aarti megha sharekhan

8/13/2019 Aarti Megha Sharekhan

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DECLARATION

I, Megha Sheth, hereby declare that the project work has been carried out through my ownefforts and under the guidance of Mr. Taral Pathak and Mr. Mayank Joshipura, facultyof AES PGIBM, Ahmedabad.

This project has been submitted as a part of study curriculum of MBA program. Thereport has not been submitted to any other university.

DATE

PLACE Signature

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ACKNOWLEDGEMENTIt is my great pleasure to present this report. I thank all those people who helped me to

make this project, by providing necessary information.

I would like to express my gratitude towards Mr. Amit Buch of Sharekhan who spenthis most valuable time and provided with all the necessary details regarding the company.

I would also like to thank Mr. Shrinivas Bhatt and Mr. Tejas Doshi, who shared theirknowledge and expertise.

I would also like to thank Mr. Taral Pathak and Mr. Mayank Joshipura ofAESPGIBM for their guidance throughout the preparation of the project and for theirvalued suggestion.

At last I would like to thank all those people who helped me bring this project to fruitism

Date:

Place: Signature

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EXECUTIVE SUMMARYThis project mainly focuses on Share Market as a whole, its history and development.

Herein, I discuss the basic concepts of the share market, what is equity market,commodities market and derivatives market, how do they function and how are themargins set. It also contains industry analysis based on Michael Porters Five ForceModel and Competition analysis.

It discusses Sharekhan as a stock broking company, its products and services. It discussesthe Seven S Model as applied to Sharekhan.

The report also contains the analysis of the Market survey carried out by me.

Lastly, it includes an analysis on The Historic Market Crash of May 2006.

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INDEXSR. TITLE PAGE NO.

1. Industry Overview 62. Stock Exchanges 9

3. Transaction Cycle 14

4. Major Players 15

5. Industry Analysis 21

6. Entry Barriers 24

7. Competition Analysis 25

8. Traditional vs E-broking 26

9. About Sharekhan 28

10. 7S Model 4211. Sharekhan Stock Cluster 44

12. Publications 45

13. Products and Servicies 46

14. Comparision 54

15. SWOT Analysis 64

16. Derivatives 66

17. Commodities 77

18. Research at Sharekhan 85

19. Market Crash Analysis 87

20. Market Survey 94

21. Conclusion 105

22. Recommendation 106

23. My Learning 107

24. Bibliography 108

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INDUSTRY OVERVIEWINTRODUCTION

Stock exchanges to some extent play an important role as indicators, reflecting theperformance of the countrys economic state of health. Stock market is a place wheresecurities are bought and sold. It is exposed to a high degree of volatility, prices fluctuatewithin minutes and are determined by the demand and supply of stocks at a given time.Stock brokers are the ones who buy and sell securities on behalf of individuals andinstitutions 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. Thepast performances in the capital markets especially the securities scam by HasrshadMehta has led to tightening of the operations by SEBI. In addition the internationaltrading and investment exposure has made it imperative to better operational efficiency.With the view to improve, discipline and bring greater transparency in this sector, constantefforts are being made and to a certain extent improvements have been made.

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HISTORY

Indian Stock Markets are one of the oldest in Asia. Its history dates back to nearly 200

years ago. The earliest records of security dealings in India are meager and obscure.

By 1830's business on corporate stocks and shares in Bank and Cotton presses tookplace in Bombay. Though the trading list was broader in 1839, there were only half adozen brokers recognized by banks and merchants during 1840 and 1850. The 1850'switnessed a rapid development of commercial enterprise and brokerage business attractedmany men into the field and by 1860 the number of brokers increased into 60.

In 1860-61 the American Civil War broke out and cotton supply from United States ofEurope was stopped; thus, the 'Share Mania' in India begun. The number of brokers

increased to about 200 to 250. However, at the end of the American Civil War, in1865, a disastrous slump began (for example, Bank of Bombay Share which had touchedRs 2850 could only be sold at Rs. 87). At the end of the American Civil War, thebrokers who thrived out of Civil War in 1874, found a place in a street (nowappropriately called as Dalal Street) where they would conveniently assemble and transactbusiness.

In 1887, they formally established in Bombay, the "Native Share and Stock Brokers'Association" (which is alternatively known as "The Stock Exchange"). In 1895, the

Stock Exchange acquired a premise in the same street and it was inaugurated in 1899.Thus, the Stock Exchange at Bombay was consolidated.

Thus in the same way, gradually with the passage of time number of exchanges wereincreased and at currently it reached to the figure of 24 stock exchanges.

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DEVELOPMENT

An important early event in the development of the stock market in India was the

formation of the Native Share and Stock Brokers Association at Bombay in 1875, theprecursor of the present-day Bombay Stock Exchange. This was followed by the formationof associations /exchanges in Ahmedabad (1894), Calcutta (1908), and Madras(1937). IN addition, a large number of ephemeral exchanges emerged mainly in buoyantperiods to recede into oblivion during depressing times subsequently.

In order to check such aberrations and promote a more orderly development of the stockmarket, the central government introduced a legislation called the Securities Contracts(Regulation) Act, 1956. Under this legislation, it is mandatory on the part of a stockexchanges to seek government recognition. As of January 2002 there were 23 stockexchanges recognized by the central Government. They are located at Ahmedabad,Bangalore, Baroda, Bhubaneshwar, Calcutta, Chennai,(the Madras stock Exchanges ),Cochin, Coimbatore, Delhi, Guwahati, Hyderbad, Indore, Jaipur, Kanpur, Ludhiana,Mangalore, Mumbai(the National Stock Exchange or NSE), Mumbai (The StockExchange), popularly called the Bombay Stock Exchange, Mumbai (OTC Exchange ofIndia), Mumbai (The Inter-connected Stock Exchange of India), Patna, Pune, andRajkot. Of course, the principle bourses are the National Stock Exchange and TheBombay Stock Exchange , accounting for the bulk of the business done on the Indianstock market.

While the recognized stock exchanges have been accorded a privileged position, they aresubject to governmental supervision and control. The rules of a recognized stock exchangesrelating to the managerial powers of the governing body, admission, suspension, expulsion,and re-admission of its members, appointment of authorized representatives and clerks, soon and so forth have to be approved by the government. These rules can be amended,varied or rescinded only with the prior approval of the government. The SecuritiesContracts (Regulation) Act vests the government with the power to make enquiries intothe affairs of a recognized stock exchange and its business, withdraw the recognition thetask of regulating the stock exchange to the Securities Exchanges Board of India.

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BSE(BOMBAY STOCK

EXCHANGE)

The Stock Exchange, Mumbai, popularly known as "BSE"was established in 1875as "The Native Share and Stock Brokers Association".It is the oldest onein Asia, even older than the Tokyo Stock Exchange, which was established in 1878. Itis 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 overthe years into its present status as the premier Stock Exchange in the country. It is thefirst Stock Exchange in the Country to have obtained permanent recognition in 1956from the Govt. of India under the Securities Contracts (Regulation) Act, 1956.

The Exchange, while providing an efficient and transparent market for trading insecurities, debt and derivatives upholds the interests of the investors and ensures redressal oftheir grievances whether against the companies or its own member-brokers. It also strivesto educate and enlighten the investors by conducting investor education program andmaking available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies andregulates 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), threeSEBI nominees, six public representatives and an Executive Director & ChiefExecutive Officer and a Chief Operating Officer.

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NSE(NATIONAL STOCK EXCHANGE)

NSE was incorporated in 1992 and was given recognition as a stock exchange in April1993. It started operations in June 1994, with trading on the Wholesale Debt MarketSegment. Subsequently it launched the Capital Market Segment in November 1994 as atrading platform for equities and the Futures and Options Segment in June 2000 forvarious derivative instruments.

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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 atthe cheapest possible cost. It provides a nation-wide, screen-based, automated tradingsystem, with a high degree of transparency and equal access to investors irrespective ofgeographical location. The high level of information dissemination through on-line systemhas helped in integrating retail investors on a nation-wide basis. The standards set by theexchange in terms of market practices, Products , technology and service standards havebecome 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 forwhich it was set up. It has been playing a leading role as a change agent in transformingthe Indian Capital Markets to its present form. The Indian Capital Markets are a farcry from what they used to be a decade ago in terms of market practices, infrastructure,technology, risk management, clearing and settlement and investor service.


