A Project Report on

Submitted to

GANDHI INSTITUTE OF MANAGEMENT STUDIES,GUNUPUR

BY

PRIYAM PRASAD PADHY

2ND SEMESTER
Registration No. 1905330179
Roll No. 19MBA181

UNDER THE GUIDANCE OF :

 Prof Dr. Manav Sahu (College guide)

1
 DECLARATION

I am Mr. PRIYAM PRASAD PADHY the undersigned, hereby declare

that the Project Report entitled “TRADING IN STOCK MARKET “A GREAT
GIZMO OF INVESTMENT” has been prepared by me under the supervision
and guidance of Prof. Dr. MANAV SAHU, Department of MBA, GANDHI
INSTITUTE OF MANAGEMNT STUDIES, GUNUPUR.

The report is submitted to GIET UNIVERSITY, GUNUPUR, ODISHA,

in partial fulfillment of the University rules and regulations for the award
of the Degree of Master of Business Administration in finance
specialization.

I further declare that this report is based on the original research

report undertaken by me and has not formed a basis for the award of any
other Degree of RCU or any other University.

PRIYAM PRASAD PADHY

2
 ACKNOWLEDGEMENT

I feel immense pleasure to present this “TRADING IN STOCK MARKET “A

GREAT GIZMO OF INVESTMENT” of as my project work. Success of every endeavor is
the, by product of constant effort, patience and accountability from various sources.
This project is no exception. This project has given me tremendous experience.

I am overwhelmed with pleasure to express my sincere obligation to them who

kept my spirits high completion of this report. I am deeply indebted to Prof. Dr.
Manav Sahu, Department of MBA, GANDHI INSTITUTE OF MANAGEMENT STUDIES for
giving me an opportunity to carry on this project.

At the very outset, I would like to thank Mr. Megesh.M (Business Head) for
giving me an opportunity to work for the esteemed and reputed Jmarathon Advisory
company and guiding and motivating me through all the difficulties that came my way
and spending enormous amount of time discussing about the project. During this
period I experienced the real work environment the market situation the mannerisms,
etc. that are very much needed to sustain myself in this large and competitive
environment.

I own a debt of gratitude to my Parents, the silence guides in my life without

those never-ending support nothing would have been possible.

Last but not the least I thank each and every one who directly or indirectly helped me
in making my project successful and memorable one.

3
 TABLE OF CONTENTS

SL. NO. PARTICULARS

1 ACKNOWLEDGEMENTS

2 DECLARATION

3 LITERATURE REVIEW

4 INTRODUCTION

5 INVESTMENT OBJECTIVES

6 INVESTMENT AVENUES AND THEIR FEATURES

7 WHY TO INVEST IN SECURITIES MARKET?

8 STRUCTURAL VIEW OF SECURITIES MARKET

9 TRADING IN STOCK EXCHANGE

10 CASE STUDY

11 CONCLUSION

12 REFRENCES

4
Literature Review
1. Gupta (1972) in his book has studied the working of stock exchanges in
India and has given a number of suggestions to improve its working. The
study highlights the' need to regulate the volume of speculation so as to
serve the needs of liquidity and price continuity. It suggests the
enlistment of corporate securities in more than one stock exchange at the
same time to improve liquidity. The study also wishes the cost of issues
to be low, in order to protect small investors Panda (1980) has studied
the role of stock exchanges in India before and after independence. The
study reveals that listed stocks covered four-fifths of the joint stock
sector companies Investment in securities was no longer the monopoly of
any particular class or of a small group of people. It attracted the
attention of a large number of small and middleclass individuals. It was
observed that a large proportion of savings went in the first instance into
purchase of securities already issued.

2. Gupta (1981) in an extensive study titled `Return on New Equity Issues'

states that the investment performance of new issues of equity shares,
especially those of new companies,deserves separate analysis. The factor
significantly influencing the rate of return on new issues to the original
buyers is the `fixed price' at which they are issued. The return on
equities includes dividends and capital appreciation. This study presents
sound estimates of rates of return on equities, and examines the
variability of such returns over time.Jawahar Lal (1992) presents a profile
of Indian investors and evaluates their investment decisions. He made an
effort to study their familiarity with, and comprehension of financial
information, and the extent to which this is put to use. The information
that the companies provide generally fails to meet the needs of a variety
of individual investors and there is a general impression that the
company's Annual Report and other statements are not well received by
them.

3. L.C.Gupta (1992) revealed the findings of his study that there is

existence of wild speculation in the Indian stock market. The over
speculative character of the Indian stock market is reflected in extremely
high concentration of the market activity in a handful of shares to the
neglect of the remaining shares and absolutely high trading velocities of
the speculative counters. He opined that, short- term speculation, if
excessive, could lead to "artificial price". An artificial price is one which is
not justified by prospective earnings, dividends, financial strength and
assets or which is brought about by speculators through rumours,

5
 manipulations, etc. He concluded that such artificial prices are bound to
crash sometime or other as history has repeated and proved.

4. Nabhi Kumar Jain (1992) specified certain tips for buying shares for
holding and also for selling shares. He advised the investors to buy
shares of a growing company of a growing industry. Buy shares by
diversifying in a number of growth companies operating in a different but
equally fast-growing sector of the economy. He suggested selling the
shares the moment company has or almost reached the peak of its
growth. Also, sell the shares the moment you realise you have made a
mistake in the initial selection of the shares. The only option to decide
when to buy and sell high priced shares is to identify the individual merit
or demerit of each of the shares in the portfolio and arrive at a decision.

5. Pyare Lal Singh (1993) in the study titled, Indian Capital Market - A
Functional Analysis,depicts the primary market as a perennial source of
supply of funds. It mobilises the savings from the different sectors of the
economy like households, public and private corporate sectors.The
number of investors increased from 20 lakhs in 1980 to 150 lakhs in
1990 (7. 5 times). In financing of the project costs of the companies with
different sources of financing, the contribution of the securities has risen
from 35.01% in 1981 to 52.94% in 1989. In the total volume of the
securities issued, the contribution of debentures / bonds in recent years
has increased significantly from 16. 21% to 30.14%.

6. Sunil Damodar (1993) evaluated the 'Derivatives' especially the 'futures'

as a tool for short-term risk control. He opined that derivatives have
become an indispensable tool for finance managers whose prime
objective is to manage or reduce the risk inherent in their portfolios. He
disclosed that the over-riding feature of 'financial futures' in risk
management is that these instruments tend to be most valuable when
risk control is needed for a short- term, i.e., for a year or less. They tend
to be cheapest and easily available for protecting against or benefiting
from short term price.Their low execution costs also make them very
suitable for frequent and short term trading to manage risk, more
effectively.

7. R.Venkataramani (l994) disclosed the uses and dangers of derivatives.

The derivative products can lead us to a dangerous position if its full
implications are not clearly understood. Being off balance sheet in nature,
more and more derivative products are traded than the cash market
products and they suffer heavily due to their sensitive nature. He brought
to the notice of the investors the 'Over the counter product' (OTC) which

6
 are traded across the counters of a bank.OTC products (e.g. Options and
futures) are tailor made for the particular need of a customer and serve
as a perfect hedge. He emphasised the use of futures as an instrument of
hedge, for it is of low cost.

8. Amanulla & Kamaiah (1995) conducted a study to examine the Indian

stock market efficiency by using Ravalli on co integration and error
correction market integration approaches. The data used are the RBI
monthly aggregate share indices relating five regional stock exchanges in
India,viz Bombay, Calcutta, Madras, Delhi, Ahmedabad during 1980-1983.
According to the authors,the co integration results exhibited a long-run
equilibrium relation between the price indices of five stock exchanges and
error correction models indicated short run deviation between the five
regional stock exchanges. The study found that there is no evidence in
favour of market efficiency of Bombay, Madras, and Calcutta stock
exchanges while contrary evidence is found in case of Delhi and
Ahmedabad.

9. Pattabhi Ram.V. (1995) emphasised the need for doing fundamental

analysis and doing Equity Research (ER) before selecting shares for
investment. He opined that the investor should look for value with a
margin of safety in relation to price. The margin of safety is the gap
between price and value. He revealed that the Indian stock market is an
inefficient market because of the absence of good communication
network, rampant price rigging, and the absence of free and
instantaneous flow of information, professional broking and so on. He
concluded that in such inefficient market, equity research will produce
better results as there will be frequent mismatch between price and value
that provides opportunities to the long-term value oriented investor. He
added that in the Indian stock market investment returns would improve
only through qualityequity research.

10. Karajazyk (1995) investigated one measure of financial integration

between equity markets. He used a multifactor equilibrium Arbitrage
pricing theory to define risk and to measure deviations from the “Law of
one price”. He applied the integration measure to equities traded in 24
countries (four developed and 20 emerging). He found that the measure
of market segmentation tends to be much larger for emerging markets
than for developed markets, which flows into or out of the emerging
markets. The measure tends to decrease over time, which is consistent
with growing levels of integration. Large values of adjusted mis-pricing
occur around periods in which capital controls change significantly. Finally,

7
 he found asymmetric integration relationship; stock markets of developed
nations are more integrated than those of emerging nations.

11. Debjit Chakraborty (1997) in his study attempts to establish a

relationship between major economic indicators and stock market
behaviour. It also analyses the stock market reactions to changes in the
economic climate. The factors considered are inflation, money supply, and
growth in GDP, fiscal deficit and credit deposit ratio. To find the trend in
the stock markets, the BSE National Index of Equity Prices (Natex) which
comprises 100 companies was taken as the index. The study shows that
stock market movements are largely influenced by, broad money supply,
inflation, C/D ratio and fiscal deficit apart from political stability.

12. Redel (1997) concentrated on the capital market integration in

developing Asia during the period 1970 to 1994 taking into variables such
as net capital flows, FDI, portfolio equity flows and bond flows. He
observed that capital market integration in Asian developing countries in
the 1990‟s was a consequence of broad-based economic reforms,
especially in the trade and financial sectors, which is the critical reason for
economic crises which followed the increased capital market integration in
the 1970s in many countries will not be repeated in the 1990s. He
concluded that deepening and strengthening the process of economic
liberalization in the Asian developing countries is essential for minimizing
the risks and maximizing the benefits from increased international capital
market integration.

13. Avijit Banerjee (1998) reviewed Fundamental Analysis and Technical

Analysis to analyse the worthiness of the individual securities needed to
be acquired for portfolio construction. The Fundamental Analysis aims to
compare the Intrinsic Value (I.V.) with the prevailing market price (M.P)
and to take decisions whether to buy, sell or hold the investments. The
fundamentals of the economy, industry and company determine the value
of a security. If the 1.V is greater than the M.P., the stock is under priced
and should be purchased. He observed that the Fundamental Analysis
could never forecast the M.P. of a stock at any particular point of time.
Technical Analysis removes this weakness. Technical Analysis detects the
most appropriate time to buy or sell the stock. It aims to avoid the pitfalls
of wrong timing in the investment decisions. He also stated that the
modern portfolio literature suggests 'beta' value p as the most acceptable
measure of risk of scrip. The securities having low P should be selected for
constructing a portfolio in order to minimise the risks.

8
14. Madhusudan (1998) found that BSE sensitivity and national indices did
not follow random walk by using correlation analysis on monthly stock
returns data over the period January 1981 to December 1992.

