2.

INTRODUCTION
2.1 FOREIGN EXCHANGE MARKET OVERVIEW
In todays world no economy is self sufficient, so there is need for exchange of goods and services amongst the different countries. So in this global village, unlike in the primitive age the exchange of goods and services is no longer carried out on barter basis. Every sovereign country in the world has a currency that is legal tender in its territory and this currency does not act as money outside its boundaries. So whenever a country buys or sells goods and services from or to another country, the residents of two countries have to exchange currencies. So we can imagine that if all countries have the same currency then there is no need for foreign exchange.

2.2

Need for Foreign Exchange

Let us consider a case where Indian company exports cotton fabrics to USA and invoices the goods in US dollar. The American importer will pay the amount in US dollar, as the same is his home currency. However the Indian exporter requires rupees means his home currency for procuring raw materials and for payment to the labor charges etc. Thus he would need exchanging US dollar for rupee. If the Indian exporters invoice their goods in rupees, then importer in USA will get his dollar converted in rupee and pay the exporter. From the above example we can infer that in case goods are bought or sold outside the country, exchange of currency is necessary. Sometimes it also happens that the transactions between two countries will be settled in the currency of third country. In that case both the countries that are transacting will require converting their respective currencies in the currency of third country. For that also the foreign exchange is required.

2.3 About foreign exchange market.

Particularly for foreign exchange market there is no market place called the foreign exchange market. It is mechanism through which one countrys currency can be exchange i.e. bought or sold for the currency of another country. The foreign exchange market does not have any geographic location. Foreign exchange market is describe as an OTC (over the counter) market as there is no physical place where the participant meet to execute the deals, as we see in the case of stock exchange. The largest foreign exchange market is in London, followed by the new york, Tokyo, Zurich and Frankfurt. The market are situated throughout the different time zone of the globe in such a way that one market is closing the other is beginning its operation. Therefore it is stated that foreign exchange market is functioning throughout 24 hours a day. In most market US dollar is the vehicle currency, viz., the currency sued to dominate international transaction. In India, foreign exchange has been given a statutory definition. Section 2 (b) of foreign exchange regulation ACT,1973 states: Foreign exchange means foreign currency and includes : All deposits, credits and balance payable in any foreign currency and any draft, travelers cheques, letter of credit and bills of exchange. Expressed or drawn in India currency but payable in any foreign currency.
Any instrument payable, at the option of drawee or

holder thereof or any other party thereto, either in Indian currency or in foreign currency or partly in one and partly in the other. In order to provide facilities to members of the public and foreigners visiting India, for exchange of foreign currency into Indian currency and vice-versa. RBI has granted to various firms and individuals, license to undertake money-changing business at seas/airport and tourism place of tourist interest in India. Besides certain authorized dealers in foreign exchange (banks) have also been permitted to open exchange bureaus.

2.4 RISK MANAGEMENT

Risk is defined as possibility of suffering losses This risk in itself is not bad, risk is essential to progress, and failure is often key part of learning, but we must learn to balance the possible negative consequences of risk against the potential benefits of its associated opportunities. This is risk management.

2.5 Principles of Risk management are as follows

1 Global Perspective
Viewing development within the context of large level developments Recognizing both the potential value of opportunity and the potential impact of adverse effects

2 Forward looking view

Thinking towards tomorrow, identifying uncertainties, anticipating potential outcomes Managing project resources and activities while anticipating uncertainties

3 Open Communications
Encouraging free-flowing information at and between all project levels Enabling formal, informal, and proper communication Using processes that value the individual voice (bringing unique knowledge and insight to identifying and managing risk)

- 4 Integrated management
Making risk management an integral and vital part of project management Adapting risk management methods and tools to a projects infrastructure and culture

5 Continuous processes
Sustaining constant vigilance Identifying and managing risks routinely through all phases of the projects lifecycle

6 Shared product vision

Mutual product vision based on common purpose, shared ownership, and collective communication Focusing on results

7 Team work
Working cooperatively to achieve common goal Pooling talents, skills, and knowledge

2.6 Functions of Risk Management are as follows

i. ii.