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NCDEX (NATIONAL COMMODITIES AND DERIVATIVESEXCHANGE)

NCDEX started working on 15thDecember, 2003. This exchange provides facilities totheir trading and clearing member at different 130 centers for contract.In commodity market the main participants are speculators, hedgers and arbitrageurs.Promoters of NCDEX areNational Stock Exchange(NSE) ICICI bankLife Insurance Corporation(LIC)National Bank for Agricultural and Rural Development (NABARD) IFFICOPunjab 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 informationNCDEX 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

FACILITIES PROVIDED BY NCDEX

NCDEX has developed facility for checking of commodity and also provides awear house facility

By collaborating with industrial partners, industrial companies, news agencies,

banks and developers of kiosk network NCDEX is able to provide current ratesand contracts rate.

To prepare guidelines related to special products of securitization NCDEX workswith bank.

To avail farmers from risk of fluctuation in prices NCDEX provides specialservices for agricultural.

NCDEX is working with tax officer to make clear different types of sales andservice taxes.

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NCDEX is providing attractive products like weather derivatives


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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-commoditymarketplace, offering unlimited growth opportunities to commodities market participants.As a true neutral market, MCX has taken several initiatives for users In a newgeneration commodities futures market in the process, become the countrys premierexchange.MCX, an independent and a de-mutualized exchange since inception, is all set up tointroduce a state of the art, online digital exchange for commodities futures trading in thecountry and has accordingly initiated several steps to translate this vision into reality.

Market Watch:

The market watch window is used to view the market details for a particular or group ofcontracts 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 tradedprice, D.P.R, volume (in 000s), value (in lac),% change, average trade price, high, low,open, close & open interest.

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TRANSACTION CYCLEError!

PLACING ANORDER

FUNDS ORSECURITIES

TRADEEXECUTION

CLEARING OFTRADES

SETTLEMENTOFTRADES

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

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


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MAJOR PLAYERS

1. S S KANTILAL ISHWARLAL SECURITIES PVT LTD.(www.sharekhan.com)2. ICICI WEB TRADE LTD. (www.icicidirect.com)3. 5 PAISA.COM (www.5paisa.com)4. KOTAK SECURITIES LTD. (www.kotakstreet.com)5. INDIABULLS (www.indiabulls.com)6. MOTILAL OSWAL SECURITIES LTD.7. HDFC SECURITIES LTD. (www.hdfcsec.com)8. UTI SECURITIES LTD.9.

IDBI CAPITAL MARKET SERIVICES LTD.10.REFCO SIFY SECURITIES PVT LTD.

A/c Opening

Fee

Brokerage InterfaceParameters

Trading

A/c

Demat Delivery Square

Off

Banks

Associated with

Sharekhan 750 NIL 0.50 0.10 HDFC, UTI,

OBC, IDBI &

Citibank

ICICI Direct 750 NIL 0.75 0.18 ICICI Bank

Indiabulls 750 250 0.40 0.10 N.A.

5 paisa 800 NIL 0.20 0.05 Citibank, HDFC,

OBC, UTI &

ICICI Bank

Kotak Street 500 N.A. 0.59 0.06 Kotak Bank &

Citibank

HDFC Securities 700 NIL 0.50 0.15 HDFC & Other 4

Banks

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http://www.sharekhan.com/http://www.icicidirect.com/http://www.5paisa.com/http://www.kotakstreet.com/http://www.indiabulls.com/http://www.hdfcsec.com/http://www.hdfcsec.com/http://www.indiabulls.com/http://www.kotakstreet.com/http://www.5paisa.com/http://www.icicidirect.com/http://www.sharekhan.com/


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S. S. KANTILAL ISHWARLAL SECURITIES PVT.

LTD. (sharekhan.com):

Sharekhan, Indias leading stockbroker is the retail arm of SSKI, and offers youdepository services and trade execution facilities for equities, derivatives and commoditiesbacked with investment advice tempered by decades of broking experience. A research andanalysis team is constantly working to track performance and trends. Thats whySharekhan has the trading products, which are having one of the highest success rates inthe industry. Sharekhan is having 240 share shops in 110 cities; the largest chainof retail share shops in India is of Sharekhan.

In future, Sharekhan is planning to enter in Mutual funds, Insurance sector and bankingsector to expand beyond the market currently covered by it. And it has started MF(Mutual Funds) on priority basis but wants to grow in it.

ICICI Web Trade Ltd. (ICICIdirect.com):

ICICIdirect.com was the first entrant into e-broking. ICICdirect.com provides the 3-in-1to the users which tie in their saving bank account and their Demat account to theirbrokerage account electronically. This integration ensures that money is transferred

to/from their bank account and the shares are transferred from/to their Demat accountautomatically without writing any cheques or transfer instructions while carrying out theirtrades in shares.

ICICIdirect.com has the option of trading in shares in cash, margin or spot segments. Aninvestor can also invest in 14 Mutual Funds (Prudential ICICI MF, FranklinTempleton India MF, Alliance Capital MF, JM MF, Birla Sun Life MF, SundaramMF, IL&FS MF, Principal MF, HDFC MF, Standard Chartered MF, RelianceCapital MF, Kotak Mahindra MF, TATA MF and DSP MERRILL LYNCHMF) through their trading account.

ICICIdirect.com doesnt provide the facility of trading in a traditional way.

5PAISA.COM

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5paisa is the trade name of India Infoline Securities Private Limited (5paisa), member ofNational Stock Exchange and The Stock Exchange, Mumbai. 5paisa is a wholly ownedsubsidiary of India Infoline Ltd, Indias leading and most popular finance and investmentportal. 5paisa has emerged as one of leading players in e-broking space in India.


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The companys brokerage is one of the lowest in the industry. It also provides the researchon commodities. Investors can benefit from its analysis and advice available at the click ofthe mouse. For those who prefer to trade the traditional way, India Infoline investor pointsare available across the country.

India Infoline was founded by a group of professionals in 1995. Its institutional investorsinclude Intel Capital, one of the leading technology companies in the world promoted by the

UK government, ICICI, TDA and Reeshanar. The company offers a slew of productssuch as stock and derivatives broking, commodities broking and mutual funds.

KOTAK SECURITIES LIMITED (kotakstreet.com):

Kotak Securities Ltd., a strategic joint venture between Kotak Mahindra Bank andGoldman Sachs (holding 25% - one of the worlds leading investment banks andbrokerage firms) is Indias leading stock broking house with a market share of 5 - 6 %.Kotak Securities Ltd. has been the largest in IPO distribution - It was ranked numberOne in 2003-04 as Book Running Lead Managers in public equity offerings byPRIME Database. It has also won the Best Equity House Award from Finance Asia -April 2004.

Kotak Securities Ltd is also a depository participant with National Securities DepositoryLimited (NSDL) and Central Depository Services Limited (CDSL) providing dual

benefit services wherein the investors can use the brokerage services of the company forexecuting the transactions and the depository services for settling them. The company has42 branches servicing around 1, 00,000 customers. Kotakstreet.com the online division ofKotak Securities Limited offers Internet Broking services and also online IPO andMutual Fund Investments.

Kotak Securities Limited manages assets over 1700 crores under Portfolio ManagementServices (PMS) which is mainly to the high end of the market. Kotak Securities Limitedhas newly launched Kotak Infinity as a distinct discretionary Portfolio ManagementService, which looks into the middle end of the market.

INDIA BULLS

Indiabulls is India's leading retail financial services company with 77 locations spreadacross 64 cities. Its size and strong balance sheet allows providing varied products andservices at very attractive prices, our over 750 Client Relationship Managers are dedicatedto serving your unique needs.

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Indiabulls is lead by a highly regarded management team that has invested crores of rupeesinto a world class Infrastructure that provides real-time service & 24/7 access to all


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information and products. The Indiabulls Professional Network offers real-time prices,detailed data and news, intelligent analytics, and electronic trading capabilities, right atyour fingertips. This powerful technology is complemented by our knowledgeable andcustomer focused Relationship Managers.

Indiabulls offers a full range of financial services and products ranging from Equities,Derivatives, Demat services and Insurance to enhance wealth and to achieve the financialgoals.

Motilal Oswal Securities Ltd. (MOSt):

One of the top-3 stock-broking houses in India, with a dominant position in bothinstitutional and retail broking, MOSt is amongst the best-capitalized firms in the

broking industry in terms of net worth. MOSt was founded in 1987 as a small sub-broking unit, with just two people running the show. Focus on customer-first-attitude,ethical and transparent business practices, respect for professionalism, research-based valueinvesting and implementation of cutting-edge technology have enabled it to blossom into athousand-member team.