15. Arun Jethmalani (1999) reviewed the existence and measurement of risk
involved in investing in corporate securities of shares and debentures. He
commended that risk is usually determined, based on the likely variance
of returns. It is more difficult to compare 80 risks within the same class of
investments. He is of the opinion that the investors accept the risk
measurement made by the credit rating agencies, but it was questioned
after the Asian crisis. Historically, stocks have been considered the most
risky of financial instruments. He revealed that the stocks have always
outperformed bonds over the long term. He also commented on the
'diversification theory' concluding that holding a small number of non-
correlated stocks can provide adequate risk reduction. A debt-oriented
portfolio may reduce short term uncertainty, but will definitely reduce
long-term returns. He argued that the 'safe debt related investments'
would never make an investor rich. He also revealed that too many
diversifications tend to reduce the chances of big gains, while doing little
to reduce risk. Equity investing is risky, if the money will be needed a few
months down the line. He concluded his article by commenting that risk is
not measurable or quantifiable. But risk is calculated on the basis of
historic volatility. Returns are proportional to the risks, and investments
should be based on the investors' ability to bear the risks, he advised.

16. Suresh G Lalwani (1999) emphasised the need for risk management in
the securities market with particular emphasis on the price risk. He
commented that the securities market is a 'vicious animal' and there is
more than a fair chance that far from improving, the situation could
deteriorate.

17. Bhanu Pant and Dr. T.R.Bishnoy (2001) analyzed the behaviour of the
daily and weekly returns of five Indian stock market indices for random
walk during April 1996 to June 2001.They found that Indian Stock Market
Indices did not follow random walk.

18. Nath and Verma (2003) examine the interdependence of the three major
stock markets in south Asia stock market indices namely India (NSE-Nifty)
Taiwan (Taiex) and Singapore (STI) by employing bivariate and
multivariate co integration analysis to model the linkages among the stock
markets, No co -integration was found for the entire period (daily data

9
 from January 1994 to November 2002).They concluded that there is no
long run equilibrium.
19. Debjiban Mukherjee (2007) made a comparative Analysis of Indian stock
market with International markets. His study covers New York Stock
Exchange (NYSE), Hong Kong Stock exchange (HSE), Tokyo Stock
exchange (TSE), Russian Stock exchange (RSE), Korean Stock exchange
(KSE) from various socio- politico-economic backgrounds. Both the
Bombay Stock exchange (BSE) and the National Stock Exchange of Indian
Limited (NSE) have been used in the study as a part of Indian Stock
Market. The main objective of this study is to capture the trends,
similarities and patterns in the activities and movements of the Indian
Stock Market in comparison to its international counterparts. The time
period has been divided into various eras to test the correlation between
the various exchanges to prove that the Indian markets have become
more integrated with its global counterparts and its reaction are in
tandem with that are seen globally. The various stock exchanges have
been compared on the basis of Market Capitalization, number of listed
securities, listing agreements, circuit filters, and settlement. It can safely
be said that the markets do react to global cues and any happening in the
global scenario be it macroeconomic or country specific (foreign trade
channel) affect the various markets.

20. Juhi Ahuja (2012) presents a review of Indian Capital Market & its
structure. In last decade orso, it has been observed that there has been a
paradigm shift in Indian capital market. The application of many reforms
& developments in Indian capital market has made the Indiancapital
market comparable with the international capital markets. Now, the
market features a developed regulatory mechanism and a modern market
infrastructure with growing market capitalization, market liquidity, and
mobilization of resources. The emergence of Private Corporate Debt
market is also a good innovation replacing the banking mode of corporate
finance. However, the market has witnessed its worst time with the recent
global financial crisis that originated from the US sub-prime mortgage
market and spread over to the e

10
Trading in Stock Exchange:
A Great Gizmo of Investment
Introduction to the Topic

Indian securities market is a great avenue for investment due to various

reasons like:
 An emerging economy like India brings in the scope of high industrial
growth rate opportunities
 Development of industries in turn would result in wealth appreciation of
investors
 The securities market opens up a wide range of options for investment
like- equities, bonds, debentures, futures and options, commodities etc.
 The stock exchanges which provide a market for the trade of securities
have developed and deployed robust trading and risk management
mechanism ensuring investor protection and uninterrupted service
However, the lack of retail investor participation which stands out to be
only 1-2% of the country’s population whereas in developed parts of the
world it’s around 30-40% shows lack of faith residing in the minds of
small investors regarding the high risk associated. Only a small segment
of the population is aware of the opportunity that lies in this market. The
risks can be largely reduced with proper financial literacy which is not
that complex as it sounds. This report would act as a lighthouse on the
stock market and will show how general investors can successfully reduce
the risk and earn maximum benefits by investing in this market.

Purpose of Report
The report will give a complete analysis of how trading is carried out in
Indian stock markets. It will ensure and equip investors with tools and
techniques for intelligently investing in the equity segment of stock market
without taking any help of any expert or consultant.
This report would also help a general investor by providing analysis report
on market movement indicators and events of addition and removal of listed
shares and how to react in such a situation.

Hence the report will basically try to answer the following questions:

11
 1. Why stock market is one of the best options for long term
investment?
2. Which company’s stocks should one invest and when should one
invest?
3. How to keep a track of the market movement without going
through the price of each share in your portfolio?
4. How addition and removal of a company’s listed shares affects
one’s investment?

1.1 Investment objectives

 Generating an additional source of income

 Financing future needs
 Buying a home
 Building a retirement corpus
 Children higher education and Daughter’s marriage
 Legacy planning
 Increasing savings/ Inducing savings
 Reducing tax liability
 Protect savings from inflation

1.2 Investment avenues and their features

The investment story of India is not at all smooth. Pitfalls always exist. At
this point of time the main hurdle before India's growth seems to be its
infrastructure. In another aspect, infrastructure may stand out to be the
biggest opportunity as well if invested and utilized properly. The fiscal
deficit of India also poses a big threat to the investment industry in India.
For a developing economy like India, it is always recommended that an
investor should balance the unique risks against the potential for high
long-term growth.
The investment avenues available in India can be summarized as below:
1. Post Office Investments: These are risk free investments and offer
lower return.
2. Bank Deposit:

There are two types of deposits:

 Demand deposits: The money we keep in our saving accounts is like a

medium of exchange and this is called Demand deposits. This is because
ownership of this deposit may be transferred from one person to another
via cheques or electronic transfers. There is no fixed term to maturity for
Demand Deposits.

12
 Time Deposits: If we deposit our money has an FD in the bank it
becomes a Time Deposit on which NO cheque is drawn. They are paid on
maturity at a particular time.

3. Current Account and Savings Accounts:

A current account is always a Demand Deposit and the bank is

obliged to pay the money on demand. The Current accounts bear no
interest and they account for the smallest fraction among the current,
saving and term deposits. They provide the convenient operation facility
to the individual / firm. The cost to maintain the accounts is high and
banks ask the customers to keep a minimum balance.

On the other hand, Savings deposits, which are also demand deposits,
are subject to restrictions on the number of withdrawals as well as on the
amounts of withdrawals during any specified period. Further, minimum
balances may be prescribed in order to offset the cost of maintaining and
servicing such deposit.

4. Life Insurance:

Life Insurance can be termed as an agreement between the policy owner

and the insurer, where the insurer for a consideration agrees to pay a
sum of money upon the occurrence of the insured individuals or
individuals death or other event, such as terminal illness, critical illness
or maturity of the policy.

They are one of the important parts of good investment portfolios. Life
insurance is an investment for security of life. The main objective of other
investment avenues is to earn return but the primary objective of life
insurance is to secure our families against unfortunate event of our death.
It is popular in individuals. Other kinds of general insurances are useful
for corporate. There are different types of insurances which are as follows:

• Endowment Insurance Policy

• Money Back Policy

• Whole Life Policy

• Term Insurance Policy

• General Insurance for any kind of assets.

13
 5. Real Estate:

 Real Estate: Every investor has some part of their portfolio invested in
real assets. Almost every individual and corporate investor invests in
residential and office buildings respectively. Apart from these, others
include:

– Agricultural Land

– Semi-Urban Land

– Commercial Property

– Raw House

– Retail

– Farm House etc

– Industrial Property

• Manufacturing Only

• Warehousing

• Retail/Showroom/office

6. Precious objects:

* Gold

* Silver

* Precious stones

* Art objects

7. Shares and Securities:

Equity Shares:

Equity shares also known as Ordinary shares. Equity shares

represent the ownership position in a company. The shareholders of
equity shares are the legal owner of the company. Equity shares are the
source of the permanent capital since they do not have a maturity date.
Shareholders are entitled for dividend. The amount or rate of dividend is
not fixed: the company’s board of directors decides it. An ordinary share
is known as variable income security.
14
 Authorized Share Capital represents the maximum amount of
capital, which a company can raise from shareholders. The portion of the
authorized share capital, which has been offered to shareholders, is
called Issued Share Capital. Subscribed Share Capital represents that
part of the issued share capital, which has been accepted by shareholders.
The amount of subscribed share capital actually paid up by shareholders
to the company is called Paid-Up Share Capital. The company’s earnings,
which have not been distributed to shareholders and have been retained
in the business, are called Reserves and Surplus.

Preference Shares:

• Preference share dividend has to be paid before any dividend payment

to ordinary equity shares.

• Preference shares have fixed dividends.

• Also preference dividends are not tax deductible.

• Preference over Equity.

8. Bonds:

A company needs funds to expand into new markets, while governments

need money for everything from infrastructure to social programs. The
solution is to raise money by issuing bonds (or other debt instruments) to
a public market. Thousands of investors then each lend a portion of the
capital needed. Really, a bond is nothing more than a loan for which you
are the lender. The organization that sells a bond is known as the issuer.

15
 Derivatives:

Derivatives means indirect investments in the assets. The derivatives

market is growing at a tremendous speed. The important benefit of
investing in derivatives is that it leverages the investment, manages
and/or hedges the risk and helps in doing speculation. Derivatives include:

 Forwards
 Futures
 Options
 Swaps etc.

9. Mutual Fund:

• A mutual fund is professionally managed type of collective investment

scheme that pool money from many investors and invest typically in
investment securities (stock, bond, cash,).

• Mutual fund sells their share to the investors; invest the proceeds in a
wide choice of securities in the financial market.

• Thus reduce risk by diversification.

• A Mutual Fund is a trust that pools the savings of a number of investors

who share a common financial goal.

• The money thus collected is then invested in capital market instruments

such as shares, debentures and other securities.

• The income earned through these investments and the capital

appreciation realized are shared by its unit holders in proportion to the
number of units owned by them.

• Thus a Mutual Fund is the most suitable investment for the common
man as it offers an opportunity to invest in a diversified, professionally
managed basket of securities at a relatively low cost.

1.3 Why to invest in securities market?

Its 21st century the world has seen many revolutions but still India
lags behind when it comes to number of retail investors interested in
stock market instruments. The main cause behind such a drawback can
be manifold starting from severity of risk attached to fear of fraud and
cheating along with the lack of proper infrastructure also contributes a
little as a factor deterring full faith of retail investors. These all sum up to
the basic problem of low financial literacy among the potential investing

16
 population because of which they are ignorant of the techniques and
technology adopted by stock markets to eradicate fraud and scams and
ensure investor protection in the stock market.
The stock market always entails high risk, but one should always
remember that high risk brings in the scope of better returns and thus
justifies the risk and return trade-off as being used by financial
researchers and analysts. The Risk and Return trade-off states that
wherever there is high risk there is a probability of high returns too and
vice versa. The securities market also works on the same principle.
However, one should always keep in mind the risk affordable should not
be crossed in the greed of higher returns as is seen many times in these
markets which gives these markets the face of gambling arena. But it is
not the complete story the securities market can prove to be very
beneficial for any investor if invested wisely and after thorough research
which is not a very complicated task.
Investing in a securities market, also called investing in stocks and bonds,
is one of the primary ways to build wealth through capital appreciation --
an increase in the securities’ value over time.

