Marwadi Final

INDUSTRY OVERVIEW

Stock exchanges to some extent play an important role as indicators, reflecting the performance of the country’s economic state of health. Stock market is a place where securities are bought and sold. It is exposed to a high degree of volatility, prices fluctuate within minutes and are determined by the demand and supply of stocks at a given time. Stock brokers are the ones who buys and sells securities on behalf of individuals and institutions for some commission.

The Securities and Exchange Board of India (SEBI) is the authorized body, which regulates the operations of stock exchanges, banks and other financial institutions. The past performances in the capital markets especially the securities scam by Hasrshad Mehta has led to tightening of the operations by SEBI. In addition the international trading and investment exposure has made it imperative to better operational efficiency. With the view to improve, discipline and bring greater transparency in this sector, constant efforts are being made and to a certain extent improvements have been made.

1

INDIAN FINANCIAL MARKET

➢ SAVING AND INVESTMENT IN INDIA

➢ CAPITAL MARKET AND MONEY MARKET

➢ BSE

2

➢ NSE

➢ ABOUT NSDL

➢ DIFFERENT INSTRUMENT

➢ INTERMEDERIES

3

SAVING AND INVESTMENT IN INDIA

The organization defines saving as the excess of current income over current expenditure. It is the balancing item on the income and joutlay accounts of producing enterprise and households, goverement administration, and other final consumers. For the purpose of estimating the domestic saving, the economy has been divided into three broad institutional sectors;

A. HOUSEHOLD:

The household sector comprises heterogeneous entities such as individuals, unincorporated business enterprises (sole proprietorships and partnership concerns), farm production units, and a number of non-profit institute.

B. PRIVATE CORPORATE: 4

Private corporate sector comprises non-government, non-financial companies, private financial institutions, and co-operative institutions.

C. PUBLIC:

The public sector comprises the government, administrative depertments and enterprises both departmental and non-departmental. The saving of the government administration is defined as the excess of current receipts over current expenditures.

CAPITAL MARKET AND MONEY MARKET In today’s era investor invest their funds after basic analysis. The basic function of financial market is to facilitate the transfer of funds from surplus sectors that is 5

from (lenders) to deficit sectors (borrowers). If we look at the financial cycle then we can say that households make their savings, which is provided to industrial sectors, which earn profit and finally this profit will go to the households in the form of interest and dividend. Indian Financial System is made-up of 2 types of markets i.e. Capital Market & Money market. CAPITAL MARKET

Securities market may be classified is by the types of securities bought and sold there. The broadest classification is based upon whether the securities are new issues or are already outstanding and owned by investors. Now we see following chart for understanding market types.

6

Capital Market

Primary Market

Secondary Market

Organized

Over The

Exchanges

Counter

Primary Market: Securities available for the first time are offered through the primary securities markets. The issuer may be a brand-new company or one that has been in business for many years. The securities offered may be a new type for the issuer of additional amounts of a securities used frequently in the past. In primary market funds are mobilized in the primary market through prospectus, rights issues ,and private placement. 7

Secondary market: Once new issues have been purchased by investors, they change hands in the secondary markets. This market also known as stock market. In India the secondary market consist of recognized stock exchanges operating under rules, bylaws and regulations duly approved by the government. There are actually two broad segments of the secondary markets. a. Organized market : Organized exchange are physical marketplaces where the agents of buyers and sellers operate thorough the auction process. There are number of organized exchanges in India. NSE(National Stock Exchange) and BSE (Stock Exchange Mumbai) are main stock exchange. Other than this there are more then 23 stock exchanges. b. Over The Counter (OTC) : The OTC market is not a central physical marketplace but a collection of brokerdealer scattered across the country. This market is more a way of doing business than a place. Bu matched not through the auction process on the floor of an exchange but through negotiated bidding, over a massive network of telephone and teletype wires that link thousand of securities firms here and abroad

8

MONEY MARKET

The money market has 2 components-The organized & unorganized. The organized market is dominated by commercial banks. The other major participants are RBI, LIC, GIC, UTI, and STCI.The main function of it is that of borrowing & lending of short term funds. On the other hand unorganized money market consists of indigenous bankers & money lenders. This sector is continuously providing finance for trade as well as personal consumption.

9

BSE (THE STOCK EXCHANGE OF MUMBAI)

The Stock Exchange, 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 10

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 recoginition 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 redressal of their grievances whether against the companies or its own memberbrokers. It also strives to educate and enlighten the investors by conducting investor education program and making available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies and regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors, who are from the broking community (one third of them retire ever year by rotation), three SEBI nominees, six public representatives and an Executive Director & Chief Executive Officer and a Chief Operating Officer.

11

BSE Sensex is depend on the 30 companies which are as follows.

1. ACC

16. Maruti

2. Bajaj auto

17. NTPC

3. Bharti

18. ONGC

4. BHEL

19. Ranabaxy

5. Cipla

20. RCVL

6. Dr. Reddy

21. Reliance

7. GACL

22. REL

8. Grasim

23. Satyam

9. HDFC

24. SBI

10. HDFC bank

25. Tata motors

11. Herohonda

26. Tata Steel

12. ICICI bank

27. TCS

13. Infosys

28. Wipro

14. ITC

29. Hindalco

15. L & T

30. HLL

12

13

NSE (NATIONAL STOCK EXCHANGE) NSE was incorporated in 1992 and was given recognition as a stock exchange in April 1993. It started operations in June 1994, with trading on the Wholesale Debt Market Segment. Subsequently it launched the Capital Market Segment in November 1994 as a trading platform for equities and the Futures and Options Segment in June 2000 for various derivative instruments.

NSE has been able to take the stock market to the doorsteps of the investors. The technology has been harnessed to deliver the services to the investors across the country at the cheapest possible cost. It provides a nation-wide, screen-based, automated trading system, with a high degree of transparency and equal access to investors irrespective of geographical location. The high level of information dissemination through on-line system has helped in integrating retail investors on a nation-wide basis. The standards set by the exchange in terms of market practices, Products , technology and service standards have become industry benchmarks and are being replicated by other market participants. Within a very short span of time, NSE has been able to achieve all the objectives for which it was set up. It has been playing a leading role as a change agent in transforming the Indian Capital Markets to its present form. The Indian Capital Markets are a far cry from what they used to be a decade ago in terms of market practices, infrastructure, technology, risk management, clearing and settlement and investor service.

14

About NSDL: Although India had a vibrant capital market which is more than a century old, the paper-based settlement of trades caused substantial problems like bad delivery and delayed transfer of title till recently. The enactment of Depositories Act in August 1996 paved the way for establishment of NSDL, the first depository in India. This depository promoted by institutions of national stature responsible for economic development of the country has since established a national infrastructure of international standard that handles most of the trading and settlement in dematerialized form in Indian capital market. Using innovative and flexible technology system, NSDL works to support the investers and brokers in the capital market of the country. NSDL aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increases efficiency, minimize risk and reduces costs. At NSDL, we play a quiet but central role in developing products and services that will continue to nurture the growing needs of the financial services industry. In the depository system, securities are held in depository accounts, which is more or less similar to holding funds in bank accounts. Transfer of securities is done through simple account transfers.This method does away with all the risks and hassles normally associated with paperwork. Consequently, the cost of transacting in a depository environment is considerably lower as compared to transacting in certificates. 15

FUNCTIONS OF NSDL:  Enables the surrender and withdrawal of securities to and from the depository.  ( dematerialization and re- materialization)  Maintains investor holdings in the electronic form.  Effects settlement of securities traded to the exchanges.  Carries out settlement of trades not done on the stock exchange. ( off market traders )  Transfer of securities  Pledging / hypothecation of dematerialized securities. SERVICES OFFERED BY NSDL  NSDL offers a host of services to the investors through it  Network of Dips  Maintenance of beneficiary holdings through DPS  Dematerialization  Off – market trades  Settlement in dematerialized securities  Receipt of allotment in the dematerialized form  Distribution of corporate benefits 16

 Re – materialization  Pledging and Hypothecation Facilities  Freezing / Locking of investor’s account  Stock lending and borrowing facilities  Speed – e  Idea

NCDEX (NATIONAL COMMODITIES AND DERIVATIVES EXCHANGE)

NCDEX started working on 15th December, 2003. This exchange provides facilities to their trading and clearing member at different 130 centers for contract. 17

In commodity market the main participants are speculators, hedgers and arbitrageurs. Promoters of NCDEX are  National Stock Exchange(NSE)  ICICI bank  Life Insurance Corporation(LIC)  National Bank for Agricultural and Rural Development (NABARD)  IFFICO  Punjab National Bank (PNB)  CRISIL

WHY NCDEX?