The institutional business unit has relationships with several leading foreign institutionalinvestors (FIIs) in the US, UK, Hong Kong and Singapore. In a recent media reportMOSt was rated as one of the top-10 brokers in terms of business transacted for FIIs.

The retail business unit provides equity investment solutions to more than 50,000investors through 270 outlets spanning 150 cities and 22 states. MOSt provides Advice-Based Broking, Portfolio Management Services (PMS), E-Broking Services, DepositoryServices, Commodities Trading, and IPO and Mutual Fund Investment AdvisoryServices. Its Value PMS Scheme gave a 160% post-tax return for the year ended March2004

In AsiaMoney Brokers Poll 2003 MOSt has been rated as the Best Domestic ResearchHouse- Mega Funds, while in 2000 and 2002 it has been rated as the Best DomesticEquity Research House and Second best amongst Indian Brokerage firms respectively.

HDFC SECURITIES LTD (HDFCsec):

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HDFC securities is a brand brought to you by HDFC Securities Ltd, which has beenpromoted by the HDFC Bank & HDFC with the objective of providing the diversecustomer base of the HDFC Group and other investors a capability to transact in theStock Exchanges & other financial market transactions. The services comprise onlinebuying and selling of equity shares on the National Stock Exchange (NSE). Buying and

selling of select corporate debt and government securities on the NSE would be introduced
http://www.motilaloswal.com/eag.htmhttp://www.motilaloswal.com/eag.htmhttp://www.motilaloswal.com/eag.htmhttp://www.motilaloswal.com/eag.htm


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in a subsequent phase. In a few months, they will also start offering the following onlinetrading services on the BSE and NSE:

Buying and selling of shares on the BSE

Arbitrage between NSE & BSE

3. Trading in Derivatives on the NSE

4. Margin trading products.

They are also planning to include buying and selling of Mutual Funds, IPO subscriptions,Right issues, purchase of Insurance policies and asset financing.

UTI SECURITIES LTD.: (UTISEL)

Unit Trust of India incorporated UTI SECURITIES LTD on June 24, 1994 as a100% subsidiary and on the repealing of the UTI Act, the capital is now held by theAdministrator of the Specified Undertaking of Unit Trust of India (ASUUTI). UTISecurities has been working as an independent professional entity for providing financialintermediary and advisory services to its corporate and retail clientele.

The Company has presence in major cities with 20 branches and 50 franchisees to servicea wide range of clients. The company has also invested in the joint-venture company withStandard Chartered Bank viz. Standard Chartered UTI Securities (P) Ltd. that isengaged in primary dealership and Government securities. The company is very soon goingto start Commodity Trading through its subsidiary, USEc Commodities Ltd, whichprovides facility of commodity trading on NCDEX and MCX.

IDBI Capital Market Services Ltd.

IDBI Capital is a leading Indian securities firm offering a complete suite of products andservices to individual, institutional and corporate clients.

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IDBI Capital Market Services Ltd. (IDBI Capital), a wholly owned subsidiary ofIndustrial Development Bank of India (IDBI), is a leading Indian securities firm,offering a complete suite of products and services to individual, institutional and corporateclients. The services include fixed income trading, equities brokerage, debt and equityderivatives, research, private placements, depository services, portfolio management anddistribution of financial products. Over the last five years, we have emerged as a leadingplayer in each of these businesses.


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March 1995 - Commenced Equity Broking on NSE CM segment

July 1995 - Built agent Distribution Network across the country

October 1996 - Commenced Debt Broking on NSE WDM segment

December 1996 - Started operations as a Depository Participant

1996 - Started to act as Arranger to Privately Placed Bond issues

April 1998 - Commenced operations as a Portfolio Manager

February 1999 - Acquired membership of BSE, Mumbai

November 1999 - Started operations as a Primary Dealer

June 2000 - Acquired Derivatives memberships of BSE and NSE

March 2002 - Achieved an outright secondary market turnover exceeding Rs100,000

October 2002- Commenced trading in Interest Rate Swaps

REFCO - SIFY SECURITIES INDIA PVT. LTD

Refco-Sify Securities India Pvt. Ltd., headquartered in Mumbai, is a joint venturebetween the Refco Group Holding Ltd., USA; and Satyam Infoway Limited(NASDAQ: SIFY) to offer online and offline equity and derivatives trading for retailcustomers as well as execution and clearing services for financial institutions.

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Refco also provides clients with prime brokerage services, fixed income, equities, foreignexchange, OTC derivatives and asset management. Refco is a leader in providing clientswith the latest technological advances in products and services. Its proprietary systems andglobal infrastructure provide the flexibility to meet all client requirements.


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INDUSTRY ANALYSIS

INDUSTRY ANALYSIS USING PORTERS 5 FORCES

MODEL

SUPPLIERS

Web maintainersNSCLCSDLNSEBSEMCX

NCDEX

SUBSTITUTES

Mutual FundsInsuranceBank FD

COMPETITORS

BUYERSICICI Web Trade Ltd

5paisa.comSmall Investors

Kotak Securities LtdFranchise/Business

Partners

India Bulls

Motilal Oswal Securities Ltd HNIsHDFC Securities Ltd

MF CompaniesMarwadi Finance Ltd

HUFInstitutional Investors

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POTENTIAL ENTERANT

InvestmartVarious Banks

Geojit

CipherUTI Securities Ltd.Refco Group Ltd.

IDBI Capital Mkt. Services Ltd.


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SUPPLIERS

NSDL & CSDL are the regulatory bodies for Depository Participants like

SSKI, SHCIL, ICICIdirect.com, etc. Also these regulatory bodies have got anupper hand as the bargaining power stock broking houses like SSKI, etc. wouldbe less.

NSE & BSE are playgrounds where common investors trade through stockbroking houses, for which they have to take permission from NSE/BSE.

NSE & BSE are under the purview of SEBI, thats why stock broking houseslike SSKI, have low bargaining power. But here NSE/BSE have one advantage,

they cannot go for forward integration.

MCX & NCDEX are stock exchanges, which trade in commodities andderivatives. Here again stock broking houses have to follow rules and regulation ofthe same.

BUYERS

There are various types of investors who trade through stock broking houses likeSSKI, which includes investors like small investors, medium net worth investors,business partners, institutional investors and mutual fund companies.

Here the bargaining power of stock broking houses depends on how big theinvestor is. So here we can say that bargaining power of stock broking houses ishigh in case of small investors & HUF.

While, the bargaining power is moderate in case of HNI (High New WorthInvestors)/ MNIs (Medium Net Worth Investors) and business partners.

But in case of mutual fund companies and institutional investors bargaining poweris less.

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There is competitive buzz in stock broking industry; competitors are offering lowbrokerage and best services with added feature. So switching cost is pretty muchless. So the buyer can easily switch over to competitors product.


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COMPETITORS

The company is facing the competition from local as well as national level players.The local players provide facility for off-line trading while the national players likeICICIdirect.com and Kotakstreet.com, HDFC Security provide online tradingservices.

There are also other big names like Indiabulls, Motilal Oswal, 5paisa andMarwadi, which encircle the company from both the sides by providing online andoff-line trading with competitive services.

POTENTIAL ENTRANTS The potential entrants like Investmart, Jeojit and Cipher, which are coming in

near future to Rajkot City.

Nationalized banks are also planning to enter this field by tying up with brokinghouses. E.g. Bank Of Baroda.

SUBSTITUES

Here substitutes are such instruments, which can be used instead of investing inshares.

The instruments like Bank FD, insurance, mutual funds are the substitutes.

If the use of this instruments increase this may be disadvantageous for the stockbroking houses.

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The companies and banks, which are having these instruments, can plunge intothis industry.


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COMPETITION ANALYSISFollower:

The followers are those who just blindly follow the other players, which are

leaders and challengers.

The players like 5 paisa, Motilal Oswal, HDFC Securities, Kotakstreet are

the followers.

LEADER:

ICICIdirect.com is a leader in the online account which is having 1, 24,000

accounts in the country.

While in offline account Sharekhan is leading with 64,000 offline accounts.

NICHER:

ICICIdirect.com and Kotakstreet.com are the two stock broking houses, which

are focusing only on online investors.

CHALLENGER:

Sharekhan, Kotakstreet and Indiabulls come under this head.

Sharekhan challenges competitors by providing quality services and research

based advice.

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Indiabulls is also challenging with low brokerage rates and class one services.


