A Project Report On

AN OVERVIEW OF INDIAN STOCK MARKET

Submitted in Partial fulfillment for the award of the degree MASTER IN BUSINESS ADMINISTRATION. (Batch2008-2010)

Under Guidance Of,

Submitted By,

Mr. Gouri sankar moharana (faculty in finance)

Saroj kumar das Roll No-0806998022 MBA 6th trimester

ASTHA SCHOOL OF MANAGEMENT,BBSR ORISSA

1

CANDIDATE DECLARATION

I solely declare that the report titled An

Overview
fulfillment of

Of Indian Stock Market

work carried by me, submitted

is a bonafied record of partial

requirement for the award of degree Master Of Business administration under the guidance of

MR.GOURI SAN FACULTY OF

KAR MOHARANA(FINANCE

ASTHA SCHOOL OF MANAGEMENT)

This research is solely the work of me based upon questionnaire, printed material given in bibliography. The matter embodied in this report has not been submitted for the award of any other degree.

Dated KUMAR DAS

MR.SAROJ
REG,0806998022

ACKNOWLEDGEMENT

Dissertation Report is a bridge connecting the educational and professional use. It is the path leading to success by shouldering responsibilities under the careful guidance of seniors and experienced personnel without fear and failures. It gives me immense pleasure to take the opportunity to remember and thanks to the personalities who are involved with this project work during its study stage during my days of hard work. I feel that it is my duty to express thanks and deep gratitude to everyone who is directly or indirectly associated in the completion of this Dissertation Report

With deep reverence, I offer my deepest regards gratitude to Mr. Gouri Sankar Moharana who is my finance faculti and Miss.Nandita Mahapatro, finance faculty of Astha School Of Management, without whom this Report could not have been fulfilled.

SAROJ KUMAR DAS

Astha school of management

Reg. 0806998022

Executive Summary
Indian securities markets have undergone many changes during the last decade. Exponential growth in trading volumes is pushing existing trading systems and processes to capacity and increasing settlement risk. With Indian market moving to a T+3 rolling settlement cycles in line with global markets, SEBI is continuing its efforts to increase the efficiency and transparency in Indian markets. Indeed it has been SEBI endeavor to make the Indian markets, one of the most competitive and efficient markets of the world. Income, Savings mobilization and promotion of investment are functions of the stock and capital markets which are a part of the organized financial system in India. This Project titled An Overview of Indian stock market is an attempt to understand the stock market and role played by Indian retail Brokerage Firms in stock market. The objective of brokerage firms is to help the investor to minimize the risk involved in investment and 4

maximize the return. Some of the main characteristics of the brokerage industry include growth in e-broking; growing derivatives market, decline in brokerage fees etc. An endeavor was also made to understand the role played by Indiabulls Securities compared to its competitors in Indian retail brokerage market. The role played by Indian retail brokerage industry is of immense significance, taking into account the health of the capital markets and the intensity of competition among the brokerage companies.

Table of Contents
Particulars Chapter 1 Outlook on Indian Stock market................ Chapter 2 Overview of Indiabulls.............................. Chapter 3 Overview of Indiabulls Securities.............. Chapter 4 Financial Analysis.................................... Chapter 5 Understanding Capital market.................. Chapter 6 Derivatives.............................................. Chapter 7 Competitors............................................ Chapter 8 Competitive Analysis............................... Chapter 9 SWOT Analysis......................................... Chapter 10 Research Methodology Chapter 11 Findings & Suggestions..........................

Questionnare Conclusion Bibliography........................................................... Appendix................................................................

Chapter 1

OUTLOOK ON INDIAN STOCK MARKET

1.1 Introduction
Indian Stock Markets is 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. The East India Company was the dominant institution in those days and business in its loan securities used to be transacted towards the close of the eighteenth century. By 1830's business on corporate stocks and shares in Bank and Cotton presses took place in Bombay. Though the trading list was broader in 1839, there were only half a dozen brokers recognized by banks and merchants during 1840 and 1850. The 1850's witnessed a rapid development of commercial enterprise and brokerage business attracted many men into the field and by 1860 the number of brokers increased into 60. In 1860-61 the American Civil War broke out and

cotton supply from United States to Europe was stopped; thus, the 'Share Mania' in India began. The number of brokers increased to about 200 to 250. At the end of the American Civil War, the brokers who thrived out of Civil War in 1874, found a place in a street (now appropriately called as Dalal Street) where they would conveniently assemble and transact business. In 1887, they formally established in Bombay, the "Native Share and Stock Brokers' Association, which is alternatively known as The Stock Exchange". In 1895, the Stock Exchange acquired a premise in the same street and it was inaugurated in 1899. Thus, the Stock Exchange at Bombay was consolidated. The Indian stock market has been assigned an important place in financing the Indian corporate sector. The principal functions of the stock markets are enabling mobilizing resources for investment directly from the investors providing liquidity for the investors and monitoring Disciplining company management.

The two major stock exchanges in India are National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

1.2 National Stock Exchange

With the liberalization of the Indian economy, it was found inevitable to lift the Indian stock market trading system on par with the international standards. On the basis of the recommendations of high powered

Pherwani Committee, the National Stock Exchange was incorporated in 1992 by Industrial Development Bank of India, Industrial Credit and Investment Corporation of India, Industrial Finance Corporation of India, all Insurance Corporations, selected commercial banks and others. The National Stock Exchange (NSE) is India's leading stock exchange covering various cities and towns across the country. NSE was set up by leading institutions to provide a modern, fully automated screen-based trading system with national reach. The Exchange has brought about unparalleled transparency, speed & efficiency, safety and market integrity. It has set up facilities that serve as a model for the securities industry in terms of systems, practices and procedures. NSE has played a catalytic role in reforming the Indian securities market in terms of microstructure, market practices and trading volumes. The market today uses state-of-art information technology to provide an efficient and transparent trading, clearing and settlement mechanism, and has witnessed several innovations in products & services viz. demutualization of stock exchange governance, screen based trading, compression of settlement cycles, dematerialization and electronic transfer of securities, market of debt and derivative instruments and intensive use of information technology. Trading at NSE can be classified under two broad categories: Wholesale debt market Capital market

Wholesale debt market operations are similar to money market operations - institutions and corporate bodies enter into high value transactions in financial instruments such as government securities,

treasury bills, public sector unit bonds, commercial paper, certificate of deposit, etc. Capital market: A market where debt or equity securities are traded. There are two kinds of players in NSE: Trading members Participants

Recognized members of NSE are called trading members who trade on behalf of themselves and their clients. Participants include trading members and large players like banks who take direct settlement responsibility. Trading at NSE takes place through a fully automated screen-based trading mechanism which adopts the principle of an order-driven market. Trading members can stay at their offices and execute the trading, since they are linked through a communication network. The prices at which the buyer and seller are willing to transact will appear on the screen. When the prices match the transaction will be completed and a confirmation slip will be printed at the office of the trading member. NSE has several advantages over the traditional trading exchanges. They are as follows:

NSE brings an integrated stock market trading network across the nation.

Investors can trade at the same price from anywhere in the country since inter-market operations are streamlined coupled with the countrywide access to the securities.

Delays in communication, late payments and the malpractices prevailing in the traditional trading mechanism can be done away with greater operational efficiency and informational transparency in the stock market operations, with the support of total computerized network.

NSE Nifty S&P CNX Nifty is a well diversified 50 stock index accounting for 22 sectors of the economy. It is used for a variety of purposes such as benchmarking fund portfolios, index based derivatives and index funds. NSE came to be owned and managed by India Index Services and Products Ltd. (IISL), which is a joint venture between NSE and CRISIL. IISL is India's first specialised company focused upon the index as a core product. IISL have a consulting and licensing agreement with Standard & Poor's (S&P), who are world leaders in index services. CNX stands for CRISIL NSE Indices. CNX ensures common branding of indices, to reflect the identities of both the promoters, i.e. NSE and CRISIL. Thus, 'C' stands for CRISIL, 'N' stands for NSE and X stands for Exchange or Index. The S&P prefix belongs to the US-based Standard & Poor's Financial Information Services.

1.3 Bombay Stock Exchange

The Bombay Stock Exchange is one of the oldest stock exchanges in Asia. It was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956. The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide.

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SENSEX The Stock Exchange, Mumbai (BSE) in 1986 came out with a stock index that subsequently became the barometer of the Indian stock market. SENSEX is not only scientifically designed but also based on globally accepted construction and review methodology. First compiled in 1986, SENSEX is a basket of 30 constituent stocks representing a sample of large, liquid and representative companies. The base year of SENSEX is 1978-79 and the base value is 100. The index is widely reported in both domestic and international markets through print as well as electronic media The Index was initially calculated but based on the to "Full the Market

Capitalization"

methodology

was

shifted

free-float

methodology with effect from September 1, 2003. The "Free-float Market Capitalization" methodology of index construction is regarded as an industry best practice globally. All major index providers like MSCI, FTSE, STOXX, S&P and Dow Jones use the Free-float methodology. Due to is wide acceptance amongst the Indian investors; SENSEX is regarded to be the pulse of the Indian stock market. As the oldest index in the country, it provides the time series data over a fairly long period of time. Small wonder, the SENSEX has over the years become one of the most prominent brands in the country. The SENSEX captured all these events in the most judicial manner. One can identify the booms and busts of the Indian stock market through SENSEX.

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The launch of SENSEX in 1986 was later followed up in January 1989 by introduction of BSE National Index (Base: 1983-84 = 100). It comprised of 100 stocks listed at five major stock exchanges. The Exchange launched dollar-linked version of BSE-100 index i.e. Dollex-100 on May 22, 2006. In order to fulfill the need of the market participants for still broader, segment-specific and sector-specific indices, the Exchange has continuously been increasing the range of its indices. The launch of BSE-200 Index in 1994 was followed by the launch of BSE-500 Index and 5 sectoral indices in 1999. In 2001, BSE launched the BSE-PSU Index, DOLLEX-30 and the country's first free-float based index - the BSE TECK Index. The Exchange shifted all its indices to a free-float methodology (except BSE PSU index) in a phased manner. The values of all BSE indices are updated every 15 seconds during the market hours and displayed through the BOLT system, BSE website and news wire agencies. All BSE-Indices are reviewed periodically by the "Index Committee" of the Exchange.