. Higher Rate of Return:

The stock market has its ups and downs, but a patient investor who holds
stocks as a long-term investment -- five years or more -- historically
earns a higher rate of return than someone who puts his money in a
savings account. Buying stock shares means having an ownership
interest in a company. As the company grows and becomes more
profitable, the value of the shares increases. At times, stocks can rise
dramatically, allowing investors to earn double-digit returns on their
investment portfolios -- much more than savings account holders earn.
Over the last 60 years, the average annual rate of return on stocks has
been 11 percent -- 7 percent when adjusted for inflation.

 Capital Gains and Dividends:

Investors in stocks can earn money two ways: capital gains and
dividends. Savings account holders just earn interest. Many corporations
pay cash dividends, usually quarterly, to shareholders. The big payoff for
stock investors is the capital gain, which is the difference between the
value of the stock when it is sold and the value when it was purchased.

 Flexible Objectives:

A century ago, the universe of possible investments was so limited that

their prices could be published in the morning newspaper. These days,

17
the investment world is like a giant supermarket, with choices to fit every
financial objective. Of course, in this supermarket it’s not easy to spot
the potentially rotten eggs. Mutual funds are considered excellent ways
for the beginning investor to get started. These are professionally
managed funds that select groups of securities. The investor purchases
shares of the overall fund, not the individual stocks. If you want a
combination of current income and growth, certain funds are designed to
accomplish that objective. If you want a riskier portfolio with the
potential for faster growth, you can choose from among the “aggressive
growth” mutual funds. Savings accounts provide just one major objective:
a stress-free way to earn a modest return.

 The Fun of Investing:

Investing is challenging, can be exciting and is a learning experience.

Selecting stocks to invest in doesn’t require an advanced degree in
finance, but it does require careful research and keeping up with current
economic trends. It’s a great thrill to participate in a bull market -- one in
which stocks go up in price -- and watch the value of your investments
climb week by week. A savings account may be a safe place to park your
money without the worry that comes with stocks, which can decline in
value. But it is also boring. No one ever impresses his friends at a party
by exclaiming, “The interest rate on my savings account jumped a
quarter of a point last month!”

1.4 Investment in securities rests on three set out

objectives such as –
Protection of investors:

Investors are the backbone of the securities market. They not only
determine the level of activity in the securities market but also the
level of activity in the economy. The growth in the numbers of
investors in India is encouraging.

Investor protection is a very popular phrase which everyone concerned

with regulation of the capital markets uses these days, be they the
Securities and Exchange Board of India(SEBI), Stock Exchanges,
Investors associations or for that matter of fact the companies
themselves. The term Investor Protection is a wide term
encompassing various measures designed to protect the investors
from malpractices of companies, merchant bankers, depository
participants and other intermediaries. Investor Beware should be
the watchword of all programs for mobilization of savings for

18
 investment. As all investment has some risk element, this risk
factor should be borne in mind by the investors and they should
take all precautions to protect their interest in the first place. If
caution is thrown to the winds and they invest in any venture
without a prior assessment of the risk, they have only to blame
themselves. Investors are a heterogeneous group, they are large or
small, rich or poor, expert or lay and not all investors need equal
degree of protection for their invested amount from the corporate
securities.

The corporate systems and processes need to be credible and

transparent, so that the interests of the investors may be
safeguarded in a manner that enables them to exercise their choice
in an informed manner while making investment decisions, and also
providing them with a fair exit option. The Securities and Exchange
Board of India (SEBI) has been mandated to protect the interests
of investors in securities and to promote the development and
regulate the securities market so as to establish a dynamic and
efficient Securities Market contributing to Indian Economy.

1.5 Investment in securities always entails risk

Risk involves the chance an investment's actual return will differ
from the expected return. Risk includes the possibility of losing
some or all of the original investment. Different versions of risk are
usually measured by calculating the standard deviation of the
historical returns or average returns of a specific investment.

A high standard deviation indicates a high degree of risk. Many

companies allocate large amounts of money and time in developing
risk management strategies to help manage risks associated with
their business and investment dealings. A key component of the
risk management process is risk assessment, which involves the
determination of the risks surrounding a business or investment. A
fundamental idea in finance is the relationship between risk and
return. The greater the amount of risk an investor is willing to take,
the greater the potential return. Investors need to be compensated
for taking on additional risk. For example, a U.S. Treasury bond is
considered one of the safest, or risk-free, investments and when
compared to a corporate bond, provides a lower rate of return. A
corporation is much more likely to go bankrupt than the U.S.
government. Because the risk of investing in a corporate bond is
higher, investors are offered a higher rate of return.

19
 On the other end of the investment spectrum, ultra-conservative
investors avoid any type of risk to principal whatsoever. These
types of investors seek safety and insured holdings such as bank
certificates of deposits (CDs), whose one-year interest rate
averages approximately 1.25% as of June 2016. Bank deposits are
also insured by the Federal Deposit Insurance Corporation (FDIC),
an agency created to maintain consumer confidence in the U.S.
banking system.

U.S. Treasury's, backed by the full faith and credit of the U.S.
government, also appeal to risk-averse investors. The three-month
Treasury bill is considered a riskless security and is measured
against securities that hold higher measures of volatility. As of July
1, 2016, the 91-day T-bill, purchased at a discount to par value,
has a yield to maturity of 0.27%.

1.6 Risk brings the scope of better return

Questions of risk and returns are viewed with reference to a
commitment to maximize the total, overall portfolio performance
on both financial and social terms. It is a kind of tradeoff where
potential return increases with an increase in risk which is a basic
investment principle. Greater the variability, riskier is the security
is said to be, more certain is the return and vice-versa. Investment
return is a function of risk.

For example- ability to invest in equities over the long term

provides the potential to recover from the risk of bear market and
participate in bull market, while a short time frame makes the
equities riskier proposition. Returns can also be earned by staying
low on risk by leveraging and control. Historically stocks have
earned the most robust average annual rate of just above 10% per
year than any other investments. It is because as an asset class,
stocks are riskier than corporate bonds, T-bills, bank savings etc.

1.7 Risk should be affordable

There is no such thing as truly risk free investment but one can say
that different investment carry different types of risk class. Risk
spectrum is according to the potential reward it carries. So
investors should be aware of the risk an investment is exposed to,
and the return they can earn from a portfolio or single asset. One
can invest in bank savings to be on a safe side but earning is low.

20
 For medium risk and returns, one can invest in equities, preferred
stocks (hybrid securities which have a stated dividend rate around
2% higher than that of treasuries. They have low liquidity and
qualify for capital gains.), utility stocks (they come with voting
rights and price is generally stable and non-cyclical and have
slightly higher market risk than preferred stocks) and blue chip
stocks. For speculative risk and aggressive returns, oil and gas
investments, penny stocks etc. can be an option.

2. Structural View of Securities Market

2.1 Money Market
Definition: Money market basically refers to a section of the financial
market where financial instruments with high liquidity and short-
term maturities are traded. Money market has become a
component of the financial market for buying and selling of
securities of short-term maturities, of one year or less, such as
treasury bills and commercial papers.
Over-the-counter trading is done in the money market and it is a
wholesale process. It is used by the participants as a way of
borrowing and lending for the short term.
Description: Money market consists of negotiable instruments
such as treasury bills, commercial papers. and certificates of
deposit. It is used by many participants, including companies, to
raise funds by selling commercial papers in the market. Money
market is considered a safe place to invest due to thehigh liquidity
of securities.
It has certain risks which investors should be aware of, one of them
being default on securities such as commercial papers. Money
market consists of various financial institutions and dealers, who
seek to borrow or loan securities. It is the best source to invest in
liquid assets.
The money market is an unregulated and informal market and not
structured like the capital markets, where thingsare organize in a
formal way. Money market gives lesser return to investor who
invest in it but provides a variety of products.
Withdrawing money from the money market is easier. Money
markets are different from capital markets as they are for a shorter
period of time while capital markets are used for longer time
periods.

21
Functions of Money Market
Money market is an important part of the economy. It plays very
significant functions. As mentioned above it is basically a market
for short term monetary transactions. Thus it has to provide facility
for adjusting liquidity to the banks, business corporations, non-
banking financial institutions (NBFs) and other financial institutions
along with investors.

The major functions of money market are given below:

1. To maintain monetary equilibrium. It means to keep a balance
between the demand for and supply of money for short term
monetary transactions.
2. To promote economic growth. Money market can do this by making
funds available to various units in the economy such as agriculture,
small scale industries, etc.
3. To provide help to Trade and Industry. Money market provides
adequate finance to trade and industry. Similarly, it also provides
facility of discounting bills of exchange for trade and industry.
4. To help in implementing Monetary Policy. It provides a mechanism
for an effective implementation of the monetary policy.
5. To help in Capital Formation. Money market makes available
investment avenues for short term period. It helps in generating
savings and investments in the economy.
6. Money market provides non-inflationary sources of finance to
government. It is possible by issuing treasury bills in order to raise
short loans. However, this does not leads to increases in the prices.

2.2 Capital Market

The Capital Market is a market for financial investments that are
direct or indirect claims to capital. It includes all forms of lending
and borrowing. The Capital Market comprises the complex of
institutions and mechanisms through which intermediate term
funds and long term funds are pooled and made available to
business, government and individuals.
Let us try to understand the capital market in a broad way
considering the practical needs. Here, we may cite an instance of a
business venture, how to set up and manage it in so far as financial
requirement is concerned. As regards finance, it is the most

22
 important aspect of any business and it is how to enhance revenue,
reduce losses and to arrange and manage capital.
Setting up of a business requires huge capital investment both long
term and short term. This capital investment process in a business
may be divided into different stages, first it is required for
incorporation of a company and then for investment in the business
as per the objectives of the company. So, every business venture
needs long term as well as short term capital. Long term capital is
essentially required for investment in fixed assets such as land,
building, plant & machineries, vehicles etc. It also includes core
working capital and pre-operative and preliminary expenses
incidental to setting up of a business. Short-term capital or working
capital on the other hand, is required essentially for financing the
requirements of day to day operations of the business such as raw
materials, work-in-progress, finished goods, trade debtors, etc.

New Issue (Primary) Market

The promoters of a company in search of capital can issue shares
and securities for subscription by the investing public at large with
the help of primary market which is also known as new issue
market. There is no physical location of primary market. It is just a
complex which is constituted with the participation of issuers who
issue shares and securities, the subscribers such as individual
investors, institutional investors both domestic and foreign,
companies, trust, etc. who subscribe those securities, the
intermediaries such as merchant bankers, underwriters, bankers to
the issue, registrar to the issue, stock brokers, depository and their
participants, credit rating agencies who assist the issue process and
regulators such as SEBI, Registrar of Companies, stock exchanges
who regulate and monitor the issue process.

