADVISOR
RELATIONSHIP MANAGER
2.1.8 FUNCTIONAL DEPARTMENTS Hedge Equities consists of fourteen major departments. Each of the department is headed by a Department Head and has adequate number of Asst. Managers and executives to support in the operations. At times trainees and interns are also placed under various departments. Each of the employees should report to the corresponding department head and to the HR manager, via the department head. The departmental chart of Hedge Equities can be given as:
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ACCOUNTS DEPARTMENT
The financial activities of a firm are often under the direct control of the board of directors. The CFO is the key person as far as this department is concerned. Chartered Accountants and other highly qualified professionals work hand in hand to generate error free accounts for the firm. Lower level employees delegate the other routine activities in this department.
ADMINISTRATION
The department of administration is mainly responsible for ensuring the day to day activities of the firm. This department performs various tasks and functions such as branch support, bill payments and requests, branch expense regulation, complaints & rectification, shop & commercial establishment registration, record on office inventory, co-ordination of advertisement related works, renewal of rent agreement, branch closure – rent termination, etc.
HUMAN RESOURCES DEPARTMENT
Even at this age of advanced automation & mechanization, Human resource is often considered as the back bone of an organization. Since virtual organizations are not very much popular in our part of the world, it is very important for any organization to have a HR department. Human resource management is defined as asset of practices, policies and programmes designed to maximize both personal and organizational goals. The presence of an excellent HR department increases the efficiency of Hedge Equities considerably. Some of the major functions of the HR Department are:
a) Training & Induction The selected employees will undergo three days continuous induction. During this period, he will undergo training with all the department of Hedge Equities. There will also be classroom induction within three months.
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b) Wages and Salary Administration The wages and salaries of the employees are fixed and granted by the HR department with the proper consent of the finance department c) Performance Appraisal It is the Human Resources department which makes up the report suggesting promotions to employees, making transfers and taking disciplinary actions if needed
d) Grievance Handling The grievances of the employees are received only through proper channels i.e., through the particular department heads. The HR department will try to figure out solutions to the complaints as per the rules and regulations of the company, in line with the judiciary of the country.
SYSTEMS DEPARTMENT
The systems department plays a vital role in the day to day operations of the company. It is through the systems department that the clients can avail the facilities of Internet trading. Optic fiber cables and high bandwidth connections from the Hedge Equities office to the ISP, a dedicated server and back-up ISDN connections are maintained directly by the systems department. For the purpose of trading they have made use numerous software systems, the prime one being ODIN (Open Dealers Integrated Network).
SOFTWARE DEVELOPMENT DEPARTMENT
The Software development department is involved in developing indigenous software systems for the company. This department is filled with technocrats who are engaged in the design and development of both simple and sophisticated software tools. This department ensures the cross platform independency of the software systems in the company. Many of the so developed systems provide Hedge Equities a better competitive edge over its competitors
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DEPOSITORY/ CLEARING AND SETTLEMENT DEPARTMENT
Delivery becomes crucial for those shares that are bought on a particular day and not sold on that day itself. For holding these shares for an appreciation in the value of the security and to trade it on a future date the shares need to be transferred to ones depository. Deliver Instruction Slip, which is a slip the client should fill and give to the dealer, is vital in buying the shares and delivering it to a depository.
Hedge Equities offers depository services from both NSDL and CSDL. The Delivery & Depository Department is mainly responsible with the day to day operations with the depository services utilized by the clients.
SYSTEMATIC INVESTMENT PLAN
The department of SIP provides with a common platform in the form of Monthly Investment Plan. It helps one to invest systematically without huge amount. It is often considered a stepping stone to build ones future.
The SIP department offers different options in Account Opening (Gold, Silver, Direct- Equity, Debt Market, and Mutual Fund). Some of the various other functions include Code Change -operations, SIP Renewal Clients, Branches Follow up, Bank follow up for auto debit or ECS, Form filling, Pay in, Payout, etc
RESEARCH DEPARTMENT
The function of the department is to study the details regarding the share or security and to make predictions regarding the future performance of the company.