Identify - Search for and locate risks before they become problems Analyze - Transform risks data into decision-making information. Evaluate impact, probability, and time frame, classify risks, and prioritize them Plan - Translate risk information into decision and mitigating actions (both present and future) and implement those actions Track - Monitor risk indicators and mitigation actions Control - Correct for deviations from the risk mitigation plan. Communicate - Provide information and feedback internal and external to the project on the risk activities, current risks, and emerging risks.

iii.

iv. v. vi.

2.7 RISK MANAGEMENT IN A BROKING FIRM

Risk management in a Broking Industry is a new concept in India, since it poses maximum risk in the financial market, managing it was felt most essential by the regulatory bodies and exchanges. Therefore NSE introduced for the first time in India, risk containment measures that were common internationally but were absent from the Indian Securities Market. NSCCL has put in place a comprehensive risk management system, which is constantly upgraded to pre-empt market failures. These measures were taken to reduce the brokers risks. Whereas SEBI has given some guidelines under Investors Protection to protect investors risks. NSE has given the following risk management measures payable

Statement of the Problem

There are several financial security companies playing their roles in

Indian

equity market. But People dont have basic knowledge regarding stock market. So they not understand there is various risk involved in the working of broking firm. Due to none availability of the proper guidance most of the person take stock market as gambling.

Need for the Study

Create awareness among investors about the different risks involved in the broking firms. Understand the total transparency and automation of broking firm Give basic knowledge to investors regarding risk in broking firm Also understand the equity market and different way of trading Convert our therotical knowledge in to practical knowledge

3.1 Objectives of the Project

To get familiar with the working of a broking firm.

To understand various risks involved in the broking firm.

To understand various risk for the investors of the broking firm.

To manage and reduce the identified risks.

Limitations of Study: To understand the overall working of share market, the period of 60 days is not enough. Moreover, very few investor and agents have a detail knowledge of the study. The study was conducted in Ahmednagar only, which restricted the scope of the study.

4. PROFILE OF THE
ORGANISATION
4.1 NAMERELIGARE SECURITIES LTD.
Corporate Office: 19 Nehru Place, New Delhi 110019 Website Email SMS : www.religare.in : info@religare.in : RELIGARE to 58888

PUNE:
Ground Floor, Amar Caliber, BMCC Road, Shivajinagar, Pune 411004

AHMEDNAGAR:
5&6, Himalaya Tower, Opp. Deepak Hospital, Savedi Road, Ahmednagar - 414003

4.2 VISION & MISSIONCompanys Vision

To build Religare as a globally trusted brand in the financial services domain and present it as the Investment Gateway of India.

Companys Mission
Providing complete financial care driven by the core values of diligence and transparency.

Brand Essence
Core brand essence is Diligence and Religare is driven by ethical and dynamic processes for wealth creation.

4.3 History and background

RELIGARE Securities Ltd. (RSL) is a wholly owned subsidiary of RELIGARE Financial Services Ltd. (RFSL), a Company promoted by the late Dr.Parvinder Singh, Ex-CMD of Ranbaxy Laboratories Ltd. The primary focus of Religare Securities Ltd. is to cater to services in Capital Market Operations to Institutional Investors. The Company is a member of the National Stock Exchange (NSE) and OTCEI. The growing list of financial institutions with whom RSL is empanelled as approved Broker is a reflection of the high levels of services maintained by the Company. REL operates from seven domestic regional offices, 43 sub-regional offices, and has a presence in 498* cities and towns controlling 1,837* business locations all over India. To make a mark in the global arena, REL acquired UK-based Hichens, Harrison & Co. in 2008 which was subsequently re-named as Religare Hichens Harrison PLC ("RHH"). Hichens, Harrison & Co. was incorporated in London in the year 1803 and is believed to be one of the oldest firms of stockbrokers in the City of London. Pursuant to expansion of REL's business, the company has grown from largely an

equity trading company into a diversified financial services company. With the addition of RHH the REL group now operates out of multiple global locations, other than India, (the UK, the USA, Brazil, South Africa, Dubai and Singapore). RELIGARE was founded with the vision of providing integrated financial care driven by the relationship of trust. The bouquet of services offered by RELIGARE includes Broking (Stocks and Commodities), Depository Participant Service, Advisory on Mutual Fund Investments and Portfolio Management Services. RELIGARE is a pioneer in the concept of partnership to reach multiple locations in order to effectively service its large base of individual clients. Besides the reach of RELIGARE, the clients of the company greatly benefit by its strong research capability, which encompasses fundamentals as well as technical knowledge.