Secondary (Trading in Securities) Market

Definition: This is the market wherein the trading of securities is
done. Secondary market consists of both equity as well as debt
markets.
Description: Securities issued by a company for the first time are
offered to the public in the primary market. Once the IPO is done
and the stock is listed, they are traded in the secondary market.
The main difference between the two is that in the primary market,
an investor gets securities directly from the company through IPOs,

23
while in the secondary market, one purchases securities from other
investors willing to sell the same.
Equity shares, bonds, preference shares, treasury bills, debentures,
etc. are some of the key products available in a secondary market.
SEBI is the regulator of the same.
Thus, secondary market is a trading platform where the shares and
securities are bought and sold which are previously issued in the
primary market. This is the most active segment and nerve centre
of capital market. Further, more and more new products and by-
products of securities have been introduced for trading in the
secondary market to make it more attractive and particularly to
enhance liquidity in the underlying securities in the interest of the
investors as well as of the economy. Thus, without an active
secondary market, the capital market cannot have a good primary
market.
The primary market and the secondary market are not physically
segregated. Both are inseparable and inter-dependent segments of
capital market which is popularly known as stock (securities)
market. Securities market, while helping economic growth of a
country facilitates internationalization of an economy by linking it
with the rest of the world. This linkage helps inflow of capital in the
form of portfolio investment. Further, a vibrant domestic stock
market performance forms the basis for well performing domestic
corporates to raise capital in the international market. This implies
that the domestic economy is opened up to international
competitive pressure which helps to increase efficiency in the
domestic corporate sector. It is also likely that existence of a
domestic securities market discourages capital outflow by providing
attractive investment opportunities within the domestic economy.
In that direction, the institutions of stock exchanges play an
instrumental role. Among modern service institutions, stock
exchanges are the most crucial agents and facilitators of
entrepreneurial progress and are also key promoters of spreading
equity culture and campaigning financial literacy for financial
inclusion. Therefore, it may not be wrong in terming the stock
exchange as one of the barometers of an economy.

24
2.3 STOCK EXCHANGE
A Stock Exchange also called Stock Market or Share Market is a
convenient place providing necessary market infrastructure for trading in
securities in systematic manner i.e. as per certain rules and regulations.

In simple words a stock exchange is a market place where

investors can buy and sell stocks and other securities like- bonds,
futures and options etc.
Indian securities market had 2 national and 20 regional stock
exchanges (Most of the RSEs are non-functional or converted to
other businesses). Bombay stock exchange (BSE) is the first Stock
Exchange of India.

Objectives
 Capital Formation
The primary function of a stock exchange is to help companies
raise money. To accomplish this task, ownership in a private
corporation is sold to the public in the form of shares of stock.
Funds received from the sale of stock contribute to the firm's
capital formation. Companies plan to use the newly-raised funds to
invest in productive business assets and grow revenues and profits.
This positive business expansion then may be reflected in a higher
stock trading price.

 Facilitate Trading
An organized and regulated stock exchange facilitates the
efficient trading of stock and other investment vehicles. Without
this highly controlled and coordinated stock exchange, the global
trading of stock would not be possible. Through the stock exchange,
any individual or company may buy or sell shares in another
company. In fact, at any one time, there are thousands of company
shares being traded through millions of individual transactions. The
stock exchange, particularly the high volume electronic
computerized trading platform, serves as the infrastructure
required to connect both buyers and sellers efficiently around the
globe.

 Security
The legitimate sale of stock on any exchange requires reliable and
accurate information. By requiring a high level of transparency
from all trading companies, the stock exchange creates a more

25
 secure environment for investors, which helps them to
determine the risks of investing.
 Regulation
A stock exchange works in close cooperation with government
agencies and officials. Unregulated markets can have a negative
impact on capital formation. Close regulation of stock
exchanges allows strangers from all parts of the world to honor
contracts executed in the daily trading of shares. A goal of stock
market regulations also is to prevent criminal activity in financial
markets. By protecting investors, and fostering transparency, the
stock market promotes capital formation.

Functions of a Stock Exchange

Characteristics or functions of stock exchange are:

1. Platform for buying & selling of securities: Stock exchange

creates a platform or market, where securities of corporate
bodies, government and semi-government bodies are traded.

2. Deals in second hand securities: It deals with shares,

debentures bonds and such securities already issued by the
companies. In short it deals with existing or second hand
securities and hence it is called secondary market.

3. Regulates trade in securities: Stock exchange does not buy or

sell any securities on its own account. It merely provides the
necessary infrastructure and facilities for trade in securities to its
members and brokers who trade in securities. It regulates the
trade activities so as to ensure free and fair trade

4. Allows dealings only in listed securities: In fact, stock

exchanges maintain an official list of securities that could be
purchased and sold on its floor. Securities which do not figure in
the official list of stock exchange are called unlisted securities.
Such unlisted securities cannot be traded in the stock exchange.

5. Transactions effected only through members: All the

transactions in securities at the stock exchange are affected only
through its authorised brokers and members. Outsiders or direct
investors are not allowed to enter in the trading circles of the
stock exchange. Investors have to buy or sell the securities at
the stock exchange through the authorised brokers only.

26
 6. Recognition from Central Government: Stock exchange is an
organised market. It requires recognition from the Central
Government.

7. Working as per rules: Buying and selling transactions in

securities at the stock exchange are governed by the rules and
regulations of stock exchange as well as SEBI Guidelines. No
deviation from the rules and guidelines is allowed in any case.

8. Specific location: Stock exchange is a particular market place

where authorised brokers used to gather together daily (i.e. on
working days) on the floor of market called trading circles and
conduct trading activities. The prices of different securities traded
are shown on electronic boards. After the working hours market
is closed. All the working of stock exchanges is conducted and
controlled through computers and electronic system.

9. Financial Barometers: Stock exchanges are the financial

barometers and development indicators of national economy of
the country. Industrial growth and stability is reflected in the
index of stock exchange.

10. Public Utility: A stock exchange encourages financial literacy

and investor awareness which help in the overall development of
a country by educating the citizens. It also helps in wealth
appreciation, preservation and adds on an option in financial
planning of individuals.

Evolution
 On Global Front:
Coming back to evolution theory of stock exchanges, world’s oldest
stock exchange was probably dates back to 1460 in Antwerp,
Belgium. Although trading in financial instruments existed much
before, it was probably the first time that a magnificent monument
of gothic structure was built for trading of stocks. It was simply
known as a “bourse” derived from the Latin word “burse”, meaning
“purse”. In fact, the gothic structure was so magnificent that Queen
Elizabeth-I had copied it when the Royal Exchange of London was
built. However, in the later part of the fifteenth century, Antwerp’s
role as a leading stock trading centre declined for various reasons
and Amsterdam emerged as the new hub for financial securities
trading. Many consider Amsterdam Stock Exchange, established in

27
 1602, as the oldest in the world because of its uninterrupted
continuity. The Dutch East India Company had established this
stock exchange for dealings in their own stocks and bonds. In due
course, bonds and shares of other companies started trading in this
stock exchange.

 On Domestic Front:
As regards the story of Indian stock market, the journey started
probably in the mid nineteenth century in erstwhile Bombay. A
group of people used to trade in different stocks under the shadow
of a banyan tree. Subsequently, that group formed an Association,
namely Native Share Brokers’ Association which took the shape of a
formal stock exchange in 1875 i.e. the present Bombay Stock
Exchange.

3. Trading in Stock Exchange

3.1 Trading Platform/ Segment
Stock markets provide a platform for buying and selling of
securities like- equities (stocks), bonds and derivatives. The price
of a stock is determined by demand and supply of the stock. For
e.g.- If the stock price of a company is Rs.100/share it means
someone has placed an order of buying the share at Rs.100 each at
the same time there is another person ready to sell shares of that
company held by him at Rs 100/share.

Cash Market
A cash market is a place where financial instruments like securities
and commodities, i.e. precious metals or agricultural produce are
bought and sold for immediate delivery (on a spot date). It is also
referred as a spot market. In the cash market, there are two
sections, equities – where equities like shares are traded and
debts – where debts like government bonds and mortgage bonds
are traded.
The cash market may be an exchange or an OTC – Over The
Counter. The exchange is a place where the general public,
government, firms, etc. can mutually by and sell their securities
and other financial instruments. It can be a Stock Exchange like
BSE (Bombay Stock Exchange) or NSE (National Stock Exchange)

28
 or a Commodity Exchange or a Foreign Exchange Market. Over The
Counter is a trading made between two parties without the help of
exchange.

 Trade for Trade

Trade to Trade settlement is a segment where shares can be traded only
for compulsory delivery basis. It means Trade to Trade shares cannot be
traded on intraday. Each share purchased/sold which are parts of this
segment need to be taken delivery by paying full amount. The settlement
of scrips available in this segment is done on a trade for trade basis and
no netting off is allowed for the day.
Suppose you buy 1,000 shares of SUZLON at Rs.25 per share and
sold these 1,000 shares for Rs.30 per on the same day (before the
close of trading). You have gained Rs.5 per share (less
brokerage/Other Expenses). This is the amount you will receive
from your broker in the normal rolling settlement system.
But, if the same stock is under trade-for-trade segment, you will
have to pay Rs.25,000 to take delivery of the shares you bought.
Similarly, the quantity you have sold will have to be presented for
delivery in Demat A/C. The Trade-for-Trade segment considers
each transaction individually.

 Day Trading
Day trading is defined as the buying and selling of a security within
a single trading day. This can occur in any marketplace, but is most
common in the foreign-exchange (forex) market and stock market.
Typically, day traders are well-educated and well-funded. They
utilize high amounts of leverage and short-term trading strategies
to capitalize on small price movements in highly-liquid stocks or
currencies. Day traders serve two critical functions in the
marketplace: they keep the markets running efficiently via
arbitrage and they provide much of the
markets' liquidity (especially in the stock market).

 Margin Trading
Definition: In the stock market, margin trading refers to the
process whereby individual investors buy more stocks than they
can afford to. Margin trading also refers to intraday trading in India
and various stock brokers provide this service. Margin trading
involves buying and selling of securities in one single session. Over
time, various brokerages have relaxed the approach on time
duration. The process requires an investor to speculate or guess

29
 the stock movement in a particular session. Margin trading is an
easy way of making a fast buck. With the advent of electronic stock
exchanges, the once specialised field is now accessible to even
small traders.

Description: The process is fairly simple. A margin account

provides you the resources to buy more quantities of a stock than
you can afford at any point of time. For this purpose, the broker
would lend the money to buy shares and keep them as collateral.

Derivative Market
A derivative market trades in the security or contract that has no
intrinsic value of its own but derives its value from an underlying
asset or security. There are many types of derivatives based
underlying asset type etc.

 Future & Option Trading

A Futures Contract is a legally binding agreement to buy or sell any
underlying security at a future date at a pre-determined price. The
Contract is standardised in terms of quantity, quality, delivery time
and place for settlement at a future date (In case of equity/index
futures, this would mean the lot size). Both parties entering into
such an agreement are obligated to complete the contract at the
end of the contract period with the delivery of cash/stock.

 Product lines
NSE and BSE provide following products for investment to retail
investors

Cash Market Segment

a) Equities

b) Exchange Traded Funds

c) Indices

d) Mutual Funds

e) Bonds/Debentures

Derivatives Market Segment

a) Equity Derivatives

30
 b) Currency Derivatives

c) Global Indices Derivatives

d) Interest Rate Derivatives

e) New Debt Market

3.2 Participants of Trading

Intermediaries (Trading Members)

Trading can be carried out in stock exchanges only through

registered brokers who are also referred to as trading members.

31
 Members are admitted in the following categories:

This category of membership entitles a member to execute

trades on his own account as well as on account of his clients
Trading but, clearing and settlement of trades executed through the
Member Trading Member would have to be done through a Trading-cum
Clearing Member or Professional Clearing Member of the
Exchange

Trading Cum This category of membership entitles a member to execute

Self Clearing trades and to clear and settle the trades executed on his own
Member account as well as on account of his clients.

This category of membership entitles a member to execute

Trading Cum trades on his own account as well as on account of his clients
Clearing and to clear and settle trades executed by themselves as well
Member as by other trading members who choose to use clearing
services of the member.

Professional This category of membership entitles a member to clear and

Clearing settle trades of such members of the Exchange who choose to
Member clear and settle their trades through this member.