Hedge equities constantly strive to deliver insightful research to enable pro-active investment decisions. The research department is broadly divided into two divisionsFundamental Analysis Group (FAG) and Technical Analysis Group (TAG).
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The fundamental analysts are continuously scanning the entire economy for discovering what they call the hidden gems in stock market terminology and present it to our clients for profitable investments. A good fundamental analysis team has the capability to identify emerging businesses before such businesses become the talk of the street and Hedge Equities can be proud of processing one such fundamental analysis team.
Timing the market has always been the most difficult task for all analysts and The Hedge Technical Analysis Group has merged to predict the market movements well in advance using complex analytical methods. The department is equipped with cutting-edge technologies for technical charting which assist the technical analysts to predict both upside and downside movements efficiently for the benefit of the clients.
WEALTH MANAGEMENT SERVICES
Hedge Equities Ltd provides a comprehensive and unique wealth management service to help their clients build, manage and grow their wealth. Hedge Equities is a SEBI registered portfolio manager with a high caliber to analyze in detail the needs of individual clients and come up with tailored portfolio solutions to meet clients risk appetite and evolving needs. In addition to deducting appropriate conclusions out of the research data, WMS shares valuable insights with the client through various communication channels, both traditional and modern, as well.
RISK MANAGEMENT SURVEILLANCE
The department of Risk Management Surveillance has two basic functions which can be given as; To reduce the risk of various investments by channeling the investment decisions properly through the research department and to reduce the risk involved for the company in making the investor invest in a particular financial product, which the company regards harmful. This department is key in making out various checklists and other such mechanisms which ensure smooth operations of the company.
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KNOW YOUR CLIENT /ACCOUNT OPENING
The KYC department assists the client or customer to open an account in Hedge Equities securities. This department is also responsible for the various front office activities. A client has to sometimes open two types of accounts to trade and own securities in the NSE & BSE. It should also be noted that a separate commodity account should be opened by a client in order to trade in commodities, even though he/she has a valid trading account. The KYC department helps and assists the clients in completing the various processes and formalities that is associated with the same.
COMPLIANCE
The compliance department is a very important department in each and every organization because it is this department that ensures that each and every department, individual, activities and processes are in line with the rules and regulations of the company, industry and judiciary of the country. This department is also responsible to ensure that the various activities, processes and procedures of the company strictly coincides with the objective of the firm.
BUSINESS DEVELOPMENT GROUP
Some of the various functions of the BDG department can be given as:
a) Business associate development: the Department is responsible for marketing activities at the various branches. It also ensures that an efficient marketing arena exists at all branches. The company encourages better relations with its branches and promotes development and formulation of various marketing strategies.
b) Brand promotion: Another important function of BDG department is to promote the brand of the company. Hedge Equities does it through the different promotional activities including advertisements and various campaigns. This department is vital in ensuring that the Hedge Equities brand as a stock broking firm is made known to the outside world.
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c) Investment promotion: The main clients of Hedge Equities are its investors. Hence the marketing department tries to capture as many investors as possible to encourage them to invest.
d) Delivery Promotion: Intraday trading is not always profitable and might involve a lot of risk hence Hedge Equities promotes for delivery, where the shares are kept to be sold for a later date after analyzing the profitability factors.
PRIORITY CLIENT GROUP
As the name suggest this department mainly deals with the clients with high priority, often with a higher investment, or highly influential personalities. This department also deals with the trading related activities of the company. Trading refers to buying and selling of shares. This department is the most important part of the organization. There are two types of trading. They are:
A) Online Trading:
These are the prime trading terminals of the organization. Each computer of the department with the terminal software and connectivity is termed as the trading terminal. Each terminal is assigned with NCFM certified dealers, who is in charge of each portal and will do the trade according to the client request. The terminal is managed by either NEAT (National Exchange for Automated Trading) software or ODIN (Open Dealers Integrated Network) software. The client can also place his through written request or through the telephone.
B) Internet trading:
It is a facility provided by the company in order to trade the securities from convenient place like his office, home etc. The order will be placed by the client itself, and he/she can make changes before the trade is done. ie, changing the price, cancellation of the order, etc.