4.4

RELIGARE GROUP:
RELIGARE in recent years has expanded its reach in health care and financial

services wherein it has multiple specialty hospital and labs which provide health care services and multiple financial services such as secondary market equity services, portfolio management services, depository services etc. RELIGARE financial services group comprises of Religare Securities Limited, RELIGARE Comdex Limited and RELIGARE Finvest Limited which provide services in Equity, Commodity and Financial Services business & Religare Insurance Advisory Ltd.

4.5 RELIGARE SECURITIES LIMITED

1. Member of National Stock Exchange of India and Bombay Stock Exchange of India.

2. Depository Participant with National Securities Depository Limited (NSDL) and

Central Depository Services Limited (CDSL). A SEBI approved Portfolio Manager.

RSL provides platform to all segments of the investor to leverage the immense opportunity offered by equity investing in India either on their own or through managed funds in Portfolio Management. The ARN No. of the Religare Securities Ltd. is 33764. The ARN No. is required by to be available with the broker who deals on behalf of investors or sell the mutual funds of the different companies present in the market.

4.6

Religare Enterprises Limited Religare Securities Limited Equity Broking Online Investment Portal Portfolio Management Services Depository Services Religare Commodities Limited Commodity Broking Religare Finvest Limited Lending and Distribution business Proposed Custodial business

Religare Insurance Broking Limited Life Insurance General Insurance Reinsurance Religare Arts Initiative Limited Business of Art Gallery launched - arts-i Religare Venture Capital Limited Private Equity and Investment Manager Religare Asset Management* Derivatives Sales

Religare Capital Markets Limited Investment Banking Proposed Institutional Broking Religare Realty Limited In house Real Estate Management Company Religare Hichens Harrison** Corporate Broking

Institutional Broking

Corporate finance

\
4.7 SERVICES :-

Equity Arts Initiative Commodity

Investment Banking

REL

Mutual Fund

Wealth Advisory Services

Insurance Personal Credit

4.8 Organization Structure:

4.9 Competititors of Religare:There are several financial security companies playing their roles in Indian equity market. But Religare faces competitions from these few companies. ICICI Direct.com Share Khan (SSKI) Kotak Securities.com India Bulls HDFC Securities 5paisa.com Motilal Oswal IL&FS Karvy

4.10 About Religare Securities Limited (RSL)

One of the leading integrated financial services groups of India Diverse range of offerings Client base of more than 5000,000 and growing across the retail, wealth and Institutional Spectrum. Pan India and global footprint. Width and depth of management leading a formidable employee base. Best-in-class Research. Sweetly placed to spot new opportunities and power ahead.

5. RESEARCH DESIGN & METHODOLOGY

5.1Introduction to Research MethodologyResearch Methodology comprises defining and redefining the problem, formulating hypothesis or suggesting solution, collecting, organizing and evaluating the data, making deduction and reaching to conclusions and determines whether the formulated hypothesis is right and wrong. Research Methodology is a way to solve research in study and solving research problems along with logic behind them are defined through research methodology. Thus while talking about research methodologies we are not only talking of research methods but also consider the logic behind the methods. During my project, I collected data through various sources primary & secondary.

5.2 Sources of Data Collection-

Primary source includes:1) Discussion with branch manager

2) Discussion with experts 3) Discussion with investors of the firm. 4) Live trading in the market 5) Data collected from questionnaire.