(Categories of intermediaries)

Trading capability of various categories of members:

Futures Currency
Types of Cash Debt WDM
& Option Derivatives
Membership Segment Segment Segment
Segment Segment

Trading Member - -

Trading Cum Self

Clearing Member

Trading Cum Clearing

- -
Member

Professional Clearing
- -
Member

32
(Member trading capabilities)

Membership can be taken in combination with any of the above

segments except for Futures & Options segment which has to be
taken in combination with Cash segment.

 Eligibility & Requirements

a) Financial requirement: For being a corporate member the net

worth required is 100, 00, 000 and for individual/partnership
member firms net worth required will be 75, 00,000.1

b) Age requirement: Minimum age for being a trader is 21years

c) Education requirement: At least HSC or equivalent qualification

d) Experience:Should have an experience for not less than two years

as a partner with, or an authorised assistant or authorised clerk or
remisier or apprentice to, a member

 Functions

 Intermediary or middleman for trading

 Clearing agent for traders

 Investors

An investor can be any person who allocates capital with the

expectation of a financial return. Any person who buys a stock is
considered to be an investor. An investor who owns a stock is
known as a shareholder.
The investors can be among any of the following classes of
investors and may be a combination of multiple types also:

Types of investors

Retail investor

 Individuals gambling in games of chance

33
  Individual investors (including trusts on behalf of individuals, and
umbrella companies formed by two or more to pool investment
funds)

 Collectors of art, antiques, and other things of value

 Angel investors (individuals and groups)

 Sweat equity investor

Institutional investor

 Venture capital funds, which serve as investment collectives on

behalf of individuals, companies, pension plans, insurance reserves,
or other funds.

 Firms that make investments, either directly or via a captive fund

 Investment trusts, including real estate investment trusts

 Mutual funds, hedge funds, and other funds, ownership of which

may or may not be publicly traded (these funds typically pool
money raised from their owner-subscribers to invest in securities)

 Sovereign wealth funds

3.3 Trading Engines

They are cross-market core of the platform which provides a rich
function set for cash and derivatives markets and enables multiple
market models to be configured for whole markets or individual
product groups. Their primary job is to automatically match
demand and supply of securities for trading.
Their important features are average order-processing latency
measured in microseconds and capacity to handle orders each
second.

Online(Screen Based) Trading

The trading on stock exchanges in India used to take place through

open outcry without use of information technology for immediate
matching or recording of trades. It was time consuming and
inefficient. This imposed limits on trading volumes and efficiency.
In order to provide efficiency, liquidity and transparency, NSE
introduced a nation-wide on-line fully-automated SCREEN BASED

34
 TRADING SYSTEM (SBTS) where a member can type into the
computer quantities of securities and the prices at which he likes to
transact and the transaction is executed as soon as it finds a
matching sale or buy order from a counter party.

Features:

1. SBTS electronically matches orders on a strict price/time priority

and hence cuts down on time, cost and risk of error, resulting in
improved operational efficiency.

2. It allows faster incorporation of price sensitive information into

prevailing prices, thus increasing the informational efficiency of
markets.

3. It enables market participants, irrespective of their geographical

locations, to trade with one another simultaneously, improving the
depth and liquidity of the market.

4. It provides full anonymity by accepting orders, big or small, from

members without revealing their identity. It also provides a perfect
audit trail, which helps to resolve disputes by logging in the trade
execution process in entirety.

With implementation of this technology from its very inception NSE

became the leading stock exchange in the country in the very first
year of its operation.
The SBTS of NSE is called NEAT and that of BSE is called BOLT.

Depository System

A depository is an organisation which holds securities of investors

in electronic form at the request of the investors through a
registered Depository Participant. It also provides services related
to transactions in securities. At present two Depositories viz.
National Securities Depository Limited (NSDL) and Central
Depository Services (India) Limited (CDSL) are registered with
SEBI.
A Depository Participant (DP) is an agent of the depository through
which it interfaces with the investor and provides depository
services. Depository services can be availed through a DP.

35
 As per the available statistics at BSE and NSE, 99.9 per cent
transactions take place in dematerialised mode only2. Therefore, it
is advisable to have a beneficial owner (BO) account for trading at
the exchanges.

Requirements & Mechanism

The minimum net worth stipulated by SEBI for a depository is Rs

100crore.
Public financial institutions, scheduled commercial banks, foreign
banks operating in India with the approval of the Reserve Bank of
India, state financial corporations, custodians, stock-brokers,
clearing corporations /clearing houses, NBFCs and Registrar to an
Issue or Share Transfer Agent complying with the requirements
prescribed by SEBI can be registered as DP.

3.4 Order Management

How to place order

The order placing is facilitated by the broker/broking firm.

Generally one can add scrip in the watch list after selecting the
exchange as BSE/NSE. Once the scrip is added, he/she can place
orders.

 Electronic Order Book

In an electronic order book, traders continuously post bids and
offers on the system for other participants to view. The order book
displays orders and typically ranks them by price and then by time.

 Bid/Ask (Offer) Spread

This is essentially the difference in price between the highest price
that a buyer is willing to pay for a stock and the lowest price for
which a seller is willing to sell it.

 Tick Size
Tick size is the minimum value by which the price of a stock moves.

36
 Order Types
An investor can place various types of orders depending upon
his/her requirements. These orders are broadly classified into three
categories: time related orders, price-related conditions and
quantity related conditions.

A. Time Conditions

a. DAY - A Day order, as the name suggests, is an order which is valid

for the day on which it is entered. If the order is not matched
during the day, the order gets cancelled automatically at the end of
the trading day.

b. IOC - An Immediate or Cancel (IOC) order allows a Member to buy

or sell a security as soon as the order is released into the market,
failing which the order will be removed from the market. Partial
match is possible for the order, and the unmatched portion of the
order is cancelled immediately.

B. Price Conditions

a. Limit Price/Order – An order that allows the price to be specified

while entering the order into the system.

b. Market Price/Order – An order to buy or sell securities at the best

price obtainable at the time of entering the order.

c. Stop Loss (SL) Price/Order – The one that allows the Trading
Member to place an order which gets activated only when the
market price of the relevant security reaches or crosses a threshold
price. Until then the order does not enter the market.

C. Quantity Conditions

Disclosed Quantity (DQ) - An order with a DQ condition allows the

Trading Member to disclose only a part of the order quantity to the
market.
For example, an order of 1000 with a disclosed quantity condition
of 200 will mean that 200 will be displayed to the market at a time.
After this is traded, another 200 is automatically released and so

37
 on till the full order is executed. The Exchange may set a minimum
disclosed quantity criteria from time to time.

3.5 Clearing & Settlement

Clearing in stock exchanges refer to the process of verification of
custodial of the seller and then initiate delivery. Whereas
settlement refers to the process involving pay out-pay in of funds
and securities to the verified parties.
NSE has NSCCL (National Securities Clearing Corporation Limited)
as its settlement and clearing house. NSCCL follows a T+2 rolling
settlement cycle.
In a rolling settlement, for all trades executed on trading day .i.e. T
day the obligations are determined on the T+1 day and settlement
on T+2 basis i.e. on the 2nd working day.
A tabular representation of the settlement cycle for rolling
settlement is given below

Activity Day

Trading Rolling Settlement Trading T

T+1 working
Clearing Custodial Confirmation days

T+1 working
Delivery Generation days

T+2 working
Settlement Securities and Funds pay in days

T+2 working
Securities and Funds pay out days

T+2 working
Valuation Debit days

Post T+2 working

Settlement Auction days

38
 T+3 working
Auction settlement days

T+4 working
Bad Delivery Reporting days

T+6 working
Rectified bad delivery pay-in and pay-out days

T+8 working
Re-bad delivery reporting and pickup days

Close out of re-bad delivery and funds pay-in T+9 working

& pay-out days

Role of Clearing House:

For all trades executed on the T day, NSCCL determines the
cumulative obligations of each member on the T+1 day and
electronically transfers the data to Clearing Members (CMs). All
trades concluded during a particular trading date are settled on a
designated settlement day i.e. T+2 day. In case of short deliveries
on the T+2 day in the normal segment, NSCCL conducts a buy –in
auction on the T+2 day itself and the settlement for the same is
completed on the T+3 day, whereas in case of W segment there is
a direct close out. For arriving at the settlement day all intervening
holidays, which include bank holidays, NSE holidays, Saturdays and
Sundays are excluded.

3.6 How Transactions are guaranteed?

For instilling investor confidence and faith in the stock markets the
stock exchanges and its regulatory body SEBI have taken many
initiatives which would protect investors from frauds and scams.
Those initiatives are described below:

A. Base Minimum Capital (BMC)

39
 All active members of the Exchange are required to maintain a
Base Minimum Capital of Rs.1 million with the Exchange.
As per directions of SEBI, the stock broker and trading members
shall be required to provide BMC deposit based on their profiles i.e.
whether trading on proprietary account only, or trading on behalf of
clients only, or both including with or without algorithmic trading.
The BMC deposit requirement prescribed for the different profiles
ranges from Rs.10 Lacs to Rs. 50 Lacs for members of stock
exchanges have nation-wide trading terminals. For members of
other stock exchanges the requirement would be 40%.3

B. Additional Capital Deposit

The members may also deposit additional capital over and above
their base minimum capital with the Exchange for availing of the
higher intra-day trading limit and gross exposure limit. The
valuation of the securities deposited by the members towards the
base minimum and additional capital is done by the Exchange
weekly, since September 1999, as against monthly intervals earlier.
This exercise is carried out to ensure that depreciation in the value
of securities due to fall in prices can be collected from the members
within the shortest possible time and the base minimum capital is
kept intact.4

C. Surveillance

According to IOSCO (International Organization of Securities

Commissions), “the goal of surveillance is to spot adverse
situations in the markets and to pursue appropriate
preventive actions to avoid disruption to the markets.”
Effective surveillance is qui-essentialfor a well functioning capital
market.
Indian stock exchanges have Automated Surveillance system as a
tool for monitoring real-time trading activities.
The main objectives of the system can be summarized below:

1. To detect potential abnormal activity

2. Capture real time data on surveillance system

3. To generate alerts in case of aberrations

40
Technologies implemented by stock exchanges for the purpose of
surveillance are as follows:

a.Online Real Time Alerts

The objective of these alerts is to identify any abnormality as soon
as it happens. These alerts include intraday price movement related
and abnormal trade quantity or value related alerts.

b. Online Non real Time Alerts

The objective of these alerts is to analyze the price, volume and
value variations over a period.

c. Alerts to Trading Members

Trading members are cautioned to be alert or to exercise due
diligence by the Exchange, in dealing with securities which have
shown abnormal deviation in prices and volume of
transactions. The Exchange shall, on the basis of pre-determined
parameters identify such securities and disseminate information
about the same to the trading members.

d. Rumor / News Verification

In case of any rumor / news appearing in print media in relation to
any development in respect of any listed company, necessary
clarification or confirmation shall be sought, from the concerned
company and information shall be disseminated to the market
through electronic media by the Exchange as soon as possible from
the time such confirmation or clarification is received.

e. Dissemination of Price Sensitive Information to Market or

Public
Any price sensitive information in relation to any securities like
positive information which may relate to dividend, bonus, rights
and/or any other privilege being considered in favour of
shareholders and/or any other negative information, such as strike,
lock-out, closing of any unit, downgrading by CRISIL etc. which
when published, capable of influencing the movement of prices,
received from a company shall be disseminated to the market or

41
 public through electronic display, as soon as possible, as may be
provided in the relevant Regulations from time to time.