 NCDEX is nationalized screen based system which is providing transparent, private and easy services.  NCDEX is one of the traditional media which gives online information  NCDEX is one of the Indian commodity exchange, constructed on the basis of the current national institutes the exchange has been established with the coloration of leading institutes like NABARD, LIC, NSI etc….  In India NCDEX has maximum settlement guarantee fund.  NCDEX has appointed two exports for checking quality at the time of delivery 18

FACILITIES PROVIDED BY NCDEX

 NCDEX has developed facility for checking of commodity and also provides a wear house facility  By collaborating with industrial partners, industrial companies, news agencies, banks and developers of kiosk network NCDEX is able to provide current rates and contracts rate.  To prepare guidelines related to special products of securitization NCDEX works with bank.  To avail farmers from risk of fluctuation in prices NCDEX provides special services for agricultural. 19

 NCDEX is working with tax officer to make clear different types of sales and service taxes.  NCDEX is providing attractive products like “weather derivatives”

20

MCX (MULTI COMMODITY EXCHANGE)

MULTI COMMODITY EXCHANGE of India limited is a new order exchange with a mandate for setting up a nationwide, online multi-commodity marketplace, offering unlimited growth opportunities to commodities market participants. As a true neutral market, MCX has taken several initiatives for users

In a new generation commodities futures market in the process, become the country’s premier exchange.MCX, an independent and a de-mutualized exchange since inception, is all set up to introduce a state of the art, online digital exchange for commodities futures trading in the country and has accordingly initiated several steps to translate this vision into reality.

MARKET WATCH:

21

The market watch window is used to view the market details for a particular or group of contracts and for a particular instrument type. This window displays the following details: Symbol,Expiry,price quotation unit, buy qty, buy price, sell price, sell qty, last traded price,D.P.R,volume (in 000’s), value (in lac),% change, average trade price, high, low, open, close & open interest.

TRANSACTION CYCLE Frame1

22

A person holding assets (Securities/Funds), either to meet his liquidity needs or to reshuffle his holdings in response to changes in his perception about risk and return of the assets, decides to buy or sell the securities. He selects a broker and instructs him to place buy/sell order on an exchange. The order is converted to a trade as soon as it finds a matching sell/buy order. At the end of the trade cycle, the trades are netted to determine the obligations of the trading member’s securities/funds as per settlement cycle. Buyer/seller delivers funds/ securities and receives securities/funds and acquires ownership of the securities.

A securities transaction cycle is presented above. Just because of this Transaction cycle, the whole business of Securities and Stock Broking has emerged. And as an extension of stock broking, the business of Online Stock broking/ Online Trading/ E-Broking has emerged.

MAJOR PLAYERS

1. MARWADI SHARES & FINANCE LIMITED

2. ICICI WEB TRADE LTD. 3. KOTAK SECURITIES LTD. 4. INDIABULLS 5. MOTILAL OSWAL SECURITIES LTD. 23

6. HDFC SECURITIES LTD. 7. UTI SECURITIES LTD. 8. IDBI CAPITAL MARKET SERIVICES LTD. 9. REFCO SIFY SECURITIES PVT LTD.

A/c Opening Fee Parameters Marwadi ICICI Direct

Trading A/c 750 750

Indiabulls

750

Brokerage

Interface

NIL NIL

Deliver y 0.30 0.75

Square Off 0.10 0.18

Banks Associated with HDFC ICICI Bank

250

0.40

0.10

N.A.

Demat

5 paisa

800

NIL

0.20

0.05

Kotak Street

500

N.A.

0.59

0.06

HDFC Securities

700

NIL

0.50

0.15

24

Citibank, HDFC, OBC, UTI & ICICI Bank Kotak Bank & Citibank HDFC & Other 4 Banks

25

ABOUT THE MARWADI COMPANY From a decade all financial service groups are offering stock -broking and commodity - broking through NSE, BSE, NCDEX and MCX. Marwadi also offer depository services as DP of NSDL and CDSL. Marwadi is spread through out Saurashtra Kutch Peninsula with their 46 branches and manpower strength of over 300 employees. Marwadi have built up customer trust and credibility through qualitative service and prompt redressal of queries. Marwadi have 100,000 customers, whose various investment needs Marwadi are servicing, vindicates their index of customer credibility. The company has always been driven by a desire to create values for its customers by customer First approach, ethical and transparent business practices, reverence for professionalism and implementation of cuttingedge technology. These have enabled them to flourish into one of the top-50 stock broking houses in India. A convincing index of their customer loyalty is that nearly 75% of their customers have been with them for period of three years. This means that a bulk of their customer has subscribed to their services on a long term basis. MSFL strength lies in its team of young, talented and confident individuals. 26

Qualified and experienced professionals to carry out different functions under the Leadership of its promoter's viz. Mr. Ketan Marwadi, Mr.Deven Marvadi and Mr.SandeepMarwadi.

Company profile

Name

~

Marwadi Shares And Finance Ltd.

Establishment

~

1992

Registered office

~

Limda Lan Jamnagar

Head office Ltd.

~

Marwadi Shares And finance, 27

Nr. Kathiawad Gymkhana, Dr,Radhakrishna Road RAJKOT – 360001

Ph No

~

(0281) 2481313

E-Mail

~

[email protected]

Web Site

~

www.marwadionline.com www.msfl.com

Managing Director

~

Mr. Ketan Marwadi

Directors

~

Mr. Deven Marwadi Mr. Sandeep Marwadi

Deputy General Manager

~

Mr. Haresh Maniyar

CEO

~

Mr. Jay kumar A.S

Company Secretary

~

Mr. Tushit Mangaliya

28

29

MILESTONES • 1992...Marwadi Shares And Finance Pvt. Ltd. was incorporated. • 1996...Became a corporate member of National Stock Exchange Of India (NSE) • 1998...Became a member of Saurastra Kutch Stock Exchange (SKSE) •

1999...Launched Depository services of Depository Participant under National Depository Security Ltd. (NSDL)

• 2000...Commenced Derivative Trading after obtaining registration as Clearing and Trading Member in NSE. • 2003...(MCBPL) Became a corporate member of the National Commodity and Derivatives Exchange of India Ltd. • 2003...(MCBPL) Became a corporate member of The Multi Commodity Exchange of India Ltd. • 2004...Became a corporate member of Bombay Stock Exchange Ltd. (BSE) • 2004...Launched Depository Services of Depository Participant under Central Depository Services (India) Ltd. •

2005...Launched Portfolio Management Services

• 2006...MSFPL converted to Public Limited (Marwadi Shares And Finance Limited) 30

• 2006 – The Company raised private equity from ICGU Limited, a wholly owned subsidiary of India Capital Growth Fund. • 2007 – The Company raised further private equity from Caledonia Investments plc.

31

Ahmedabad (C G Road)

9879207311

Ahmedabad (Panjarapore)

9925206974

Ahmedabad (Maninagar)

9979862199

Amreli

9909958604

Anand

9879207325

Ankleshwar

9879615936

Banglore

9972038321

Baroda

9879159060

Bharuch

9879615935

Bhavnagar

9879207326

Bhuj

9879207328

Chandigarh

9915777515

Chennai

Kolhapur

9423281810

Kolkata

9831582888

Kanpur

9935115911

Manavadar

9879207342

Mandvi

9879207343

Mangrol

9909958610

Mehsana

9879615932

Mithapur

9879207385

Morbi

9879615916

Mumbai (Andheri)

9322247996

Mumbai (Borivali)

9324236690

9383180636

Mumbai (Kandivali)

9820251056

Cochin

9388129275

Mumbai (Vashi)

9323035983

Coimbatore

9345147763

Nadiad

9879615934

Delhi

9313756795

Navsari

9879615937

Dhoraji

9979862133

Neemuch

9301909991

Dahod

9979862174

Okha

9824884471

Dhrangdhra

9825026678

Palitana

9909958549

Disha

9925247562

Patan

9979862170

32

OVERVIEW OF DIFFERENT DEPARTMENT Introduction Demat Service The concept of Depository Participant came in India in 1996 and on national level stock exchanges started settlement in demats form in the year 1999. So it became 33

compulsory for each and every broking client to have a demat account for this obligation in trading. As present approximately 390 DPs are registered with SEBI. Depository Participant addresses the needs of retail investor clients of Gujarat. Marwadi were the first corporate DP in Saurashtra. As on date service 50,000 plus clients through a well-equipped branch network. They offer online services offered by NSDL/CDSL. Affiliated to both NSDL and CDSL in order to give optimum cost solution to clients keeping in view the investors needs. Company place a high premium customer service and prompt reporting in order to ensure integrity of transactions. Customer centric schemes have been designed to address the investor needs relative to element (such as trade execution dematerialization and re materialization) economical prices. Marwadi is one of the big players in depository participant market. Marwadi has more than 25000 clients. The head of the department is Mr. Arvind A. Gamot. In this department mainly 23 employees are working under him. Balance inquiry, DRF, receipt of trade and forms for opening or closingof

demat account are

being provided. Marwadi shares & finance ltd, a leading broking house, started to provide depository participant services in May 1999. At present Marwadi is having about 35,000 clients situated at 550 pin codes. MSFL is having more than 28 branches for their depository participants operations. Marwadi also gives following services without any charges : 34

• Demat Confirmation • Remat Confirmation • Rejection of Instruction • Special Transaction Statement as our desire • Allotment of Shares under IPO • Every quater we send the Ledger to each Client • Inimates the renewal of account • Speed - e services client without any additional charges

Account Opening Procedure

 Proof of Identity: A beneficiary account must be opened only after

obtained a proof of identity of the applicant. The applicant's signature and photograph must be authenticated by an existing account holder or by applicant's bank or after due verification made with the original of the applicant's valid passport, voter ID, driving license or PAN card with photograph and further.  Proof of Address: Certified copies of ration card/passport/voter ID/PAN

card/driving license/bank passbook. 35

 Ensure that all compulsory fields in the account opening form are filled.  In case of corporate, ensure a copy of board resolution of authorized signatories. Ensure proper authorization in case of power of attorney holder.  DP should give a copy of agreement to the client, including the charges. An investor intending to hold securities in the electronic form in a depository system should open an account with a participant. So also should all the clearing members who intend to provide settlement function in the depository system.