Chapter 2

OVERVIEW OF INDIABULLS
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2.1 Introduction
Indiabulls is Indias leading Financial and Real Estate Company with a wide presence throughout India. Indiabulls Financial Services Limited was established in the year 2000 by three promoters all of whom are engineers from Indian Institute of Technology, New Delhi, and has attracted over Rs 700 million of investments from venture capital firms, private equity funds and institutional investors. History Indiabulls Financial Services Limited was incorporated on January 10, 2000 as Orbis Infotech Private Limited at New Delhi. The name of the Company was changed to Indiabulls Financial Services Private Limited on March 16, 2001 due to change in the main objects of our Company from Infotech business to Investment & Financial Services business. It became a Public Limited Company on February 27, 2004 and the name of the Company was changed to Indiabulls Financial Services Limited. Indiabulls has over 640 branches all over India. The customers of Indiabulls are more than 4,50,000 which covers from a wide range of financial services and products from securities, derivatives trading, depositary services, research & advisory services, consumer secured & unsecured credit, loan against shares and mortgage & housing finance. The company employs around 4000 Relationship managers who help the clients to satisfy their customized financial goals. Indiabulls entered the Real Estate business in the year 2005 with its group of companies.

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Indiabulls Financial Services Ltd is listed on the National Stock Exchange, Bombay Stock Exchange and Luxembourg Stock Exchange. The market capitalization of Indiabulls is around USD 2500 million (29th December 2006). Indiabulls and its group companies have attracted USD 500 million of equity capital in Foreign Direct Investment (FDI) since March 2000. Some of the large shareholders of Indiabulls are the largest financial institutions of the world such as Fidelity Funds, Goldman Sachs, Merrill Lynch, Morgan Stanley and Farallon Capital.

2.2 Growth of Indiabulls

Year 2000-01: One of Indias first trading platforms was set up by Indiabulls Financial Services Ltd. with the development of an in-house team.

Year 2001-03: The service offered by Indiabulls was increased to include Equity, F&O, Wholesale Debt, Mutual fund, IPO Financing/Distribution and Equity Research.

Year 2003-04: In this particular year Indiabulls ventured into Distribution and Commodities Trading business. Year 2004-05: This was one of the most important years in the history of Indiabulls. In this year:

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Indiabulls came out with its initial public offer (IPO) in September 2004. Indiabulls started its Consumer Finance business. Indiabulls entered the Indian Real Estate market and became the first company to bring FDI in Indian Real Estate. Indiabulls won bids for landmark properties in Mumbai.

Year 2005-06: The world renowned investment banks like Merrill Lynch and Goldman Sachs increased their shareholding in Indiabulls. It also became a market leader in securities brokerage industry, with around 31% share in Online Trading. The worlds largest hedge fund, Farallon Capital and its affiliates committed Rs. 2000 million for Indiabulls subsidiaries Viz. Indiabulls Credit Services Ltd. and Indiabulls Housing Finance Ltd. In the same year, the Steel Tycoon Mr. LN Mittal promoted LNM India Internet venture Ltd. acquired 8.2% stake in Indiabulls Credit Services Ltd.

Year 2006-07: In this year, Indiabulls Financial Services Ltd. was included in the prestigious Morgan Stanley Capital International Index (MSCI). The company also received an in principle approval from Government of India for development of multi product SEZ in the state of Maharashtra.

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Diversified Business Group of Indiabulls

Securities & Derivatives Broking

Secured Financing

Mortgage & Housing Finance

Financial Products Distribution

Consumer Financing

Fig 2.1: Diversified Business Groups of Indiabulls

2.3 IndiaBulls Subsidiaries

Indiabulls securities limited: business comprises of Securities & Derivatives broking. Indiabulls Credit services limited: business comprises of personal loans, secured and unsecured loans, and housing and auto loans.

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Financial products distribution: distribution of mutual funds and insurance products. Indiabulls commodities Pvt ltd: deals with commodity brokerage business Indiabulls Realities limited: is into development of Real estate and mining. Indiabulls housing loans: is into mortgage of properties and housing loan business.

2.4 Organizational Structure of Indiabulls

The organizational structure of Indiabulls is Functional, which consist of several departments. Functioning Online: serving clients primarily through an Internet based relationship targeted towards clients who value anytime, anywhere access and can be serviced at low incremental costs. Functioning Offline: serving clients primarily through an office based relationship targeted towards clients who value physical interaction. Online & offline business consist of following departments Administration Operations & Service quality Technology Finance Corporate affairs Human resources Marketing

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Corporate communications Legal

Department based Organizational Structure:

Director-Online

Director-Offline

Administration

Operations & Service

Technolog y

Finance

Corporate Affairs

Human Resources

Corporate Communi cation

Legal

Customer Service

Recruitment

Marketing

Training

Sr. Vice President

Regional Manager

Branch Manager

Relationship Manager 18

Figure 2.2 Department based organizational Structure of Indiabulls

Regional Hierarchy of Indiabulls

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Senior Vice President

Regional Manager

Branch Manager Senior Sales Manager

Support System

Sales Function

Back Office Executive

Local Compliance Officer

RM/SRM

ARM

Dealer

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Figure 2.3 Regional hierarchies of Indiabulls

Key Positions

Chairman

CFO & President

Securities

Consumer Finance

Real Estate

Executive Director

Chief Executive Officer

Executive Director

Figure 2.4 Key Positions

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2.5 Products and Services of Indiabulls

Indiabulls offer the following products and services in the financial markets: Stocks Options and Futures Depository Services Commodities Insurance Products Mutual Funds Bonds and Debt Products

Services

Commercial Vehicle Loans: In April 2006 Indiabulls started Commercial Vehicle Finance under the flagship of Indiabulls Credit Services Ltd. in order to provide refinance to its commercial vehicle clients. Their fundamentals, competent management and expertise in financing the transporters are pretty sound. The companys unique market position enables it to excel in client contentment, quick service and growthled profitability.

.Mortgage Loans:

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Indiabulls Housing Finance Ltd. which is a flagship of Indiabulls has started lending of Mortgage Loans to prospective customers. This company enables the home-seekers to access finance to buy their homes. They provide different types of loans like plot loans, Loan against Residential, Commercial and Rental Property, thereby enabling the borrower to leverage the property owned to fund any genuine needs be it Business Expansion, Child's Education, Child's Marriage or for Holiday Abroad.

Consumer Finance: Indiabulls is a retail focused organization that fulfills the credit needs of a large percentage of population in India. The key aspect of Indiabulls business model is to provide an extremely unique customer experience.

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Chapter 3

OVERVIEW OF INDIABULLS SECURITIES LTD 3.1 Introduction

Indiabulls Securities Ltd is engaged in the business of Internet based trading and is registered with SEBI as a stockbroker, trading and clearing member of NSE, member of BSE and as a depositary participant with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). ISL is also a member of the National Securities Clearing Corporation Limited. History Indiabulls Securities Limited (ISL) was incorporated as GPF Securities Private Limited on June 9, 1995. The name of the company was changed to Orbis Securities Private Limited on December 15, 1995 to change the profile of the company and subsequently due to the conversion of the company into a public limited company; the name was further changed to Orbis Securities Limited on January 5, 2004. The name of the company was again changed to Indiabulls Securities Limited on February 16, 2004 so as to capitalize on the brand image of the term Indiabulls in the company name. ISL is a corporate member of capital market & derivative segment of The National Stock Exchange of India Ltd.

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Trading With Indiabulls

This section will introduce us about the process and instruments used to help a customer or a client to trade with Indiabulls securities. This process is almost similar to any other trading firm but there will be some difference in the cost of brokerage commission.

Trading: It is a process by which a customer is given facility to buy and sell

share this buying and selling can only be done through some broker and this is where Indiabulls help its customer. A customer willing to trade with any brokerage house need to have a demat account, trading account and saving account with a brokerage firm. Any one having following document can open all the above mentioned account and can start trading.

Document Required
3 photographs ( signed across) Photo Identification Proof - any of the following - Voter ID/Driving License/Passport. Address Proof any of the following - Voter ID/Driving License/ Passport/ Bank statement or pass book sealed and attestation by bank official/ BSNL landline bill.

A crossed Cheque favoring India bulls Securities Ltd. of the required amount. The amount for Demat as well as trading will be Rs. 900/-(free Demat +900 Trading Account) the minimum amount being Rs. 900 a cheque can be given for a larger amount.

Copy of PAN Card is mandatory. Registration Kit

25

CDSL Demat Kit Bank and address proof declaration. (Master undertaking) PAN name discrepancy form

These documents may not be consumer friendly but it is to avoid illegal transaction and to prevent black money this ensures that money invested is accounted.

3.2

Business

Model

&

Operations

of

Indiabulls

Securities Ltd
The three distinct internal business segments are: Online business Offline business Other Sales

Online business: serving clients primarily through an Internet based relationship targeted towards clients who value anytime, anywhere access and can be serviced at low incremental costs. The Online sales force sells all products and services and follows the relationship manager model.

Offline business: serving clients primarily through an office based relationship targeted towards clients who value physical interaction and are typically larger accounts. The Offline Sales force sells all products and services and follows the relationship manager model. The Institutional business serving clients such as mutual funds and pension funds is considered part of the offline business due to largely similar client servicing and channel needs as required for high net worth clients. Indiabulls Securities Limited has established relationships with

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some large institutional players in India and is qualified broker for Equities, F&O and Debt markets for 145 such institutional clients.

Other Sales: includes insurance, research services and other offerings

3.3 Basic Requirement for doing Trading

Trading requires Opening a Demat account. Demat refers to a dematerialized account. You need to open a Demat account if you want to buy or sell stocks. So it is just like a bank account where actual money is replaced by shares. We need to approach the Depository Participants (DP, they are like bank branches), to open Demat account. A depository is a place where the stocks of investors are held in electronic form. The depository has agents who are called depository participants (DPs). Think of it like a bank. The head office where all the technology rests and details of all accounts held is like the depository. And the DPs are the branches that cater to individuals. There are only two depositories in India The National Securities Depository Ltd (NSDL) and the Central Depository Services Ltd (CDSL).

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3.4 Trading Products of Indiabulls Securities Indiabulls Securities Trading Products

Cash Account

Intraday Account

Margin Trading

Fig showing 3.1 Trading Products of Indiabulls securities

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Indiabulls Securities provide three products for trading. They are Cash account Intraday account Margin trading (Mantra)

Cash account provides the client to buy 4 times of cash balance in his trading account. Intraday product provides the client to buy 8 times of his cash balance in the trading account. Mantra account called as margin trading, is a special account to buy on leverage for a longer duration

Chapter 4

FINANCIAL ANALYSIS OF INDIABULLS SECURITIES

4.1 Income: Indiabulls Securities Ltd income unit has the following components Income from Online business : The contribution of revenue from Online business have grown from Rs. 31.85 million in FY 2002 to Rs. 242.26 million in FY 2004 and from 24.05% of total business in FY 2002 to 34.85% of business in FY 2004. The rapid growth of the online business is driven by growth in total clients, increasing product flexibility and quality, enhanced online-only features such as portfolio analysis and updates, streaming tickers, enhanced product offering of Power Indiabulls. 29

Brokerage Equities F&O

Income from Offline Business: The offline business unit has one of the widest branch networks in India with a pan India presence with large market share. The revenues have grown from Rs. 96.02 million in FY 2002 to Rs. 447.25 million in FY 2004 and have changed from 72.52% of total business in FY 2001 to 64.34% of business in FY 2004. The rapid growth of the Offline business is driven by growth in total clients, increased geographical presence. Brokerage Equities F&O Wholesale Debt Markets

Brokerage Income
Brokerage Income comprises revenues earned from Equities, F&O and Wholesale debt markets on all stock exchanges. The income from brokerage services is driven primarily by the number of active clients. The rapid growth in total clients is driven primarily by increased geographical presence. Equities constitute the largest portion of brokerage business. F&O brokerage is becoming an increasingly important component of its revenues as Futures & Options trading gains more acceptance. 30

Wholesale Debt market is focused on institutional clients.