D. Settlement/Trade Guarantee Fund (SGF/TGF)

The Clearing Corporation or the Exchange shall maintain

Settlement Guarantee Fund(s), either separately or jointly, in
respect of different clearing segment(s) which may be utilized for
allocating funds to a particular segment of trading for the
satisfaction of losses or liabilities of the Clearing Corporation or the
Exchange.

E. Investor Protection Fund (IPF)

The Central Government, vide notification No. F. No. 14/4/SE/85

dated August 22, 1985, has stipulated the setting up of the
Investor Protection Fund (IPF)/ Customer by Stock Exchanges. This
fund should take care of legitimate investment claims which are not
of speculative nature of the clients of defaulting member(s).

3.7 Measure for Investor Assistance & Remedy for

Investor Grievance
A.Investor Service Centre

The Investor Services Cell facilitates resolution of complaints of

investors against the listed companies or Stock exchange members.
Stock Exchange gives high priority for resolution of investor
complaints

The detailed process of attending to complaint by the ISC against a

listed company is as follows:
1.Investors' complaints against listed companies are forwarded by
stock exchange to the concerned companies, with a copy sent to
the complainant.

2.The investors are advised to inform stock exchange, whether or

not the complaints are not resolved within 30 days.

42
 3.If a company fails to resolve the complaint within 30 days, stock
exchange sends a reminder to the company.

4.Stock exchange follows-up with the companies and / or their

Registrar & Transfer Agents, to resolve such complaints.

5.If the total number of pending complaints against a company

exceeds 25 and remain unresolved by the company for more than
45 days, then steps like suspension of trading in the securities of
such company till the complaints are resolved or imposition of fine
on company are initiated by stock exchange.

For example stock exchange transfers such scrip to “Z” group.

A "Z" category company indicates that it has not complied with
various provisions of the listing agreement including non-resolution
of investors' complaints. Through imposition of "Z' category, stock
exchange warns investors to be more careful in their investments
in such companies.

B. Investor Grievance Cell

Stock Exchanges provide the services of IGRC (Investors'

Grievances Redressal Committee) which, in its meetings, mediates
and counsels the disputes between an investor and stock exchange
Trading Member for finding friendly solution, for which the
Exchange sends Notice to both parties to remain present before the
IGRC.
In cases, where a friendly solution cannot be reached, IGRC
suggests the complainant to opt for arbitration if they desire. It
records the final outcome in the matter in the form of minutes, a
copy of which is handed over to the parties or mailed to an absent
party

4.Case Study to Justify the Title

Case Study/ Data Analysis

43
1.The reason of making case study is to make analysis of some stocks and to
recommend for investment in those stocks considering the current market
situation.

2.Preparation of line charts of flagship indices of BSE and NSE from 1st
April, 2018 to 31st May, 2019 and making analysis of the same.

Hence, we can see that from 1st April, 2018 to 31stMay, 2019 we found that the
fluctuations in BSE SENSEX are within 6,200. It started with the value of
25,269.64 and ended with the closing value of 31145.8.The data in the above
table is taken on weekly basis. At the initial stage, the value got down by around
600 points and went up by around 1,100 points. Again in the 9th week, it went
through a steep rise of 1,350 points and 750 and 700 points in the 14th and 16th

44
week respectively. In the 23rd week the value gained about 750 points but went
down by 800 points in the 27th week. After crossing 30 weeks the value went
drastically down in 4 consecutive weeks grossing depletion of about 2,000 points.
From 37th week to 40th week there was major fluctuations in the value i.e. firstly
it rose by 500 but depreciated in the next two weeks by 700 and again rising by
600. Then the value again started growing after the 40th week rising from
26,626.46 to 30,464.92 in the 60th week showing an appreciation of around
3,800 and making the value cross the historic 30,000 mark. In the mean while
there were also some downs in the value but those were not very much
significant

Hence, we can see that from 1st April, 2018 to 31st May, 2019 we found that the
fluctuations in NSE NIFTY are around 2,000. It started with the value of
7,713.05and ended with the closing value of 9,621.25.The data in the above
table is taken on weekly basis. At the initial stage, the value got down by about
150 points and then rose by about 350 points. Again in the 9th week, it went
through a steep rise of 400 points and 240 and 220 points in the 14th and 16th
week respectively. In the 23rd week the gain in the value was about 240 points
but went down by 220 points in the 27th week. After crossing 30 weeks the
value went drastically down in 4 consecutive weeks grossing depletion of about
620 points. But in the 41st week it again rose by 215 points. From 44th week to

45
 48th week there was a continuous growth in its value, rising up by around 580
points. Also there were major positive fluctuations in the value in the 51st, 57th
and 59th weeks by 225, 185 and 115 respectively.
In the mean while there were also some downs in the value but those were not
very much significant.
From the above analysis we can conclude that there was some relationship
between the fluctuations happening in the value of BSE SENSEX and NSE NIFTY
i.e. their fluctuations in values were directly proportional to each other.

Reasons behind the fluctuations in the value of the flagship indices of BSE and NSE from 1st
April, 2016 to 31st May, 2017 are discussed below:-
• Undisclosed income: April 2018
The Ministry of Finance announced that all tax payers or person* not coming under any tax
slabs have the option to give information about their undisclosed income on or before
30th September otherwise heavy penalty would be imposed on them if found guilty.
• Brexit vote: June 2018
Britain voted to exit the EU with the 'Leave' camp winning with 51.9 per cent votes in a historic
referendum, which was followed by the resignation of David Cameron as Prime Minister.
It may take years of negotiations for the UK to disentangle from the EU law, finance,
trade, foreign policy, say experts. The immediate impact was felt across currency
markets with major equity indices losing 2-10 per cent. If Brexit is a precursor to a
tectonic shift in the euro zone, it could eventually disintegrate the entire European
Union. Then, it may impact India in the short term. But in the long run, it will help India
attain prominence in the global landscape, as we would emerge as a safe haven in such
times of turmoil, attracting global funds. This caused the rise of the value of the indices.
• Surgical strike on Pakistan: Sept 2018
The domestic equity market went into a tailspin after the Director General of Military
Operations said that Indian Army carried out surgical strikes on terror launch pads in
Pakistani soil. Analysts feared that a series of such strikes in near future could rekindle
tensions between the both nations, roiling markets. Some analysts on D-Street were
factoring in a 10 per cent fall if the geopolitical tensions between the two nations were
to escalate. However, Pakistan dismissed India's claim of 'surgical strike' as an illusion,
and termed the incident as 'cross-border fire'. This led to fall in the value of indices.
• Demonetisation: Nov 2018
The most effective event that risk to hit market sentiment was Prime Minister Narendra Modi's
surgical strike on black money. Demonetisation has been the boldest reform of this
government, which has the potential to bring long-term structural benefits to the
economy, while causing pain in the short term due to a cash crunch. Demand in the
consumer sector and sectors associated with it are likely to take a hit in the near term,
but once the cash situation normalises, demand should bounce back, experts said. This
was the reason for the steep fall in the value of the indices.
• Arrival of Trump: Nov 2018
Republican Donald Trump surprised experts by beating Democrat Hillary Clinton in the US
presidential election, which gave way to 'Trumponomics'. The word 'Trumponomics'
refers to the bold economic plans such as cuts in personal and corporate taxes and
restructuring of bilateral trade deals, as well as protectionism that can not only impact
the US but economies across the world, including India. There was a threat on the
Indian IT companies after the selection of Trump as the President. This resulted in the
decline of the indices.

46
• Rupee at new low: Nov 2018
The rupee collapsed to a fresh life-time low of 68.86 against the dollar amid sustained foreign
capital outflows. Foreign portfolio investors retreated from emerging markets like India
towards US dollar on hopes of protectionist measures by President-elect Donald Trump.
Expectations that Trump will adopt an expansionary fiscal measure lifted US bond yields
and fuelled a rally in the US dollar. This has prompted FPIs to offload some of their
holdings in India market.
• Inflows from Foreign and Domestic investors: April 2019
The foreign institutional investors (FIIs) were net buyers in the Indian equity market on April
25, helping the major indices hit their respective record highs. The domestic institutional
investors have been pouring funds in the markets for past many trading sessions. As
per the data available at the NSE, FIIs poured in Rs 178.82 crore in the markets in the
month of April while DIIs also bought shares worth 998.26 crore. Thus resulted in the
growth of the indices.
• Monsoon: May 2019
This year there is as estimation that the monsoon will reach India early. Also India is supposed
to have an excellent monsoon this year. This news will increase the expectations of the
investors and hence, it led to the heavy rise in the indices in mid May.
• Relief from French polls : May 2019
Relief rally was triggered in the global markets after pro-centrist and market favourite
Emmanuel Macron won the first round of French Presidential elections. Macron won first
round vote with 23.91%. Far-right nationalist and anti-euro candidate Marine Le Pen
came in second with 21.42%, almost exactly as earlier polls predicted. Later, the French
far-right presidential hopeful Marine Le Pen stepped down as leader of her National
Front (FN) party to focus on gathering a large number of voters ahead of the decisive
round, to be held on May 7. This resulted in appreciation in the value of the indices.
• Rupee below 64/$: May 2019
Rupee strengthened past the 64 mark against the US dollar for the first time since in over an
year, tracking the gains in the global equity markets. The currency opened at 64.16 a
dollar and touched a high of 63.96, a level last seen on 10 August 2015. It gained 6.4%
in last 3 month becoming the best performing currency in Asia. Hence, there was steep
rise in the value of the indices.

3. Listing out the stocks separately that currently represent flagship indices such as NSE
Nifty50 and BSE SENSEX.

NSE Nifty50 BSE SENSEX

Sl. Name of the Scrip Sl. No. Name of the Scrip

No.

1. ACC LTD 1. ADANI PORTS & SEZ

2. ADANI PORTS & SEZ 2. ASIAN PAINTS

3. AMBUJA CEMENT 3. AXIS BANK

4. ASIAN PAINTS 4. BAJAJ AUTO

5. AUROBINDO PHARMA 5. BHARTI AIRTEL

47
6. AXIS BANK 6. CIPLA LTD.

7. BAJAJ AUTO 7. COAL INDIA

8. BANK OF BARODA 8. DR. REDDY’S LABS

9. BHARTI AIRTEL 9. GAIL (INDIA) LTD.

10. BHARTI INFRATEL 10. HDFC

11. BOSCH LTD 11. HDFC BANK

12. BPCL 12. HERO MOTOCORP LTD.

13. CIPLA 13. HUL

14. COAL INDIA 14. ICICI BANK

15. DR. REDDY’S LABS 15. INFOSYS LTD.

16. EICHER MOTORS 16. ITC LTD.

17. GAIL (INDIA) LTD. 17. L&T

18. HCL TECHNO LTD. 18. LUPIN LTD.

19. HDFC 19. M&M

20. HDFC BANK 20. MARUTI SUZUKI

21. HERO MOTOCORP LTD. 21. NTPC LTD.

22. HINDALCO 22. ONGC

23. HUL 23. POWER GRID

24. ICICI BANK 24. RELIANCE

25. INDIABULLS HSG 25. SBI

26. INDUSLND BANK 26. SUN PHARMA

27. INFOSYS LTD 27. TATA MOTORS

28. IOC LTD. 28. TATA STEEL

29. ITC LTD. 29. TCS LTD.

30. KOTAK MAHINDRA 30. WIPRO LTD.

31. L&T

32. LUPIN LTD.

33. M&M

34. MARUTI SUZUKI

35. NTPC LTD.

48
 36. ONGC

37. POWER GRID CORP.

38. RELIANCE

39. SBI

40. SUN PHARMA

41. TATA MOTORS

42. TATA MOTORS(D)

43. TATA POWER

44. TATA STEEL

45. TCS LTD.

46. TECH MAHINDRA

47. ULTRATECH CEMENT

48. VEDANTA LTD.

49. WIPRO LTD.

50. YES BANK

51. ZEE ENTERTAINMENT

3.1 List of stocks which are included both in NSE Nifty50 and BSE SENSEX.

Stocks which represent both NSE Nifty50 and BSE SENSEX

Sl. No.

