ASSIGNMENT 2

SECURITIES ANANLYSIS AND

PORTFOLIO MANAGEMENT

Submitted to,
Prof. Sachin kumar

Submitted by,
Yonika B
MBA - III B
 INTRODUCTION

Simply said, a brokerage business is a location where traders and investors go to

buy and sell stocks. The company offers a trading platform to everyone and
serves as a mediator between buyers and sellers. On these exchanges,
commission is charged. A transaction fee is assessed for each stock purchase
made by an investor.
A broker is a person or business that stands between a potential investor and a
securities exchange. Individual traders and investors require the services of
exchange members since securities exchanges only accept orders from people or
companies who are members of that exchange. Brokers offer that service and
are paid in a variety of ways, including through commissions, fees, or payments
from the exchange itself.
Brokers may offer investors information, investment ideas, and market
knowledge in addition to carrying out client orders. They might also cross-sell
other financial services and products that their brokerage company provides,
such access to a private client offering that caters to high net worth clients'
specific needs. Only the wealthy could formerly afford a broker and have access
to the stock market. Discount brokers, which enable investors to trade at a
reduced cost but without individualised guidance, have exploded as a result of
online broking. Here are some well-known brokerage firms:-
• SHAREKHAN SECURITIES LTD
• ANANDRATHI SECURITIES LTD
• SMC GLOBAL SECURITIES LTD
• ICICI DIRECT
• TATA SECURITIES LTD.
 SHAREKHAN SECURITIES LTD.

PARAMETERS THEY USE TO SELL THEIR PRODUCTS

1. Equity Trading
2. Commodity Trading
3. Currency Trading
4. Options
5. Futures
6. Mutual Funds
7. SIP
8. Fixed Deposits / Bonds
9. Loans
10. E-Trade
BROKERAGE CHARGES :
Opening: ₹ NIL

Delivery: min ₹ 16/ per scrip

settlement
Brokerage: min ₹ 16/ per
scrip settlement
AMC: ₹ 400
 ANANDRATHI SECURITIES LTD

PARAMETERS THEY USE TO SELL THEIR PRODUCTS

1. Equity Trading
2. Commodity Trading
3. Currency Trading
4. Options
5. Futures
6. Mutual Funds
7. SIP
8. Fixed Deposits / Bonds
9. Loans
10. E-Trade

BROKERAGE CHARGES :
Equity Delivery: 0.30%
Trading Charges [One Time] : Rs. 750
Trading AMC [Yearly] Rs. 0
Demat Charges : Rs 3 per certificate + Rs 35 per request In case of bulk, above
100 certificate Rs 5 & Actual Courier Charge
Demat AMC [Yearly] : Rs 450 per year or Lifetime free with Rs 999 one-time
payment with Rs 3000 refundable deposit amount

· Lifetime free with Rs 999 one-time payment with Rs 3000 refundable deposit
amount
 SMC GLOBAL SECURITIES LTD

PARAMETERS THEY USE TO SELL THEIR PRODUCTS

1. Equity Trading
2. Commodity Trading
3. Currency Trading
4. Options
5. Futures
6. Mutual Funds
7. SIP
8. Insurance

BROKERAGE CHARGES :

Trading Account Opening Charges (One Time) Nil

Trading Annual Maintenance Charges AMC (Yearly Fee) Nil
Demat Account Opening Charges (One Time) Rs 499
Demat Account Annual Maintenance Charges AMC (Yearly Fee) Rs 300
Equity Delivery 0.3%
 ICICI DIRECT

PARAMETERS THEY USE TO SELL THEIR PRODUCTS

1. Equity Trading
2. Currency Trading
3. Options
4. Futures
5. Mutual Funds
6. Forex
7. Banking
8. SIP
9. Insurance
10. NPS
11. E Locker
12. Fixed Deposits / Bonds
13. Loans
14. E-Trade
BROKERAGE CHARGES :
Trading Account Opening Charges (One Time): Rs 0 (Free)
Trading Annual Maintenance Charges AMC (Yearly Fee) Rs 0 (Free)
Demat Account Opening Charges (One Time) Rs 0 (Free)
Demat Account Annual Maintenance Charges AMC (Yearly Fee) Rs 300 (from 2nd year)
Delivery: 0.55%

AMC: ₹ 700
 TATA SECURITIES LTD

PARAMETERS THEY USE TO SELL THEIR PRODUCTS

1. Equity Trading
2. Options
3. Futures
4. Mutual Funds
5. SIP
6. Insurance
7. Loans

BROKERAGE CHARGES :

Trading Account. NA.