Income from transaction and service charges and interest income

Related income comprises revenues earned from market related activities such as transaction charges, service charges and interest levied on customer transactions. These charges are dependent on trading volume, number of transactions completed and any ledger debit amount in the client account.

Income from other Sales including Insurance, Mutual Fund Sales and Other Products
Other income comprises revenues earned from sale of third party products such as Insurance, Mutual Funds and new services such as Research Services. Revenues are a function of volume of mutual funds sold, the type of fund sold (active managed equity, passive fixed income etc.) and the commissions paid on the funds sold.

Brokerage Income of Indiabulls Securities

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Brokerage Incom of Indibulls Securities of 3 Y e ears( in Crore)

300
Brokerage Income

261.11

250 200 150 100 50 0 2004

Y ears M ar-04 M ar-05 M ar-06

99.65 47.2

2005

2006

Bar Chart 4.1 Brokerage Income of Indiabulls Securities (in Crore)

Segment wise Sales of Indiabulls securities for March 2005(in Crore)

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S e g m e n tw ise S a le s o f In d ia b u lls S e cu ritie s F o r M a rch 2005(in C ro re )

2, 2% 0 .8 4, 1 % 9.88 , 9 %

1 .9 3 , 2 %

B rok erage Inc om e Inc om e F rom D epos itory S ervic e Inc om e F rom other F inanc ial A c tivity Interes t Trans ac tion C harges

9 9 .6 5, 86 %

Pie Chart 4.2 Segment wise Sales of IndiaBulls Securities for year 2005

Segment wise Sales of Indiabulls securities for March 2006(in Crore)

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Segmentwise sales of Indiabulls Securities For March 2006(in Crore)

21.16, 7% 9.08, 3% 23.06, 7%

3.57, 1%

261.11, 82%

Brokerage Income Income From other Financial Activity Transaction Charges

Income From Depository Service Interest

4.2 Financial Ratio Analysis of Indiabulls Securities Ltd

34

Profitability ratios:

35

Indiabulls Securities Ltd. Per cent (Non-Annualized)

Mar 2004 12 months

Mar 2005 12 months

Mar 2006 12 months

Margins ratios (%) As % of operating income PBDT 43.05 PBT 41.45 PAT 25.92 PBDT (NNRT) 43.01 PBT (NNRT) 41.41 PAT (NNRT) 25.88 Corporate tax as per cent of 35.83 PBT Returns ratios (%) As % of total assets PBDT PBT PAT PAT (NNRT) Operating cash flow As % of net worth PBDT PBT PAT PAT (NNRT) Operating cash flow As % of capital employed PBDT PBT PAT PAT (NNRT) Operating cash flow Appropriation of profits (as % of PAT) Dividends 3.89

44.75 42.87 27.25 44.52 42.63 27.02 33.69

58.76 56.7 37.49 58.72 56.66 37.45 32.47

18.95 18.15 11.54 11.44 77.78 53.48 51.23 32.57 32.29 219.53 47.39 45.39 28.86 28.61 194.53

31.35 30.25 20 19.98 65.19 128.77 124.25 82.16 82.07 267.75 58.11 56.06 37.07 37.03 120.82

19.66

0.52

36

Equity dividends 0.44 Preference dividends 3.44 Retained profits 96.11 Dividends / net worth Equity dividends / equity capital Equity dividends / equity cap. & sh. prem.

2.27 17.39 80.34 6.4 3.98 3.98

0.07 0.45 99.48 0.43 0.45 0.45

Liquidity ratios: Indiabulls Securities Ltd. Times (Non-Annualized) Short term liquidity Cash / current liabilities & provisions Quick ratio Medium to long term liquidity Current ratio Solvency ratio Debt equity ratio Interest incidence (%) Interest cover PBIT / interest PBIT (NNRT) / interest Operating cash flow / interest (Rs. Crore) Current assets Current liabilities Working capital Net worth Reserves & surplus Mar 2004 Mar 2005 12 months 12 months Mar 2006 12 months

0.67 1.6

0.86 0.86

1.7 1.89

1.776 1.567 1.237 11.42

1.141 1.561 0.848 19.13

2.137 1.269 2.056 11.67

3.63 3.63 -2.99 231.47 130.34 101.13 83.34 20.24 37

4.01 4 11.97 261.19 228.86 32.33 108.43 45.33

5.2 5.2 8.91 914.49 427.87 486.62 181.77 163.94

Asset utilization ratios Indiabulls Securities Ltd. Times (Non-Annualized)

Mar 2004 12 months

Mar 2005 12 months

Mar 2006 12 months

Efficiency ratios Operating cash flow / total assets 0 Operating cash flow / gross fixed 0 assets Operating cash flow / capital 0 employed Operating income / total assets Operating income / GFA / leased assets Operating income / capital employed PBDT (NNRT) / total assets PBDT (NNRT) / gross fixed assets PBDT (NNRT) / capital employed PBT / total assets PBT / gross fixed assets PBT / capital employed PAT / total assets PAT / gross fixed assets PAT / capital employed

0.78 17.46 1.95 0.42 9.51 1.06 0.19 4.23 0.47 0.18 4.05 0.45 0.11 2.57 0.29

0.65 14.15 1.21 0.53 11.58 0.99 0.31 6.8 0.58 0.3 6.56 0.56 0.2 4.34 0.37

4.3 Interpretation:

38

Profitability Ratios: Profitability is the net result of a number of policies and decisions. The ratios examined thus far provide useful clues to the effectiveness of firms operations.

Liquidity Ratios: liquidity ratios deal with firms ability to pay off its debts. It includes Current ratio: The current ratio is calculated by dividing current assets by current liabilities. The current ratio of Indiabulls securities is 1.776, 1.441, & 2.137 for year 2004, 2005 & 2006 respectively. Current ratio = Current assets Current Liabilities

Quick ratio (acid test ratio): The quick ratio is calculated by deducting inventories from current assets and then dividing the remainder by current liabilities. The quick ratio is a measure of the firms ability to pay-off the short-term liabilities. A large part of the firms current assets are tied up in slow paying debts. The industry average for Acid test ratio is 2.1, but for Indiabulls securities quick ratio is 1.6, 0.86 & 1.89 for year 2004, 2005 & 2006 respectively, which is less than Industry average. The quick ratio should be high which indicates the companys ability to payoff short term obligations.

Debt equity Ratio:

39

Debt equity ratio is the related contribution of creditors and owners of the business in its financing.

4.4 Financial performance Year on Year

Increasing Market Share of Indiabulls on NSE Trading Volumes (1)

35 % 30 % 25 % 20 % 15 % 10 % 5 % 0 % 1.1 % FY200 2 1.9 % FY200 3 Share in Online Trading 2.2 % FY200 4 3.4 % 17.5 % 22.3 % 21.9 %

30.7 %

18.8 %

5.5 %

FY200 5 Share in Total Trading

FY200 (1) 6

(1) Source: NSE data from NSE website (Equity Segment)

40

Graph 4.3 Market share of Indiabulls on NSE trading Volumes

Market Shares of Top Brokers on NSE (2)

40% 35% 30% 25% 20% 15% 10% 5% 0% Top 5 Top 10 FY02

35%

24% 20% 14% 7% 12%

Top 25 FY05

UNDERSTANDING CAPITAL MARKET

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5.1 Project Framework

An Outlook on Indian Stock Market

Capital Market

Derivative Segment

Intraday

Delivery

Futures

Options

Figure 5.1

Project Framework

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The Indian capital markets have witnessed a transformation over the last decade. India now finds its place amongst some of the most sophisticated and largest markets of the world. With over 20 million shareholders, India has the third largest investor base in the world after the USA and Japan. The Indian capital market is significant in terms of the degree of development, volume of trading and its tremendous growth potential. Over the past few years, the capital markets have also witnessed substantial reforms in regulation and supervision. Reforms, particularly the establishment and empowerment of SEBI, market-determined prices and allocation of resources, screen-based nation-wide trading, dematerialization and electronic transfer of securities, rolling settlement and derivatives trading have greatly improved both the regulatory framework and efficiency of trading and settlement.

5.2 Indian Capital markets - Chronology 1994- Equity Trading commences on NSE 1995- All Trading goes Electronic 1996- Depository comes in to existence 1999- FIIs Participation- Globalization 2000- over 80% trades in Demat form 2001- Major Stocks move to Rolling Set 2003- T+2 settlements in all stocks 2003 - Demutualization of Exchanges

5.3 Capital Market Participants Banks 43

Exchanges Clearing Corporations Brokers Custodians Depositories Investors Merchant Bankers

5.4 Types of Investors Institutional Investors- MFs / FI / FIIs / Banks Retail Investors Arbitrageurs / Speculators Hedgers Day traders/Jobbers

5.5 Cash Market The Spot Market or Cash Market is a commodities or securities market in which goods are sold for cash and delivered immediately. Contracts bought and sold on these markets are immediately effective. Spot markets can operate wherever the infrastructure exists to conduct the transaction. The Spot market for most securities exists primarily on the internet. The trading in this cash market can be further divided into Intraday and Delivery. 5.6 Key Terms Intraday refers to buying or selling stocks today with an obligation to sell or buy the stock on the same day. It means completing the trading cycle in the same day. Here the stocks do not come to the Demat account. 44

Delivery refers to buying stocks today with a plan of selling it in future. In India there is a concept of T+2 settlements. Which means a stock bought on trade day is credited to your Demat account (or delivered) into your Demat account after 2 days.

Square off- making the position nil. Say selling off the stocks. (or buying back in case of short selling) Short selling- selling without having the possession of the stocks (possible in intraday trade). Selling the stocks initially and buying them back later. It is a concept used in the falling markets.

Demat Account- the account where in the shares are delivered. Every Demat account is linked to a trading account and a savings bank account. Demat account are provided by CDSL (central depository services limited) and NSDL (national securities depository limited). Indiabulls is a depository participant which links the depository to the beneficial owner of the account (client).

Trading pool/margin account- the place where the stock is received after the trade, it is the brokers account called the broker pool account.