1. ADANI PORTS & SPECIAL ECONOMIC ZONE

2. ASIAN sPAINTS LTD

3. AXIS BANK LTD

4. BAJAJ AUTO LTD.

5. BHARTI AIRTEL LTD.

6. CIPLA LTD.

7. COAL INDIA LTD.

8. DR. REDDY’S LABORATORIES LTD.

9. GAIL (INDIA) LIMITED

49
 10. HDFC

11. HDFC BANK LTD.

12. HERO MOTOCORP LTD.

13. HINDUSTAN UNILEVER LTD.

14. ICICI BANK LTD.

15. INFOSYS LTD.

16. ITC LTD.

17. LARSEN & TOUBRO LTD.

18. LUPIN LTD.

19. MAHINDRA & MAHINDRA LTD.

20. MARUTI SUZUKI INDIA LTD.

21. NTPC LTD.

22. OIL & NATURAL GAS CORPORATION

23. POWER GRID CORPORATION OF INDIA

24. RELIANCE INDUSTRIES LTD.

25. STATE BANK OF INDIA

26. SUN PHARMACEUTICAL INDUSTRIES

27. TATA MOTORS LTD.

28. TATA STEEL LTD.

29. TCS LTD.

30. WIPRO LTD.

3.2 Fundamentals of those stocks to be sorted out under Item no. 3.1 above on the basis of
last financial statement (As on 31.03.2017) and also trading history of those stocks in
the following manner:

Trading History

Report Card (Fundamentals) of the Stocks 52-Wk. Last 52-

H/L Wk. Avg.
Name of the Stock Face EPS PE Ratio Net Last Return
Market Market
Value (Rs.) Profit Div. on
Price Price
(Rs.) Margin (%) Avg.
(Rs.)
(%) Equity

ADANI PORTS & SEZ 2 14.97 24.03 61.36 65 20.85 368.75- 282.05

50
 195.35

ASIAN PAINTS LTD. 1 18.80 61.20 14.25 200 25.94 1230.00- 1040.05
850.1

AXIS BANK LTD. 2 15.36 33.03 20.06 250 15.46 638.30- 531.35
424.40

BAJAJ AUTO LTD. 10 132.27 21.37 16.09 550 29.71 3122.00- 2816.00
2510.00

BHARTI AIRTEL LTD. 5 -24.83 -14.72 12.51 20 8.93 401.00- 342.025

283.05

CIPLA LTD. 2 12.12 45.57 11.61 100 11.33 621.90- 540.75

459.60

COAL INDIA LTD. 10 23.36 11.14 9873. 11.5 105.2 349.95- 303.025
45 1 256.10

DR. REDDY’S LABS 5 83.48 31.46 13.26 400 11.67 3689.85- 3035.1
2380.35

GAIL (INDIA) LTD. 10 20.71 18.44 4.42 27 7.51 433.70- 351.005

268.31

HDFC 2 46.85 35.08 22.95 750 20.81 1682.20- 1432.175

1182.15

HDFC BANK LTD. 2 56.78 29.40 20.41 550 16.91 1691.90- 1418.075
1144.25

HERO MOTOCORP 2 169.11 22.32 10.95 1500 39.42 3880.55- 3362.475

2844.40

HUL 1 20.75 53.02 14.07 1000 69.18 1119.60- 950.775

781.95

ICICI BANK LTD. 2 16.82 18.77 18.09 125 10.11 327.50- 274.30
221.10

INFOSYS LTD. 5 60.18 16.01 23.30 295 20.31 1215.00- 1057.65

900.30

ITC LTD. 1 8.40 36.24 26.72 475 29.94 319.90- 270.95

222.00

L&T LTD. 2 58.46 29.70 8.88 1050 13.04 1834.00- 1564.55

1295.10

LUPIN LTD. 2 69.56 16.64 25.57 375 24.88 1750.00- 1415.00

1080.00

M&M LTD. 5 66.64 21.37 7.74 260 14.59 1508.95- 1325.175

1141.40

51
MARUTI SUZUKI 5 242.97 30.38 7.91 1500 16.92 7480.90- 5673.75
3866.60

NTPC LTD. 10 11.38 13.88 14.52 21.7 11.53 178.25- 158.975

139.70

ONGC 5 13.95 12.07 20.42 16 10.53 212.00- 175.035

138.07

POWER GRID CORP. 10 14.37 14.33 28.97 33.5 14.1 214.00- 182.15
150.30

RELIANCE 10 96.66 13.65 11.75 110 11.41 1467.75- 1198.875

930.00

SBI 1 13.15 21.68 5.97 260 6.69 315.30- 257.75

200.20

SUN PHARMA 1 -0.15 -3660.05 -14.09 350 -4.99 854.95- 673.8

492.65

TATA MOTORS LTD. 2 -7.30 -62.51 0.55 10 1.04 598.60- 507.85

417.10

TATA STEEL LTD. 10 35.46 14.31 12.82 100 6.95 520.65- 408.475
296.30

TCS LTD. 1 120.04 20.74 25.51 2750 30.31 2744.80- 2398.35

2051.90

WIPRO LTD. 2 33.58 15.67 18.12 100 19.79 288.90- 246.475

204.05

3.3 Selecting 5 different stocks from the above table under Item No. 3.2 on the basis of
their fundamental soundness and trading history for the purpose of detailed analysis
and to ascertain growth rate before recommending investment.

Ratio Analysis

(a) Name of the stock: DR. REDDY’S LABS

Particulars March, March, March, March, March,

2019 2018 2017 2016 2015

Per Share Ratio

Adjusted EPS (Rs.) 100.2 98.57 113.6 74.51 53.81

5 2

Adjusted Cash EPS (Rs.) 138.3 127.3 135.9 92.93 71.57

0 4 9

Dividend per share 20.00 20.00 18.00 15.00 13.75

52
Operating profit per share (Rs.) 140.9 140.3 162.3 116.9 90.95
1 4 5 2

Book Value per share (Rs.) 680.2 624.1 548.4 458.2 396.1
4 3 1 9 9

Net operating income per share (Rs.) 598.3 587.5 571.8 496.6 397.4
1 6 7 0 8

Profitability Ratio

Operating margin (%) 23.55 23.88 28.38 23.54 22.88

Gross profit margin (%) 17.19 18.98 24.47 19.83 18.41

Net profit margin (%) 13.26 16.77 19.86 15.00 13.53

Adjusted return on net-worth (%) 14.73 15.79 20.71 16.25 13.58

Liquidity Ratio

Current Ratio 3.01 3.28 3.33 2.60 2.56

Quick Ratio 2.41 2.64 2.70 2.02 1.92

Payout Ratio

Dividend payout ratio (Net profit) 25.13 20.29 15.84 20.13 25.54

Dividend payout ratio (Cash profit) 16.99 15.70 13.23 16.14 19.20

Earning retention ratio 80.10 79.71 84.16 79.87 74.46

Cash earnings retention ratio 85.57 84.30 86.77 83.86 80.80

53
(b) Name of the stock: LUPIN LTD.

54
Particulars March, March, March, March, March,
2019 2018 2017 2016 2015

Per Share Ratio

Adjusted EPS (Rs.) 64.03 53.34 51.84 28.16 18.01

Adjusted Cash EPS (Rs.) 70.81 60.83 55.58 31.52 20.96

Dividend per share 7.50 7.50 6.00 4.00 3.20

Operating profit per share (Rs.) 89.67 75.05 64.95 42.10 26.01

Book Value per share (Rs.) 257.2 200.8 155.6 108.3 83.61
8 4 5 0

Net operating income per share (Rs.) 250.3 216.9 199.3 159.1 120.5
4 7 7 5 6

Profitability Ratio

Operating margin (%) 35.81 34.58 32.57 26.45 21.57

Gross profit margin (%) 33.10 31.13 30.70 24.34 19.12

Net profit margin (%) 25.57 24.58 25.99 17.69 14.93

Adjusted return on net-worth (%) 24.88 26.55 33.30 26.00 21.53

Liquidity Ratio

Current Ratio 3.36 2.60 3.09 2.50 2.38

Quick Ratio 2.50 1.70 2.27 1.69 1.59

Payout Ratio

Dividend payout ratio (Net profit) 11.71 14.06 11.57 14.20 17.76

Dividend payout ratio (Cash profit) 10.59 12.33 10.79 12.69 15.26

Earning retention ratio 88.29 85.94 88.43 85.80 82.24

Cash earnings retention ratio 89.41 87.67 89.21 87.31 84.74

55
56
(c) Name of the stock: MARUTI SUZUKI

Particulars March, March, March, March, March,

2019 2018 2017 2016 2015

Per Share Ratio

Adjusted EPS (Rs.) 151.33 122.85 92.13 79.19 56.60

Adjusted Cash EPS (Rs.) 244.81 204.63 161.13 140.80 96.00

Dividend per share 35.00 25.00 12.00 8.00 7.50

Operating profit per share (Rs.) 297.22 222.22 168.69 140.02 86.98

Book Value per share (Rs.) 894.04 784.70 694.45 615.03 525.68

Net operating income per share (Rs.) 1,911.6 1,654.2 1,446.6 1,442.9 1,231.7
2 2 6 3 7

Profitability Ratio

Operating margin (%) 15.54 13.43 11.66 9.70 7.06

Gross profit margin (%) 10.65 8.49 6.89 5.43 3.86

Net profit margin (%) 7.91 7.42 6.36 5.48 4.59

Adjusted return on net-worth (%) 16.92 15.65 13.26 12.87 10.76

Liquidity Ratio

Current Ratio 0.63 0.68 0.88 1.17 1.33

Quick Ratio 0.37 0.41 0.67 0.89 1.03

Payout Ratio

57
Dividend payout ratio (Net profit) 23.12 20.34 13.02 10.10 13.25

Dividend payout ratio (Cash profit) 14.29 12.21 7.44 5.68 7.81

Earning retention ratio 76.88 79.66 86.98 89.90 86.75

Cash earnings retention ratio 85.71 87.79 92.56 94.32 92.19

58
(d) Name of the stock: HUL

Particulars March, March, March, March, March,

2019 2018 2017 2016 2015

Per Share Ratio

Adjusted EPS (Rs.) 19.63 19.05 16.88 16.83 14.74

Adjusted Cash EPS (Rs.) 21.46 20.53 18.20 18.03 15.84

Dividend per share 17.00 16.00 15.00 13.00 18.50

Operating profit per share (Rs.) 27.94 26.48 24.07 20.69 18.51

Book Value per share (Rs.) 29.99 17.04 17.22 15.15 12.37

Net operating income per share (Rs.) 147.3 147.8 142.3 129.5 119.3
4 2 9 6 6

59
Profitability Ratio

Operating margin (%) 18.96 17.91 16.90 15.97 15.51

Gross profit margin (%) 17.72 16.91 15.97 15.04 14.59

Net profit margin (%) 14.07 12.76 14.00 13.50 14.37

Adjusted return on net-worth (%) 65.46 111.7 98.03 111.0 119.2

9 6 3

Liquidity Ratio

Current Ratio 0.81 0.75 0.74 0.73 0.75

Quick Ratio 0.51 0.49 0.46 0.43 0.44

Payout Ratio

Dividend payout ratio (Net profit) 79.53 84.80 75.20 72.69 105.3
5

Dividend payout ratio (Cash profit) 73.08 78.63 70.52 68.10 99.18

Earning retention ratio 15.96 16.00 11.12 22.74 -

25.45

Cash earnings retention ratio 23.13 22.06 17.59 27.91 -

16.81

60
61
(e) Name of the stock: HDFC BANK LTD.