Demat account. Rs50
Commodity Account. NA.
Trading Annual maintenance charges (AMC). Rs 200/ Year.
Equity (Delivery). Delivery – 0.2%, upfront charges
 COMPARISON CHART BETWEEN THE SERVICES
OFFERED BY THE BROKERAGE FIRMS

SMC GLOBAL
ANANDRATHI TATA
SERVICES ICICI SECURITIES SHAREKHAN
SECURITIES SECURITIES
DIRECT LTD SECURITIES LTD
LTD LTD
Demat Services YES YES YES YES YES
Trading Services YES YES YES YES YES
3 in 1 Account NO YES YES NO NO
Intraday Services YES YES YES YES YES
IPO Services YES YES YES YES YES
Stock Recommendations YES YES YES YES YES
Robo Advisory NO NO NO NO YES
PMS YES YES NO YES YES
Trading Institution NO NO NO NO YES
Trading Exposure UP TO 21x UP TO 5x UP TO 5x UP TO 5x UP TO 32x
Virtual Trading NO YES NO NO NO
NRI Services YES YES YES YES YES
Investment Banking YES YES YES YES NO
Debt Funding NO NO NO YES NO
Issue Management YES YES YES YES YES
Depository Services YES YES YES YES YES

All the above companies use there parameters according to them what is the
product and how do they target there customers according to their needs and
investment categories.
Investment time- the time period for the investment is to be made
Risk- variability in the return
Return income- the total income, the investors receives during his holding period
Liquidity- the ease with which the investment is converted into cash
Safety- it refers to the legal and regulatory protection to the investment
Hedge against inflation- the returns should be higher than the rate of inflation
 PRODUCTS WHICH HAS HIGH DEMAND IN THE
MARKET AND ARE SOLD MOSTLY

• Equity trading
• Commodity trading
• Currency trading
• Future
• Option
• Mutual funds
• E trade
• SIP
After examining every product sold in the market, I have come to the conclusion
that the financial brokers sell the products listed above the majority of the time
because these are the core investment products that every company sells. The
products vary depending on the size of the company and whether it expands into
other markets, such as banking and insurance, or if it focuses solely on the
investment market.
Among the aforementioned stock brokers, Tata Securities Ltd. is the most
profitable because they charge only 0.2% of brokerage from delivery while
everyone else is charging more. Accounting opening or annual charges are
irrelevant if we conduct trading on a daily basis it will cost more than the annual
charges the main focus is delivery charges the more they charge will be loss
making for investors.
 HOW DO MANAGERS GIVE TIPS TO THE CONSUMERS
TO BUY OR SELL EQUITY SHARES
Equity analysts employ a variety of techniques and indicators to
forecast market movements despite the difficulty of doing so.

Price-to-earnings, or P/E, ratio, price-to-book value, or P/B, ratio, and

interest rates are some fundamental and technical indicators (put-call
ratio, volumes traded). We will explore certain indicators that are
frequently used by traders and fund managers to forecast market moves
but are not well-known to many ordinary investors, despite the fact that
P/E and P/B ratios are frequently used.

FUNDAMENTAL INDICATORS

**Dividend Yield**

The annual dividend paid on each share is divided by its current price to determine
dividend yield.
Dividend yield is equal to (Annual Dividend/Present Price) x 100.
A stock's dividend yield, for instance, would be 5% if it paid an annual dividend of
Rs 22 and the stock's current market price was Rs 440. So, what does dividend yield
indicate about a stock's potential price in the future?

If the dividend yield is low, the stock may be overvalued because the share price is
comparatively higher than the dividend paid. This suggests a potential future
decrease.
On the other side, a high dividend yield indicates that there is little interest in the
stock and that the company is making an effort to attract investors by increasing
payouts. It implies the stock price is undervalued.

EXPERT TIP: Invest in realty stocks with care

This can be extended to a stock index too. One can calculate the aggregate
dividend yield of an index, compare it with past dividend yields and see if the
current yield is low or high. A low dividend yield indicates an overpriced
market and vice versa.
Let's demonstrate it by a simple calculation. According to the National Stock
Exchange data, the average dividend yield of the Nifty in the last couple of
months has been around 1.5 per cent. On 2 November 2011, the Nifty closed at
5,263. The current dividend yield is Rs 79.

EXPERT TIP: Stocks that held strong amid sell-off

If analysts expect Nifty companies to increase their dividend payouts by 10 per

cent every year for the next three years and investors expect at least a 4
percentage point premium (12.5 per cent) on equity returns over the risk-free 91-
day Treasury bill rate, which is currently 8.5 per cent, then,

Where,

Expected dividend=current dividend x 1.1

Present value=Expected dividend/(1.125)

The expected dividend in the 4th year will be (105.15 x 1.1)=Rs 115.66

The value of the index at the end of the 3rd year (Terminal Value)=105.15/(.125-
0.1)=4,206

The present value of the terminal value=4,206/1.125=3,739

The present value of the index is the sum of the present value of dividend paid
during the three years and the present value of the terminal index value

=77.24+84.96+93.46+3,739

=3994

Hence, at its present value (5,263), the Nifty is overvalued and may fall in the
immediate future.

(The above calculation is purely based on assumptions)

**Insider Moves**

Though the name smells of something unlawful, not all insider trades are illegal.
According to Indian laws, an insider is a top official, director or shareholder who
owns 10 per cent or more shares and has access to unpublished price-sensitive
information about the company.