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2.1.7 PRODUCT AND SERVICE OFFERED
2.1.7.1 EQUITY TRADING In finance, equity trading is the buying and selling of company stock shares. Equity Market, at present, is a rewarding field for the investors and investing in Indian stocks are profitable for not only the long and medium-term investors, but also the position traders, short-term swing traders and also very short term intra-day traders. Fundamentally, stock market is an avenue for business people to meet shareholders. Other than bank loans, they now have another option to finance their businesses. This is possible by offering the company's equities in exchange of shareholders cash. The company is never required to repay the capital, but the new shareholders have a right to future profits distributed by the company. For shareholders, they have alternatives to where they should put their money into. In the same time, they get the opportunity to participate in capital intensive businesses at an affordable price. Equity is an investment area which can capitalize on with proper assistance regardless of the market circumstances. Hedge Equities opens the door to this highly lucrative investment opportunity that could provide a feasible solution to all your financial queries.
2.1.7.2 COMMODITY TRADING In economics, a commodity is a marketable item produced to satisfy wants or needs. Economic commodities comprise goods and services. The more specific meaning of the term commodity is applied to goods only. It is used to describe a class of goods for which there exist a demand, but which is supplied without qualitative differentiation across a market. In case of commodity, the market treats its instances as equivalent or nearly so with no regard to who produced them. At Hedge Equities one can trade in futures like gold, silver, crude oil, rubber etc and take advantage of the extended trading hours (10 am to 11 pm) in commodities trading.
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2.1.7.3 CURRENCY TRADING Currency derivatives can be described as contracts between the sellers and buyers, whose values are to be derived from the underlying assets, the currency amounts. These are basically risk management tools in force and money markets used for hedging risks and act as insurance against unforeseen and unpredictable currency and interest rate movements. Any individual or corporate expecting to receive or pay certain amounts in foreign currencies at future date can use these products to opt for a fixed rate- at which the currencies can exchanged now itself. Currency derivatives serve the purpose of financial risk management encompassing various market risks. An upfront premium is payable for buying a derivative. Currency futures will bring in more transparency and efficiency in price discovery, eliminate counterparty credit risk, provide access to all types of market participants, offer standardized products and provide transparent trading platform.
2.1.7.4 MUTUAL FUNDS, BONDS ETC A mutual fund is nothing more than a collection of stocks and/or bonds. You can think of a mutual fund as a company that brings together a group of people and invests their money in stocks, bonds, and other securities. Each investor owns shares, which represent a portion of the holdings of the fund. It is often measured in terms of NAV. A debenture or bond is like a certificate of loan or a loan bond evidencing the fact that the company is liable to pay a specified amount with interest and although the money raised by the debentures becomes a part of the company's capital structure, it does not become share capital. In some countries the term is used interchangeably with bond, loan stock or note. Hedge equities also offer Mutual funds and bonds. One can select from a wide range of Mutual funds and bonds available in the market today.
2.1.7.5 ONLINE TRADING Hedge equities have a large network of branches with online terminals of NSE and BSE in the capital market and Derivative segments. The clients are assured of prompt order execution through dedicated phones and expert dealers at our offices.
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2.1.7.6 INTERNET TRADING Hedge equities offer internet trading through their site. One can trade through the internet from the comforts of your office or home, anywhere in the world. The dedicated IT systems ensure service up time and speed, making internet broking through Hedge equities hasslefree. Using the easiest facility provided by NSDL, the clients can transfer the shares sold by them online without delivery instruction slips. Additionally, digitally signed contract notes can be sent to clients through E-mail.
2.1.7.7 DEPOSITORY SERVICES Hedge equities is
a member of Central Depository Services Ltd.(CDSL), offer
depository services with minimum annual maintenance charges and transaction charges Account holders can view their holding position through the internet. It also offer the “easiest” facility provided by CDSL through which clients can give delivery instructions via the internet.
2.1.7.8. DERIVATIVE TRADING Hedge offers trading in the futures and options segment of the National Stock Exchange (NSE). Through the present derivative trading an investor can take a short term view on the market for up to a three months’ perspective by paying a small margin on the futures segment and a small premium in the options segment. In the case of options, if the trade goes in the opposite direction the maximum loss will be limited to the premium paid.