T+2= Transaction + 2 days

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Chapter 6

DERIVATIVES
By far the most significant event in finance during the past decade has been the extraordinary development and expansion of financial derivatives. These instruments enhance the ability to differentiate risk and allocate it to those investors most able and willing to take it

6.1 Definition: Derivatives are instruments whose value is derived, in whole or in part, from the value of one or more underlying assets.

History of Derivatives The history of derivatives is surprisingly longer than what most people think. Some texts even find the existence of the characteristics of derivative contracts in incidents of Mahabharata. Traces of derivative contracts can even be found in incidents that date back to the ages before Jesus Christ. However, the advent of modern day derivative

46

contracts is attributed to the need for farmers to protect themselves from any decline in the price of their crops due to delayed monsoon, or overproduction. The first 'futures' contracts can be traced to the Yodoya rice market in Osaka, Japan around 1650. These were evidently standardized contracts, which made them much like today's futures.

The Chicago Board of Trade (CBOT), the largest derivative exchange in the world, was established in 1848 where forward contracts on various commodities were standardized around 1865. From then on, futures contracts have remained more or less in the same form, as we know them today. Derivatives have had a long presence in India. The commodity derivative market has been functioning in India since the nineteenth century with organized trading in cotton through the establishment of Cotton Trade Association in 1875. Since then contracts on various other commodities have been introduced as well. Exchange traded financial derivatives were introduced in India in June 2000 at the two major stock exchanges, NSE and BSE. There are various contracts currently traded on these exchanges. National Commodity & Derivatives Exchange Limited (NCDEX) started its operations in December 2003, to provide a platform for commodities trading. The derivatives market in India has grown exponentially, especially at NSE. Stock Futures are the most highly traded contracts on NSE

47

accounting for around 55% of the total turnover of derivatives at NSE, as on April 13, 2005.

6.2 Understanding Derivatives The primary objectives of any investor are to maximize returns and minimize risks. Derivatives are contracts that originated from the need to minimize risk. The word 'derivative' originates from mathematics and refers to a variable, which has been derived from another variable. Derivatives are so called because they have no value of their own. They derive their value from the value of some other asset, which is known as the underlying. Derivatives are specialized contracts which signify an agreement or an option to buy or sell the underlying asset of the derivate up to a certain time in the future at a prearranged price, the exercise price. The contract also has a fixed expiry period mostly in the range of 3 to 12 months from the date of commencement of the contract. The value of the contract depends on the expiry period and also on the price of the underlying asset. For example, a farmer fears that the price of soybean (underlying), when his crop is ready for delivery will be lower than his cost of production. Let's say the cost of production is Rs 8,000 per ton. In order to overcome this uncertainty in the selling price of his crop, he enters into a contract (derivative) with a merchant, who agrees to buy the crop at

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a certain price (exercise price), when the crop is ready in three months time (expiry period). In this case, say the merchant agrees to buy the crop at Rs 9,000 per ton. Now, the value of this derivative contract will increase as the price of soybean decreases and vice-a-versa. If the selling price of soybean goes down to Rs 7,000 per ton, the derivative contract will be more valuable for the farmer, and if the price of soybean goes down to Rs 6,000, the contract becomes even more valuable. This is because the farmer can sell the soybean he has produced at Rs 9000 per ton even though the market price is much less. Thus, the value of the derivative is dependent on the value of the underlying.

6.3 Difference between Commodity Derivative & Financial Derivative If the underlying asset of the derivative contract is coffee, wheat, pepper, cotton, gold, silver, precious stone or for that matter even weather, then the derivative is known as a commodity derivative. If the underlying is a financial asset like debt instruments, currency, share price index, equity shares, etc, the derivative is known as a financial derivative.

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Derivative contracts can be standardized and traded on the stock exchange. Such derivatives are called exchange-traded derivatives. Or they can be customized as per the needs of the user by negotiating with the other party involved. Such derivatives are called over-the-counter (OTC) derivatives.

Continuing with the example of the farmer above, if he thinks that the total production from his land will be around 150 quintals, he can either go to a food merchant and enter into a derivatives contract to sell 150 quintals of soybean in three months time at Rs 9,000 per ton. Or the farmer can go to a commodities exchange, like the National Commodity and Derivatives Exchange Limited, and buy a standard contract on soybean. The standard contract on soybean has a size of 100 quintals. So the farmer will be left with 50 quintals of soybean uncovered for price fluctuations. However, exchange traded derivatives have some advantages like low transaction costs and no risk of default by the other party, which may exceed the cost associated with leaving a part of the production uncovered.

In India we have several derivatives, two of the most famous derivatives traded on National stock exchange are Futures Option

50

Futures and options are traded on the NSE platform, with a normal IndiaBulls trading account the client get the access to trade in the F&O contracts.

6.4 Futures and Forwards As the name suggests, futures are derivative contracts that give the holder the opportunity to buy or sell the underlying at a pre-specified price some time in the future. They come in standardized form with fixed expiry time, contract size and price. Forwards are similar contracts but customizable in terms of contract size, expiry date and price, as per the needs of the user. 6.5 Options Option contracts give the holder the option to buy or sell the underlying at a pre-specified price some time in the future. An option to buy the underlying is known as a Call Option. An option to sell the underlying at a specified price in the future is known as Put Option. In the case of an option contract, the buyer of the contract is not obligated to exercise the option contract. Options can be traded on the stock exchange or on the OTC market.

6.6 Futures Terminology

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Spot Price: the price at which an asset trades in the spot market. Futures Price: the price at which the futures contract trades in the futures market Contract Cycle: The period over which the contract trades. The index futures contracts on the NSE have a one-month, two-month and three-month expiry cycles which expire on the last Thursday of the month. On the Friday following the last Thursday, a new contract having a three-month expiry is introduced for trading.

Expiry Date-the date specified in the futures contract. It is the last Thursday of the month Contract Size: the amount of asset that has to be delivered less than one contract. For instance, the contract size on NSE futures market is 100 Niftiest. It is prescribed by NSE for stocks. Each stock had a different lot size.

Basis the futures price minus the spot price. There will be a different basis for each delivery month for each contract. In a normal market, basis will be positive. This reflects that futures prices normally exceed spot prices.

Cost of Carry the storage cost plus the interest that is paid to finance the asset less the income earned on the asset. Initial Margin the amount that must be deposited in the margin account at the time the futures contract is first entered into. These margins are prescribed by the exchange. It varies from stock to stock.

Marking to Market the adjustment made at the end of each trading day to the investors margin account to reflect the investors gain or loss depending upon the futures closing price. It is the difference between todays closing price and yesterdays closing. The MTM profit /loss are credited to the 52

client account on day to day basis. Thus we call this a T+0 settlement. Maintenance Margin somewhat lower than the initial margin; the balance in the margin account must never become negative and in case it does, the investor receives a margin call that must top-up the account to the initial margin level before trade commences the following day.

Difference between Long Position & Short Position

A long position is an agreement to buy. You take a long position on a stock when you are bullish or have a feeling that the stock will move up. LONG => BUY A short position is an agreement to sell. You take a short position on a stock when you are bearish or have a feeling that the stock will move down. SHORT => SELL There are around 152 companies which are underlying for future and options in NSE. There are index Futures (Nifty futures, Bank Nifty, CNX IT futures) Stock Futures (Infosys futures. ITC futures, etc linked to specific stocks) Index options (linked to indices) Stock option (linked to specific stocks).

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6.7 Option Contracts: The owner of an option has the OPTION to buy or sell something at a predetermined price. Option provides the buyer of the contract the right but not the obligation to exercise. Right to BUY / OWN CALL OPTION Or Right to SELL / WRITE PUT OPTION

You buy a call option when you are bullish or have an upward target. You buy a put option when you are bearish or have a downward target.

6.8 Options Terminology Stock options options on individual stocks. A contract gives the buyer the right to buy or sell shares at the specified price Buyer of an option the one who by paying price (premium) buys the right but not the obligation to exercise his/her option on the seller/writer Writer of an option the one who by receiving premium, is obliged to sell/buy the asset if the buyer exercises on him Call Option gives the buyer the right but not the obligation to buy an asset by a certain date for a certain price Put Option gives the buyer the right but not the obligation to sell an asset by a certain date for a certain price Spot Price the price at which an asset trades in the spot market.

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Strike Price the target price or the expected price. Contract Cycle the period over which the contract trades. There are three month contracts just like the futures. Expiry Date the date specified in the option contract. It is the last Thursday of the month, just as in futures. Contract Size the amount of asset that has to be delivered under one contract. In-The-Money Option (ITM) an option that would lead to a positive cash-flow to the holder if it were exercised immediately. A call option on the index is said to be ITM if the current index stands higher than the strike price (Spot Price > Strike Price). A put option is ITM if the index is below the Strike price (Spot Price < Strike Price). At-The-Money (ATM) an option that would lead to zero cash flows to the holder if it were exercised immediately. Out-Of-The-Money Option (OTM) an option that would lead to a negative cash-flow to the holder if it were exercised immediately.

A call option on the index is said to be OTM if the current index stands at a level which is less than the strike price (Spot Price < Strike Price).

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Chapter 7

THE COMPETITORS
7.1 Major Competitors of Indiabulls Securities Ltd Indiabulls Securities faces significant competition from companies seeking to attract client financial assets, including traditional and online brokerage firms, mutual fund companies and institutional players having wide presence and a strong brand name. They are; ICICI Securities Ltd. Kotak Securities Ltd. India Infoline SSKI Ltd. Motilal Oswal Securities Karvy Geojit Securities HDFC Securities

7.2 India Infoline Ltd

India Infoline Ltd is listed on both the leading stock exchanges in India, viz. the Stock Exchange, Mumbai (BSE) and the National Stock Exchange (NSE). The India Infoline group, comprising the holding company, India Infoline Ltd and its subsidiaries, straddles the entire financial services space with offerings ranging from Equity research, Equities and derivatives trading, 56 Commodities trading, Portfolio

Management Services, Mutual Funds, Life Insurance, Fixed deposits and other small savings instruments to loan products and Investment banking. India Infoline also owns and manages the websites, www.indiainfoline.com and www.5paisa.com .

India Infoline Securities Pvt Ltd India Infoline Securities Pvt Ltd is a 100% subsidiary of India Infoline Ltd, which is engaged in the businesses of Equities broking and Portfolio Management Services. It offers broking services in the Cash and Derivatives segments of the NSE as well as the Cash segment of the BSE. A choice of technologically advanced trading that is with the help of 5paisa.com. 5 paisa also represents the availability of world class service to investors at the lowest possible rate - 5 paisa for every trade of Rs100, i.e., a brokerage rate of 0.05%.

Features of 5 paisa.com: Paisa sense - They offer a good value for money proposition. Their brokerage rates are very competitive, charging only 5 paise for Rs100 of trade done, which is 0.05% brokerage. They offer the most reasonable rates, independent of your net worth or volumes. In case of trades that result in delivery, they charge an additional 0.20% for back office and securities handling.