 The participant will make available the relevant account opening form (depending on whether the client is a retailer investor or corporate client or clearing member) and specify the relevant list of documents regarding references that should be submitted along with the form. It will also give a copy of the relevant agreement, to be entered with the client, in duplicate.  The client will submit the duly filled in account opening form. It should also furnish such documents regarding references, as specified electronic form in by the participant, along with the account opening form. After executing the agreement the client has to forward it to the Marwadi.  The Marwadi will verify that the account opening form is duly filled in. it 13THHKLM will also verify the enclosed documents, if any. Incomplete forms will be forwarded to the client for rectification. 36

 The authorized signatories are enclosed.  After completion of all documentation, the Marwadi will enter the client details

as mentioned in the account opening form in the DPM screen provided for the purpose. After entering client details in the system, a client account number will be generated by the DPM. The Marwadi will enter this in the account opening form.  The Marwadi will record the client’s signature (on the form) as specimen for authorization in the future.  The Marwadi will give a copy of the report listing the client details captured in the DPM database to the client.

Finally Marwadi dispatch, demat account kit to the client by courier. In this kit Marwadi provide following things.

 Trade book of NSDL. With requisition slip.  Trade book of SDSL.  DRF book

 Identify card  Agreement copy, duly authenticated  Account closing form 37

 Guild lines for operation demat account  Account master letter Covering letter

OPENING ACCOUNT FORM:

38

Procedure for opening of Demat Account of Corporate: Memorandum & Articles of Association (MOA & AOA ), board resolution for opening demat account and list of authorized signatories and photographs, etc.  Introduction by an existing account holder or by the applicant's bank.  Proof of address of the corporate evidenced by the document registered with Registrar of Companies or acknowledged copy of Income Tax Return or Bank Statement or Leave and License agreement/Agreement for sale. 39

 An authorized official of the Participant shall verify the proof if address with the original documents and affix his/her signature on the documents submitted by the Client. Change of Address:  A written application for change of address of the corporate entity, signed by all the authorized signatories should be submitted to the Participant.  Following documents should be submitted along with the application:  Latest transaction statement of the corporate's account received from the participant.  Proof of new address along with the original document of new address, for verification by the Participant.  At least one of the authorized signatories should visit the office of the Participant in person to submit its application for change of address along with necessary documents and sign the application once again in the presence of the officials of the participant.  An authorized official of the Participant shall verify the application and the

abovementioned documents with the original and put his/her signature on the application with remarks "verified" and thereafter record the change of address in the DPM system. Change of Signature: 40

 The client should make a request in writing specifying reasons for change in signature.  New signature should be duty attested by client's banker.  Client should visit participant's office personally and procedure valid proof of identify as well as the latest transaction statement of its account.  In the presence of officials of participant client should affix his/her new signature.  An authorised official of the participant shall under his signature varify the identity proof with the proof and photograph that were furnished at the time of opening of account and thereafter, if found satisfactory, make necessary changes in its records. Process Of Security Transfer: Procedure for buying and selling dematerialized share is similar to the procedure for buying and selling dematerialized shares is similar to the procedure for buying and selling physical shares. The difference lies in the process of delivery (in case of sell) and receipt (in case of Purchase of securities.

In case of purchase:  The broker will receive the securities in his account on the payout day

41

 The broker will give instruction to its DP to debit his account and credit investor's account  Investor will give ‘Receipt Instruction to DP for receiving credit by filling appropriates form. However one can give standing instruction for credit in to ones account that will obviate the need of giving Receipt Instruction every time. In case of Sell: You will give delivery instruction to DP to debit ones account and credit your broker’s account. Such instruction should reach to your DP’s office at least 24 hours before the pay-in other wise DP will accept the instruction only at your risk.

Transfer of Security by Depository:  The first step is that two receipts are prepared one is for trade received by fax, which is done through broker the other is for investors & small investors.  The next step is that the batch is generated after every hour. After that signature is verified.

42

 Two types of verifications are done i.e. V1 & V2. In V1 Marwadi verify the company name, quantity & price of scripts. In V2 Marwadi verify ISIN, date, time, market type etc…  Now pre-audit has been done in which two conformations are checked, i.e. if the value exceeds rs.1 lacks & whether the duration between two trades exceeds specified time limit.  To be more specific post-audit has been done in which all the data’s are checked further.  The last step is that execution is done in NSE.

Pledge/Hypothecation

A cline having a beneficiary account with a participant can pledge / hypothecate securities in electronic form against loan/ credit facilities extended by a pledge. Who too has a beneficiary account with a participant. The creation of pledge / hypothecation will be initiated by the pledge through the participant and the pledge will instruct its participant to confirm the creation of the pledge.

Procedure for Creation of Pledge/Hypothecation 43

 The first step is that the pledgor will submit an instruction to its participant to initiate a pledge / hypothecation request in the DPM by indicating the option create a pledge / hypothecation in the pledge / hypothecation form vide exhibit is the pledgor will indicate therein the agreement number, closure date of the pledge / hypothecation.  The next step is that the participant will check for the completeness of the form.  If the form is complete in all respects, the participant will accept the form for processing and issue an acknowledgment for the same to the pledgor.  The participant will then enter the details of the request in the DPM and the DPM will generate a pledge / hypothecation instruction number of request.  If there is sufficient balance in the client’s account, the participant will enter the request form.  The acceptance / rejection of pledge / hypothecation confirmation is electronically communicated to the DPM of the pledgor’s participant through dm  In case of rejection by the pledge creation of the pledge / hypothecation instructions will be reversed and the reasons for the rejections are displayed in the DPM of the pledgors participant  After once confirmation of creation of the pledge / hypothecation it can’t be cancelled.

44

 The pledge’s participant can not confirm the creation of pledge hypothecation

after the closure date.

What should one do to pledge electronic securities?  Both investor (pledgor) as well as the lender (pledgee) must have depository accounts;  Investor has to initiate the pledge by submitting to DP the details of the securities to be pledged in a standard format ;  The pledgee has to confirm the request through his/her DP;  Once this is done, securities are pledged

Corporate benefits on the pledged securities: It is very important to know that who receive corporate benefits such as dividend, bonus etc... So, in this case the securities pledged are only blocked in the account of pledgor in favor of the pledgee. The pledgor would continue to receive all the corporate benefits.

Closure Procedure: 45

After repayment of loan to the pledgee, the pledgee will send instructions. After that participant will check for completeness of the form submitted by pledgor. If the form is complete in all respect, the participant will accept the form for further processing & will issue an acknowledgement. Now the next step is that the participant will compare details of form with those recorded in the DP as specified in the form. Now the participant will enter the closure request details in the dam against the pledge / hypothecation number. Now the participant will enter the closure details in the DPM against the from of the pledge / hypothecation. Closure request is electronically communicated to the DPM of ledger’s participant through the dm for confirmation. Demet Requisition Form (DRF): In today’s era, all the transactions are done through electronic form in NSE/BSE. So here, investors need to convert their physical certificate into electronic form. The applicant must have gone through a systematic process to open demat account. The first step is that the applicant will make request for opening his account with DP. Marwadi has to first fill up DRF form. Procedure for Dematerialization: Investor

46

DP

Steps :

R & T Agent

NSDL

 DPS provides DRF(De-mat Requisition Form) to the clients  Client/ investors submit the DRF and physical certificates of securities to

DP. DP checks whether the securities are available for de-mat. Client defaces the certificate by stamping “Surrendered for Dematerialization.”  The DP should enter the dematerialization request in DPM. dpm  generate request number (drm) which should be mentioned in  DRF  DP punches two holes on the name of the company and draws two parallel lines across the face of the certificate.  DP enters the de-mat request in his system to be sent to nsdl. Dp dispatches the physical certificates along with the drf to the r&t agent

47

 NSDL records the details of the electronic request in the system and forwards the request to the r&t agent  R & T agent, on receiving the physical documents and the electronic request, verifies and checks them.  The DP issues a statement of transaction to the client.

TRADING DEPARTMENT - 1 48

INTRODUCTION: With the increasing popularity of “scrip less trading” many brokers and sub brokers are attempting to assess possible impact of this in their business practices. In lay man language, the broker can be considered as a “wholesaler” of services and sub broker can be considered as a “retailer”. As a part of service the sub brokers also collect the securities and funds from the investor and delivers the same to the main broker for onward settlement with the clearing corporation (CC)/clearing house (CH).

According to SEBIrules, it is advisable to open trading account. An investor can open trading account in any depository.