Secondary source includes:1) Various books related to stock market 2) Books related to Financial Management 3) Web sites were used as the vital information source 4) References given by Relationship Manager

6. FUNDAMENTALS IN
EXCHANGE RATE
Exchange rate is a rate at which one currency can be exchange in to another currency, say USD = Rs.48. This rate is the rate of conversion of US dollar in to Indian rupee and vice versa. METHODS FOR QOUTING EXCHANGE RATES EXCHANGE QUOTATION DIRECT INDIRECT VARIABLE UNIT VARIABLE UNIT HOME CURRENCY FOREIGN CURRENCY METODS OF QOUTING RATE There are two methods of quoting exchange rates.

1) Direct methods Foreign currency is kept constant and home currency is kept variable. In direct quotation, the principle adopted by bank is to buy at a lower price and sell at higher price. 2) In direct method: Home currency is kept constant and foreign currency is kept variable. Here the strategy used by bank is to buy high and sell low. In India with effect from august 2, 1993,all the exchange rates are quoted in direct method. It is customary in foreign exchange market to always quote two rates means one for buying and another rate for selling. This helps in eliminating the risk of being given bad rates i.e. if a party comes

to know what the other party intends to do i.e. buy or sell, the former can take the letter for a ride. There are two parties in an exchange deal of currencies. To initiate the deal one party asks for quote from another party and other party quotes a rate. The party asking for a quote is known as asking party and the party giving a quotes is known as quoting party. The advantage of twoway quote is as under i. The market continuously makes available price for buyers or sellers ii. Two way price limits the profit margin of the quoting bank and comparison of one quote with another quote can be done instantaneously. iii. As it is not necessary any player in the market to indicate whether he intends to buy or sale foreign currency, this ensures that the quoting bank cannot take advantage by manipulating the prices. iv. It automatically insures that alignment of rates with market rates. v. Two way quotes lend depth and liquidity to the market, which is so very essential for efficient market. `In two way quotes the first rate is the rate for buying and another for selling. We should understand here that, in India the banks, which are authorized dealer, always quote rates. So the rates quoted- buying and selling is for banks point of view only. It means that if exporters want to sell the dollars then the bank will buy the dollars from him so while calculation the first rate will be used which is buying rate, as the bank is buying the dollars from exporter. The same case will happen inversely with importer as he will buy dollars from the bank and bank will sell dollars to importer.

6.1 FACTOR AFFECTINGN EXCHANGE RATES

In free market, it is the demand and supply of the currency which should determine the exchange rates but demand and supply is the dependent on many factors, which are ultimately the cause of the exchange rate fluctuation, some times wild. The volatility of exchange rates cannot be traced to the single reason and consequently, it becomes difficult to precisely define the factors that affect exchange rates. However, the more important among them are as follows:

6.2 STRENGTH OF ECONOMY

Economic factors affecting exchange rates include hedging activities, interest rates, inflationary pressures, trade imbalance, and euro market activities. Irving fisher, an American economist, developed a theory relating exchange rates to interest rates. This proposition, known as the fisher effect, states that interest rate differentials tend to reflect exchange rate expectation. On the other hand, the purchasing- power parity theory relates exchange rates to inflationary pressures. In its absolute version, this theory states that the equilibrium exchange rate equals the ratio of domestic to foreign prices. The relative version of the theory relates changes in the exchange rate to changes in price ratios.

6.3 POLITICAL FACTOR

The political factor influencing exchange rates include the established monetary policy along with government action on items such as the money supply, inflation, taxes, and deficit financing. Active government intervention or manipulation, such as central bank activity in the foreign currency market, also have an impact. Other political factors influencing exchange rates include the political stability of a country and its relative economic exposure (the perceived need for certain levels and types of imports). Finally, there is also the influence of the international monetary fund.

