SECURITY ANALYSIS

AND
PORTFOLIO MANAGEMENT
ASSIGNMENT 2

SUBMITTED BY: SUBMITTED TO:

SHIVANI SINGHAL DR. SHOBHIKA TYAGI
MBA (B) 1703270085
Q1) What is utility analysis?
Explain with example.
Utility analysis is a quantitative method that
estimates the dollar value of benefits generated by
an intervention based on the improvement it
produces in worker productivity. Utility analysis
provides managers information they can use to
evaluate the financial impact of an intervention,
including computing a return on their investment in
implementing it.

Example of a Utility Analysis

We were asked to evaluate a contracts
management course offered on a fee-for-service
basis by the human resource department of a
government agency. The course trained contract
officer's technical representatives (COTRs) in
how to specify requirements, build a request for
quote or proposals, evaluate bidders, select and
contract with the best supplier, manage contract
performance, and ensure the delivery of the
needed products or services on time, at cost, and to
specifications. One of the questions being asked
was whether the course returned a monetary value
greater than its cost. We proposed a utility analysis
as the means to assess the monetary benefits
produced by the course and a return on investment
analysis to determine the ratio of benefits received
to the cost expended.
Q-2 Explain the rules and regulation of
SEBI for secondary market?
RULES AND REGULATIONS
1. All the companies entering the capital market
should give a statement regarding fund utilization of
previous issue.
2. Brokers are to satisfy capital adequacy norms so
that the member firms maintain adequate capital in
relation to outstanding positions.
3. The stock exchange authorities have to alter their
bye-laws with regard to capital adequacy norms.
4. All the brokers should submit with SEBI their
audited accounts.
5. The brokers must also disclose clearly the
transaction price of securities and the commission
earned by them. This will bring transparency and
accountability for the brokers.
6. The brokers should issue within 24 hours of the
transaction contract notes to the clients.
\The brokers must clearly mention their accounts
details of funds belonging to clients and that of their
own.
8. Margin money on certain securities has to be paid
by claims so that speculative investments are
prevented.
9. Market makers are introduced for certain scrips
by which brokers become responsible for the supply
and demand of the securities and the price of the
securities is maintained.
10. A broker cannot underwrite more than 5% of the
public issue.
Q-3 Do you consider SEBI as an effective
regulator of capital market? Comment?
Rules and regulations: role of SEBI in regulating
Indian Capital Market
1. Power to make rules for controlling stock exchange:
SEBI has power to make new rules for controlling stock
exchange in India. For example, SEBI fixed the time
of trading 9 AM and 5 PM in stock market.
2. To provide license to dealers and brokers:
SEBI has power to provide license to dealers and brokers
of capital market. If EBI sees that any financial product is
of capital nature, then SEBI can also control to that
product and its dealers. One of main example is ULIPs
case.
3. To stop fraud in Capital Market:
SEBI has many powers for stopping fraud in capital
market. It can ban on the trading of those brokers who
are involved in fraudulent and unfair trade practices
relating to stock market. It can impose the penalties on
capital mar ket intermediaries if they involve in insider
trading.
4. To Control the Merge, Acquisition and Takeover the
companies:
Many big companies in India want to create monopoly in
capital market. So, these companies buy all other
companies or deal of merging. SEBI sees whether this
merge or acquisition is for development of business or to
harm capital market.
5. To audit the performance of stock market :
SEBI uses his powers to audit the performance of
different Indian stock exchange for bringing transparency
in the working of stock exchanges.
6. To make new rules on carry - forward transactions:
Share trading transactions carry forward cannot exceed
25% of broker total transactions. 90 day limit for carry
forward.
7. To create relationship with ICAI:
ICAI is the authority for making new auditors of
companies. SEBI creates good relationship with ICAI for
bringing more transparency in the auditing work of
company accounts because audited financial statements
are mirror to see the real face of company and after this
investors can decide to invest or not to invest.
Moreover, investors of India can easily trust on audited
financial reports. After Satyam Scam, SEBI is investigating
with ICAI, whether CAs are doing their duty by ethical
way or not
8. Introduction of derivative contracts on Volatility
Index :
For reducing the risk of investors, SEBI has now been
decided to permit Stock Exchanges to introduce
derivative contracts on Volatility Index, subject to the
condition that a. The underlying Volatility Index has a
track record of at least one year.
b. The Exchange has in place the appropriate risk
management framework for such derivative contracts.
9. To require report of Portfolio Management Activities:
SEBI has also power to require report of portfolio
management to check the capital market performance.
Recently, SEBI sent the letter to all Registered Portfolio
Managers of India for demanding report.