As per the guidelines prescribed,

partnership firm & corporate body cannot open their trading account. Marwadi has different segments to facilitate the transactions related to trading. To open trading account anyone must have to follow the specific procedure which is as follows.

49

DIFFERENT SAGMENT:

FORM:

EXPLANATION OF DIFFERENT SEGMENTS: 50

Clients can be divided mainly in three segments.

 Direct Client (All Segment)  Authorized Person’s Client (Derivatives Segment)  Sub Broker Client (Cash Segment)  1. DIRECT CLIENT: When client wants to deal in each and every segment then Marwadi make direct client agreement. When client wants to open an account in Marwadi or in any of the branches at that time Marwadi also makes direct client agreement.

FORM:

51

2. AUTHORISED PERSON’S CLIENT: Trading members of the Exchange may appoint authorized person who can be individuals, registered partnership firms, corporate bodies or companies as defined 52

under the Companies Act, 1956 in the Capital Market (CM) segment or Futures & Options (F&O) segment or in both Capital market and Future & Options segment.

FORM

53

3. SUB BROKER CLIENT:

When client wants to deal in only cash segment then Marwadi makes sub broker client agreement. FORM

54

PROCEDURE FOR OPENING AND CLOSING TRADING ACCOUNT

 Client ask for form  The client fills up the form and submit to Marwadi  The Marwadi checks all the details and then verify the proves.  Marwadi makes agreement according to segment and relevant agreement form has been attached.  The next step is coding. In coding name and surname has been checked and if anything matches then it shows that account is already been opened. Otherwise new code is given. After coding address details have been entered.  The next step is brokerage. The brokerage charge depends upon different segments and clients. In same day square up the brokerage is fixed that is 0.8 paisa. Client gives brokerage to broker and broker will give it to Marwadi at the end of month. There would not be any delivery charge. Marwadi decides the different slabs according to which clients are charged. 55

 At last data entry has been done.

REQUIREMENT FOR OPENING AN ACCOUNT:

 Photo copy (driving license, ration card, voter id card, pass port)  De-mat account copy  Pan card number  Bank Account number  Electric bill (Last Two Months bill)  Authority letter  E-mail id  Declaration

56

CLOSING OF AN ACCOUNT:

A beneficial owner or clearing member may close his account with the participant. at the time of default of client participant can also be initiated for closure of account for which the client has to submit an account closure request form to the participant on the other hand client can also re-materialize his holdings or can transfer it with another participant.

PROCEDURE FOR CLOSING AN ACCOUNT:

 The client will submit a request to the Participant in the form vide for account closure.  On receipt of the request form, the Participant will verify that the form is duly filled in and issue to the client, an acknowledgement slip, signed and stamped. 57

 The Participant will verify signature of the client on the form with the specimen signature available in its records.  If the signature differs, the Participant will ensure the identity of the client.  The client is required to indicate whether it has opted for transferring the holding to another account or for re-materialization.  If the option is for transfer of holding to another account, procedure laid down to another transfer will be followed.  If the option is for re-materialization, procedure laid down for rematerialization will be followed.  After all the balances in the client account become zero, the Participant will change the status of the client account to “TO BE CLOSED.”  The Participant will issue a final statement of accounts to the clien

TRADING DEPARTMENT - 2

58

Different Option for Trading,  NSE Cash  NSE Derivatives  BSE Cash

PROCESS OF TRADING:

 The trading system provides tremendous facilities to the users in terms of orders that can be placed on the system.  It provides complete online market system.  The market screen at any point of time provide complete information on total order depth, five best buyers & sellers available in the market, the quantity traded during the day in that security, the high - low, the last traded price etc…  Immediately after the trading limit has been placed in order book investor can know the fate of the orders.  Limit orders are orders to bye & sell shares at a stated quantity & stated price.  If price quantity condition doesn’t match; the limit order will not be executed. 59

 NSE CASH  The neat system supports an order driven market, where in orders match on the basis of time & price priority. All quantity fields are in units & prices are quoted in Indian currency (RS.)  The regular lot size & tick size for various securities traded are notified by the exchange from time to time.  The system (NEAT) is available for trading on all days except Saturday, Sunday & other Holidays which are declared by the exchange from time to time.  The trading member can carry out following activities after login to the NEAT system & before the market pens for trading  Setup market watches (i.e. the securities which the user would Like to view the entire screen)  Viewing inquiry screens.

Now the trading market is divided into different phases as follows. 1. Open phase 2. Market close 3. Surcon 60

1) Open phase: The open period indicates the commencement of the trading activity. At that time a message is sent to all the trader workstations.

 Order entry is allowed only when all the securities have been opened.  The activities that are mainly done at this stage are order inquiry, order modification, order pending until executed, cancellation at the time of closing.

2) MARKET CLOSE: At the time of closing normally no further orders can be entered but in F&O there are two types available i.e. American & European in which European type allows users to enter the order after closing the session.

3) SURCON:

61

Surveillance & control is that period after closure of the market during which the users can, inquire. After every SURCON period, the system processes the data for making the system available for the next trading day.

MARKET TYPES:

The Capital Market System has four types of market. Marwadi are:  Normal Market  Odd Lot Market  ALBM Market  Auction Market

1.NORMAL MARKET: Normal market consists of various book types wherein orders are segregated as Regular Lot orders, Special Term orders, Negotiated Trade orders and Stop Loss orders depending on their order attributes. All orders have to be of Regular Lot size or multiples thereof.

2.ODD LOT MARKET: 62

An order is called an Odd Lot order if the order size is less than Regular Lot size. Such orders are traded in the Odd-Lot market. These orders do not have any special terms attribute attached to them. In an Odd-Lot market, both the price and quantity of the orders (buy and sell) should exactly match for the trade to take place.

3.ALBM MARKET: ALBM orders are similar to the normal market orders except that ALBM orders have different settlement periods vis-a-vis normal market. The orders entered in this market do not have any special terms attribute attached to them.

4.AUCTION MARKET: In the Auction market, auctions are initiated by the Exchange on behalf of trading members for settlement related reasons.

There are three participants in this market. A. Initiator : The party who initiates the auction process is called an initiator. B. Competitor: The party who enters orders on the same side as of the initiator is called a Competitor. C. Solicitor: 63

The party who enters orders on the opposite side as of the initiator is called a Solicitor. NEAT SCREEN

64

MAJOR SEGMENTS: The following windows are displayed on the Trader Workstation screen:  Title Bar  Ticker Window  Tool Bar  Market Watch Window  Inquiry Window  Snap Quote  Order/Trade Window  Message Window

NSE DERIVATIVE: Derivatives are one of the most complex instrument. Delivery contracts, stating what is to be delivered for a fixed priced at a specified place on a specified date. These contracts were undertaken between farmers & merchants to element the risk arising out of uncertainty future prices of grains. A derivative is Na contract whose value is derived from value of another assets, known as the underlying, which could be a share, a stock market index, and interest rate, a commodity or a currency.

65

66

As per above structure of derivative markets, two major segment of it financial derivative market and commodity derivative market. In financial derivative market it sub divided in organized market and Over The Counter (OTC) market. All the financial instruments are treaded under this market. The functions of financial derivative markets are treading, clearing, settlement.

BSE CASH The transaction of BSE is done in BOLT software. The BSE On-Line trading system (BOLT) is designed and developed by CMC Ltd…It is simple to use, screen-based computer trading system. You can trade on the all scripts using this system. This is a primary guide on how to use the BOLT system.

The BOLT system aims at converting the open outcry system of trading to a screen-based system. You, as a trader on the BOLT system can input orders.

What is BOLT? 67

BOLT is CMC’s implementation of the screen – based on-line trading system for Bombay Stock Exchange. Trading Rules on the BOLT system are based on the business Requirements Specification (BRS) provided by the BSE.

Options :

There are two type of options- calls and puts, calls give the buyer the right but not the obligation to buy a given quantity of the underlying asset, at a given price on or before a given future date. Puts give the buyer the right but not the obligation to sell quantity of the underlying asset at a given price on or before a given date. ‘Option’, as the word suggests, is a choice given to the investor to either honor the contract; or if he chooses not to walk away from the contract. There are two kinds of options: Call Options and Put Options. 68

 A Call Option is an option to buy a stock at a specific price on or before a

certain date. When you buy a Call option, the price you pay for it, called the option premium, secures your right to buy that certain stock at a specified price called the strike price. If you decide not to use the option to buy the stock, and you are not obligated to, your only cost is the option premium.  Put Options are options to sell a stock at a specific price on or before a

certain date. In this way, Put options are like insurance policies. With a Put Option, you can "insure" a stock by fixing a selling price. If something happens which causes the stock price to fall, and thus, "damages" your asset, you can exercise your option and sell it at its "insured" price level. If the price of your stock goes up, and there is no "damage," then you do not need to use the insurance, and, once again, your only cost is the premium. Technically, an option is a contract between two parties. The buyer receives a privilege for which he pays a premium. The seller accepts an obligation for which he receives a fee.

➢ Forwards: A forward contract is an agreement between two entities to buy or sell the underlying asset t a future date, at today’s pre-agreed price. 69

➢ Futures: A futures contract is an agreement between two parties to buy or se the underlying asset at a future date at today’s future price.Futures contracts differ from forward contracts in the sense the they are standardized and exchange traded.