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TRADITIONAL VS E-BROKINGTRADITIONAL BROKING

Traditionally in Stock Market, the investors invested their money in shares under theguidance of the Brokers of any stock broking company. This was convenient to thoseinvestors who were not familiar with the computer and the use of internet. But it requiredmore dealers to the share broking companies to give guidance related to investment. Therewas a chance of inaccuracy of price because it was a time consuming process. The costs ofthe company also use to increase due to more paperwork. From the investors point of view,there was a problem of privacy. The broker may leak the information of investor. So, toremove these limitations of traditional broking, there was an emergence of new concept e-

Broking.

E-BROKING

Today is a world of technology. So the person who adapt to it achieves success. E-brokingis broking through electronic means. E-broking is the broking in which the investors whoare familiar with the use of computer and internet directly trade in stock market. Theytrade anytime at any place when the stock market is open. The cost of transaction is also

reducing with time. The investors have large range of options for trading. It is a paperlesstransaction so it reduces the cost of the company. There is facility of live streaming quotes,which gives exact price of the share prevailing in the market at that time. There are twotypes of online trading services: discount broker and full service online broker.

Discount online brokers allow you to trade via internet at reduced rate. Someprovide quality research, others dont. Full service online brokerage is linked to existingbrokerage. These brokers allow their clients to place online orders with the option oftalking/chatting with brokers if needed. Brokerage rates here are higher. Online trading isstill in its infancy stage in India with trading turnover at around Rs.10 crores per dayfrom online trading as compared to a combined gross turnover of around Rs.9000 to10,000 crores handled by BSE and NSE together.

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INTERNET TRADING IN INDIA:

In the past, investors had no option but to contact their broker to get real time access tomarket data. The net brings data to the investor online and net broking enables him totrade on a click. Now information has become easily accessible to both retail as well as biginvestors.

The development of broking in India can be categorized into 3 phases. Stock brokersoffering on their sites features such as live portfolio manager, live quotes, market researchand news to attract more investors.

Brokers offering online broking and relationship management by providing and offeringanalysis and information to investors during broking and non broking hours based ontheir profile and needs i.e. customized services

Brokers (e-brokers) will offer value management or services such as IPO online, assetallocation, portfolio management, financial planning, and tax planning, insurance servicesand enable the investors to take better and well-considered decisions.

Presently internet trading can take place through the order routine system, which will routeclient orders to exchanges trading systems for execution of trades on stock exchanges (BSEand NSE). This will also require interface with banks to facilitate instant cash debit orcredit and depository system for debit or credit of securities.

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ABOUT SHAREKHANINTRODUCTION

Share khan is a stock broking company. Share khan comes under retail arm of SSKI(Shripal Sevantilal Kantilal Ishwarlal) investors services pvt. Ltd. It offers world-classfacilities for buying and selling shares on BSE and NSE demat services (DP) andderivatives (F&O). SSKI group also comprises of institutional broking and corporatefinance.

Sharekhan is also about focus. Sharekhan does not claim expertise in too many things.Sharekhan's expertise lies in stocks and that's what he talks about with authority. So

when he says that investing in stocks should not be confused with trading in stocks or aportfolio-based strategy is better than betting on a single horse, it is something that isspoken with years of focused learning and experience in the stock markets. And thesebeliefs are reflected in everything Sharekhan does.

Share khan is an eight decades old company, which started its online services in the year2000, and it is the first who started online in 1984 that ventured into institutionalbroking and corporate finance.

Share khan as a retail broking arm of SSKI, caters to the needs of individual investors.While the investment world abounds with Jack of all trades, share khan chose to buildtheir business by focusing on what they know best- market driven investment avenues likeequities, derivatives and commodities. They facilitate the investment process for their clientsand also provide value added services like research, stock ideas, demat, online trading etc.to make their investment experience rewarding.

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VISION

To empower the investor with quality advice and superior service to help him take better

investment decisions. We believe that our growth depends on client satisfaction.

MISSION

To provide the best customer service and product innovation tuned to diverse needsof clientele

Continuous up-gradation with changing technology, while maintaining human

values.

Respond to progressive globalization and achieving international standards.

Efficiency and effectiveness built on ethical practices.

CORE VALUES

Customer satisfaction through

Providing quality service effectively and efficiently

Smile, it enhances your face value is a service quality stressed on periodic

customer service Audits

Maximization of stakeholder value

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Success through Teamwork, integrity and People


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GENERAL INFORMATION

NAME : S. S. KANTILAL ISHWARLAL

SECURITEIS PVT. LTD.

HEAD OFFICE : SHAREKHAN LTD.

A 206, PHOENIX HOUSE,

PHOENIX MILL COMPOUND,

SENAPATI BAPTA MARG,

LOWER PAREL,

MUMBAI - 400013

PH NO : 1800 - 22 7500 , 3970 75 00

E-MAIL : [email protected]

WEB SITE : www.sharekhan.com

CHIEF EXECUTIVE OFFICER: TARUN SHAH

BRANCH OFFICES : 100 BRANCHES

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http://www.sharekhan.com/http://www.sharekhan.com/


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CHANGING TRENDRemember the time when you left orders with your broker in the morning and received aconfirmation fax late in the evening?

You wondered whether you had acquired the shares at the best possible price for the day.Today, the picture is different. Imagine a scenario where you log on to your account, get thelive quotes of scripts you are interested in, get advise from experts and research reports onyour investment choice and then just click the mouse to place your order, pay the amount due(which automatically gets debited into your account with the on line brokerage firm), getyour account statement, and the delivery of your shares into your Demat account. All thisthrough just one click of a mouse. Seems like a dream? But with online trading this has

become a reality. A few seconds later, you get the confirmation on your screen. And after thetrade settlement, your bank and DP accounts will reflect the changes accordingly.

The speed of transaction, confidentiality about the prices and ease of settlement in thepaperless mode should be good reasons for retail investors to jump on to the Net. All theyneed is a PC, a modem, a subscription to an ISP, an account with a bank (which has a webpresence) and a depository account. And they can choose from a plethora of e-trading websites.

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So, finally the changing trend is known as E-trading which really means Buying and sellingsecurities via the Internet or other electronic means such as wireless access, touch-tone telephones,and other new technologies with online trading. In most cases customers access a brokeragefirm's Web Site through their regular Internet Service Provider. Once there, customers mayconsult information provided on the Web Site and log into their accounts to place orders andmonitor account activity"


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SSKI Group - Corporate Structure

Owns 50.5% of

Integrated Equity Solutions Provider

Among the top 3 branded retail service providers

(Rs. 200+crs average daily Vol- FY 03-04)

Multi-channel access to clients

Tailor made research and products

Depository Services Derivatives

Innovative products for enhanced performance

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SSKI Corpor ate Finance Pvt. Ltd.

Investment Banking arm of thegroup

Shareholding pattern

50.5% SSKI Securities Pvt.Ltd.

49.5 % Morakhia family

SSKI Investor Services Pvt. Ltd.

Retail broking arm of the group Shareholding pattern

56% Morakhia family (promoters)

18.5% HSBC Private EquityManagement, Mauritius

18.5% First Carlyle Ventures,Mauritius

SSKI Securities Pvt. Ltd.

Morakhia Family & Associates

Owns 56%


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COMPANY OVERVIEW

SSKI named its online division as SHARE KHAN and it is into retailBroking

The business of the company overhauled 4 years ago on February 8, 2000.

It acts as a discount brokerage house to a full service investment solutions provider

It has specialized research product for the small investors and day traders

Largest chain of share shops, 68 Branches across India.

It has $25m/trades every day.

Leading player today with 20% market share

Over 10,000 online clients

The site was also launched on February 8, 2000 and named it aswww.sharekhan.com

The SpeedTrade account of share khan is the next generation technology productlaunched on April 17, 2002

SpeedTradePlus was launched on October 28, 2002 for trading in Derivatives

It offers its customers with the trade execution facilities on the NSE, for cash aswell as derivatives, depository services

It gives advice based on extensive research to its customers and provides them withrelevant and updated information to help them take their investment decisions.

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Share khan offers its customers the convenience of a broker-DP.


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MARKET COVERAGE

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Ground Network Largest in India

122 Franchisees and 68 branches

Covers 82 cities in 17 states across India

Trade execution facility on BSE and NSEfor Cash as well as Derivatives

Depository/Demat account services

Personalized Sharekhan research advice

Uniform service standards


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Award-Winner

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Winner of Chip

magazinesBestFinancial Website

Award


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SEVEN PS OF SHAREKHANPRODUCT

Product Variety

types of online trading accounts for its customers specially designed

worth investors with large and active equity

ling in derivative market.