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Personalized service - At 5paisa.com, they are committed to provide you with unparalleled service, using e-mail, call centers and support staff. They have also invested in physical infrastructure.

Protection

All

transactions

of

5paisa.com

are

secure

and

confidential. The orders are electronically routed via sophisticated trading systems for execution. They follow a world class security system that enables them to protect from any fraud or hacking. Pedigree - 5paisa.com is a brand renowned for quality of information and services, they are professionally managed, with a skill set which is of high standard. Their top management has years of experience in financial services with leading banks and institutions.

7.3 Sharekhan Securities

Sharekhan was created when SSKI Investor Services Pvt. Ltd., a company in the securities and equities segment decided to harness the power of the Internet and offer services to its customers through an online stock trading portal. Sharekhan brings and provides a userfriendly online trading facility. They also have an extensive all-India ground network of franchisees across the country. The company offers its services through a combination of online and offline channels. The online model comprises a portal, chat facilities, and 'speed trade' terminals. And the offline model uses a combination

58

of an IVR infrastructure and a team of customer agents to receive orders over the telephone.

7.4 Motilal Oswal

Motilal Oswal Securities Ltd. was founded in 1987 as a small subbroking unit, with just two people running the show. Motilal Oswal Securities Limited has established itself as the Best Local Brokerage House in India (Asia Money Brokers Poll 2005). Their Institutional Equities Division combines the efforts of the Research and Sales & Trading departments to best serve clients' needs. Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy has established them as a reliable research unit amongst leading Indian as well as international investors. Their sales & trading team, comprising top equity professionals, translates the research findings into actionable advice for clients, based on their specific needs. Sophisticated computerized tools are used to understand client investment profile and objectives, which ensures proactive and timely service. FEATURES Integrity: A company honoring commitment with highest ethical and business practices. Team Work: Attaining goals collectively and collaboratively.

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Meritocracy: Performance gets differentiated, recognized and rewarded in an apolitical environment. Passion & Attitude: High energy and self motivated with a Do It attitude. Excellence in Execution: Time bound results within the framework of the companys value system.

7.5 Karvy
The birth of Karvy was on a modest scale in the year 1982. It began with the vision and enterprise of a small group of practicing Chartered Accountants based in Hyderabad, who founded Karvy. They started with consulting and financial accounting automation, and then carved inroads into the field of Registry and Share Transfers. Karvy has built a reputation as an integrated financial services provider, offering a wide spectrum of services for over 20 years. In 1982, a group of Hyderabad-based practicing Chartered Accountants started Karvy Consultants Limited with a capital of Rs.150, 000 offering auditing and taxation services initially. Later, it forayed into the Registrar and Share Transfer activities and subsequently into financial services. Karvy made inroads into a host of capital-market services, - corporate and retail - which proved to be a sound business synergy. In January 1998, Karvy became the first Depository Participant in Andhra Pradesh.

60

Karvy Securities Limited Deals in distribution of various investment products, viz., equities, mutual funds, bonds and debentures, fixed deposits, insurance policies for the investor.

7.6 Kotak Securities

Kotak Securities Limited, a subsidiary of Kotak Mahindra Bank, is the stock broking and distribution arm of the Kotak Mahindra Group. Kotak Mahindra is one of India's leading financial institutions, offering complete financial solutions that encompass every sphere of life. From commercial banking, to stock broking, to mutual funds, to life insurance, to investment banking, the group caters to the financial needs of individuals and corporate. Kotak Securities was set up in 1994. Kotak Securities is a corporate member of both The Bombay Stock Exchange and the National Stock Exchange of India Limited. Its operations include stock broking and distribution of various financial products - including private and secondary placement of debt and equity and mutual funds. Currently, Kotak Securities is one of the largest broking houses in India with wide geographical reach. The company has four main areas of business: Institutional Equities, Retail (equities and other financial products), Portfolio Management and Depository Services.

61

Kotak Securities Ltd is also a depository participant with National Securities Depository Limited (NSDL) and Central Depository Services Limited (CDSL), providing dual benefit services wherein the investors can use the brokerage services of the company for executing the transactions and the depository services for settling them. Kotak Securities has 195 branches servicing more than 2, 20,000 customers and coverage of 231 Cities. Kotaksecurities.com, the online division of Kotak Securities Limited offers Internet Broking services and also online IPO and Mutual Fund Investments. Features of Kotak Securities AKSESS Kotak securities Electronic Search Service: AKSESS offers you an easy way to get to Kotak Securities' institutional research. On this online archive you will be able to access estimates, company reports, sector reports, strategy reports and a bunch of other products including the daily India Market Flash produced by Kotak Securities. High Quality of software (KEAT): K.E.A.T is special software that Koataksecurities.com provides its customers using which they can view live market rates of scrips on both the NSE and BSE. Research Reports: Kotak Securities provide Different reports to investors which include Intraday calls Daily Technical View Daily Morning Brief Weekly Technical Report Sectoral Reports

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Stock Ideas Derivative Reports SMS Alerts: Kotak Securities also provides SMS alerts to customers providing useful tips about stocks & shares.

7.7 ICICI SECURITIES

ICICI Securities, A subsidiary of ICICI Bank, was set up in February 1993 to provide investment-banking services to investors in India. As on date ICICI Bank holds 99.9% of the share capital of ICICI Securities. ICICI Securities Limited is Indias leading full service investment bank with a dominant position in all segments of its operations Corporate Finance Fixed Income and Equities.

Features of ICICI securities ICICI provides multiple channels in banking like, which is unique feature. Internet Banking Mobile Banking ATM banking Phone Banking ICICI Securities is amongst the largest arranger of funds in Debt and Equity segments and also amongst the leading advisors in Mergers and Acquisitions.

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Chapter 8

COMPETITIVE ANALYSIS FOR INDIABULLS SECURITIES

8.1 Indian Retail Brokerage Market The Indian retail brokerage industry consists of companies that primarily act as agents for the buying and selling of securities (e.g. stocks, shares, and similar financial instruments) on a commission or transaction fee basis. It has two main interdependent segments: Primary market and the Secondary market. 64

Indian Retail Brokerage Market

Interdepende nt Segments

Primary Market

Secondary Market

Figure 8.1 Interdependent Segments of Brokerage Market

Objective: The main objective is to Analyze retail brokerage industry taking into account the health of the capital markets, Derivative Market and the intensity of competition among the brokerage companies. Doing Competitive Analysis for Indiabulls

8.2 Major growth drivers for brokerage revenue and trading volume are: Continuous fall in brokerage fees Adoption of technology screen-based trading, electronic matching, and paperless securities. Centralized operations, effective risk management, and control on large interconnected operations spanning multiple locations, which 65

is enabled by telecom connectivity and low costs Increasing access to capital and the ability to provide margin finance

8.3 Parameter Assessment for Doing Competitive analysis A differentiating aspect is a comparative assessment of the top retail brokerages on various value indicators, comprising of Product Pricing Service Unique Value proposition.

Competitive analysis

Product

Price

66

Service

Value Proposition

8.4 Customers need to analyze the Brokerage Firms Based on these 5 Parameters. Brokerage & Miscellaneous charges Quote Software Execution Platform Demat Account, and finally Back office Support.

Brokerage & Miscellaneous charges: This accounts for all the charges that you incur for your trading/investing. A few examples would be: Demat Account maintenance, Brokerage, Annual account Fee, Telephone based trading charges, trading software usage charges, etc. Quote Software: This is used mainly for technical study and for live quotes. Many people dont evaluate quote software. Some Investors dont pay attention to the quality of data (how accurate it is). Or how fast and often it refreshes. Does it allow us to back test our strategy? Does it allow customizing technical signals/parameters?? Does it allow us to see historic data? For, what period is intra day data available? They might need all this information. They should be clear on what they need and ensure quote software provides it all. Execution Platform: Its nothing but a platform that allows us to

67

execute our trade fast. It should automate trade management and execution, and should automatically give protection against human errors. Demat Account: Demat account should only be opened with a well known and established brokerage firm in the market. Back office Support: People while trading face lots of problem because of lack of good back office support. Relationship Managers trading without their clients knowledge, funds not being transferred, trades not being executed, slow execution etc are a few examples.

8.5 Brokerage Charges Intraday Brokerage charges of the Competitors of Indiabulls Securities Ltd

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In tra d a y B ro ke ra g e C h a rg e s
0.3 0.25 0.2 0.25

Charges

0.15 0.1 0.05 0 Indiabulls K o tak India-infoline IC I direc t IC S ec urities K arvy M otilal os w al S harek han 0.1 0.05 0.1 0.05 0.1 0.1

F in a n c ia l B ro k e ra g e F ir m s

Indiabulls K otak S ec uritiesIndia-infoline IC IC I direc t K arvy M otilal os w alS harek han

Graph 8.2 Intraday Brokerage Charges

Delivery Brokerage charges of the Competitors of Indiabulls Securities Ltd

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Delievery Brokerage Charges

0.8 0.7 0.6 Charges 0.5 0.4 0.3 0.2 0.1 0 Indiabulls Kotak Securities Indiainfoline ICICI Direct Karvy Motilal oswal Sharekhan 0.5 0.5 0.5 0.5 0.5 0.75

0.45

Financial Broke rage Firms

Indiabulls Kotak Securities India-infoline ICICI Direct Karvy Motilal oswal Sharekhan

Graph 8.3 Delivery Brokerage Charges

8.6 Analyzing the Blogs from Web Site Traderji.com (online community for Indian Investors & Traders)

70

We were interpreting the blogs written by customers, their experiences and their review on brokerage firms. In this web site they have conducted opinion poll on broker preferences of customers & reasons for choosing the particular brokerage firm. In this poll opinion, customers have shared their viewpoint about pros & cons of different brokerage firms.

Experiences of Customers
Poll Options Which online broker u prefer and why - chose one 5paise ShareKhan Motilal Oswal ICICI Direct HDFC India Bulls Kotak Any other (mention name) View Poll Results
Vote Now

Poll Results of Blogs: Total Number of Voters =457

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Which Online Broker You Prefer? Poll Results of Blog(Voters 457)

Any other Mention, (58), 13%

India-Infoline(5paisa), (68), 15%

Kotak, (34), 7%

Sharekhan, (83), 18%

Indiabulls, (75), 16% ICICI direct, (109), 24% HDFC, (14), 3%

Motilal Oswal, (16), 4%

India-Infoline(5paisa) HDFC

Sharekhan Indiabulls

Motilal Oswal Kotak

ICICI direct Any other Mention

Pie chart 8.4 showing Poll results

8.7 Competitive Strength of Indiabulls Securities Indiabulls securities Ltd have a distinct set of competitive advantages that make it uniquely capable of winning in the marketplace against its competitors Diverse Branch Network Bouquet of financial products and services Advanced technology team that delivers market leading product innovation Strong sales and marketing teams with continuous reinvestment and training Strong cross-selling opportunities. Strong and experienced promoters Leading product innovation and marketing strategies

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Well capitalized player, with strong banking relationships and credit ratings Ability to combine people and technology in unique ways Strong market presence and increased market share leading to a virtuous cycle of growth and Profitability.