➢ Swaps:

A Swaps can be defined as an exchange of obligation by two parties for instance I an interest rate Swap(IRS), one company arrange with another to exchange interest rate payment.

There are many types of Swaps like Assets Swap, Currency swaps and so on. The most important one is an interest rate Swaps (IRS) and Currency Swaps.

 Interest Rate swap (IRS):-

One company may be paying fixed rate of interest but prefer floating rates. Another company may be paying a floating rate but would fina a fixed rate advantageous. Thus it makes sense for both the companies to enter into an IRS agreement.

70

An important advantage of IRS is that different firms can access funds at varying rates and terms. They may not always find these terms beneficial, they enter into Swap agreement. IRS enables them to access sources of funding at better rates than what they would be able to achieve on a direct basis.

 Currency swaps:

These entail swapping both principal and interest between the parties, with the cash flows in one direction being in a different currency than those in the opposite direction.

➢ Warrants:

Options generally have lives of up to one year; the majority of options traded on options exchanges have a maximum maturity of nine months. Longerdated options are called warrants and are generally traded over-the-counter.

➢ Basket:

71

Basket options are options on portfolios of underlying assets. The underlying asset is usually a moving average or a basket of assets. Equity index options are a form of basket options.

CURRENT SYSTEM IN INDIA:

Currently in India, all future transactions are settled in cash. There is no system of physical delivery. It is widely expected that NSE/BSE will move to a physical delivery soon. However index based future and options will continue to be based on cash settlement system.

Following items are treaded in commodity exchange namely NCDEX and MCX.

72

73

INITIAL PUBLIC OFFER (IPO)

A corporate may raise capital in the primary market by way of an initial public offer, rights issue or private placement. An Initial Public Offer (IPO) is the selling of securities to the public in the primary market. It is the largest source of funds with long or indefinite maturity for the company. 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:  100% of the net offer to the public through the book building route.  75% of the net offer to the public through the book building process and 25% through the fixed price portion.  Under the 90% scheme, this percentage would be 90 and 10 respectively.

The traditional method of doing IPOs is the fixed price offering. Here, the issuer and the merchant banker agree on an "issue price" - e.g. Rs.100. Then you and I 74

have the choice of filling in an application form at this price and subscribing to the issue. Extensive research has revealed that the fixed price offering is a poor way of doing IPOs. Fixed price offerings, all over the world, suffer from `IPO underpricing'. In India, on average, the fixed-price seems to be around 50% below the price at first listing; i.e. the issuer obtains 50% lower issue proceeds as compared to what might have been the case. This average masks a steady stream of dubious IPOs who get an issue price which is much higher than the price at first listing. Hence fixed price offerings are weak in two directions: dubious issues get overpriced and good issues get underpriced, with a prevalence of underpricing on average.

There should be no fragmentation of the shares on offer. All shares to be sold should go through a single auction. If a retail investor wanted to "access the IPO at prices close to the offer price" she would just place non--competitive bids at the IPO, where she bids to buy (say) 100 shares at the IPO price, whatever it proves to be.

Allocation of shares in the depository should take place on Tuesday itself. There should be no physical shares. Trading on NSE should start on Wednesday (the next day). This gives us a one--day lag between the IPO and the start of trading. 75

Bid, A bid is the demand for a security that can be entered by the syndicate/subsyndicate members in the system. The two main components of a bid are the price and the quantity . Bidder, The person who has placed a bid in the Book Building Process.

Book Running Lead Manager, A Lead Merchant Banker who has been appointed by the Issuer Company as the Book Runner Lead Manager. The name of the Book Runner Lead Manager is mentioned in the offer document of the Issuer Company. Floor Price, The minimum offer price below which bids cannot be entered. The Issuer Company in consultation with the Book Running Lead Manager fixes the floor price.

Merchant Banker, 76

An entity registered under the Securities and Exchange Board of India (Merchant Bankers) Regulation, 1999.

Syndicate Members, Syndicate Members are the intermediaries registered with the Board and permitted to carry on activity as underwriters. The Book Running Lead Managers to the issue appoints the Syndicate Members.

PORTFOLIO MANAGEMENT(PMS) Introduction:

Portfolio management is a tool provides some basic benefits such as giving a holistic view of the various investments and the alignment of the investments with the long term goals of the individual. However Portfolio is one of the most challenging jobs and therefore isn't easy. Portfolio Management can help you gain 77

control of your investments and deliver some meaningful value to your earnings from the investments. Portfolio Management takes a holistic view of the overall earning strategy of the individual. While managing the investment portfolio; it is important to remember that the riskier strategic investments should always be balanced with more conservative investments. The investment mix should be constantly monitored to assess which investments are on track, and which are the ones that need help and which are the ones that need to be shut down. However, the key of successful portfolio management lies in the execution. A strong portfolio management program can turn any sinking investment around and do the following:  maximize value of investments while minimizing the risk.  Allow investors to schedule resources more efficiently  Reduce the number of redundant investments and make it easier to kill loss making investments. And of course portfolio management definitely means that you are left with more money in your pockets. Efficient portfolio management also reduces overall expenditures by 20% by saving the losses that are otherwise made on loss making investments.

78

Marwadi having own 3 schemes under the BAGBAN product for Portfolio management there are as follows. 1. Baramasi 2. Marigold 3. Sunflower

79

So far in INDIA most of the middle class earners have been risk-averse and therefore park most of their savings in Fixed Deposits and Other Savings Accounts, though the yield from such investment avenues is very low. However, the recent trend has been such that more people have been attracted towards investment in Mutual Funds and Equities. It is in this light that Portfolio Management Companies have been gaining prominence in India. The trend is only set to go upwards in the years to come, as the Indian middle class becomes more risk friendly IT portfolio management can help any organization to gain control of its IT projects and deliver meaningful value to the business. IT Portfolio management takes a holistic view of the organization’s overall IT strategy. Both IT and business leaders analyze project proposals by matching them with the company's strategic objectives. Effective IT portfolio management also helps in the following manner:  Helps to maximize value of IT investments while minimizing the risk

Improves communication and alignment between Information Systems and business leaders  Encourages business leaders towards teamwork and to take responsibility for projects  Allows planners to schedule the IT resources more efficiently

80

The application and definition of pharmaceutical portfolio management has evolved greatly over the past 20 years. It is becoming even more important in India in the face of the patents regime coming to an end in 2005. The TRIPS agreement brings about great implications for the pharmaceutical portfolio management of the Indian companies, as many drugs will be coming off-patents this year. It is imperative that the Indian pharmaceutical organizations handle this changing scenario to their best advantage and build a competitive advantage earlier on in this equal platform. Product Portfolio Management is a system that is put in place in organizations in order to select a portfolio of new product development projects.

This system is implemented in any organization with the view of achieving the following goals:  Maximizing the profitibality or value fo the portfolio  Providing balance supporting the strategy of the enterprise Product Portfolio Management is the responsibility of the senior management team of an organization or business unit. The team, which is involved in the process, is usually called the Product Committee. The product committee meets regularly to manage the product pipeline and make decisions about the product portfolio. 81

Program portfolio management in any multimedia company or a television channel company is akin to the concept of product portfolio management followed by any other product manufacturing company, or in fact similar to the financial portfolio management followed by any investment professional. The program portfolio management is a concept that has only recently emerged in the Indian entertainment industry owing to the fact that, before the advent of international channels in the Indian scenario, the Indian television industry was monopolized by the national television channel and therefore had no requirement for any channel or program management as the audience gulped down whatever was offered to them through the only channel of entertainment in the country.

82

COMMODITY DEPARTMENT Introduction Organized commodity derivatives in India started as early as 1875, barely about a decade after they started in Chicago. However, many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the markets for the underlying commodities. As a result, after independence, commodity options trading and cash settlement of commodity futures were banned in 1952. A further blow came in 1960s when, following several years of severe draughts that forced many farmers to default on forward contracts (and even caused some suicides), forward trading was banned in many commodities considered primary or essential. Consequently, the commodities derivative markets 83

dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in policy, started actively encouraging the commodity derivatives market. Since 2002, the commodities futures market in India has experienced an unprecedented boom in terms of the number of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which might cross the $ 1 Trillion mark in 2006. However, there are several impediments to be overcome and issues to be decided for sustainable development of the market. This paper attempts to answer questions such as: how did India pull it off in such a short time since 2002? Is this progress sustainable and what are the obstacles that need urgent attention if the market is to realize its full potential? Why are commodity derivatives important and what could other emerging economies learn from the Indian mistakes and experience? The Indian economy is witnessing a mini revolution in commodity derivatives and risk management. Commodity options trading and cash settlement of commodity futures had been banned since 1952 and until 2002 commodity derivatives market was virtually non-existent, except some negligible activity on an OTC basis. Now in September 2005, the country has 3 national level electronic exchanges and 21 regional exchanges for trading commodity derivatives. As many as eighty (80) commodities have been allowed for derivatives trading. The value of trading has been booming and is likely to cross the $ 1 Trillion mark in 2006 and, if all goes well, seems to be set to touch $5 Trillion in a few years. 84

Role of Marwadi in Commodity Marwadi Commodity Broker Ltd. (MCBL) is experienced share broker dedicated for progress of Commodity Derivatives. Marwadi Group owns MCBL. MCBL provided all the commodity related services against Commodity Derivatives brokerage.