2.1.7.9 KNOWLEDGE CENTRE Knowledge centre activities are intended to provide systematic and structured services mainly to new investors and also to young aspirant aiming for a career in financial markets. The centre has three functional areas: the publication division, the training centre,
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and wealth management advisory service which provides complete investment solutions to investments through knowledge based personalized services.
2.1.7.10 EQUITY RESEARCH Hedge equities constantly strive to deliver insightful research to enable pro-active investment decisions. The research department is broadly divided into two divisionsFundamental Analysis Group (FAG) and Technical Analysis Group (TAG). The fundamental analysts are continuously scanning the entire economy for discovering what they call the hidden gems in stock market terminology and present it to our clients for profitable investments. A good fundamental analysis team has the capability to identify emerging businesses before such businesses become the talk of the street and Hedge Equities can be proud of processing one such fundamental analysis team. Timing the market has always been the most difficult task for all analysts and The Hedge Technical Analysis Group has merged to predict the market movements well in advance using complex analytical methods. The department is equipped with cutting-edge technologies for technical charting which assist the technical analysts to predict both upside and downside movements efficiently for the benefit of the clients.
2.1.7.11 PORTFOLIO MANAGEMENT SERVICES (PMS) Hedge equity is a SEBI-approved portfolio manager offering discretionary and nondiscretionary schemes to its clients. Hedge equities’ portfolio management team keeps track of the markets on a daily basis and is exposed to a lot of information and analytic tools which an investor would not normally have access to. Other technicalities pertaining to shares like dividends, rights, bonus, buy-back, Mergers and Acquisitions and are also taken care of. PMS provides the clients an avenue to maximize their returns.
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2.1.9 THE USPS OF THE HEDGE:
SEBI registered portfolio manager
Expert team of research analysts
Execution excellence, transparency, and visibility
Trust and goodwill of over 35000 satisfied customers
Strong risk management practices
Customer Oriented Wealth Management Services desk.
Members of BSE, NSE, MCX, MCXSX, NMC and depository participant in CDSL.
Rated as the top brand by the investor community of asianet channel
A global outlook blended with a local flavour.
2.1.10 CORPORATE SOCIAL RESPONSIBILTY Being a Responsible Corporate Citizen, Hedge Equities has initiated a Non Profit movement HEDGE YUVA which focuses on educating the masses about Stock Market. The movement has also formulated various scholarship programs for young and dynamic youth.
The Hedge School of Applied Economics also provides various courses, workshops and projects to create a better pool or market educated citizens and thus contributes its part towards the Indian Economy.
The Human Resource Department has initiated several steps in the cause of nature. It frequently circulates messages reminding the employees about the need for conservation of mother earth. One small but a giant leap is the movement to reduce the number of emails that are being printed and thus to reduce the usage of paper and other resources.
2.1.11 INNOVATIVE MARKETING PRACTICES Hedge Equities follows a innovative marketing concept called the family tree concept in which an individual is made to plot down his family tree. The roots of the family tree are dug deeper and deeper and proves to be virtually infinite in nature. A software called as the “Free Mind” is used in this regard. The power of relations is exploited here in order to bring
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in more business for the company. This marketing strategy has proven to be one of the best in the world. Since there exists a stronger bonding among the relations the firm will get more loyal and trustworthy client base. This marketing practice can help each and every business model to bring in more bossiness and thus is an example for every marketing organization.
Fig 2.4 Free Mind Screen Shot
2.1.12 SWOT ANALYSIS STRENGTH catering to the beginners in the stock market. Efficient DBMS: customer data usage and retrieval WEAKNESS
OPPORTUNITIES
market
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THREATS Economic slowdown both domestic and international
2.1.13 OBSERVATIONS
It is one among the many prospective start ups in India, with a higher growth potential.
Hedge Equities Ltd. can be proud of having a very descent work culture and a great employer brand.
The organization has been successful in attracting some of the best masterminds in the industry to its portfolio. This organization makes sure that each employee in the organization stays motivated and satisfied and this is evident from the employee turnover rate.
The organization lays great importance to client relationships and that is probably one of the reasons for higher volume of trade per individual and the loyalty of its clients that it enjoys..