Core pillars of Business strategy Increase the number of Client Relationships. Offer Diversified Financial Products & Services. Multiple Channels Enhance Customer Experience and Opportunities. Low cost and highly scalable business.

Merits of Indiabulls Securities Low brokerage charges (Competitive) with 0.10 for Intra-day Indiabulls securities provide 8 times margin for Intra-day and 4 Indiabulls is suitable for both Day trading & Long term IndiaBulls has software called Power IndiaBulls. It is a Java and 0.50 % for delivery. times margin for delivery. investment based application, with real-time streaming quotes. It is fast in terms of speed and execution Research reports are free of cost to trading members. They Provide 3 in 1 interface, i.e. Demat Account, Trading

account & bank account all are linked in one interface.

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De-Merits of Indiabulls Securities You have to open a bank account with the banks mentioned in Indiabulls site for Credit/ Debit Facility as they dont have their own bank. And In ICICI direct , you have a direct debit/credit facility with the bank Most customers feel that it is difficult to understand the ledger reports of Indiabulls securities, so proper customer guidance should be given. Lack of Banking arm Rural market is yet to be tapped. More importance should be given to promotions &

advertisements. Value Proposition of Indiabulls Securities ISL provide a very good Trading tools like Power Indiabulls & Indiabulls market trader. Power Indiabulls: A desktop Trading application offering clients sophisticated trading tools accessible at lightning fast speed. Indiabulls Market Trader: Browser based trading application built for retail investor. Indiabulls Equity Analysis: Premium research on 400 plus companies. Indiabulls Professional Network: Offers real-time prices, detailed data and news, intelligent analytics and electronic trading capabilities. Relationship manager: Indiabulls securities robust technology is integrated with knowledgeable and customer-focused

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relationship managers who are available 24X7 to assist the clients. In Depth Market Analysis and Research Their special research cell bring you intensive research reports on how the stock market is faring, when is the right time to invest, when to execute your order and more. Depending on what kind of investor you are, they bring you fundamental or basic research and technical research.

8.8 Number of Branches of Competitors compared with Indiabulls securities

Branches of Competitors of Indiabulls as per the Year 2005-06

800 750

Number of Branches

700 600 500 400 300 200 100 0 Kotak Indiabulls 306

667 500 400 250 257

ICICI

Sharekhan

Competitors

IndiaInfoline

M otilaloswal

Karvy

Kotak

Indiabulls

ICICI

Sharekhan

India-Infoline

Motilal-oswal

Karvy

Number Indiabulls

of

Customers

of

competitors

compared

with

75

Number of Customers Using Online Trading Terminal as per Year 2005 800,000 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0
Se cu ri t ie s lls Se cu rit ie IC s IC Is Sh ec ur ar iti ek es ha n Se cu rit ie s In di aIn fo lin e In di ab u

Number of Customers using Online Trading Terminal

675,000

140,000 75,000 60,000 90,000

Ko t

ak

Broke rage Firms

8.9 Merits & De-merits of Competitors

ICICI securities: It provides products & services in fixed income,

equity & corporate finance. Merits of ICICI Securities ICICI Direct is considered best for long term investment. ( Indiabulls is suitable for both Day trading & Long term investment) A direct debit/credit facility with the bank. All facilities available under one umbrella. BTST (Buy today & sell tomorrow) is available; this facility is available only in ICICI Direct. Can apply for IPO online (we cant do this in Indiabulls).

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Can apply for mutual funds online and can also sell them online. Internet banking demo which gives customers an opportunity to learn.

De-Merits of ICICI Securities Brokerage charges are high - intraday 0.3% and 0.75% delivery compared to other brokerage firms (is considered as highest in the market). Day trading is a night mare in ICICI because of Web based terminal, which is very slow. Orders placed at or around 10.00 hrs may be queued for a while. So intra-day Margin trading could be annoying now & then. It's not much of a hassle for Cash trading though. (Indiabulls offers you a trading terminal 'powerIndiabulls', which is java based software. It is fast in terms of speed and execution). ICICI Direct brokerages are not negotiable ( Where as Indiabulls Brokerage Charges are negotiable) While opening Demat account, three accounts are opened ,the saving bank account, trading account and Demat account and you have to maintain minimum of rs5000 in case if it is not a salaried account. (That money) Other banks account cannot be linked with the ICICI trading account. They charge an annual maintenance charges are Rs540. Rs5000 sleeps without earning any

Value Proposition of ICICI Securities E-Instructions: You can transfer securities 24 hours a day, 7 days a week through Internet & Interactive Voice Response (IVR)

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at a lower cost. Now with "Speak to transfer", you can also transfer or pledge instructions through our customer care officer. Mobile Request: Access your Demat account by sending SMS to enquire about Holdings, Transactions, Bill & ISIN details. The equities research team tracks over 15 key sectors of the Indian economy and publishes in-depth research reports every year. The equities team at ICICI Securities comprises of research desk, sales desk and the trading desks.

ShareKhan
Merits of ShareKhan Securities Low brokerage charges, intraday 0.1% and 0.5% for Live streaming quotes Customer support is good No monthly charges Can trade in both BSE and NSE delivery.

De-Merits of ShareKhan Securities No BTST (buy today sell tomorrow), in ShareKhan you cant sell a share today which you bought yesterday. You have to open a bank account with the banks mentioned Streaming quotes requires JVM (Java Virtual Machine); this Annual charges are Rs330. in ShareKhan site. may be big headache for customers.

78

Their trading terminals are certainly not for "investors",

only for active traders. That is because, you have to trade a certain volume every month, otherwise you end up paying a fine Comparing ShareKhan & ICICI Direct Sharekhan Live Streaming quotes but streaming quotes require JVM No BTST facility (Buy today sell tomorrow) Annual Maintenance charge Rs 330 You have to open a bank account With the ShareKhan site banks mentioned in Annual Rs 540 Maintenance charge BTST facility is available ICICI Securities No live streaming quotes

other banks account cannot be linked account with ICICI trading

Can apply IPO online Not necessary

Can apply IPO online while opening a Demat account you Need to maintain a minimum of Rs 5000

Can trade in BSE & NSE No Monthly Charges Cannot apply

Can Trade in BSE & NSE No Monthly Charges can apply mutual funds online

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India Infoline
Merits of India Infoline (5 Paisa.com) Securities Low brokerage charges, intraday 0.10% and 0.50% for Minimum brokerage per share will be 1 paisa for trading 5 paisa provides 6 times margin for Intraday & 8 times All customers will get Digital Contract Notes. Physical delivery and it is negotiable. transactions and 5 paisa for delivery based transactions. margin for Delivery. contract notes could be provided on request which would entail a nominal charge. De- Merits of India Infoline (5 Paisa.com) Securities Registration Fees (one time) Rs.500/ and is non-refundable. Software License Fee Rs.799/- per month or 7999/- per There is lot of Hidden costs. Annual Service Charges Rs.250. Customers who just want to have a depository relationship

annum and is non-refundable.

will be required to pay Rs.1000/-, for each Demat account, which will be adjusted against service charges. The information in their web based terminal is too much terminal is good, but the interface is too compressed in one screen. Trader complicated

Kotak Securities

80

Merits They provide streaming quote software free. Low Brokerage charges with 0.05% for Intra-day & 0.45% for delivery. Kotak Securities will offer small-time retail investors with invest able surpluses as low as Rs.5, 000 a chance to invest in capital markets. Transactions are transparent with effective back office support. They provide Simple Ledger reports, which customers feel easy to understand than any other brokerage firms.

Mutual fund & IPO facility is available online. Flexibility of products - Once you invest with Kotak Securities, you can enjoy access to a wide range of products and services to help you make the most of your investments. De-Merits Unethical act: Geojit Securities Ltd has accused kotak securities stock broking firm of hacking into its account to steal critical business information and blocking information access. (Report: dated 2002, Ref: www.domain-b.com). Some investors have bad experience with accounts opening & they complain that it takes a long time for opening accounts. Some customers are not happy with customer care of Kotak securities.

Value Proposition of Kotak Securities Kotak Securities have a definite policy on brokerage, and they have different slabs for different clients based on their turnover.

81

You can always choose your brokerage based on your style and quantum of trading. High Quality of software (KEAT) K.E.A.T is a special software that Koataksecurities.com provides its customers using which they can view live market rates of scrips on both the NSE and BSE, create a watch list and simultaneously place orders, view order reports, research companies etc. It is a complete online trading terminal. Mobile trading The facility is exclusively designed to give you instant access to the stock market through mobile phone. Phone Trading Call and Trade Call & Trade is a service offered by Kotak Securities for its customers, which provides customers with a facility to trade over the phone. Kotak Securities provides you a toll free number that you can call from anywhere in India.

Chapter 9

SWOT ANALYSIS OF INDIABULLS SECURITIES

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9.1 STRENGTHS
Integrated technology platform: - Since the launch of their website, www.indiabulls.com their online trading platform, they have invested in building a technology platform. They have also developed software called power Indiabulls. Their trader terminal is an application which allows customers to trade on both the BSE and the NSE, has features like live intra-day tick by tick charts, historical charts, price alerts and other features. The features allow them to seamlessly integrate across delivery channels, online or offline through branches or telephone. Pan India distribution network: - They have 640 branches across India. These branches help in customer acquisition as well as customer service. Their distribution network is well spread to capture the target audience and cater to the needs of their potential customers. Relationship manager facility: - This is one of the unique services that Indiabulls offers its customers. Every customer is provided with a relationship manager, where in the customers can contact these managers at anytime of the day to get information on the market or get their queries clarified. Growth rate: - The Company is growing at a very rapid rate, from 25 branches in the year 2003 it has grown to 650 branches in the beginning of 2007. Not only has it seen a fast growth rate in the number of branches but also it has grown in the number of clients and the employee strength. They have a customer base of more than 450,000 and over 4500 relationship managers. Indiabulls has been rated as the Fastest Growing Large Cap Company in India in a report by Business Today magazine in April, 2006. 83

Power

Indiabulls

has

developed

into

brands:

Indiabulls.com and power Indiabulls which is their software are well known brands amongst retail investors across India. In all the cities that they have expanded into, they have been able to leverage upon brand awareness and have established a customer base. Strong sales and marketing teams that deliver market leading product innovation: - their relationship manager channel offers a single point contact to all their retail customers. These managers offer personalized services to their customers and help to build strong and continuing relationships with them. The marketing associates help the company in client acquisition at minimal cost and they also help the company and its subsidiaries in increasing their penetration into smaller towns and cities. Strong banking relations and credit ratings: - Indiabulls has banking relation with some of the major banking institutions in the country such as HDFC Bank, ICICI Bank, Standard Chartered Bank, etc, for easy mobilization of funds of the customers. Strong market presence and increased market share: Their growing client base and market share have increased their market presence and brand recognition has enhanced their profitability. Their brand and profitability allows them to recruit good and efficient employees, compensate them attractively and provides the flexibility for them to invest in the business and technology systems these attributes in turn has a positive effect on the growth of the company.