Quality

ndly, attractive & colorful Website.

esign

site of Share khan namely www.sharekhan.com has been specially designed to

eatures:

ns product comes with the following features:

watch on any number of scripts.

me windowall scripts

leading Banks

companies

Share khan offers 3according to their volume in share trading. Those 3 varieties are:

Classic- for retail investors

Speed Trade: for high netportfolio who need to monitor and action swiftly

Speed trade Plus- for high net worth investors dea

User Frie

D

The webfacilitate its users to buy and sell shares in an instant at anytime and from anywhere theylike. The site is user friendly allowing even a layman to easily operate without any hassles.

F

- Share kha- Trade execution in a fraction of a second!- Single Screen Trading Terminal- Real time streaming quotes. Price- Back up Facility to place trades on Direct Phone Lines.- Intra day charts, updated live, tick-by-tick.- Instant Order\ Trade Confirmation in the sa- Market depth, i.e. Best 5 bids and offers, updated live for- Online access to both accounts and DP.- 128 - bit super safe encryption.- Online fund transfer facility from- Online intra-day technical calls.

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- Exhaustive database of over 2000


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Brand Name

The company as a whole in its offline business has named itself as SSKI Securities Pvt.Ltd -Sevaklal Sevantilal Kantilal and Ishwarlal Securities Pvt. Ltd. The company has

preferred to name themselves under a Blanket Family Name.But in its online division started since 1997, the company preferred to name itself asSHARE KHAN. The Brand Name SHARE KHAN itself suggests thebusiness in whichthe company is dealing so that the consumer could easily identify the product or servicecategory.

Services

Share khan offers its customers, depository services and trade execution facilities for

equities, derivatives and commodities backed with investment advice tempered by decades ofbroking experience. The teams of its dedicated analysts are constantly at work to trackperformance and trends.

Dial-n-trade is also an exclusive service available to all Sharekhan customers for tradingin shares via the telephone. On dialing the toll free number 1600-22-7050 and onentering the customers TPIN number, the customer will be directed to a telebroker whowill buy or sell shares for him.

PRICEList Price

CLASSIC SPEEDTRADE

SPEEDTRADE

PLUS

One time

registration fee

750 1000 1500

Minimum

brokerage ChargesQuarterly

Nil 1000 1500

Brokerage

Share khan in its online business charges brokerage as follows:

- In equity Market:

On Trading: 0.1% On Delivery: 0.5%

- In Derivative Market

On Trading: 0.12% (Total brokerage) On Delivery: 0.1%

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Service Tax


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-8% on Brokerage.

Turnover tax + Stamp duty

-0.015% (Rs. 15 on every turnover of Rs. 100000)

Custody Charge

Re. 1 per script held per month.

Discounts

For investors with High Net worth, there are slabs in brokerage rates.

Payment Period

The transaction settlement date in the securities market is T+ 2 days i.e. thepayment of the transaction taken place has to be made within two days of its

occurrence.Credit terms

Share khan allows its customers to trade up to 4 times i.e. by keeping 1/4thmargin with them.Dematerialization charges

Re. 3 per certificate or Rs.15 per requests whichever is higher.

PROMOTION

Online share trading is totally a new concept in Indian Market. Generally investordoesnt like to come out from conventional way of share trading. Share khan hasintroduced this product in. The concept and Product are still new in the market.Therefore the company has undertaken extensive promotion campaign to createawareness about the product. Share khan adopts the following tools for promotingthe product

Advertising

Company advertises its product through TV media on channels like CNBC, Print

Media-in leading dailies and outdoors media. It advertises itself as an innovativeBrand with a cartoon of tiger-called SHERU. Besides attractive and colorfulbrochures as well as posters are used giving full details about the product.

Mails are sent to people logging on to sites like moneycontrol.com and rediff.com.

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Also, stalls are opened up now and then at places where prospective customers canbe approached.


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Sales Promotion

The Company offers Rs.500 instead of Rs.750 for corporate accounts (more than20 accounts).

Also, it provides online trading accounts for just Rs.300 for IIM students.

Sales Force

The Company has an aggressive sales force, which is given incentives, based on theirsales. The sales force is given intensive training continuously.

Seminar

The Company also arranges seminar in corporate world for creating awarenessabout the product. Recently, it had organized for a seminar in ONGC, IIM.

Direct Marketing

Company emphasizes more on direct marketing, as many people are still not awareof this new way of smart trading. For this, the company recruits and trains salesrepresentatives so as to explain the product and solve customer queries related to theproduct. This is the most effective way to communicate the three-in-one concept whichcompany offers.

Telemarketing

This is another promotional tool company is using to boost up its sales. For this, the

company collects the database of the people belonging to different professionalsegments.

PLACE

Channels

Share khan uses various channel alternatives to reach to its customers through Internet Tele Marketing Retail Share Shops Franchisee Owners Sales Force

Coverage

Access to the website from any part of the globe.

Locations

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Share khan has the largest chain of retail share shops in India. It has 180 shareshops located in 90 cities all over India like Pune, Thane, Chennai, Kolkata,Banglore, Luckhnow, Darjleeng, Kanpur, Baroda, Midnapore, Surat, Delhi,Gaziabad, Hydrabad, Allahbad, etc.


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PEOPLE

Employees

Selection: Employees are selected on the basis of their experience andqualification as applicable to the job.

Training: Intensive training is provided to the employees till a weekonce they join and even at times required after that.

Motivation: The employees are motivated through incentives they areprovided.

Research Team

Share khan has a team of dedicated analysts who have years of working

experience in the industries that they track, and a proven track record in usingtheir knowledge of the investment science to deliver results.

Customers,

The heart of sharekhan are really treated loyally like the kings. The customercare, which comprises of highly trained executives operating from 9:30 to 8:00p.m.

PHYSICAL EVIDENCE

Locality of the office:

In Ahmedabad, two franchise outlets are located in posh areas like Navrangpuraand Maninagar. A new franchise is going to open up in Vastrapur.

Office Environment:

The ambience within the office is what can make the customer feel comfortable intrading. The cordial and friendly atmosphere at office is like a full time motivationfor the employees.

Interiors and Infrastructure:

The office is well furnished and has 24 computer terminals on which tick-by-tickprice movements of the securities are displayed.

PROCESS

In this service organization, the ways in which the customers receive delivery of theservice constitutes the process. Here, the process involves adding value or utilityso that the customers get full satisfaction for the money spent by them.

Here the process begins from the step when customer wants to open e-invest accountand ends when his account is actually activated.

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All Indian residents and NRI are eligible to avail this service.


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Customers can open a sharekhan e-invest account by filling a single applicationform.This form includes 9 agreements like

1. Main form with customer details2. Agreement between sharekhan and client in respect of the ONLINE-INVESTMENT SUPPORT service offered.3. Agreement between the Depository Participant and the client for providing the

transaction statement through Internet.4. Irrevocable power of attorney5. Agreement between the DP and the person seeking to open an account with the

DP.6. Maintenance of clients account on a running account bases by SSKI.7. Agreement giving the right of lien on the credit balance of client in NSE trading.8. Agreement giving the right of lien on the credit balance of client in BSE trading.

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9. Risk disclosure document (cash segment)


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SEVEN S MODEL

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Super -ordinate Goals

Style

System

Structure

Strategy

Skills

Staff


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STRUCTURE:

Share khan is flexible in terms of making temporary structural changes to

cope up with specific strategic tasks without any hassles. If need arises, the topmanagement can assign the role to any of its employees which it considerscapable and skillful.

STRATEGY:

Share khan believes not only in developing the strategies but also in itssuccessful execution.

SYSTEMS:

This constitutes of all the training and development systems, estimating budgets

and the accounting system of Share khan.STYLE:

Style refers to all the symbolic actions undertaken by top managers of Sharekhan and its influence on the subordinates.

STAFF:

Share khan values its employees as its assets and therefore carefully trains andmotivates them by giving them incentives at regular intervals. Talentedemployees are assigned as mentors and given real responsibility and moved into

higher positions.SKILLS:

The term skills refer to those activities organizations do best and for whichthey are known. Share khan is known for its timely advice (suggestions/tips),which it caters to its customers and it boasts of 70-90% strike rates inbooking recommendations.

SUPERORDINATE GOALS:

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This refers to guiding concepts, values and aspirations that unite an

organization in some common purpose. It provides the customers the bestservice as it believes in customer satisfaction and retention.