The organization has a very positive sense of commitment to the society, which is primarily established through quality of service and client education. Programmes like Hedge Yuva and Ohari are classic examples for this.
The Hedge School of Applied economics also play a key role in shaping the employees of the organization and also provides a lot to its face of social commitment.
Basic human values and ethics are strictly followed by the organization and it makes sure that all its activities are oriented in this line.
Hedge group basically follows a need based marketing concept, wherein the needs of the clients are the centre of focus.
Customer wealth maximization is given prime importance, rather than just business development and hence the organization tries to educate the clients about their
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investments and thus assist in their investment decision making process. This is in turn used as a strategic tool in order to reduce the risk of the company also.
Power is basically centralized among the top level management and almost all tactical and operational strategies are also directed directly from the top level management.
The organization is also very good at incorporating new technologies and practices at a very fast pace and thus always tries to gain a competitive advantage.
Hedge Equities Ltd. also invests a lot and depends heavily on the research department for its day to day operational activities.
This organization is also very keen about developing and bringing in new and unique products and services like SIP in Equities.
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SECTION II: RESEARCH REPORT “LEGAL AND COMPLIANCE STATEMENTS WITH RESPECT TO HEDGE EQUITIES”
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PURPOSE OF THE STUDY
The purpose of the study is to know whether the departments of “HEDGE EQUITIES” properly complied with the various rules, byelaws and various circulars of the Exchange. If not, what are the reasons for the non-compliance and also implications for the noncompliance of various rules, byelaws and various circulars of the Exchange?
OBJECTIVE
To study whether the functions of every department are strictly in accordance with the rules, bye-laws and circulars of the exchange. To study the reasons for deviations. To find the implications or consequences for the non-compliance of the rules, byelaws, and various circulars of the exchange.
METHODOLOGY
The methodology of preparing ANNUAL COMPLIANCE REPORT includes Studying the various rules, bye-laws and circulars as specified by Exchange. It includes making a detailed study of the previous year’s ANNUAL COMPLIANCE REPORT in order to know how to prepare ANNUAL COMPLIANCE REPORT. Sorting the whole data according to various departments is the next step in the preparation of Annual Compliance Report. Followed by going to each department and enquiring with department head whether the department is properly compiled with rules, bye-laws and circulars as specified by the Stock Exchange. The next step is that if the functions of the departments in not properly compiled with rules, bye-laws and circulars of the Exchange stating the reasons for the same. After receiving all the information from all departments, preparing a detailed report including all the collected information from the depart
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After preparing a detailed report taking signature from each department head to ensure that the report is clear and accurate. Finally updating the information in the website of Exchange and submitting the report.
FINDINGS
Major findings are: I. II. III.
Almost all departments are performing as per the rules and regulations of exchange. In the case of non- compliance, proper reasons are given by HEDGE EQUITIES. Penalties for non- compliance are payed.
SUMMARY OF FINDINGS Byelaw no
Circular no
Specification
Comp lied (yes/n o) Yes
a
1,2,3
Sauda book
a
3,2,4,5
Exchange wise client ledgers
Yes
a
5,2
General ledger
Yes
a
5,2
Journals
Yes
a
5,2
Cash book
Yes
If yes (how)
If no (why)
Implications
Properly maintaining Sauda book Properly maintaining exchange wise client ledgers Properly maintaining general
-
-
-
-
-
-
-
-
-
-
ledger Properly maintaining journals Properly
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a
5,2
Bank pass book
Yes
a
5,2,3
Register of transactions
Yes
a
5
Bank book
Yes
a
5,3