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9.2 WEAKNESSES
Lack of a banking arm: - Indiabulls does not have a banking arm of its own which otherwise would have helped the company to a large extent. Whereas a few of its competitors like HDFC securities, ICICI securities, Kotak securities, etc have their own banking arms which make the transactions easier and simpler. Loss of relationship managers leads to loss of clients: Their business is dependent on the team of relationship managers who directly manage client relationships. Any events that harm these relationships including the loss of their relationship managers may lead to the loss of client.

9.3 OPPORTUNITIES
Changing demographics with higher disposable income: India is one of the fastest growing economies in the world. It has a large and rapidly growing middle class of 300 million people with increasing levels of discretionary income available for consumption and investment purposes. The options they have for investments are fixed deposits, post office deposits etc,. This gives them a limited interest rate on their investment; where as the stock market provides a good scope for making good returns. The evolution in Indias demographic setup with a median age of 24 years and higher consumption expenditure is expected to

85

have a virtuous cycle effect by improving the economic growth and per capita income which would result in higher savings and investments. Rapid penetration of internet and computers: -Technology is vastly used in stock market trading. Now, with the use of the computers and internet the stock market trading has become fast. The traders can place orders through the internet and execute them. This saves the time of the investors, who earlier had to make calls to their brokers in order to trade. These people are willing to use advanced communication tools, such as computers and telephones, and want to take charge of their personal investment decisions. The use of technology is influencing more people to invest in the stock market. Market size and Characteristics: -India is a large and growing economy with rapidly expanding financial services sector. The sector has witnessed a transformation over the last decade as a result of the economic liberalization which started in 1991. India is the worlds 12th largest economy in dollar terms and the 4th largest in PPP terms. The projected growth rate of real GDP is greater than 9% per annum with higher growth in many sectors such as financial services. Indian financial sector presents a huge retail finance opportunity. As a result of falling interest rates, bank deposits, other traditional investment opportunities are losing their attraction. Thus, Indian investors are getting attracted towards alternate investments such as the equity markets and are looking for newer financial products. Diversified business model: -Our Company and our

subsidiaries offer various financial services and products ranging 86

from equity, F & O and wholesale debt, insurance and IPO distribution, depository services to cater to the specific needs of the retail and institutional investors thus providing all these services in a single platform. Thus Indiabulls is not dependent on any single of its subsidiary for survival and failure of any one subsidiary will not have an adverse effect on the company as a whole.

9.4 THREATS
Economic slowdown: - Terrorist attacks and other acts of violence or war, including those involving India or other countries could adversely affect national economy or world economy as a whole. Such act may also result in a loss of business confidence. Travel restrictions as a result of such incidents may have adverse affect on the ability to operate effectively. This will result in an economic slowdown (example: the 9/11 attack on the World Trade Centre, New York). Political instability in the country: - The government of India has pursued the policy of economic liberalization, including relaxing restriction on the private sector. With the change in government, there is no assurance that these liberalization polices will continue in the future. Any political instability could delay the economic reforms and could have adverse effect on the market. Volatile movement in market indices: - The Indian stock market is very volatile in nature and is capable of shedding or gaining several points in a single day. Unless and until the market stabilizes the investors will be very hesitant to invest in the

87

market. Stock market falls will have a cascading effect on the investors and economy of the country.

Competition: - Indiabulls faces significant competition from companies seeking to attract clients financial assets, including traditional and online brokerage firms, mutual fund companies, etc, which are having a wide presence and strong brand name. As the company enters new markets their bound to face additional competition from those who have longer operating history have grater retail and brand presence than Indiabulls. If the company is unable to manage its business it might impede their competitive position and their profitability.

Substitutes: - Various alternative forms of investment including fixed deposits with banks and post offices etc act as substitutes to retail broking products and services. The stock market is very unpredictable with fluctuations; this may prompt many people to invest in fixed deposits, posy office deposits, etc in order to avoid risk.

Low product differentiation: - The retail broking services provided by the various companies are homogeneous with very low product differentiation. This does not allow the company to freely fix their prices due to the threat of competition, which in turn reduces their profit.

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CHAPTER 10

RESEARCH METHODOLOGY
Research in common paralance refers to a search for knowledge. One can also define research as a scientific and systematic search for pertinent information on a specific topic. Research is an art of investigation. The Advance Learners Dictionary of Current English lays down the meaning of research as a careful investigation or inquiry especially through search for new facts in any branch of knowledge . Some people consider research as a movement, a movement from known to unknown .it is actually a voyage of discovery Research methodology mean what's method apply to do any type of research and. how can you collect the data from the field'. Before conducting any type of research and analysis and inference based on it, the first and the foremost thing is to collected the date and after the proceeding in a systematic manner to finally reach at result. There are the various steps to be followed such as: What should be the sample size? From where it can be taken? Compilation of data Presentation of data

89

 Analysis and presentation of data Making inference Research can be conducted by researcher by:1. UNDERSTANDING THE ORGANIZATION: An in depth study of the Organization's working was done. The motive was to know the working of the Organization and why INDIA BULLS is considered as number one. Current status of the competitors is considered as to analyse their competitive situation.

2. DEVELOP A SURVEY QUESTIONNAIRE: A questionnaire was developed to understand the comfort and investment level of customer in any Security and stock Market and his preference with the Organization. To know the areas where INDIA BULLS lack so that the Organization can improve upon its weak areas and be able to extract best business. 3. CONDUCT SURVEY: After finalizing the sample, who may be old or new, meetings were scheduled and survey conducted. We contacted the Customers, fixed appointment with them and collected data. Data obtained was then analyzed. 4. ANALYSIS AND INTERPRETATION OF INFORMATION The collected data should be properly analysed ,so that some fruitful information can be yield out of it. The data must then be interpreted in a manner that the analysis may be easily presented before anyone and easy to understand.

90

TYPES OF RESEARCH:1. Descriptive and Analytical Research:Descriptive research include survey and fact finding enquiries of different kinds. In analytical research, the research has to use facts or information already available, and analyze these to make a critical evaluation of the material.

2. Applied and fundamental Research:Applied research aim at finding a solution for an immediate problem facing a society or an industrial /business organization. Fundamental research is mainly concerned with generalizations and with the formulation of a theory. 3. Quantitative and Qualitative Research:Quantitative research is based on the measurement of quantity or amount.

91

Qualitative research is concerned with qualitative phenomenon, i.e., phenomena relating to or involving quality or kind. 4. Conceptual and Empirical Research:Conceptual research is used by the philosophers and thinkers to develop new concepts or to reinterpret existing ones. Empirical research relies on experience or observation alone, often without due regards for system and theory.

The type of research adopted to perform the project work is Descriptive Research as the information is collected through survey by questionnaire, without giving regards to any theory and concepts. The need of primary information required for the project topic can be done through Descriptive Research. The facts and information was surveyed and various fact finding enquiries of different kinds. The description of current state of affairs in the current situation of the stock market may be analysed.

The comparison of INDIA BULLS and other stock market companies depends on the customers investment criteria and not in the hands of the company itself. The performance of share market do not depends on the companies wish to earn profit, but the investors wish to invest in share market and to earn profits.

The secondary information required to support the project topic findings is being colleted through Analytical Research, in which the researcher has to use facts and information already available, and analyse these to make a critical

92

evaluation of the material. In analytical research, the research has to use facts or information already available, and analyze these to make a critical evaluation of the material. The data colleted to conduct this type of research has been prepared from Magazines , newspaper annual and weekly issues, books on stock exchanges.

Websites:-

Bombay Stock Exchange" Bseindia. 20 Mar. 2007 <http://www.bseindia.com>. " Indiabulls Securities Indiabulls.Com. 15 Mar. 2007

<http://www.Indiabulls.com>. "National Stock Exchange nseindia. 25 Mar. 2007 <http://www.nseindia.com>. "Share khan Securities Sharekhan.Com. 25 Mar. 2007

<http://www.sharekhan.com>. India Infoline Securities India-Infoline.Com. 26 Mar. 2007

<http://trade.indiainfoline.com>. " India Infoline Securities 5paisa.Com. 26 Mar. 2007

<http://www.5paisa.com>. " Kotak Securities kotak securities.Com. 26 Mar. 2007

<http://www.kotaksecurities.com>. "ICICI Securities ICICI securities.Com..25 Mar. 2007

<http://www.ICICIsecurities.com>.

93

" Karvy Karvy.Com. 25 Mar. 2007 <http://www.karvy.com>. Online Investors & Traders 2 Apr. 2007 <http://www.traderji.com>. " Motilal Oswal Securities . 25 Mar. 2007

<http://www.motilaloswal.com>.

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METHOD AND PRINCIPLE USED:

INFORMATION REQUIRED IN DETAIL
PRIMARY INFORMATION: To know why INDIA BULLS is standing at a reputative position among stock exchanges and its competitive advantage. The competitor companies were also analysed to find out their current status and how close competition exists. SECONDARY INFORMATION: To present the specialities of INDIA BULLS which are shown through secondary data analysis.

METHOD OF DATA COLLECTION

The task of data collection begins after research problem has been defined and research design /plan checked out. While deciding about the method of data collection to be used for the study, the researcher should keep in mind the two types of data viz. primary and secondary. . Primary Data They are those which are collected a fresh and for the first time, and thus happened to be in original in character. Data is collected by:-Survey -Observation method -Interview Methodpersonal interview, telephonic interview.

95

Secondary Data Are those which has already been collected by someone else and which have already been past through the statisal process. Data is collected by:-Publications of central state and local govt. -Publication of foreign. -Journal -Books, magazines and newspaper -Reports and publication of business house -Reports and publication of scholars and universities. -Public records

RESEARCH INSTRUMENT USED IN DETAIL: PRIMARY Questionnaires: A formal list of the questions answered by the people who are thought to have the desired information and later analyzing the responses is the questionnaire method. It can be used to get some data relative to most problems. We have used structured questionnaires as a formal list of questions produces more reliable results.

For collecting the data we used questionnaire method. The questionnaire was design mainly of objective nature and partially of descriptive nature to get suggestion regarding housing finance compares. We visited various government department and business organization and also to individuals for required information according to our Performance knowing the views of the people and get their suggestions.

96

 Personal Interviews: Personal interview is the most versatile and flexible kind of technique. Direct face-to-face conversation helps in getting accurate data. Personal interview were done with the people in order to get the required information. SECONDARY Websites. Brochures and Company Magazines.