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SHAREKHANS STOCK CLUSTERShare khan categorizes the stocks under coverage into six clusters. Each cluster

represents a certain profile in terms of business fundamentals as well as the kind ofreturns you can expect over a certain time horizon. So a stock like HindustanLever, a market leader with strong brands and top-quality management, sails intothe Evergreen category. And a stock like Hindustan Construction, trading at anunwarranted discount and due for a re-rating, is an Ugly Duckling. And soon.This helps you in identifying the stocks that fit your time horizons andreturn objectives best.

Evergreen

Dominant players with strong brands, robust managementcredentials, supernormal shareholder returns. Will steadily compound 18-20% peryear for next five to ten years.

Applegreen

Potentially steady compounders, but five to ten years graph bit unclear. Couldgallop at 25-30 per year over the next two to three years.

Emerging Star

Young companies likely to rule chosen niches. Even better, the niches could ballooninto full-blow markets. Potentially ten-baggers if youre patient.

Ugly Duckling

Trading below fair value or at huge discount to peer group. But somethingscooking. Could double in two to three years time.

Vultures PickCompanies with valuable assets at throwaway prices. Buy & awaitpredators.Stratlingly high returns possible.

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Cannonball

Seasons favorites. Typically fast gainers in rising markets, could return 30-50%within six months. Get in, cash in, get out.


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PUBLICATIONS OF SHAREKHAN

Sharekhans Valueline

Derivatives Digest

Eagle Eye

High Noon

Investors Eye

Commodities Buzz

Commodities Beat

Commodity Traders Corner

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Sharekhan Xclusive


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PRODUCTS OF SHAREKHAN

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Offline

ShareKhans product

Online

ClassicA /C SpeedTradeA/C

OtherServices


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OFFLINE

Offline A/c is the A/c for the investors who are not familiar with the use of

computer.

The A/C opening charges Rs.500(One time)

For 1 Year Demat A/C is Free, On 2 Year AMC charge is applicable.st nd

ONLINE

7 ways you benefit from online trading!

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CLASSIC ACCOUNT

This account allows the client to trade through our website and is suitable for our retailinvestors. Our online trading website also comes with a dial-n-trade service that enablesyou to buy and sell shares by calling our dedicated toll free number (1-600-22-7050).

Suitable for:

Retail investors who are risk averse, invest long-term and do not trade too frequently

Features:

Free Depository Account

24 x 7 Orders Any time ordering

Multiple bank options

Instant Cash transfer

Mobile Phone Alerts

24 x 7 Phone Responses

One Share at a time

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Benefits:

Trouble-free and secure storage for shares

Flexibility to order after market closes

Flexibility to choose a bank

Flexibility to buy/sell even 1 share at a time

Price:

Account Opening : Rs 750

Monthly Access fee : None

Sharekhan has a tie up with 7 banks through which one can transfer or withdrawhis fund online.1. HDFC BANK2. IDBI3. UTI4. OBC5. CITY BANK6. INDUSLAND BANK

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7. UNION BANK OF INDIAAnyone who has an account with either of the above-mentioned banks can use thisfacility. Otherwise one has to transfer or withdraw the funds by cheque.

This account enables the customer to buy and sell shares through sharekhanswebsite. Its features are:streaming quotes(using the applet based system)Multiple watch listsintegrated banking, demat and digital contractsinstant credit and transferreal-time portfolio tracking with price alert and of course the assurance ofsecure transactions.


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SPEEDTRADE

Speedtrade is the next generation online trading product that brings the power yourbrokers terminal to your PC. It is ideal for active traders and jobbers who transactfrequently during days trading session to capitalize on intra-day price movements.

With speed trade a customer gets:1. instant order execution and confirmation.2. single screen trading terminal( cash and derivatives)3. real-time streaming quotes, tic-by-tic charts4. market summary(most traded scrip, highest value)5. hot keys similar to a brokers terminal6. alerts and reminders7. back up facility to place trades on direct phone lines.8. trading in derivatives

Sharekhan has a tie up with 7 banks through which one can transfer or withdraw hisfund online.

1. HDFC BANK2. IDBI3. UTI4. OBC5. CITY BANK6. INDUSLAND BANK7. UNION BANK OF INDIAAnyone who has an account with either of the above-mentioned banks can use thisfacility. Otherwise one has to transfer or withdraw the funds by cheque.

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Benefits:

ALL BENEFITS OF CLASSIC A/Cplus

SPEED critical for traders and arbitrageurs

Streaming quotes

Customized Market Watch a maximum of 2 at a time.

Detailed and up-to-date market information and analysis example, marketdepth of a scrip- up to 6 charts visible at a time.

Price:

Account opening charges: Rs 1000

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Monthly Access charge: Rs 500


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PORTFOLIO

MANAGEMENTEQUITIES

SERVICES

DERIVATIVES

IPO &

MUTUAL FUNDS

Your Guide to the

CoRESEARCH

COMMODITIES

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Financial Jungle


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OTHER SERVICES

DIAL-N-TRADE

Trade in Equity by using your phone!

Dial-n-trade is an exclusive service available to all Share Khan customers fortrading in shares via the telephone. Just dial 1-800-22-7050, enter your TPIN numberand you will be directed to a telebroker who will buy or sell shares for you.

Features:

7 dial-n-trade features, customers just cannot do without !

1. dedicated numbers for order placements [1-800-22-7500 (toll free)/ 39707500(local charges)]

2. automatic fund transfer with phone banking (for city bank and hdfc bankcustomer)

3. simple and secure IVR (interactive voice response) based system for authentication4. no waiting time. Enter your TPIN to be transferred to our telebrokers5. trusted, professional advice from our telebrokers6. after-hours order placement facility between 8am and 9.30 am

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7. reliable services wherever you are


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PORTFOLIO MANAGEMENT SYSTEMWith the Sharekhan Team Managing Your Portfolio, you can be assured that

your investments are in safe hands!

Sharekhan follows a multi-disciplined approach incorporating quantitativeanalysis (use of models and statistical analyses), fundamental analysis (industryand company analysis, market and economic trends) and technical analysis (buyingand selling patterns of stocks). This multi-pronged approach enables the portfoliomanagers in controlling risks and provides risk-controlled returns for you. Our portfoliomanagers try to develop a core equity portfolio based on quality and broad diversification,controlling risks in the process. The common attributes that can be found across all ourequity portfolios are:

High-quality securities Holdings widely diversified among industry sectors Stocks with adequate market capitalization and free float Stock concentration as per client risk profile but generally

greater than equal to 20.

Right from choosing the combination of stocks most suitable for customers based on theirrisk appetite to monitoring their movements and discussing them with customers at special

events. This is how Sharekhan makes investing completely hassle-free for customers.

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Investing in Mutual Funds through Sharekhan

We're glad to announce that you will now be able to invest in Mutual Funds through us!

We've started this service for a few mutual funds, and in the near future will be expandingour scope to include a whole lot more. Applying for a mutual fund through us is open toeverybody, regardless of whether you are a Sharekhan customer.You have two choice through which you can invest in Mutual Fund.A) On the main page of this micro-site and scheme snapshot page we have provided with alink to PDF version of application form, which you just need to download, print and fillup relevant details. Submit the duly filled copy with payment either to Nearest SharekhanBranch Or Mutual Fund Company.

B) Alternatively you can call up our customer service 1600-22-7500 and give yourcontact detail whereby we will arrange to mail you a hard copy of application of desiredschemes from the list offered by Sharekhan.

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SHAREKHAN DEPOSITORY SERVICE

Dematerialization and trading in the demat mode is a safer and faster alternative to thephysical existence of securities. Demat as a parallel solution offers freedom from delays,thefts, forgeries, settlement risks and paperwork. This system works through depository

participants(DPs) who offer demat services and hold the securities in the electronic form forthe investor. Sharekhan depository services offers dematerialization services to individualand corporate investors. It has a team of professionals and the latest technologicalexpertise dedicated exclusive to their demat department, apart from a national network offranchisee, making their services quick, convenient and efficient. At Sharekhan, theircommitment is to provide a complete demat solution which is simple safe and secure.

The services offered by depository participants:-

1. convert physical holding into electronic holding (which is called dematerialization ofsecurities)

2. keep custody of holdings in electronic form.3. transfer the shares in the electronic form from one account to another.4. facilitate pledge of electronic securities.5. give electronic credit of new share allotments such as public issue, bonus, rights etc.6. convert electronic holding into physical holding.( which is called rematerialization)

Research based advice

Every investors needs and wants are different. To meet these needs share khan provides acomprehensive e set of research reports so that one can take the right investment decisionregardless of his investing preference. The research and development at sharekhan is doneat its head office in Mumbai.