85

MCBL has Commodity Derivatives dedicated teams for research, dealers, experienced industrialist and experts. Currently MCBL is member of NCDEX and MCX and planning to provide to deal in other world-class exchanges shortly. MCBL will provide best services with the help of its own researched advices. Why are Commodity Derivatives Required? India is among the top-5 producers of most of the commodities, in addition to being a major consumer of bullion and energy products. Agriculture contributes about 22% to the GDP of the Indian economy. It employees around 57% of the labor force on a total of 163 million hectares of land. Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major center for trading of commodity derivatives. It is unfortunate that the policies of FMC during the most of 1950s to 1980s suppressed the very markets it was supposed to encourage and nurture to grow with times. It was a mistake other emerging economies of the world would want to avoid. However, it is not in India alone that derivatives were suspected of creating too much speculation that would be to the detriment of the healthy growth of the markets and the farmers. Such suspicions might normally arise due to a misunderstanding of the characteristics and role of derivative product. It is important to understand why commodity derivatives are required and the role they can play in risk management. It is common knowledge that prices of commodities, metals, shares and currencies fluctuate over time. The possibility of adverse price changes in future creates risk for businesses. Derivatives are used to reduce or eliminate price risk arising from unforeseen price changes. A derivative is a financial contract whose price depends on, or is derived from, the price of another asset.

86

Two important derivatives are futures and options.

(i) Commodity Futures Contracts: A futures contract is an agreement for buying or selling a commodity for a predetermined delivery price at a specific future time. Futures are standardized contracts that are traded on organized futures exchanges that ensure performance of the contracts and thus remove the default risk. The commodity futures have existed since the Chicago Board of Trade (CBOT, www.cbot.com) was established in 1848 to bring farmers and merchants together. The major function of futures markets is to transfer price risk from hedgers to speculators. For example, suppose a farmer is expecting his crop of wheat to be ready in two months time, but is worried that the price of wheat may decline in this period. In order to minimize his risk, he can enter into a futures contract to sell his crop in two months’ time at a price determined now. This way he is able to hedge his risk arising from a possible adverse change in the price of his commodity.

(ii) Commodity Options contracts: Like futures, options are also financial instruments used for hedging and speculation. The commodity option holder has the right, but not the obligation, to buy (or sell) a specific quantity of a commodity at a specified price on or before a specified date. Option contracts involve two parties – the seller of the option writes the option in favour of the buyer (holder) who pays a certain premium to the seller as a price for the option. There are two types of commodity options: a ‘call’ option gives the holder a right to buy a 87

commodity at an agreed price, while a ‘put’ option gives the holder a right to sell a commodity at an agreed price on or before a specified date (called expiry date).

The option holder will exercise the option only if it is beneficial to him; otherwise he will let the option lapse. For example, suppose a farmer buys a put option to sell 100 Quintals of wheat at a price of Rs.25 per quintal and pays a ‘premium’ of Rs.0.5 per quintal (or a total of Rs.50). If the price of wheat declines to say Rs.20 before expiry, the farmer will exercise his option and sell his wheat at the agreed price of Rs.25 per quintal. However, if the market price of wheat increases to say Rs.30 per quintal, it would be advantageous for the farmer to sell it directly in the open market at the spot price, rather than exercise his option to sell at Rs.25 per quintal. Futures and options trading therefore helps in hedging the price risk and also provide investment opportunity to speculators who are willing to assume risk for a possible return. Further, futures trading and the ensuing discovery of price can help farmers in deciding which crops to grow. They can also help in building a competitive edge and enable businesses to smoothen their earnings because nonhedging of the risk would increase the volatility of their quarterly earnings. Thus futures and options markets perform important functions that can not be ignored in modern business environment. At the same time, it is true that too much speculative activity in essential commodities would destabilize the markets and therefore, these markets are normally regulated as per the laws of the country.

88

89

Commodities products Gold, Gold HNI, Gold M, I-Gold, Silver, Silver HNI, Silver M Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cottonseed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli (Cottonseed Oilcake), Mustard /Rapeseed Oil, Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran Refined Oil, Sesame Seed, Soymeal, Soy Seeds Cardamom, Jeera, Pepper, Red Chilli

Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Flat, Steel Long (Bhavnagar), Steel Long (Gobindgarh), Tin, Zinc Cotton Long Staple , Cotton Medium Staple, Cotton Short Staple, Cotton Yarn, Kapas Chana, Masur, Tur, Urad, Yellow Peas,

Basmati Rice, Maize, Rice, Sarbati Rice,

90

Wheat

Brent Crude Oil, Crude Oil,Furnace Oil Middle East Sour Crude Oil Arecanut, Cashew Kernel, Rubber

High Density Polyethylene (HDPE), Polypropylene (PP), PVC Guar Seed, Guargum, Gurchaku, Mentha Oil, Potato, Sugar M-30, Sugar S-30,

91

National Commodity & Derivatives Exchange Limited (NCDEX) is a professionally managed online multi commodity exchange promoted by ICICI Bank Limited (ICICI Bank),

Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE). Punjab National Bank (PNB), CRISIL Limited (formerly the Credit Rating 92

Information Services of India Limited), Indian Farmers Fertiliser Cooperative Limited (IFFCO) and Canara Bank by subscribing to the equity shares have joined the initial promoters as shareholders of the Exchange. NCDEX is the only commodity exchange in the country promoted by national level institutions. This unique parentage enables it to offer a bouquet of benefits, which are currently in short supply in the commodity markets. The institutional promoters of NCDEX are prominent players in their respective fields and bring with them institutional building experience, trust, nationwide reach, technology and risk management skills.

NCDEX is a public limited company incorporated on April 23, 2003 under the Companies Act, 1956. It obtained its Certificate for Commencement of Business on May 9, 2003. It has commenced its operations on December 15, 2003.

NCDEX is a nation-level, technology driven de-mutualized on-line commodity exchange with an independent Board of Directors and professionals not having any vested interest in commodity markets. It is committed to provide a world-class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency.

NCDEX is regulated by Forward Market Commission in respect of futures trading in commodities. Besides, NCDEX is subjected to various laws of the land like the Companies Act, Stamp Act, Contracts Act, Forward Commission (Regulation) Act and various other legislations, which impinge on its working. 93

NCDEX is located in Mumbai and offers facilities to its members in more than 390 centres throughout India. The reach will gradually be expanded to more centres.

NCDEX currently facilitates trading of thirty six commodities - Cashew, Castor Seed, Chana, Chilli, Coffee, Cotton, Cotton Seed Oilcake, Crude Palm Oil, Expeller Mustard Oil, Gold, Guar gum, Guar Seeds, Gur, Jeera, Jute sacking bags, Mild Steel Ingot, Mulberry Green Cocoons, Pepper, Rapeseed - Mustard Seed ,Raw Jute, RBD Palmolein, Refined Soy Oil, Rice, Rubber, Sesame Seeds, Silk, Silver, Soy Bean, Sugar, Tur, Turmeric, Urad (Black Matpe), Wheat, Yellow Peas, Yellow Red Maize & Yellow Soybean Meal. At subsequent phases trading in more commodities would be facilitated.

Screen of Ncdex

94

Multi Commodity Exchange (MCX):

MCX is an independent and de-mutulised multi commodity exchange. It was inaugurated on November 10, 2003 by Mr. Mukesh Ambani, Chairman and Managing Director, Reliance Industries Ltd., and has permanent recognition from the Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country.

Headquartered in the financial capital of India, Mumbai, MCX is led by an expert management team with deep domain knowledge of the commodity futures markets. The integration of dedicated resources, robust technology and scalable infrastructure, has helped MCX record many firsts since its inception.

95

Being a nation-wide commodity exchange having a robust infrastructure, offering multiple commodities for trading with wide reach and penetration, MCX is well placed to tap the vast potential poised by the commodities market. MCX offers a wide spectrum of opportunities to a large cross section of participants including Producers/ Processors, Traders, Corporate, Regional Trading Centers, Importers, Exporters, Co-operatives and Industry Associations amongst others

Screen of MCX

The market watch window is used to view the market details for a particular or group of contracts and for a particular instrument type. This window displays the following details: Symbol, Expiry, price quotation unit, buy qty, buy price, sell 96

price, sell qty, last traded price, D.P.R, volume (in 000’s), value (in lack),% change, average trade price, high, low, open ,close & open interest.

97

MUTUAL FUND

Introduction 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 and other securities. The income earned through these investments and the capital appreciation realised 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

The Indian mutual fund industry is dominated by the Unit Trust of India which has a total of Rs700bn collected from more than 20 million investors. The UTI has many funds/schemes in all categories like equity, balanced, income etc with some being open-ended and some being closed-ended. The Unit Scheme 1964 commonly referred to as US 64, which is a balanced fund, is the biggest scheme with a corpus of about Rs200bn.The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank the. The history of mutual funds in India can be broadly divided into four distinct phases

98

Mutual Funds in India

UTI commenced its operations from July 1964 .The impetus for establishing a formal institution came from the desire to increase the propensity of the middle and lower groups to save and to invest. UTI came into existence during a period marked by great political and economic uncertainty in India.