CANOPY PROGRAM The conducted a five days canopy program in which we were asked get questionnaire filled by the individuals. The activity was conducted in groups. Each group was allotted a definite area for its work .Every evening the response of the day was given to the reporting officer in INDIA BULLS. The reporting officer was Mr. Maya Sarin (Relationship Manager). The data collected from it was of 50 persons (in round figures). The area allotted to us was at Noida, Greater noida, and in delhi at Lakshmi nagar.The response was good. This program enabled them as a feedback program which would help them in further innovation and make nessary changes

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RESEARCH DESIGN The formidable problem that follows the task of defining the research is preparation of the design of the research project, popularly known as research design. Decisions regarding what, where, when, how much by what means considering an inquiry or research study constitute a research design . Types:Research Design in case of exploratory research study . Research Design in case of descriptive and diagnostic research study. Research Design in case of hypothesis-testing research study. RESEARCH STUDIES CONSIDERED : EXPLORATORY RESEARCH Exploratory research is based on secondary data and survey of knowledgeable persons., This research is usually designed to obtain the investigations of the investors prospective of comparing the stock exchanges for his investment decision.Wide-ranging and versatile approaches are employed. Exploratory research is appropriate for situations where Management is searching for solutions and seeks new insights regarding the situation or desires a more precise formulation of the problem. We have made use of exploratory research in our project because it served our purpose to the maximum information.A new knowledge is being discovered ,although it exists in the environment.

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 DESCRIPTIVE RESEARCH Descriptive research studies are those studies which are concerned with describing the characteristics if a particular individual ,or of a group.this type of study is concerned with specific predicitions, with narration of facts and characteristics considering individual and groups. The decision regarding what to measure and find adequate method of measuring along with the clear cut definition of population. As data collected, they should be examined for completeness, comprehensibility, consistency and reliability. This type of research design is adopted since it takes into account all the steps involved in a survey concerning a phenomenon to be studied. This type of study makes enough provision for protection against bias and must maximize reliability.

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SAMPLING PLAN
Research is basically depend up on the data and that data depend upon the size of sample we want. So deciding of sample size is mainly based on the nature of objective of the research. Sample size has to . confirm the objective on each and every respect.Suppose we are going to decide any effective decision on the base of this report or set up any new facts. On that position we have require large size of sample on comparison to find out a trend. Here our objective is simply go to "comparative analysis and make an overview of Indian Stock Market "So we preferred to go with a sample size of only 250 data.

SAMPLING TECHNIQUES USED Systematic Sampling In some instances , the most practical way of sampling is to select every next item on the list. Sampling of this type is known as systematic sampling. An element of randomness is introduced into this kind of sampling by using random numbers to pick up the unit with which to start. In the project the samples are drawn from different zone including 50 persons in each zone constituting 250 persons all together. Stratified Sampling If a population from which as ample is to be drawn does not constitute a homogenous group stratified sampling technique is generally applied in order to obtain a representative sampling. Under stratified sampling the poplation is divided into several sub population that are individually more homogenous than

100

the total population (the different sub population are called STRATA and then we select item from each stratum to constitute a sample. In the project ,the population was selected randomly from each zone having equal chances to be selected as a sample. The population in each zone is called strata which includes 25 persons from each zone. Sequential Sampling This sampling design is somewhat complex sample design the number of sample one more than two but it is neither certain nor decided in advance this type of system is often referred to as sequential sampling. thus in brief we can say that in sequential sampling one can go on taking samples one after another as long as one desire to do so. In the project, the samples are being surveyed in a sequential manner from every zone.

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SAMPLE DESIGN The selected respondents constitute what is technically called a sample and the selection process is called sampling technique. the survey so conducted is known as sample survey. Researcher must prepare a sample design for his study i.e., he must plan how a sample should be selected and of what size such a sample would be. 1. Types of universe: - The sample design is clearly define the set of objects, technically called the universe. The total population of India is universe for INDIA BULLS. The population of the whole country may be considered as the sampling population. 2. Sampling unit: - Sapling unit may be a geographically one such as state, district, village, etc. The sampling unit is decided by dividing into central, eastern, western, northern and southern zones 3. Source list: - It is also known as sampling frame from with sample is to be drawn. It is decided by considering the people who know about SHARE MARKET. 4 Size of sample: - This refers to the number of items to be selected from the universe to constitute a sample size. The sample size chosen by me is 125 persons, 25 persons in every zone. 5. Sampling procedure:-It decides about the technique to be used in selecting the items for the sample. The procedure of deciding the sample is done zone wise.

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Measurement and Scaling Techniques Measurement is relatively complex and demanding task, specially so when it concerned qualitative and abstract phenomena. By measurement we mean the process of assigning numbers to objects or observation, the level of measurement been a function of the rules under which the numbers are assigned. Measurement is a process of mapping aspects of the domain onto other aspects of a range according to some rules of correspondence. The method used to represent the collected data is tables, graphs, charts, pie charts, bar graphs, supported by written statement. Measurement technique are deliberately selected by the researcher.During the research the researcher has to be quite alert about this aspect while measuring properties of objects or of abstract concept.

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Chapter 11

FINDINGS & SUGGESTIONS

Aggressive competitors Promotions: concentrates Indiabulls less on Securities advertising compared and to its promotions,

especially through electronic media. Its competitors like Sharekhan, ICICI and Kotak are advertising aggressively through media. Hence Indiabulls should concentrate more on advertising through print and electronic media. Tapping Rural Market: The Indian rural investors market are relatively untapped, with only small and private firms meeting the current demand. Indiabulls Securities can gain the First Mover Advantage over its competitors, especially in areas were commercial crops are grown and the standard of living is high. These people do not have much option to invest other than banks and post offices. Reduce the initial account opening charges: The charge for opening a trading and demat account in Indiabulls securities is high compared to its competitors. This influences the potential investors to open their account with another company which provides the same at lower prices. Thus it acts as a mental barrier for potential customers, who tend to overlook all other benefits offered by Indiabulls. Hence Indiabulls should consider reducing their account opening charges. Bring in more product differentiation: Product differentiation here means that Indiabulls securities should bring in more customized services and more value proposition for large investors. It can reduce

104

the brokerage charges for large investors which will encourage them to invest more in the company. Invest more on R&D: Indiabulls should concentrate on its research and development since most of its competitors are investing on R&D. This will help the company to read the market better and will also be in a better position to understand the needs of the customers. This can be extremely beneficial for Indiabulls in the long run.

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APPENDIX

Profit & loss Summary

Mar Mar 2004 2005 Rs. Crore (NonAnnualized) Income Leasing & hire services Security transactions Dividend income Interest income Others Other income Non-recurring income Expenditure Loss on security transactions Other operating expenses Personnel cost Other expenses Finance charges Lease rent Less: expenses capitalized Non-recurring expenses Profits / losses PBDT 12 12 months months 69.48 0 0.18 0 15.36 53.94 0 0.03 114.59 0 0 0.29 1.93 112.37 0 0.27

Mar 2006

12 months 317.97 0 0 0 21.16 296.81 0 0.13

0 3.58 10.72 11.33 13.97 2.19 0 0

0.28 7.92 20.88 13.71 21.48 3.89 0 0

0.04 13.84 50.24 21.24 46.7 3.08 0 0

29.91 106

51.28

186.85

Depreciation PBT Tax provision PAT Appropriation of profit Dividends Retained earnings

1.11 28.8 10.79 18.01

2.16 49.12 17.89 31.23

6.57 180.28 61.06 119.22

0.7 17.31

6.14 25.09

0.62 118.6

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QUESTIONNAIRE
Format of Questionnaire For Doing Promotions

The format of Questionnaire given to people is as follows: Name of Person: Contact Number: E-mail Id

Are you interested in Share Market? Do you invest in Share market? Are you aware of Indiabulls? Do you have a Demat Account? Presently in which security are you trading?

Yes Yes Yes Yes

No No No No

Signature

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Brokerage & Tax break up format of Indiabulls

(For Security reasons all data are not revealed)

Intraday (%) Buy Brokerage Charges Security Transaction Tax (STT) Service Tax (12.24% on brokerage) Turn over Tax (TOT) Stamp duty Total 0.1 0 Sell 0.1 0.025

Delivery (%) Buy 0.5 0.125 Sell 0.5 0.125 0

Futures (%) Buy 0.1 Sell 0.1 0.017

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CONCLUSION
Indiabulls faces significant competition from companies seeking to attract clients financial assets including traditional and online brokerage firms, mutual fund companies and institutional players, having wide presence and a strong brand name. As Indiabulls enter newer markets, they are likely to face additional competition from those who may be better capitalized, have longer operating history, have greater retail and brand presence, and better management than Indiabulls. As new players like Reliance Money enters the market the competition will only get more intense. If they are unable to manage their business it might impede their competitive position and profitability. Hence they should continue to compete vigorously to capture more market share and should add more management personnel to manage their growth in an optimal way. Post economic liberalization in 1991 the Indian financial services industry has experienced significant growth. Exposure to global practices has made the Indian customer more demanding. As a result of falling interest rates, bank deposits, other traditional investment opportunities are losing their attraction. Thus, Indian investors are getting attracted towards alternate investments such as the Retail Security Market and are looking for newer financial products. As the Indian Retail Security Market is still in a nascent stage and as a lot of potential for growth, its a very good opportunity for companies like Indiabulls to increase their market presence. They will have to concentrate more on the Research and Development and come up with strategies which are beneficial for the company. Thus for the purpose

110

of Applied Research Projects in the company, they can do more research on the market and identify the major factors which will drive the market in the future.

BIBLIOGRAPHY
Bombay Stock Exchange" Bseindia. 20 Mar. 2007 <http://www.bseindia.com>. " Indiabulls Securities Indiabulls.Com. 15 Mar. 2007

<http://www.Indiabulls.com>. "National Stock Exchange nseindia. 25 Mar. 2007 <http://www.nseindia.com>. "Share khan Securities Sharekhan.Com. 25 Mar. 2007

<http://www.sharekhan.com>. India Infoline Securities India-Infoline.Com. 26 Mar. 2007

<http://trade.indiainfoline.com>. " India Infoline Securities 5paisa.Com. 26 Mar. 2007

<http://www.5paisa.com>. " Kotak Securities kotak securities.Com. 26 Mar. 2007

<http://www.kotaksecurities.com>. "ICICI Securities ICICI securities.Com..25 Mar. 2007

<http://www.ICICIsecurities.com>. " Karvy Karvy.Com. 25 Mar. 2007 <http://www.karvy.com>. Online Investors & Traders 2 Apr. 2007 <http://www.traderji.com>.

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"

Motilal

Oswal

Securities

25

Mar.

2007

<http://www.motilaloswal.com>.

112