Margin deposit book
Yes
a
5,3
Trade log
Yes
maintaining cash book Properly maintaining bank pass book Properly maintaining register of transactions Properly maintaining bank book Properly maintaining margin deposit book Properly
a
5,3
Order log
Yes
a
6
Evidence of client placing order
Yes
a
5,3
Register of commodities
No
maintaining trade log Properly maintaining order log Properly maintaining evidence of client placing order -
a,b
5
No
-
a
5
No
-
a
5
Records of Deliveries received Records in respect of premium Records in respect of brokerage
Yes
Records in respect of brokerage properly maintained
a
5
Records respect ofin service tax
Yes
Records respect ofin service tax properly maintained
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No physical delivery No physical delivery No physical delivery -
i
-
-
i
i
-
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-
2,7,8
Obtained KYC application forms
Yes
-
9,10,11
Not placed orders of the clients whose mobile numbers and email id is not uploaded
Yes
-
12,13,14
Not placed orders in inactive clients accounts
Yes
-
15,16,17,2
PAN details of all clients obtained and uploaded to the Exchange
Yes
c,d
2,7
Issued to all clients Uniform Risk Disclosure Documents
Yes
e
5,2,18, 19,4
Collection of initial margin from clients before entertaining any order from them
Yes
-
20
Yes
f
21,22,23,2 4,25
Pre-funded instruments (pay orders and demand draft)/Electronic fund transfer Allotment of unique client codes to clients
Yes
KYC application forms properly maintained Placing only those orders of the clients whose mobile no and email id is uploaded Not placing any orders in inactive clients accounts
-
-
-
-
-
-
PAN of all details clients is obtained and subsequentl y uploaded to the Exchange Uniform Risk Disclosure Documents
-
-
-
-
-
-
-
-
-
-
is issued to all clients Before entertaining any order, initial margin is collected from clients Pre-funded instruments /Electronic fund transfer are maintained Allotting clients with unique
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-
22,23,2,26
Not allotted multiple client codes to the same client
Yes
client codes Multiple client codes is not allotted to the same client
DESCRIPTION OF THE FINDINGS
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 a b c d
MCX/012/2006 dated 5/1/2006 MCX/COMP/113/2010 dated 5/4/2010 MCX/357/2006 dated 2/9/2006 MCX/358/2011 dated 11/10/2011 MCX/012/2006 dated 10/1/2006 MCX/399/2009 dated 30/9/2011 MCX/COMP/469/2011 dated 22/12/2011 MCX/COMP/089/2012 dated 14/3/2012 MCX/T&S/413/2012 dated 11/12/2012 MCX/T&S/434/2012 dated 27/12/2012 MCX/T&S/050/2013 dated 14/2/2013 MCX/T&S/149/2008 dated 23/4/2008 MCX/COMP/513/2009 dated 15/12/2009 MCX/COMP/298/2010 dated 21/8/2010 MCX/T&S/155/2007 dated 26/4/2007 MCX/COMP/206/2008 dated 16/6/2008 MCX/COMP/029/2009 dated 19/1/2009 MCX/COMP/429/2010 dated 4/12/2010 MCX/C&S/214/2011 dated 9/6/2011 MCX/COMP/348/2011 dated 4/10/2011 MCX/342/2006 dated 24/8/2006 MCX/COMP/088/2008 dated 4/3/2008 MCX/COMP/317/2008 dated 7/10/2008 MCX/T&S/405/2008 dated 20/12/2008 MCX/T&S/355/2011 dated 10/10/2011 MCX/T&S/074/2011 dated 4/3/2011 11.5 4.8 14.1.1 14.1.2
-
-
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e f i
8.2.2 5.21 For non maintain of register, Rs.1000/- for one/few instances and Rs.2500/- for multiple instances. For non availability of prescribed information in register and non availability of register, advice for one/few instances and warning for multiple instances.
SUGGESTIONS
Various suggestions put forward are as report is prepared manually, it is better to install appropriate software to be installed for preparing the “ANNUAL COMPLIANCE REPORT”.
As it requires analysis of every department, it is better that each department can update the information by compiling Yes/No in the appropriate software if it is available.
LIMITATIONS OF THE STUDY
One of the major limitation of the study is report is prepared manually. Another limitation includes need to visit each department and consult department head for the compliance.
Lengthy and time consuming process is a major limitation for the study. Study of each law, bye-law and circulars of the Exchange and preparing the “ANNUAL COMPILANCE REPORT” takes a long time.
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BIBLIOGRAPHY
Indian Financial System, By D. K. Murthy, Dr. D.K. Murthy
SEBI Hand Book 2012
www.rbi.org.in
www.investopedia.
www.wikipedia.com
www.sebi.gov.in