EXPERT TIP: Tips to diversify commodities portfolio | How to deal with share
market rumors

A member of the board, merchant banker, share transfer agent, debenture

trustee, broker, portfolio manager, investment advisor, sub-broker or even a
relative of any such individuals is also an insider.
Insider trading based on unpublished price-sensitive information is illegal. An
'insider' can buy or sell shares provided they inform the stock exchanges on
which the stock is listed if the transaction goes beyond a certain threshold. If the
shareholding of an insider changes by more than Rs 5 lakh in value, 25,000
shares or 1 per cent of total shares or voting rights, it has to be brought to the
notice of stock exchanges and the company.
Information on insider trading is available on websites of stock exchanges and
can be used to predict future prices. Here's how.
Studies suggest that while an insider may have many reasons to sell, the only
reason for buying can be that he is bullish on the prospects of the company.

**Interest rates**
Changes in interest rates impact companies. Conventional wisdom says one
must buy shares when short-term rates (treasury bills) are low and sell when
they are high.
Rajeev Thakkar, CEO, Parag Parikh Financial Advisory Services, says: "The
corporate sector is a net borrower of funds and an increase in interest rates is
usually negative for it. Higher rates also hit demand in rate-sensitive sectors
such as real estate and automobiles." Usually, short-term rates (treasury bills) are
lower than long-term rates (10-year government bonds) as the latter factors in
uncertainty in the long term.
However, when rates on short-term securities are higher than that on long-term
ones, it hints at a possible recession. At present, the two rates are close-on 2
November 2011, the 10-year government bond and three-month treasury bills
were around 8.7 per cent.
 TECHNICAL INDICATORS

**Trading volume**
The amount of shares or contracts traded in the market is indicated by
trading volume. It reveals whether market participants are backing a
specific price trend.
If a stock's price is rising while trading at a higher-than-normal
volume, it means investors are supporting the uptrend and expect the
stock to keep rising. A significant volume decline in prices, however,
indicates a probable downward trend.
A trend reversal might also be indicated by a large trade volume. For
instance, a decline in share price accompanied by a large amount of
activity is perceived as an indication that the stock has reached its
lowest point.
**Put-Call Ratio**
An agreement between two parties to exchange an asset at a fixed rate on
or before a particular date is known as a put option. The seller of the put
option has the responsibility to buy at the prespecified price if the buyer
elects to exercise the option, while the buyer of the put option has the right
but not the obligation to sell the asset (stock, commodity) at a specified
price on or before a fixed date.
On the other hand, a call option gives the buyer the right but not the
responsibility to purchase a certain asset from the seller of the call option at
a predetermined price on or before a specific date.
The put-call ratio is calculated by dividing the number of traded put options
by the number of traded call options.
The increase in the put-call ratio indicates that more put options are being
exchanged, which indicates that investors are either anticipating a market
downturn or are hedging their portfolios against one.
Kotak Securities' Sahaj Agrawal, associate vice president of derivatives,
says: "A high ratio suggests that market participants are being overly
cautious, which lowers the likelihood that the market would decline. On the
other hand, a low ratio suggests overconfidence, thus prudence is advised."
Although traders and investment managers regularly utilise these indicators
to forecast market moves, doing so independently could result in incorrect
results because they are not infallible. You can combine these in order to
get a more convincing conclusion.
 UP TO WHAT EXTENT MANAGERS USE TECHNICAL
OR FUNDAMENTAL ANALYSIS
Both are important since fundamental analysis is what is utilised to forecast stock
movement over a long period of time, say more than a year, whilst technical
analysis mostly works for short-term swings in stock prices.
Despite being at different ends of the spectrum, the two main schools of thinking
when it comes to analysing the markets are fundamental and technical analysis.
Both are used by traders and investors for market research and stock price
forecasting. Both have proponents and opponents, just like any investment
technique or philosophy.
Fundamental Analysis
Fundamental analysis evaluates stocks by attempting to measure their intrinsic
value. Fundamental analysts study everything from the overall economy and
industry conditions to the financial strength and management of individual
companies. Earnings, expenses, assets, and liabilities all come under scrutiny by
fundamental analysts.
Technical Analysis
In contrast to fundamental research, technical analysis focuses on statistical trends,
such as changes in a stock's price and volume, to help traders spot opportunities. The
fundamental premise is that all known fundamentals are taken into account by price,
hence they are not particularly important. The intrinsic value of an asset is not
something that technical analysts try to calculate. Instead, they look for patterns and
trends in stock charts that indicate what will happen to a stock in the future. Simple
moving averages (SMA), support and resistance levels, trend lines, and momentum
indicators are examples of common technical analysis signals.
Simple Moving Averages
By averaging the daily price over a predetermined amount of time, simple moving
averages are indicators that assist in determining the trend of the stock. A shorter-
duration moving average crosses a longer-duration one to produce buy and sell
signals. Price history is used to determine support and resistance. Support zones
are those where buyers have historically entered the market, and resistance zones
are those where sellers have blocked price growth. Traders try to buy at points of
support and sell at points of resistance. As they offer clearly defined entry and exit
locations, trend lines are comparable to support and resistance. They are different,
though, in that they are forecasts based on how the stock has historically traded.
They are often utilised for  stocks moving to new highs or new lows when there is
no price history.