Finance Minister, T.T. Krishnamachari set up the idea of a unit trust that would be "open to any person or institution to purchase the units offered by the trust. However, this institution as we see it, is intended to cater to the needs of individual investors, and even among them as far as possible, to those whose means are small." His ideas took the form of the Unit Trust of India, an intermediary that would help fulfill the twin objectives of mobilizing retail savings and investing those savings in the capital market and passing on the benefits so accrued to the small investors. One thing is certain – the fund industry is here to stay. The industry was one-entity show till 1986 when the UTI monopoly was broken when SBI and Canbank mutual fund entered the arena. This was followed by the entry of others like BOI, LIC, GIC, etc. sponsored by public sector banks. Starting with an asset base of 99

Rs0.25bn in 1964 the industry has grown at a compounded average growth rate of 26.34% to its current size of Rs1130bn.

Mutual Fund Operation Flow Chart

There are many entities involved organisational set up of a mutual fund

100

and

the

diagram

illustrates

the

Schemes By Structure: Open-ended Funds

An open-end fund is one that is available for subscription all through the year. These do not have a fixed maturity. Investors can conveniently buy and sell units at Net Asset Value ("NAV") related prices. The key feature of open-end schemes is liquidity. Closed-ended Funds

A closed-end fund has a stipulated maturity period which generally ranging from 3 to 15 years. The fund is open for subscription only during a specified period. Investors can invest in the scheme at the time of the initial public issue and thereafter they can buy or sell the units of the scheme on the stock exchanges where they are listed. In order to provide an exit route to the investors, some closeended funds give an option of selling back the units to the Mutual Fund through periodic repurchase at NAV related prices. SEBI Regulations stipulate that at least one of the two exit routes is provided to the investor. 101

Interval Funds

Interval funds combine the features of open-ended and close-ended schemes. They are open for sale or redemption during pre-determined intervals at NAV related prices.

By Investment Objective: Growth Funds

The aim of growth funds is to provide capital appreciation over the medium to long- term. Such schemes normally invest a majority of their corpus in equities. It has been proven that returns from stocks, have outperformed most other kind of investments held over the long term. Growth schemes are ideal for investors having a long-term outlook seeking growth over a period of time.

Income Funds

The aim of income funds is to provide regular and steady income to investors. Such schemes generally invest in fixed income securities such as bonds, corporate debentures and Government securities. Income Funds are ideal for capital stability and regular income.

Balanced Funds 102

The aim of balanced funds is to provide both growth and regular income. Such schemes periodically distribute a part of their earning and invest both in equities and fixed income securities in the proportion indicated in their offer documents. In a rising stock market, the NAV of these schemes may not normally keep pace, or fall equally when the market falls. These are ideal for investors looking for a combination of income and moderate growth.

Money Market Funds

The aim of money market funds is to provide easy liquidity, preservation of capital and moderate income. These schemes generally invest in safer short-term instruments such as treasury bills, certificates of deposit, commercial paper and inter-bank call money. Returns on these schemes may fluctuate depending upon the interest rates prevailing in the market. These are ideal for Corporate and individual investors as a means to park their surplus funds for short periods.

Load Funds

A Load Fund is one that charges a commission for entry or exit. That is, each time you buy or sell units in the fund, a commission will be payable. Typically entry 103

and exit loads range from 1% to 2%. It could be worth paying the load, if the fund has a good performance history.

No-Load Funds

A No-Load Fund is one that does not charge a commission for entry or exit. That is, no commission is payable on purchase or sale of units in the fund. The advantage of a no load fund is that the entire corpus is put to work.

Other Schemes: Tax Saving Schemes

These schemes offer tax rebates to the investors under specific provisions of the Indian Income Tax laws as the Government offers tax incentives for investment in specified avenues. Investments made in Equity Linked Savings Schemes (ELSS) and Pension Schemes are allowed as deduction u/s 88 of the Income Tax Act, 1961. The Act also provides opportunities to investors to save capital gains u/s 54EA and 54EB by investing in Mutual Funds, provided the capital asset has been sold prior to April 1, 2000 and the amount is invested before September 30, 2000.

104

Special Schemes Industry Specific Schemes Industry Specific Schemes invest only in the industries specified in the offer document. The investment of these funds is limited to specific industries like InfoTech, FMCG, Pharmaceuticals etc.

Index Schemes

Index Funds attempt to replicate the performance of a particular index such as the BSE Sensex or the NSE 50

Sectoral Schemes Sectoral Funds are those, which invest exclusively in a specified industry or a group of industries or various segments such as 'A' Group shares or initial public offerings Advantage The advantages of investing in a Mutual Fund are: Professional Management Diversification Convenient Administration Return Potential 105

Low Costs Liquidity Transparency Flexibility Choice of schemes Tax benefits

Marwadi : Mutual Fund Industry

Marwadi Shares & Finance Pvt. Ltd., ISO 9002 Certified company, have 30000 clients and 1000 corers of holdings with strengths of 250 employees spread all over the India and number one is Saurashtra and Kutch reason. MSFPL is Corporate Agent of Mutual Fund company, like Franklin Templeton Investment, Prudential ICICI, HDFC, BIRLA Sun life, Reliance Capital, Principal Mutual fund etc., Company is technically wealthy & fully computerized managed Management uses the Internet for daily reporting as well as to keep in touch with its branches with fully trained employees.

MSFPL having Mutual fund is one products out of various financial products. Company is handling 38 company’s mutual fund’s open-ended and close-ended 106

schemes on commission basis. Company provides customer services like Daily market report, valuation report, new launches of schemes, portfolio management, Day to day NAV reports, monthly base customer meet, campaign at government or private company premises.

Mutual fund department started since November-2002, Annual turn over of mutual fund is three crores. Company gets on an average 3 lakh Rupees on mutual fund business commission every year. Sales executives go for direct marketing and collect the High Net worth Individuals (HNI), Trusts and Industrialists database. Sales Executive meet the customer and give them day to day market reports and advise them about new schemes and valuation report of their investments. Sales Executive is doing direct marketing. Company is planning to start service at all the branches with all the services of mutual fund. Presently company is providing mutual fund services only at Head Office at Rajkot, and looking for great opportunity from rest of all the branches.

ACCOUNT DEPARTMENT 107

The company is providing services for trading in shares and derivative products to its clients at Rajkot office and from it’s branches. The clients place order for buy/sale of shares and such transaction are executed on the trading terminals situated at the office of the company/ branches. All terminals are connected through v-sats, leased lines etc. and at the end of day, the complete details of all trades done is collected at Rajkot office. The software driven system takes care of all these transactions and at the end of the day, bills etc. for all trade are prepared. The bills are prepared at Rajkot only and are dispatched to the clients at the same day.

Each and every expense is mentioned under specific head only. The main books of accounts which they maintain as per the requirements u/r various Acts are; Register of transactions (sauda book) clients ledger, General ledger, Journals, Cash book, Bank book, Margin deposite book, register of accounts and all the accounting records as per general accounting standards. The company is marinating serially numbered bills for all the clients at Rajkot. As per SEBI’s directives, client are provided with contract notes cum bills on serially numbered continuous stationary. Presently the company is providing services through total thirty branches situated within the country. Marwadi’ s authorized capital is increased to 25crore from 10 crore.

In account department Different margins are also decided for different types of slabs decided for brokers and margin for square up is also decided here only. For preparing an account they use in house software that is beats.

108

3

HIRARCHY STRUCTURE

Board of Director

General Manager

DP Front

Trading

Account 109

Technology

DP Back

Audit (Compliance)

Software

GUIDELINES PROVIDED BY SEBI

While further downside in the markets cannot be ruled out, it is important to keep in mind that the markets can bounce back equally sharply and suddenly. We would recommend that investors stay invested through the current bout of volatility and focus on longer-term returns on their portfolios. Further declines in the market could be utilised as a good entry point for further investments in equities.

110

 The prices of precious and base metals tumbled on Monday in theinternational Market as speculators pulled out fearing a fall in the dem and due to the rising interest rates. Moreover, the correction was overdue for a long time. The fall in the international metal prices was also reflected in our domestic market.  The falling dollar value in the world market may lead to rise of the interest rates (Fed Rate) in U.S  If the U.S Interest Rates rise, the rest of the world will tend to resist capital flows from being sucked by the U.S.  In turn if the Domestic Interest Rates further harden then the Corporates will be inclined to redraw their investment plans. In addition, the Governments Fiscal Plans will be affected if interest rate goes up.  The prospects of further interest rate rise in the U.S have serious implications for the world economy.  Corporates in India and other developing countries may have to depend only on domestic sources of loan funds.

111

112

SURVEY As the company wants to introduce a online trading at a browse base in its new website so company need to know its competitors means what types of services they are providing and what are the different charges they are taking. In below table the companies which are stated are main competitors of Marwadi because they are already providing service of online trading at a browse base. So I have made a survey on behalf of company. Particulars

Kotak

Sharekhan

Securities A/C Opening

ICICIDirect.