Particulars March, March, March, March, March,

2019 2018 2017 2016 2015

Per Share Ratio

Adjusted EPS (Rs.) 48.64 40.76 35.34 28.27 22.02

Adjusted Cash EPS (Rs.) 51.43 43.38 38.14 31.01 24.33

Dividend per share 9.50 8.00 6.85 5.50 4.30

Operating profit per share (Rs.) 44.77 36.16 29.65 21.97 18.11

Book Value per share (Rs.) 287.4 247.3 181.2 152.2 127.5
7 9 3 0 2

Net operating income per share (Rs.) 238.2 193.3 171.4 147.3 116.2
0 8 7 7 8

Profitability Ratio

Operating margin (%) 18.79 18.70 17.28 14.90 15.57

Gross profit margin (%) 17.62 17.34 15.65 13.04 13.58

Net profit margin (%) 20.41 21.07 20.61 19.18 18.93

Adjusted return on net-worth (%) 16.91 16.47 19.50 18.57 17.26

Liquidity Ratio

Current Ratio 1.04 0.58 0.60 0.54 0.58

Quick Ratio 14.51 12.69 8.55 7.84 6.20

Payout Ratio

Dividend payout ratio (Net profit) 19.53 19.62 19.38 19.46 19.52

Dividend payout ratio (Cash profit) 18.47 18.44 17.96 17.74 17.67

Earning retention ratio 80.47 80.38 80.62 80.54 80.48

Cash earnings retention ratio 81.53 81.56 82.04 82.26 82.33

62
63
4. Technical analysis of the selected stocks from 1st April,2018 to 31st May,2019

64
The above graph has been plotted showing the price fluctuations of the RIL stock from
01/04/2018 to 31/05/2019. The open price of the stock was 1464.8 on 01/04/2016 and
the price on the last day was 1161. It was at its trough point on 29th May, 2019 and
peak point on 29th July, 2018.

The above graph has been plotted showing the price fluctuations of the RIL stock from
01/04/2018 to 31/05/2019. The open price of the stock was 1064.4 on 01/04/2018 and
the price on the last day was 1636.2. It was at its trough point on 07th April, 2018 and
peak point on 31stMay, 2019.

65
The above graph has been plotted showing the price fluctuations of the RIL stock from
01/04/2018 to 31/05/2019. The open price of the stock was 867.8 on 01/04/2018 and

66
 the price on the last day was 1067. It was at its trough point on 22nd December, 2018
and peak point on 30thMay, 2019.

Conclusion:
You can make a lot of money investing in stocks or trading in the stock market, but it is not
something for the new investors. Care must be taken when it comes to stock
investments. The investor must have a solid understanding of stocks and how they
trade in the market or risk losing money in a volatile type of investment.

 Having stock in a company means you are an owner. How many shares of stock you
have determines the extent of that ownership. As part owner, you receive dividends and
have voting rights.

 A stock represents equity, while are bonds a debt. bonds are low-risk investment
vehicles with guaranteed returns, while stocks involves more risk. This is why stocks
have a higher rate of return compared to bonds.

 In investing, the riskier the investment the bigger the chance of making more money.
Investing in stocks can make you lots of money if you invest in the right company.
However, you can lose all of it too.

 There are two main types of stocks: common and preferred. Stocks can be further
classified into different classes depending on the company.

 The stock market is a place where people go to trade stocks. Two of the most important
stock exchanges in the United States are the NYSE and Nasdaq.

 Purchase of stocks are commonly done through a brokerage. You can also get a
dividend reinvestment plan (DRIP).

 Stocks are volatile. Prices change according to supply and demand. Many people have
different opinions on why stock prices move the way they do. One of the most important
factors that influence prices is earnings.

 Learning how to read stock tables or a stock quote is a must if you are planning to be a
serious investor in stocks. It is not hard to read a stock quote once you know what the
different terms and symbols stand for.

 Always remember the old stock market saying: “Bulls make money, bears make money,
but pigs get slaughtered!”. This will perhaps save you many times from losing on your
investment.

Refrences:

1 CNBC TV18, Financial Investment Options. Retrieved from

http://www.moneycontrol.com/planning_desk/fininvoption.php

67
2 Bennett, Coleman & Co. Ltd, Glossary: Money Market
http://economictimes.indiatimes.com/definition/money-market

3 Bennett, Coleman & Co. Ltd, Glossary: Capital Market

http://economictimes.indiatimes.com/definition/capital-market

4 Kalyan city life (Maharastra, India). Functions of Stock Exchange. Retrieved from
http://kalyan-city.blogspot.com/2010/11/what-is-stock-exchange-its-definitions.html

5 Retrieved from: http://www.surfindia.com/finance/regional-stock-exchanges.html

6 Published in Live mint: Mon, Dec 12 2011. 08 42 PM IST. Retrieved from:

http://www.livemint.com/Money/T0ii9jsf57Baxte81t5F3H/Did-You-Know--There-are-23-
regional-stock-exchanges-but-the.html

7 Regional stock exchanges have lost relevance: Sebi chief March 26, 2013. Retrieved from:
http://www.business-standard.com/article/markets/regional-stock-exchanges-have-lost-
relevance-sebi-chief-113032600228_1.html

8 National Stock Exchange, Products available to investors for trading. Retrieved from
http://www.nse-india.com/products.htm

9 Investopedia, Cash Market. Retrieved from

http://www.investopedia.com/terms/c/cashmarket.asp
10 Inserted by the Securities Laws (Amendment) Act, 1999 (w.e.f. 22-02-2000).
Clause (aa) renumbered by the Securities Laws (Amendment) Act, 2004 (w.e.f. 12-10-2004).

11 CNBC TV18, Financial Investment Options. Retrieved from

http://www.moneycontrol.com/news/brokerage-recos-fo/basicsfuturesoptions_709886.html
12 NSE, Market Segment-Trade To Trade Segment. Retrieved from : http://www.nse-
india.com/products/content/equities/equities/mrkt_segment.htm

13 Securities Exchange Board. Day Trading. Retrieved from :

http://www.sec.gov/answers/daytrading.htm

14 Investopedia, Margin. Retrieved from : http://www.investopedia.com/terms/m/margin.asp

68
15 NSE, Categories of Membership. Retrieved from
http://www.nse-india.com/membership/content/cat_of_mem.htm

16 National Stock Exchange.Retrieved from : http://www.nse-

india.com/membership/content/fees_depst_n_net_req.htm

17 Indian express, Depository System, Express News Service : Mon Mar 14 2019. Retrieved from:
http://archive.indianexpress.com/news/depository-system/761907/

18 Indian Express. Retrieved from: http://archive.indianexpress.com/news/depository-system/761907/

19 NSE. Retrieved from: http://www.nse-

india.com/products/content/equities/equities/settlement_cycle.htm

20 SEBI. Retrieved from: http://www.sebi.gov.in/sebiweb/home/detail/24978/new/PR-

Requirement-of-Base-Minimum-Capital-for-Stock-Broker-and-Trading-Member

21 Capital Market. Retrieved from: http://www.capitalmarket.com/MarketBeat/base.htm

22 Equitymaster.com, Pharmaceutical Sector Analysis Report, April 10, 2014. Retrieved from:
http://www.equitymaster.com/research-it/sector-info/pharma/Pharmaceuticals-Sector-
Analysis-Report.asp

23 Equitymaster.com, Automobiles Sector Analysis Report. Retrieved from:

http://www.equitymaster.com/research-it/sector-info/auto/Automobiles-Sector-Analysis-
Report.asp

24 Equitymaster.com, Banking Sector Analysis Report. Retrieved from:

http://www.equitymaster.com/research-it/sector-info/bank/Banking-Sector-Analysis-
Report.asp

25 Ashwath Damodaran, Book: Value and Risk: Beyond Betas, pp 12

26 Investopedia, http://www.investopedia.com/terms/d/ddm.asp

69
27 Wikipedia. Retrieved from: www.wikipedia.org

28 Wikipedia,SBI. Retrieved from:

http://en.wikipedia.org/wiki/State_Bank_of_India#cite_note-3

29 Livemint. Retrieved from :

http://www.livemint.com/Money/klPIcNelruNlRbJkbg9DkL/SBI-ICICI-Bank-profits-rise-
on-higher-bond-investment-retur.html

30 Wikipedia. Retrieved from : http://en.wikipedia.org/wiki/Maruti_Suzuki

31 Wikipedia. Retrieved from : http://en.wikipedia.org/wiki/Mahindra_%26_Mahindra

32 Cipla Limited,"Shareholding pattern as on 30th September, 2018".. Retrieved from:

www.cipla .com

33 TradersEdgeIndia.com, Technical analysis. Retrieved from :

http://www.tradersedgeindia.com/basics_technical_analysis.htm

34 TradersEdgeIndia.com, Technical analysis. Retrieved from

http://www.tradersedgeindia.com/basics_technical_analysis.htm

35 TradersEdgeIndia.com, Technical analysis. Retrieved from

http://www.tradersedgeindia.com/basics_technical_analysis.htm

36 TradersEdgeIndia.com, Technical analysis. Retrieved from

http://www.tradersedgeindia.com/basics_technical_analysis.htm

37 TradersEdgeIndia.com, Technical analysis. Retrieved from

http://www.tradersedgeindia.com/basics_technical_analysis.htm

38 Milleniumfxtrading.com,technical analysis. Retrieved from

70
 http://www.millenniumfxtrading.com/index.php/2019S-01-07-20-38-12/technical-analysis

39 NSE, CNX-Nifty. Retrieved

from :http://www.nseindia.com/products/content/equities/indices/cnx_nifty.htm

40 National Stock Exchange, Further Issues. Retrieved from

http://www.nseindia.com/corporates/content/further_issues.htm

41 IM Pandey, Financial management Tenth Edition, Long term Finance Pg 486

42 IM Pandey, Financial management Tenth Edition, Long term Finance Pg 486

43 SECURITIES AND EXCHANGE BOARD OF INDIA (BUY BACK OF SECURITIES)

(AMENDMENT) REGULATIONS, 2013 Notice No. LAD-NRO/GN/2013-14/16/6348.

44 Equitymaster.com (2011, April 13) Why do MNCs want to delist from India? Retrieved
from : http://www.equitymaster.com/detail.asp?date=04/13/2011&story=4&title=Why-do-
MNCs-want-to-delist-from-India

45 Retrieved from : www.jindalsteelpower.com

46 Economic Times online news, JSPL Share Buyback Ends. Retrieved from:
http://articles.economictimes.indiatimes.com/2018-08-30/news/41619242_1_jspl-offer-
price-share-buy

47 Crompton Greaves, Company Overview. Retrieved from:

http://avanthagroup.com/companies-crompton-greaves.asp

48 http://www.moneycontrol.com/news/buzzing-stocks/crompton-greaves-shares-gain-3-as-
buyback-offer-begins_918396.html?utm_source=ref_article

49 Bakul Chugan Tongia, ET Bureau Jul 5, 2018, 06.40AM IST

71
50 Published in money control, Crompton Greaves shares gain 3% as buyback offer begins, Jul
16, 2013.Retrieved from: http://www.moneycontrol.com/news/buzzing-stocks/crompton-
greaves-shares-gain-3-as-buyback-offer-begins_918396.html?utm_source=ref_article

72