The R&D department forwards all the details regarding all stocks and scripts to all thebranches through internet. At the end of each trading day there is a teleconference throughwhich the R &D department head talks with each branch head and discusses about eachdays closing position and shows their predictions about next days opening position. Thequeries regarding stock positions and other relevant matters of the branch heads of each

branch is solved through teleconference.

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IPOIPO is an acronym for Initial Public Offering. This is the first sale of stock by a

company to the public.

Primary and Secondary Market

Since buying an IPO means buying directly from the company issuing the shares,IPOs constitute the PRIMARY MARKET.

Buying shares from the stock exchange is buying from the SECONDARYMARKET.

All shares, which are traded in the secondary market, have come through theprimary market as IPOs.

Why Do Companies Go Public?

To raise funds for expansion/startup.

Gain credibility through more scrutiny.

Easier mergers and acquisitions through availability of more number of stocks.

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To get listed in a major stock index (meaning prestige, respect, credibility).


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TYPES OF MARKETS FOR EQUITYINVESTMENT

Primary Market

Company announces IPO and distributes forms

Secondary Market

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Mohan fills up form andsubmits it to the company

Shyamlal fills up form andsubmits it to the com an

Shyamlal is allotted some shares @Rs 95 per share

Mohan is NOT allotted shares bythe company. There were not

enough shares to offer

Shyamlal sells some of his shares in themarket (at a higher price, say Rs. 105).

Mohan buys some shares from thestock market through a broker at

this price


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SWOT ANALYSISDuring this training at sharekhan, we had come to know the Strengths-Weaknesses-

Opportunities-Threats for the company and it is very useful for a company to analyzethem. Therefore, the SWOT analysis is presented here and the suggestions for maintainingstrengths and removing weaknesses are explained.

Strengths:

Well-maintained infrastructure.

Dedicated, Intelligent and Loyal staff.

On-line Trading products.

Lowest brokerage and other charges w.r.t. Competitors.

The best investment advice correct up to 70-90 % through dedicated

research and reports.

Wide product range to enable the clients to choose the best alternative.

One of the best DPs in India.

A positive image in the existing clients.

Weaknesses:

Less awareness in the market.

Time consuming process for account opening, resolving the problems of the

customers, etc.

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Service quality is not maintained accordingly how they are promoted.


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Opportunities:

Slope of stock market towards delivery based transaction.

Large potential market for delivery and intra-day transactions.

Open interest of the people to enter in stock market for investing.

Attract the customers who are dissatisfied with other broker & DPs.

An indirect opportunity generated by the market from its bullishness.

Large untapped market in the Saurashtra region of Gujarat.

Threats:

Decreasing rates of brokerage in the market.

Increasing competition against other brokers & DPs

Poor marketing activities for making the company known among the

customers.

A threat of loosing clients for any kind of weakness of the company.

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Loosing the untapped market with the entry of the competitors.


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DERIVATIVESINTRODUCTION

Keeping in view the experience of even strong and developed economies the world over, it isno denying the fact that financial market is extremely volatile by nature. Indian financialmarket is not an exception to this phenomenon. The attendant risk arising out of thevolatility and complexity of the financial market is an important concern for financialanalysts. As a result, the logical need is for those financial instruments, which allow fundmanagers to better, manage or reduce these risks.

Out of various risks, Credit Risk and Interest Rate risk are the two core risks, which are

commonly acknowledged by various categories of Financial Institutions particularly banks.Effective management of these core risks is a critical factor in comprehensive riskmanagement and is essential for the long-term financial health of business organizations,especially banks.

MEANINGA derivative is a financial instrument, which derives its value from some other financialprice. This other financial price is called the underlying. The underlying asset can beequity, FOREX, commodity or any other asset.

A wheat farmer may wish to contract to sell his harvest at a future date to eliminate therisk of a change in prices by that date. The price for such a contract would obviouslydepend upon the current spot price of wheat. Such a transaction could take place on awheat forward market. Here, the wheat forward is the derivative and wheat on the spotmarket is the underlying. The terms derivative contract, derivative product, orderivative are used interchangeably. The most important derivatives are futures andoptions.Example: -A very simple example of derivatives is curd, which is derivative of milk. The price of curd

depends upon the price of milk, which in turn depends upon the demand, and supply ofmilk.

See it this way. American depository receipts/ global depository receipts of ICICI,Satyam and Infosys traded on stock exchanges in the USA and England have their ownvalues? No. They draw their price from the underlying shares traded in India.

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Consider how the value of mutual fund units changes on a day-to-day basis. Dont mutualfund units draw their value from the value of the portfolio of securities under the schemes?Arent these examples of derivatives? Yes, these are. And you know what, these

examples prove that derivatives are not so new to us. Nifty options and futures,


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Reliance futures and options, Satyam futures and options etc are all examples ofderivatives. Futures and options are the most common and popular form of derivatives.

DERIVATIVES: IN INDIAN CONTEXT:In Indian context, the intensity of derivatives usage by institutional investors (viz. Banks,Financial Institution; Mutual Funds, Foreign Institutional Investors, Life and GeneralInsurers) depend on their ability and willingness to use derivatives for one or more of thefollowing purposes:

Risk containment: using derivatives for hedging and risk containment purposes Risk Trading/Market Making: Running derivatives trading book for profits and

arbitrage; and/or Covered Intermediation: On-balance-sheet derivatives intermediation for client

transaction, without retaining any net-risk on the balance sheet (except creditrisks).

TYPES OF DERIVATIVES

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Derivative as a term conjures up visions of complex numeric calculations,speculative dealings and comes across as an instrument, which is the prerogative ofa few smart finance professionals. In reality it is not so. In fact, a derivativetransaction helps cover risk, which would arise on the trading of securities onwhich the derivative is based and a small investor can benefit immensely. Aderivative security can be defined as a security whose value depends on the values ofother underlying variables. Very often, the variables underlying the derivativesecurities are the prices of traded securities.


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Derivatives and futures are basically of 3 types:

Forwards and Futures

Options

Swaps

FORWARDS:

A forward contract is the simplest mode of a derivative transaction. It is an agreement tobuy or sell an asset (of a specified quantity) at a certain future time for a certain price. Nocash is exchanged when the contract is entered into.

Illustration: - Shyam wants to buy a TV, which costs Rs 10,000 but he has no cash to

buy it outright. He can only buy it 3 months hence. He, however, fears that prices of

televisions will rise 3 months from now. So in order to protect himself from the rise inprices Shyam enters into a contract with the TV dealer that 3 months from now he

will buy the TV for Rs 10,000. What Shyam is doing is that he is locking the current

price of a TV for a forward contract. The forward contract is settled at maturity. The

dealer will deliver the asset to Shyam at the end of three months and Shyam in turn

will pay cash equivalent to the TV price on delivery.

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DERIVATIVES

Options Futures Swaps Forwards

Commodit Security

Interest CurrencyPut Call


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FUTURES:

It is an agreement between two parties to buy or sell an asset at a certain time in the futureat a certain price through exchange traded contracts.

A Future represents the right to buy or sell a standard quantity and quality of an asset orsecurity at a specified date and price. Futures are similar to Forward Contracts, but arestandardized and traded on an exchange, and are valued, or "Marked to Marketdaily. The Marking to Marketprovides both parties with a daily accounting of theirfinancial obligations under the terms of the Future. Unlike Forward Contracts, thecounterparty to a Futures contract is the clearing corporation on the appropriate exchange.Futures often are settled in cash or cash equivalents, rather than requiring physical

delivery of the underlying asset. Parties to a Futures contract may buy or write Options onFutures.

OPTIONS:An option is a contract, which gives the buyer the right, but not the obligation to buy orsell shares of the underlying security at a specific price on or before a specific 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: CallOptions and Put Options.

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, securesyour right to buy that certain stock at a specified price called the strike price. If you decidenot to use the option to buy the stock, and you are not obligated to, your only cost is theoption 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" astock 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 notneed 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 forwhich he pays a premium. The seller accepts an obligation for which he receives a fee.

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CALL OPTIONS

Call options give the taker the right, but not the obligation, to buy the underlying shares at

a predetermined price, on or before a predetermined date.Illustration: - Raj purchases 1 Satyam Computer (SATCOM) AUG 150 Call --

Premium 8

This contract allows Raj to buy 100 shares of SATCOM at Rs 150 per share at any

time between the current date and the end of next August. For this privilege, Raj pays

a fee of Rs 800 (Rs eight a share for 100 shares).

The buyer of a call has purchased the right to buy and for that he pays a premium.