6.4EXPACTATION OF THE FOREIGN EXCHANGE MARKET

Psychological factors also influence exchange rates. These factors include market anticipation, speculative pressures, and future expectations. A few financial experts are of the opinion that in todays environment, the only trustworthy method of predicting exchange rates by gut feel. Bob Eveling, vice president of financial markets at SG, is corporate finances top foreign exchange forecaster for 1999. evelings gut feeling has, defined convention, and his method proved uncannily accurate in foreign exchange forecasting in 1998.SG ended the corporate finance forecasting year with a 2.66% error overall, the most accurate among 19 banks. The secret to evelings intuition on any currency is keeping abreast of world events. Any event,from a declaration of war to a fainting political leader, can take its toll on a currencys value. Today, instead of formal modals, most forecasters rely on an amalgam that is part economic fundamentals, part model and part judgment. Fiscal policy Interest rates Monetary policy Balance of payment Exchange control Central bank intervention Speculation Technical factors

7. DATA PRESENTATION, ANALYSIS & INTERPRETATION

Q.1 Which Foreign currency do customers generally procure?

FREQUENTLY USED CURRENCY(MULTIPLE OPTION

Analysis

As it was found in the above figure that currency is the most used mode of foreign exchange, so this chart is depicting the among various currencies US$(USD) is the most popular mode of currency followed by EURO and GBP respectively.

Q.2 How would you spontaneously the quality of service provided by RELIGARE?

ANALYSIS During project it was found that there is good response about that rating of religare in terms of services. No one gave poor response in this respect.

Q.3 Does the RELIGARE provides FOREX to general public?

1s Qtr t S 2 lice S 3 lice S 4 lice

Q.4 From where is the exchange procured BANKS COMPANIES,BOTH?

ANALYSIS It is obvious from the above chart that FFMC is the most important source of exchange procured is the foreign exchange market,after the different banks are prominent source of foreign exchange.

Q.5 MODES OF EXCHANGE?

ANALYSIS It is cleared from the project finding that is shown in the above figure that currency is the most prevalent mode of exchange for the customer, followed by the travelers cheque there is negligible option of Debit card and Credit card.

FINDINGS
1. THE PERCENTAGE OF ENCASHMENT IN CURRENCY IS 80% AND IN TCs 20%.

2. THE FREQUENTLY USED CURRENCY IS USD. 3. AMONG THE POTENTIAL MARKET MOST OF THEM (90%) ARE SOFTWARE COMPANIES. 4. MOST OF THE POTENTIAL CUSTOMERS PREFERRED CURRENCY AS AGAINST T.Cs DEBIT CARD AND CREDIT CARD. 5. MOST OF THE POTENTIAL CUSTOMERS VISIT 20-30 TTIMES INA YEAR AND THEIR DESTINATION OF TRAVEL IS USA(32%), FOLLWED BY UK(14%) AND EUROPE(12%). 6. MOST OF THE POTENTAIL CUSTOMERS ARE SATISFIED WITH THEIR CURRENT VENDOR IN TERMS OF SERVICES, RATES, AND TREMS OF PPAYMENT. 7. MOST OF THE CLIENTS PREFER BOTH CURRENCIES AND T.Cs.

SUGGESTIONS
An Organization should have a risk management function that is independent of its trading staff i.e. personnel responsible for the risk management function should be separate from trading floor personnel. Senior management should regularly evaluate the risk management procedure in place to ensure they are appropriate and sound. Senior management should also foster and participate in active discussions with the board of directors, sub brokers, franchisee, staff of risk management function and investors regarding procedures for measuring and managing risk. Highly qualified staff not only in front office positions such as trading desk, relationship officer and sales but also all back office functions responsible for risk management and internal control. Risk management or control function should be able to produce a risk management report that highlights positions, limits and excess on a basis commensurate with trading activity. This report should be sent to senior management, reviewed, signed and returned to control staff. Auditors should perform a comprehensive review of risk management annually, emphasizing segregation of duties and validation of data integrity.

 The designated compliance officer should perform a review of trading Practices annually.

CONCLUSIONS
RELIGARE achieved its operational excellence due to, Synchronization between planning, scheduling and execution processes Defect free execution Speed Collaborative approach between RELIGARE and selected partners both equally participate in the processes.

RELIGARE management plays a very important role Dealing in foreign currency Develops good relationship with participants to maximize mutual opportunities for growth and profitability