HDFC

com

Securities

400

750

750

500

0.59%

0.50%

0.75%

0.50%

0.10%

0.10%

0.10%

0.15%

400

500

500

500

0.04, Min Rs.20

Nil

0.02, Min

Nil

Brokerage Cash Segment (Delivery) Margin Segment (Same day) Demat Charges Annual Service charges Buy: Market and OffMarket

Rs.20 Nil for trade on icicidirect.co 113

m

Sell: Market and Off-

0.04, Min Rs.20

0.04%

Market

0.04, Min

0.04%, Min.

Rs.20 Nil for

Rs.23

trade on icicidirect.co m Dematerialization

Rematerialization

Rs.25 per

Rs.25 per

Rs.35 per

Rs.35 per

request, Rs.3

request, Rs.1

request, Rs.2

request, Rs.3

Per certificate

Per certificate

Per certificate

Per certificate

Rs.10 per

Rs.0.02% of the

Rs.20 per

Rs.20 per

certificate

value, Min.

request form

certificate

Rs.15

form, Min. Rs. 10

Pledge

0.02% of

0.02% of

0.02% of

0.02% of

transaction

transaction

transaction

transaction

value, Min.

value, Min.

value, Min.

value, Min.

Rs.50

Rs.25

Rs.20

Rs.20

Rs.25

Rs.25

Rs.20

Rs.25

Minimum Balance.

HDFC-

UTI-2500

ICICI-5000

HDFC-5000

Requirement in

2500+5000

HDFC-5000

Saving A/c

UTI-1000+2500

Additional account statement

Kotak2500+5000 114

Limit Exposure Cash Segment

4 times

3 times

1 time

4 times

Margin Segment

4 times

6 times

3 to 25 times

4 times

Saving Bank A/c With

HDFC, UTI,

HDFC Bank,

ICICI Bank

HDFC Bank

KOTAK

UTI

Kotak Securities

ShareKhan

ICICI Bank

HDFC Bank

Demat A\c. With

Securities

As per the above table comparison there are some suggestions for the company:

Account Opening: In Above table Kotak Securities is taking lower charges for the A/c Opening. Marwadi should charge round about Rs.400 to Rs.500 for A/c Opening. Company can think about not to charge single penny for Account Opening because the some company like Relegan Securities which are not charging any single penny for A/c Opening.

Brokerage: In above table broking is charge 50 paisa minimum in cash segment and 10 paisa in margin segment. So it is better to charge minimum 50 paisa broking in cash segment and 10 paisa in margin segment. For those customers who are dealing in big amount company can charge him lower broking also.

Bank Account: In above table it shows that all broking houses tie up with bank or provide a service to open a bank account in its own bank. So company can tie up with many bank who are providing net banking facilities there are many banks like 115

UTI, HDFC, ICICI, HSBC, Kotak-Mahindra, etc. this tie up are beneficial for the company itself because if company tie up with all of them then customer can do online trading easily. This is good sign for the company.

Limit Exposure: In above table minimum they are providing 4 times in cash segment and in margin segment up to 20 times. Company can provide 4 to 5 times and in margin segment company can provide 25 times more or if any customer demands for more limit than it would be base on his creditability.

Demat account with: In above table all Broking house having rule that there is compulsory Demat account in its own firm if customer wants to do trade with them. But company can provide a facility that there is no any compulsion of opening an Demat account in its firm means if customer wants trade with the company and if Demat is not in the company than also customer can do trade with the company.

Demat Annually Charges: In above table Kotak Securities is charging less Demat charges. If company charges less Demat charges than automatically customer will attract towards company for opening a Demat A/c with the company.

Buy and Sell in Market and Off-Market: In above table ShareKhan and HDFC is not charging single penny in Buying so Marwadi can think of not to charge any 116

amount towards buying or if company wants to charge than they can charge a nominal charge which is applicable for the customers. In selling company can charge nominal charges same as in buying.

Research Methodology and Research Design This is basically an exploratory research and would be studied by following steps. 

The primary data will contain the survey through questionnaire. 117



Secondary data is the data collected earlier for a purpose other than

currently pursued. In this study no secondary data is used.

Research Instrument Questionnaire is the instrument of collecting the data. Primary data is collected from the mobile users and it was a direct approach.

Data Collection and Sources The opinion gathered from the mobile user by using a questionnaire method.

Sample Design

118

The sample design for primary research can be termed as stratified random sampling. Form the overall population of consumer a random sample size of 100 where selected. Research method was undertaken for soliciting information form the respondents by personal interview to know the attitude of respondents regarding the availability price etc

Field Work Primary data was collected through survey. In the case of survey any one of the following methods can collect data:



By observation



Personal Interview



Telephone Interview



By mailing of questionnaire

In this study, survey was done through personal interview. The investigator follows a rigid procedure and seeks answer to set off preconceived questions in personal interview. The method of collecting data is usually carried out in a structural way, for this study printed format of questions included in the questionnaire with a view of gathering accurate information. 119

Limitation of Research Reliability of Respondent Many of the respondents do not give 100 % true information which may be due to ignorance of the information being personal. They have to be prompted or coaxed so as to get much of the true information as possible. This is one of the barriers of the study.

Time bound This study is time bound and the results of the study may not be applicable with the passage of time.

I

120

121

QUESTIONNAIRE(DATA Analysis)

1] Name :

2] Address :

3] Mobile No.

4] Gender :

122

Male

Female

5] Age :

18- 22

23-27

28-32

33 and above

6] Occupation :

Business

Professional

Student

Other

Service

7] What is your monthly income?

Less than Rs. 5000

Rs. 5000 to 10000 123

Rs. 10000 to 15000

Rs. 15000 & Above

8] Where is your investment ?

Epuity

IPO

Commodity

Derivities

PMS

Mutual fund

124

9] Where is your investment ?

Equity

IPO

Commodity

Derivatives

PMS

Mutual Fund

10] Through which broking house are you investing? Marwadi

Angel 125

Sharekhan

Motilal Oswal

India infoline

Others

11] What is the nature of your Investment? Intraday

Delivery

12] Which type of Trading do you prefer? Online Offline 13] If you are trading Offline, than how do you manage it? Directly 126

Phone Call

14] Which initiates you to invest? Script

Chart Analysis

Research

127

128

Gender : Male Female

68% 32%

Age : 18-22 23-27 28-32 32 & Above

20% 25% 35% 20%

Occupation : Business Profession Service Others

32 % 28 % 29 % 11 %

129

What is your monthly income? Below 5000 5000-10000 10000-15000 15000 & Above

15 % 35 % 23 % 27 %

Where is your investment ?

Equity IPO Commodities Derivates PMS Mutual Fund

35 % 18 % 12 % 10 % 15 % 10 %

Investment Pattern of The people

130

Through which broking house are you investing?

Marwadi

31 %

Angel

29 %

Sharekhan

26 %

Motilal Oswal

12 %

India Infoline

7%

Other

5%

•

Interpretation

If we look at figure, there are more people investing in Angel broking and other broking ltd. And also marwadi is getting more investor.

What is the nature of your Investment?

Intraday 45

Delivery base 55 131

•

Interpretation

There are more people dealing in Delivery base, but now days there are increasing number of people who are dealing in Intraday.

➢ Which type of Trading do you prefer?

Online 78%

Offline 22%

132

If you are trading Offline, than how do you manage it? Directly

32 %

Phone Call

68 %

•

Interpretation

There are nearly 6% people those are trading directly and 14% people those are trading by phone call.

➢ Which initiates you to invest? Script

55 %

Chart Analysis

35 %

Research

10 %

•

Interpretation

133

As per the result we can say that more people are investing through script, and second large investors are investing through research and others are investing through the chart analysis.

Suggestions 

Though Marwadi has better position as far as its market share is concerned, it is facing steep competition from other industry majors. So, Marwadi is required to increase its marketing activity for retaining its top position.



As there is a vast potential for Commodities market Marwadi can take following steps to tap this potential.

➢

It can impart education by classroom teaching and literature as lack of knowledge is one of the constraint, faced by people.

➢

It can show the benefits of Trading to existing customers turn them towards these instruments.

➢

Special services like online tutorial modules and practical training would also be helpful in this regards. 134

Conclusion On the basis of this study I could reach to the following conclusions.

 More no. of people, who are already investing in Equity market are keen on investing in Commodities.

 People generally want to trade independently. But broker’s advice and tips from the well known stock broking houses are the major factors which have a great deal of bearing on the trading decisions and hence can influence the buying behavior of people.

135

 Most of the people want to learn about Trading by Self Experience. However, Literature and Classroom teaching can be considered as good methods to impart education to them.

 People consider branded stock broking companies as the best medium for trading.

BIBILOGRAPHY WEBSITES: ➢ www.msfpl.com ➢ www.nseindia.com ➢ www.bseindia.com ➢ www.mcxindia.com ➢ www.ncdex.com ➢ www.nsdl.com ➢ www.cdsl.com 136

➢ www.google.com

137