Now let us see how one can profit from buying an option; Sam purchases a Decembercall option at Rs 40 for a premium of Rs 15. That is he has purchased the right to buy

that share for Rs 40 in December. If the stock rises above Rs 55 (40+15) he will break

even and he will start making a profit. Suppose the stock does not rise and instead

falls he will choose not to exercise the option and forego the premium of Rs 15 and

thus limiting his loss to Rs 15.

Call Options-Long & Short PositionsWhen you expect prices to rise, then you take a long position by buying calls. You arebullish.When you expect prices to fall, then you take a short position by selling calls. You arebearish.

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PUT OPTIONS

A Put Optiongives the holder of the right to sell a specific number of shares of an

agreed security at a fixed price for a period of time.

Illustration:- Raj is of the view that the a stock is overpriced and will fall in future,

but he does not want to take the risk in the event of price rising so purchases a put

option at Rs 70 on X. By purchasing the put option Raj has the right to sell the stock

at Rs 70 but he has to pay a fee of Rs 15 (premium).

So he will breakeven only after the stock falls below Rs 55 (70-15) and will start

making profit if the stock falls below Rs 55.

Put Options-Long & Short PositionsWhen you expect prices to fall, then you take a long position by buying Puts. You arebearish.When you expect prices to rise, then you take a short position by selling Puts. You arebullish.

CALL OPTIONS PUT OPTIONS

If you expect a fall in price(Bearish) Short Long

If you expect a rise in price

(Bullish)Long Short

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IMPORTANT FACTORS IN DERIVATIVES

HEDGINGWe have seen how one can take a view on the market with the help of index futures. The

other benefit of trading in index futures is to hedge your portfolio against the risk oftrading. In order to understand how one can protect his portfolio from value erosion let ustake an example.

Illustration: Ram enters into a contract with Shyam that six months from now he will

sell to Shyam 10 dresses for Rs 4000. The cost of manufacturing for Ram is only Rs

1000 and he will make a profit of Rs 3000 if the sale is completed.

Cost (Rs) Selling price Profit

1000 4000 3000

However, Ram fears that Shyam may not honor his contract 6 months from now. So

he inserts a new clause in the contract that if Shyam fails to honor the contract he will

have to pay a penalty of Rs 1000. And if Shyam honors the contract Ram will offer a

discount of Rs 1000 as incentive.

Shyam defaults Shyam honors

1000 (Initial Investment) 3000 (Initial profit)

1000 (penalty from Shyam) (-1000) discount given to Shyam

- (No gain/loss) 2000 (Net gain)

As we see above if Shyam defaults Ram will get a penalty of Rs 1000 but he will

recover his initial investment. If Shyam honors the contract, Ram will still make a

profit of Rs 2000. Thus, Ram has hedged his risk against default and protected his

initial investment.

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The above example explains the concept of hedging.


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SPECULATION

Speculators are those who do not have any position on which they enter in futures and

options market. They only have a particular view on the market, stock, commodity etc. Inshort, speculators put their money at risk in the hope of profiting from an anticipated pricechange. They consider various factors such as demand supply, market positions, openinterests, economic fundamentals and other data to take their positions.

Illustration: Ram is a trader but has no time to track and analyze stocks. However, he

fancies his chances in predicting the market trend. So instead of buying different

stocks he buys Sensex Futures.

On May 1, 2001, he buys 100 Sensex futures @ 3600 on expectations that the index

will rise in future. On June 1, 2001, the Sensex rises to 4000 and at that time he sells

an equal number of contracts to close out his position.

Selling Price : 4000*100 = Rs 4,00,000

Less: Purchase Cost: 3600*100 = Rs 3,60,000

Net gain Rs 40,000

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Ram has made a profit of Rs 40,000 by taking a call on the future value of the Sensex.

However, if the Sensex had fallen he would have made a loss. Similarly, if wouldhave been bearish he could have sold Sensex futures and made a profit from a falling

profit. In index futures players can have a long-term view of the market up to atleast 3

months.


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ARBITRAGE

An arbitrageur is basically risk averse. He enters into those contracts were he can earnriskless profits. When markets are imperfect, buying in one market and simultaneously

selling in other market gives risk less profit. Arbitrageurs are always in the look out forsuch imperfections.In the futures market one can take advantages of arbitrage opportunities by buying fromlower priced market and selling at the higher priced market. In index futures arbitrage ispossible between the spot market and the futures market.

Assume that Nifty is at 1200 and 3 months Nifty futures is at 1300. The futures price of Nifty futures can be worked out by taking the interest

cost of 3 months into account.

If there is a difference then arbitrage opportunity exists.

Let us take the example of single stock to understand the concept better. If Wipro is

quoted at Rs 1000 per share and the 3 months futures of Wipro is Rs 1070 then one

can purchase ITC at Rs 1000 in spot by borrowing @ 12% annum for 3 months and

sell Wipro futures for 3 months at Rs 1070.

Sale = 1070

Cost= 1000+30 = 1030

Arbitrage profit = 40

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These kinds of imperfections continue to exist in the markets but one has to be alert to

the opportunities as they tend to get exhausted very fast.


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MARGINS

The margining system is based on the JR Verma Committee recommendations. Theactual margining happens on a daily basis while online position monitoring is done on an

intra-day basis.Daily margining is of two types:1. Initial margins2. Mark-to-market profit/loss

The computation of initial margin on the futures market is done using the concept ofValue-at-Risk (VaR). The initial margin amount is large enough to cover a one-day lossthat can be encountered on 99% of the days. VaR methodology seeks to measure theamount of value that a portfolio may stand to lose within a certain horizon time period(one day for the clearing corporation) due to potential changes in the underlying assetmarket price. Initial margin amount computed using VaR is collected up-front.

The daily settlement process called "mark-to-market"provides for collection of lossesthat have already occurred (historic losses) whereas initial margin seeks to safeguardagainst potential losses on outstanding positions. The mark-to-market settlement is donein cash.

Let us take a hypothetical trading activity of a client of a NSE futures division to

demonstrate the margins payments that would occur.

A client purchases 200 units of FUTIDX NIFTY 29JUN2001 at Rs 1500.

The initial margin payable as calculated by VaR is 15%.

Total long position = Rs 3,00,000 (200 x 1500)

Initial margin (15%) = Rs 45,000

Assuming that the contract will close on Day + 3 the mark-to-market position will

look as follows:

POSITION ON DAY 1

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Close Price Loss Margin released Net cash

outflow

1400 x 200 =

2,80,000

20,000 (3,00,000 -

2,80,000)

3,000 (45,000 -

42,000)

17,000 (20,000

- 3000)

Payment to be

made(17,000)


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NEW POSITION ON DAY 2Value of new position = 1,400*200= 2,80,000Margin = 42,000

Close Price Gain Addn Margin Net cash inflow

1510 x 200 =

3,02,000

22,000

(3,02,000 - 2,80,000)

3,300

(45,300 - 42,000)

18,700

(22,000 -

3300)

Payment to be recd 18,700

POSITION ON DAY 3

Value of new position = 1510*200 = Rs 3, 02,000Margin = Rs 3,300

Close Price Gain Net cash inflow

1600*200

=3,20,00018,000 (3,20,000-3,02,000)

18,000 + 45,300* =

63,300

Payment to be recd 63,300

Margin account*

Initial margin = Rs 45,000

Margin released (Day 1) = (-) Rs 3,000

Position on Day 2 Rs 42,000

Addn margin = (+) Rs 3,300

Total margin in a/c Rs 45,300*Net gain/loss

Day 1 (loss) = (Rs 17,000)

Day 2 Gain = Rs 18,700

Day 3 Gain = Rs 18,000

Total Gain = Rs 19,700

The client has made a profit of Rs 19,700 at the end of Day 3 and the total cash inflow

at the close of trade is Rs 63,300.

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COMMODITIES

Commodities Market In India

Organized futures market evolved in India by the setting up of "Bombay Cotton Trade

Association Ltd." in 1875. In 1893, following widespread discontent amongst leadingcotton mill owners and merchants over the functioning of the Bombay Cotton TradeAssociation, a separate association by the name "Bombay Cotton Exchange Ltd." wasconstituted. Futures trading in oilseeds was organized in India for the first time with thesetting up of Gujarati Vyapari Mandali in 1900, which carried on futures trading ingroundnut , castor seed and cotton. Before the Second World War broke out in 1939several futures markets in oilseeds were functioning in Gujarat and Punjab.

A three-pronged approach has been adopted to revive and revitalize the market. Firstly,

on policy front many legal and administrative hurdles in the fu

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